Legislature(2001 - 2002)

05/02/2002 03:47 PM Senate STA

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                    ALASKA STATE LEGISLATURE                                                                                    
                 SENATE STATE AFFAIRS COMMITTEE                                                                               
                           May 2, 2002                                                                                          
                            3:47 p.m.                                                                                           
MEMBERS PRESENT                                                                                                               
Senator Gene Therriault, Chair                                                                                                  
Senator Randy Phillips, Vice Chair                                                                                              
Senator Ben Stevens                                                                                                             
MEMBERS ABSENT                                                                                                                
Senator Rick Halford                                                                                                            
Senator Bettye Davis                                                                                                            
COMMITTEE CALENDAR                                                                                                            
CS FOR HOUSE BILL NO. 165(RES)                                                                                                  
"An Act relating  to the Kenai River Special Management  Area; and                                                              
providing for an effective date."                                                                                               
     HEARD AND HELD                                                                                                             
SENATE BILL NO. 370                                                                                                             
"An  Act  establishing   procedures  relating   to  constitutional                                                              
     MOVED CSSB 370(STA) OUT OF COMMITTEE                                                                                       
CS FOR HOUSE BILL NO. 212(L&C)                                                                                                  
"An Act requiring a subcontractor  to obtain workers' compensation                                                              
insurance  covering  the  subcontractor  and  the  subcontractor's                                                              
employees  and establishing  responsibility  of  a contractor  for                                                              
obtaining  workers' compensation  coverage  for the  subcontractor                                                              
and the  subcontractor's employees  if the subcontractor  fails to                                                              
obtain  workers'  compensation  coverage;  and  providing  for  an                                                              
effective date."                                                                                                                
     HEARD AND HELD                                                                                                             
HOUSE BILL NO. 300                                                                                                              
"An Act relating to the procurement of certain travel services."                                                                
     MOVED SCSHB 300(STA) OUT OF COMMITTEE                                                                                      
PREVIOUS COMMITTEE ACTION                                                                                                     
HB 165 - No previous action to record.                                                                                          
SB 370 - No previous action to record.                                                                                          
HB 212 - See Labor and Commerce minutes dated 4/25/01 and                                                                       
HB 300 - No previous action to record.                                                                                          
WITNESS REGISTER                                                                                                              
Representative Ken Lancaster                                                                                                    
Alaska State Capitol                                                                                                            
Juneau, AK  99801-1182                                                                                                          
POSITION STATEMENT:  Introduced HB 165.                                                                                       
Mr. Jim Stratton                                                                                                                
Division of Parks & Outdoor Recreation                                                                                          
Department of Natural Resources                                                                                                 
400 Willoughby Ave.                                                                                                             
Juneau, AK  99801-1724                                                                                                          
POSITION STATEMENT:  Testified on HB 165.                                                                                     
Mr. Ted Wellman                                                                                                                 
Kenai River Special Management Area Advisory Board                                                                              
3500 Twilight Lane                                                                                                              
Anchorage, AK                                                                                                                   
POSITION STATEMENT:  Testified in support of HB 165.                                                                          
Mr. Sam McDowell                                                                                                                
No address given                                                                                                                
POSITION STATEMENT:  Testified in support of HB 165.                                                                          
Mr. Dale Bondurant                                                                                                              
31864 Moonshine Dr.                                                                                                             
Soldotna, AK 99669                                                                                                              
POSITION STATEMENT:  Testified in support of HB 165.                                                                          
Mr. Don Ramsey                                                                                                                  
35774 Carlisle Dr.                                                                                                              
Soldotna, AK 99669                                                                                                              
POSITION STATEMENT:  Testified in support of HB 165.                                                                          
Dr. Gerald McBeath                                                                                                              
No address given                                                                                                                
POSITION STATEMENT:  Testified on SB 370.                                                                                     
Mr. Joe Balash                                                                                                                  
Aide to Senator Gene Therriault                                                                                                 
Alaska State Capitol                                                                                                            
Juneau, AK  99801-1182                                                                                                          
POSITION STATEMENT:  Testified on SB 370.                                                                                     
Ms. Amy Erickson                                                                                                                
Aide to Representative Lisa Murkowski                                                                                           
Alaska State Capitol                                                                                                            
Juneau, AK  99801-1182                                                                                                          
POSITION STATEMENT:  Introduced HB 212.                                                                                       
Mr. Don Etheridge                                                                                                               
FLCIO Alaska State                                                                                                              
No address given                                                                                                                
POSITION STATEMENT:  Testified in support of HB 212.                                                                          
Mr. Paul Grossi                                                                                                                 
Division of Workers' Compensation                                                                                               
Department of Labor & Workforce Development                                                                                     
PO Box 21149                                                                                                                    
Juneau, AK 99802-1149                                                                                                           
POSITION STATEMENT:  Testified on HB 212.                                                                                     
Mr. Allen Wilson                                                                                                                
Legislative Chair                                                                                                               
Alaska State Homebuilders Association                                                                                           
No address given                                                                                                                
POSITION STATEMENT:  Testified in support of HB 212.                                                                          
Ms. Barbara Huff-Tuckness                                                                                                       
Director of Governmental and Legislative Affairs                                                                                
Teamsters Local 959                                                                                                             
No address given                                                                                                                
POSITION STATEMENT:  Testified in support of HB 212.                                                                          
Mr. Charlie Miller                                                                                                              
Alaska National Insurance                                                                                                       
No address given                                                                                                                
POSITION STATEMENT:  Testified in support of HB 212.                                                                          
Ms. Sara McNair-Grove                                                                                                           
Property Casualty Actuary                                                                                                       
Division of Insurance                                                                                                           
Department of Community & Economic Development                                                                                  
P.O. Box 110805                                                                                                                 
Juneau, AK 99811-0805                                                                                                           
POSITION STATEMENT:  Testified on HB 212.                                                                                     
Representative Joe Hayes                                                                                                        
Alaska State Capitol                                                                                                            
Juneau, AK  99801-1182                                                                                                          
POSITION STATEMENT:  Introduced HB 300.                                                                                       
Mr. Vern Jones                                                                                                                  
Chief Procurement Officer                                                                                                       
Division of General Services                                                                                                    
Department of Administration                                                                                                    
PO Box 110200                                                                                                                   
Juneau, AK  99811-0200                                                                                                          
POSITION STATEMENT:  Testified on HB 300.                                                                                     
Ms. Sally Huntley                                                                                                               
Frontier Travel                                                                                                                 
Anchorage, AK                                                                                                                   
POSITION STATEMENT:  Testified in support of HB 300.                                                                          
Mr. Bill Beck                                                                                                                   
Airlines Online                                                                                                                 
Anchorage, AK                                                                                                                   
POSITION STATEMENT:  Testified in support of HB 300.                                                                          
Cindy Bettine                                                                                                                   
ABC Travel                                                                                                                      
Palmer, AK                                                                                                                      
POSITION STATEMENT:  Testified in support of HB 300.                                                                          
ACTION NARRATIVE                                                                                                              
TAPE 02-27, SIDE A                                                                                                            
CHAIRMAN  GENE   THERRIAULT  called   the  Senate  State   Affairs                                                            
Committee meeting  to order  at 3:47 p.m.   Present were  Senators                                                              
Phillips, Stevens and Chairman Therriault.                                                                                      
The first order of business before the committee was HB 165.                                                                    
           HB 165-KENAI RIVER SPECIAL MANAGEMENT AREA                                                                       
CHAIRMAN THERRIAULT  said Senator Halford had some  concerns about                                                              
HB 165 but was  called to the Governor's office.   He announced he                                                              
would  hear  the  bill to  get  the  issues  out  and hold  it  in                                                              
committee.    He  said  Representative  Lancaster  approached  him                                                              
earlier with a proposed CS that he  would like to get on the table                                                              
for consideration.   He asked  if Representative  Lancaster wanted                                                              
to make comments to the CS.                                                                                                     
REPRESENTATIVE  KEN  LANCASTER  said  yes.    He  noted  that  the                                                              
proposed CS was version J.                                                                                                      
SENATOR PHILLIPS wanted to make sure  that the township ranges had                                                              
been thoroughly  checked because there  were mistakes made  in the                                                              
REPRESENTATIVE  LANCASTER  said   there  were  mistakes  when  the                                                              
process was  started a  couple of years  ago that were  corrected.                                                              
He said HB 165 related to adding  lands to the Kenai River Special                                                              
Management Area (KRSMA).   The CS takes out 3,543  acres along the                                                              
south side of Kenai  Lake from Snug Harbor Road up  to the dam and                                                              
the  powerhouse at  Cooper  Lake.   He  hoped  this would  address                                                              
concerns that were expressed to him.                                                                                            
CHAIRMAN   THERRIAULT  asked   if  the   road  went  through   the                                                              
highlighted area on the map in the bill packet.                                                                                 
REPRESENTATIVE LANCASTER  said it did.   He said this  process has                                                              
been going  on for at least two  years.  As mayor of  Soldotna, he                                                              
sat on the board  that held public hearings about  the addition of                                                              
these lands.  He  noted they were all state lands  and there would                                                              
be no acquisition  or purchasing of  new lands.  HB 165  would put                                                              
the lands into  the Department of Natural Resources  (DNR) so that                                                              
the lands  could be managed  by DNR.   The plan was  adopted after                                                              
committee  meetings   and  public  hearings  over   two  years  in                                                              
Anchorage and  on the Kenai  Peninsula.   He said DNR  adopted the                                                              
language portion of the plan in December  1997.  The lands must be                                                              
transferred by the Legislature.   This was what HB 165 attempts to                                                              
SENATOR PHILLIPS asked how many acres were in the transfer.                                                                     
REPRESENTATIVE LANCASTER said about 4,200 acres.                                                                                
SENATOR PHILLIPS asked if that was reduced from 7,900.                                                                          
REPRESENTATIVE LANCASTER  said yes.  He  noted that HB 165  had no                                                              
fiscal note.                                                                                                                    
CHAIRMAN  THERRIAULT   asked  if   moving  the  lands   into  this                                                              
designation added restrictions on the use of the land.                                                                          
REPRESENTATIVE LANCASTER  said DNR had  a process to  allow public                                                              
access or use of the lands.  The  other departments that currently                                                              
control this  land did  not.  He  believes HB  165 would  give the                                                              
public a process to be able to access the lands.                                                                                
CHAIRMAN THERRIAULT  asked if the lands were in  the general state                                                              
domain in DNR.                                                                                                                  
MR.  JIM   STRATTON,  Director,   Division  of  Parks   &  Outdoor                                                              
Recreation, Department  of Natural Resources, said  the lands were                                                              
currently in  general state lands  and managed by the  Division of                                                              
Parks & Outdoor  Recreation for outdoor recreation  purposes.  The                                                              
addition of  these lands would  allow DNR to improve  recreational                                                              
access to the lands.  He said there  were a couple of projects DNR                                                              
was interested  in but  they weren't able  to sign the  obligation                                                              
that  they  would manage  the  lands  and facilities  for  outdoor                                                              
recreation  access  in  perpetuity  because  the  lands  were  not                                                              
designated  to Parks  & Outdoor Recreation.    He said when  those                                                              
lands were designated, they would  be able to do that and begin to                                                              
develop some projects such as improved boat launch ramps.                                                                       
CHAIRMAN THERRIAULT asked if there  was any organized group in the                                                              
area that opposed HB 165.                                                                                                       
MR. STRATTON said he was not aware of any.                                                                                      
REPRESENTATIVE LANCASTER  said he was  not aware of any.   He said                                                              
Senator Torgerson  had some  concerns, but he  hoped the  CS would                                                              
clear those concerns up.                                                                                                        
CHAIRMAN THERRIAULT  asked if the  CS had been brought  to Senator                                                              
Torgerson's attention.                                                                                                          
REPRESENTATIVE LANCASTER said a copy had been given to his aide.                                                                
MR. STRATTON said DNR supported HB 165 with the proposed CS.                                                                    
CHAIRMAN  THERRIAULT pointed  at the  map in the  bill packet  and                                                              
asked if the  highlighted area was the acreage the  CS dropped out                                                              
of the plan.                                                                                                                    
REPRESENTATIVE LANCASTER & MR. STRATTON said that was correct.                                                                  
CHAIRMAN THERRIAULT pointed at the  un-highlighted area of the map                                                              
and asked if that was the acreage that was being added.                                                                         
REPRESENTATIVE LANCASTER said there  was more acreage than the map                                                              
showed.   In addition to that  acreage, there was also  acreage in                                                              
the Moose Pass area and on the upper part of the Kenai River.                                                                   
CHAIRMAN THERRIAULT asked if there  was anybody present to testify                                                              
regarding HB 165.                                                                                                               
MR. TED  WELLMAN, President of the  KRMSA Advisory Board,  said he                                                              
had  served  on the  Board  since  1995  and was  instrumental  in                                                              
developing the plan that resulted  in HB 165.  He said he was also                                                              
vice-president  of the Kenai  River Property Owners'  Association.                                                              
He said  he was  a 55-year  resident of  Alaska and  had used  the                                                              
Kenai River all his life and had  owned property there for over 20                                                              
years.  He  supported HB 165.   The land additions  were developed                                                              
through  the public hearing  process with  meetings in  Anchorage,                                                              
Soldotna, Cooper Landing  and Moose Pass.  He said  the lands were                                                              
selected  close to the  Kenai River  so the  entire watershed  and                                                              
habitat  would be  protected.   He  said he  is not  aware of  any                                                              
opposition.   He  said  a number  of organizations  supported  the                                                              
addition  of these  lands, including  the  Cook Inlet  Agriculture                                                              
Association,  the  Cooper  Landing   Community  Club,  Alaska  Fly                                                              
Fishing,  Alaska Wildland  Adventures, the  City of Soldotna,  the                                                              
Kenai Peninsula  Borough, the  Friends of  Cooper Landing  and the                                                              
Kenai River Property Owners' Association.                                                                                       
CHAIRMAN  THERRAIULT asked  if there  were any  questions for  Mr.                                                              
Wellman.  There were none.                                                                                                      
MR. SAM MCDOWELL  said he has lived in Alaska since  1948.  He has                                                              
been involved  in resource  management issues  for over  50 years.                                                              
He said if  we don't support HB  165, we would never  have a river                                                              
like  the Kenai  again.   He said  habitat is  the most  important                                                              
thing, followed by resources and  then users, because if you don't                                                              
protect the  habitation, there  won't be  any resources  and there                                                              
won't be anything for the users.                                                                                                
CHAIRMAN  THERRIAULT asked  if there  were any  questions for  Mr.                                                              
McDowell.  There were none.                                                                                                     
MR. DALE  BONDURANT said he owns  property along 2000 feet  of the                                                              
Kenai  River, which  he  has put  in  a conservation  easement  to                                                              
protect forever.   He said the Kenai is one of  the most important                                                              
resources in  the country and we need  to protect it.   He said he                                                              
fully supports  HB 165.   He said he  believes in access  as well.                                                              
In 1997, he filed  a federal suit to make sure  that we had access                                                              
to all of the rivers in the country.   He said it's very important                                                              
that we continue  with this type of thing.  He  said he would like                                                              
to see the acreage that was removed in the CS protected as well.                                                                
CHAIRMAN  THERRIAULT asked  if there  were any  questions for  Mr.                                                              
Bondurant.  There were none.                                                                                                    
MR.  DON  RAMSEY said he  was a  35-year resident  of Alaska.   He                                                              
said he used the Kenai River to catch  fish for his family for the                                                              
winter.  He said he owned 430 feet  of frontage on the Kenai River                                                              
that he  has taken  very good care  of.  He  said he  supports the                                                              
acquisition  of the lands  to protect  the river  because it  is a                                                              
great  resource and  enjoyed  by residents  and  visitors and  has                                                              
great commercial value.                                                                                                         
CHAIRMAN THERRIAULT  noted that the  Future Management  section on                                                              
page  2 of  the  background information  provided  by KRMSA  said,                                                              
"Facility  development  for most  of  the new  land  would not  be                                                              
consistent with  KRMSA's intent."  He  said he had been  trying to                                                              
express  his concern  over  this in  his  previous question  about                                                              
He asked  if there was  anybody else who  wished to testify  on HB
165.  There was nobody.                                                                                                         
HB 165 was held in committee.                                                                                                   
The next order of business before the committee was SB 370.                                                                     
           SB 370-CONSTITUTIONAL CONVENTION PROCEDURES                                                                      
CHAIRMAN  THERRIAULT  said  the  Senate  State  Affairs  Committee                                                              
introduced SB  370 at his  request.  He  said the bill  deals with                                                              
the  constitutional  convention question  that  is  on the  ballot                                                              
every 10 years and  would be on the ballot this year.   He said he                                                              
looked into the  events that would occur if the  voters approved a                                                              
constitutional convention.   He said  the lieutenant  governor was                                                              
responsible for issuing the call  for a constitutional convention.                                                              
This call was  to be issued as  close as possible to  the original                                                              
call for the  Alaska Constitutional Convention in  1955 unless the                                                              
legislature placed different provisions  in statute, which had not                                                              
been done.                                                                                                                      
He said he wasn't sure we would want  the delegates to be selected                                                              
in  the same  districts  that  they  had been  in  1955.   He  was                                                              
concerned  that  those districts  would  not meet  court  approval                                                              
because they wouldn't  stand up to the one man  one vote standard.                                                              
He  said SB  370 would  restrict the  call from  being issued  for                                                              
approximately one year until October  1, 2003.  He said this delay                                                              
would allow  the next  legislature and  governor to negotiate  the                                                              
passage of  legislation to  spell out  the parameters under  which                                                              
the call  would be made.   He said  the legislature could  look at                                                              
the geographical areas the delegates should be elected from.                                                                    
DR. GERALD MCBEATH said he participated  in two recent symposia on                                                              
the constitutional  convention ballot referendum that  would be on                                                              
the ballot this  fall.  One was for the statewide  League of Women                                                              
Voters convention in  Kenai.  The other was a  symposium sponsored                                                              
by Common  Ground, which is an  organization that looks  at public                                                              
issues.   He  said  there  were several  questions  regarding  the                                                              
uncertainty of  what would  happen if the  voters were  to approve                                                              
the referendum calling  for a constitutional convention.   He said                                                              
SB 370 reduces uncertainty by spelling  out when the call would be                                                              
made  and how  delegates would  be  selected.   At both  symposia,                                                              
there was a question about whether  the delegates would be subject                                                              
to the Alaska Public Offices Commission  (APOC) rules.  He said SB
370 addresses that concern.                                                                                                     
He said  it was  not clear  why October  1   was selected  in Sec.                                                              
15.50.080.  The  current Lieutenant Governor could  issue the call                                                              
on November  6  but  SB 370 would  eliminate that possibility  and                                                              
only allow  the incoming  lieutenant governor  to issue  the call.                                                              
He said  this would  give the legislature  an opportunity  to have                                                              
hearings  during the first  session of  the 23   Legislature.   He                                                              
said Sec.  15.50.090 laid out a  system of electing  80 delegates.                                                              
He felt  80 delegates would  be too many.   He suggests  mirroring                                                              
the  legislative  election  districts  by  having  60  seats,  one                                                              
delegate  from  each  house  district  and one  from  each  senate                                                              
district.   According  to  SB  370 the  constitutional  convention                                                              
would be  held in  Fairbanks.   He said  this makes sense  because                                                              
that was where the original convention  was held but the Fairbanks                                                              
of 1955 was very  different from Fairbanks today.   He believed SB
370  was  a step  in  the  right  direction  and served  a  useful                                                              
CHAIRMAN THERRIAULT asked for his affiliation.                                                                                  
DR. MCBEATH  said he was a  professor of political science  at the                                                              
University  of Alaska Fairbanks  and was  considered an  expert in                                                              
the field.   He wrote The  Alaska State Constitution:  A Reference                                                              
Guide, which was published in 1997.                                                                                             
SENATOR PHILLIPS  asked if he had  any practical experience  as an                                                              
elected official.                                                                                                               
DR.  MCBEATH said  he served  on the  Fairbanks Northstar  Borough                                                              
Board of Education from 1986 to 1995.                                                                                           
CHAIRMAN THERRIAULT  said October  1  was  chosen as the  date for                                                              
the call in order  to put the issue before the  legislature during                                                              
the next session.   He said it was a fairly arbitrary  date but it                                                              
allowed for enough  time for the legislature to  hold hearings and                                                              
work out  a piece of legislation  with the administration.   There                                                              
would also be time after that to  bring the public up to speed and                                                              
allow the candidates enough time to run a campaign.                                                                             
CHAIRMAN  THERRIAULT  said  he understood  the  concern  over  the                                                              
number of delegates and would be  open to changing the number.  He                                                              
said he selected  80 delegates because he was  concerned about the                                                              
rural districts, which  cover large geographical areas.   In those                                                              
districts,  there was  the potential  for two  delegates from  the                                                              
same community  to be elected  because that community  happened to                                                              
have  the  largest  population  in  the district.    He  said  Dr.                                                              
McBeath's proposal seemed to be a  compromise between the original                                                              
55 delegates at the 1955 convention  and the 80 delegates proposed                                                              
in SB 370.                                                                                                                      
He  said individuals  campaigning  to  be  delegates ought  to  be                                                              
subject to  APOC provisions.   If the  public was concerned  about                                                              
money  influencing campaigns  for  legislators,  then he  expected                                                              
there would be the same level of  concern when the candidate would                                                              
be making structural changes to the constitution.                                                                               
SENATOR PHILLIPS asked why the original  Constitutional Convention                                                              
was held in Fairbanks.                                                                                                          
DR.  MCBEATH said  he spoke  with  Thomas Stewart,  who served  as                                                              
Secretary to the  Convention and was a Superior Court  judge.  Mr.                                                              
Stewart said  the main  reason they wanted  to get the  Convention                                                              
out of Juneau was  because there were too many bars.   He said the                                                              
second reason  was because they  felt that holding  the Convention                                                              
in the  atmosphere of  a university town  would contribute  to the                                                              
development of a model constitution.   He said they also wanted it                                                              
away from the site of legislative activity.                                                                                     
SENATOR  PHILLIPS  asked  if  the  convention  would  be  held  in                                                              
MR.  JOE BALASH,  Senate State  Affairs Committee  Aide, said  the                                                              
call  would not  be made  until October  of 2003.   The  delegates                                                              
would be elected at the next general  election in 2004.  The dates                                                              
of  the convention  would be  up  to the  lieutenant governor  and                                                              
would be one of the items in the call.                                                                                          
SENATOR  PHILLIPS  said if  the  convention  was held  during  the                                                              
academic year, there might not be enough room on campus.                                                                        
MR. BALASH  said the intent  of SB 370 was  not to spend a  lot of                                                              
time with the details.   He said the dates of  the convention were                                                              
certainly something that should be  considered.  Delaying the call                                                              
for one  year would  give the legislature  an opportunity  to have                                                              
hearings on the issue and work out the details.                                                                                 
SENATOR  PHILLIPS  said  the original  Convention  was  held  from                                                              
November of 1955 through February or March of 1956.                                                                             
DR.  MCBEATH agreed.   He  said there  was  a break  to allow  the                                                              
delegates to return  to their communities and  discuss the issues.                                                              
He said the temperature that year was 30 below zero.                                                                            
CHAIRMAN  THERRIAULT said  the dates  of the  convention were  not                                                              
figured into  the determination of October  1  as the  date of the                                                              
MR.  BALASH said  the  October  1   date would  also  allow for  a                                                              
special session if it were necessary because of a veto.                                                                         
SENATOR PHILLIPS  said 30  below was a  good incentive to  get the                                                              
job done quickly.                                                                                                               
CHAIRMAN THERRIAULT  joked that Fairbanks  had torn down a  lot of                                                              
its bars since 1955.                                                                                                            
SENATOR STEVENS  joked that the convention  could be held  in Adak                                                              
where there were no bars.                                                                                                       
CHAIRMAN THERRIAULT said he was open  to suggestions regarding the                                                              
number of delegates.                                                                                                            
SENATOR PHILLIPS said 60 sounded  like a more workable number than                                                              
80.   He noted  that the Senate  with 20 members  was able  to get                                                              
things  done faster  than  the House  of  Representatives with  40                                                              
SENATOR  STEVENS  said  it  looked   like  some  of  the  original                                                              
delegates in 1955 were elected from judicial districts.                                                                         
DR. MCBEATH  said in  1955 the  Legislature drew  up a new  scheme                                                              
rather  than  using  the  legislative  districts.   Seven  of  the                                                              
districts were based on judicial  districts and 12 to 15 delegates                                                              
were elected  on a statewide  basis.   He noted that  scheme would                                                              
not meet the one man one vote Supreme Court requirement.                                                                        
CHAIRMAN THERRIAULT said SB 370 was  intended as default language.                                                              
If the legislature wanted to come  up with something different, it                                                              
could.  He  said without an  agreement by the legislature,  SB 370                                                              
would be  the default rather than  the 1955 language,  which would                                                              
cause a problem with the one man one vote requirement.                                                                          
SENATOR   STEVENS  asked   how  many   times  the   constitutional                                                              
convention question had been on the ballot since statehood.                                                                     
DR. MCBEATH said this would be the fifth time.                                                                                  
SENATOR PHILLIPS noted that it passed in 1970.                                                                                  
DR.  MCBEATH  said  it  passed in  1970  but  was  challenged  and                                                              
invalidated.   He said  the question  was on  the ballot  again in                                                              
1972 and that is why we now have  the question on the ballot every                                                              
10  years  from 1972.    He  noted  that the  ballot  measure  was                                                              
defeated  in 1972,  1982 and  1992.   In  1992, the  vote was  63%                                                              
SENATOR STEVENS  asked what  the voter  turnout was  in 1992.   He                                                              
said voter turnout in 1982 was 50%.                                                                                             
CHAIRMAN THERRIAULT  asked Senator Phillips  if he wanted  to move                                                              
an amendment to change the number of delegates to 60.                                                                           
SENATOR  PHILLIPS  moved  Amendment  #1, changing  the  number  of                                                              
delegates  to 60, one  elected from  each house  district and  one                                                              
from each senate district.                                                                                                      
CHAIRMAN  THERRIAULT  clarified   that  "Two  delegates  shall  be                                                              
elected  from each house  district"  would be  deleted on page  1,                                                              
line  12 and  replaced with  language electing  one delegate  from                                                              
each house  district and  one delegate  from each senate  district                                                              
for a total of 60 delegates.  He  asked if there was any objection                                                              
to Amendment #1.                                                                                                                
SENATOR PHILLIPS asked Dr. McBeath if 60 was a good number.                                                                     
DR. MCBEATH  noted that  there were 55  delegates in  1955 because                                                              
there were 55  framers of the American Constitution  and they felt                                                              
that was  a significant  number.   He said 60  seemed like  a good                                                              
number because  60 people could fit  in one room and have  a floor                                                              
discussion on an issue.                                                                                                         
CHAIRMAN THERRIAULT asked if there  might be a problem with having                                                              
an even number rather than an odd number of delegates.                                                                          
DR. MCBEATH said that was always a question.                                                                                    
CHAIRMAN THERRIAULT said that just  meant there would be a tie and                                                              
things  would  fail.    He  said   Amendment  #1  was  before  the                                                              
committee.  He asked if there was any objection to Amendment #1.                                                                
There being no objection, Amendment #1 was adopted.                                                                             
CHAIRMAN  THERRIAULT asked  if there  were  any other  amendments.                                                              
There were none.  He asked if there  were any other issues to come                                                              
before the committee on SB 370.  There were none.                                                                               
SENATOR  PHILLIPS  moved  CSSB  370(STA)  out  of  committee  with                                                              
attached fiscal note and individual recommendations.                                                                            
There being  no objection,  CSSB 370(STA)  moved out of  committee                                                              
with attached fiscal note and individual recommendations.                                                                       
The next order of business before the committee was HB 212.                                                                     
        HB 212-WORKERS' COMP:CONTRACTORS & SUBCONTRACTOR                                                                    
MS. AMY  ERICKSON, Aide to  Representative Lisa Murkowski  and the                                                              
House Labor & Commerce Committee,  said HB 212 addressed a decade-                                                              
long issue regarding workers' compensation  insurance coverage for                                                              
sole-proprietors,  individuals  working   for  themselves  without                                                              
employees.  Current  statutes did not require  sole-proprietors to                                                              
carry  workers' compensation  insurance  but  did require  general                                                              
contractors  to carry  workers'  compensation  insurance on  their                                                              
employees.  She  said the workers' compensation  board determined,                                                              
based on the  relative nature of work test, that  in certain cases                                                              
injured sole-proprietors were actually  acting as employees of the                                                              
general contractor.   Because  of these determinations,  insurance                                                              
companies  charged  general contractors  additional  premiums  for                                                              
sole-proprietors.   She said sometimes  these extra  premiums were                                                              
charged after  the policy was audited  and therefore had  not been                                                              
anticipated nor included in their bid.                                                                                          
She said  a statewide task  force was  established to look  at the                                                              
problem, identifying  several different possibilities.   HB 212 is                                                              
the ultimate  compromise the  task force came  up with.   She said                                                              
requiring   sole-proprietors  to   provide   their  own   workers'                                                              
compensation  coverage would  eliminate  any gray  area, give  all                                                              
parties  equity and  allow for risks  and associated  costs  to be                                                              
anticipated and recovered in the bidding process.                                                                               
CHAIRMAN THERRIAULT  said the committee  had given Ms.  Erickson a                                                              
copy of a  proposed CS.  He asked  if she had a chance  to discuss                                                              
the CS with Representative Murkowski.                                                                                           
MS. ERICKSON said  although Representative Murkowski  had seen the                                                              
CS, they had not  had a chance to discuss it because  she had been                                                              
on the floor all day.                                                                                                           
CHAIRMAN THERRIAULT  said he developed  the CS after  talking with                                                              
members of the Senate and seeing  that there seemed to be a lot of                                                              
dissatisfaction  with  HB 212.    He said  he  was  looking for  a                                                              
different  way to  approach  the issue.   He  asked  if there  was                                                              
anyone who wished to testify.                                                                                                   
MR. DON ETHERIDGE said he was testifying  on behalf of the AFL-CIO                                                              
Alaska  State in  support of  HB 212.   He said  they believed  it                                                              
would  create  a more  equitable  playing  field  for all  of  the                                                              
subcontractors  that  bid on  a  project.   He  said  some of  the                                                              
subcontractors  taking a  risk and  not  purchasing the  insurance                                                              
were able  to underbid  others and  the general contractor  became                                                              
liable for everything.                                                                                                          
CHAIRMAN  THERRIAULT  asked  if   there  were  questions  for  Mr.                                                              
Etheridge.  There were none.                                                                                                    
MR.  PAUL GROSSI,  Director,  Division of  Workers'  Compensation,                                                              
Department of Labor  & Workforce Development, asked if  the CS had                                                              
been introduced.                                                                                                                
CHAIRMAN THERRIAULT said the CS was  mentioned but was not adopted                                                              
as a working document.                                                                                                          
MR. GROSSI  said a task  force consisting of homebuilders,  labor,                                                              
the  insurance industry,  insurance brokers,  the timber  exchange                                                              
and  the Workers'  Compensation  Committee of  Alaska  put HB  212                                                              
together.   He said it  was a compromise  trying to deal  with the                                                              
problem of  the risk  involved with  subcontractors working  for a                                                              
general  contractor.   He said  when a  subcontractor got  injured                                                              
they  filed  a   claim  with  the  Workers'   Compensation  Board.                                                              
Sometimes they were  found to be employees.  As a  result of that,                                                              
the insurance companies  charged the general contractor  a premium                                                              
for that  potential risk.   He said the  homebuilders came  to the                                                              
Division a couple of years ago with  the issue, which prompted the                                                              
group getting  together and coming up  with HB 212.  He  said they                                                              
looked  at  several  possible  solutions,  including  waivers  and                                                              
requiring the general contractor  to cover everybody.  He said the                                                              
solution in HB  212 was chosen because it was  the least expensive                                                              
way of handling the problem.                                                                                                    
CHAIRMAN   THERRIAULT   said   the   word   "compromise"   denoted                                                              
MR. GROSSI  said the working group  was a large, diverse  group of                                                              
people and there was difficulty getting  agreement among them.  He                                                              
said  HB 212  fixes  the problem,  puts  certainty  back into  the                                                              
situation and allows  for predictability of cost.   He said HB 212                                                              
would allow everyone to know exactly  where the liability would be                                                              
and who would be responsible for coverage.                                                                                      
CHAIRMAN THERRIAULT said it seemed  like the uncertainty came from                                                              
the regulations of the relative nature of work test.                                                                            
MR. GROSSI said the relative nature  of work test was a regulation                                                              
that was a result of Supreme Court case law.                                                                                    
CHAIRMAN THERRIAULT  said often  a court  case decided  one factor                                                              
only  to create  a number  of other  questions,  which the  courts                                                              
would have  to come  back and clarify  further.   He asked  if the                                                              
proposed CS  would bring  more clarity to  the question of  when a                                                              
sole-proprietor is acting as an employee.                                                                                       
MR. GROSSI  said he  sent the CS  to his  hearing officers  to ask                                                              
them  what it did.   They  said it  codified the  laws that  exist                                                              
currently  but it didn't  really  change anything.   He said  that                                                              
doesn't take  away the uncertainty.   He said it  would eventually                                                              
have  to be decided  in the  courts.   He said  the original  bill                                                              
removes  all uncertainty,  which is  a benefit  over the way  it's                                                              
done now.                                                                                                                       
TAPE 02-27, SIDE B                                                                                                            
4:35 p.m.                                                                                                                       
CHAIRMAN THERRIAULT  said that uncertainty  is removed  because HB
212 would require coverage regardless of the situation.                                                                         
MR.  GROSSI  said  all  subcontractor  sole-proprietors  would  be                                                              
required  to have workers'  compensation  coverage, not all  sole-                                                              
CHAIRMAN  THERRIAULT asked  why  we should  differentiate  between                                                              
when a sole-proprietor  comes into the home to lay  carpet one day                                                              
and when he lays  carpet in a house in a new  subdivision the next                                                              
day.    He said  in  one  instance the  sole-proprietor  would  be                                                              
required to have  workers' compensation coverage and  in the other                                                              
he wouldn't.                                                                                                                    
MR. GROSSI said that had more to  with whether the purchaser was a                                                              
consumer  or a producer.   He  said there  is never any  potential                                                              
liability for a consumer who is simply a customer.                                                                              
CHAIRMAN  THERRIAULT said  it was the  same sole-proprietor  doing                                                              
the same job.   He asked if  Mr. Grossi had seen the  revised 2002                                                              
rates for sole-proprietor policies  based on assigned risk in bill                                                              
packet,  which listed  the dollar  amounts of  premiums for  sole-                                                              
proprietors who  purchase the insurance  for themselves  that were                                                              
in the bill packet.                                                                                                             
MR.  GROSSI  said   that  probably  came  from   the  Division  of                                                              
Insurance, not his office.                                                                                                      
CHAIRMAN THERRIAULT said this would  be the cost to the individual                                                              
as laid out in  HB 212.  He asked if there were  any questions for                                                              
Mr. Grossi.  There were none.                                                                                                   
MR. ALLEN  WILSON, Legislative  Chair, Alaska State  Homebuilders,                                                              
said he had  worked on this issue  for several years.   He said he                                                              
faxed the proposed  CS to his co-chair  and one of the  other task                                                              
force  members to  get their  opinion on  it.  He  said they  were                                                              
intrigued by the  approach and especially liked  the definition of                                                              
a  subcontractor.   He said  it seemed  clearer  than the  current                                                              
relative nature of  work test.  He said they would  like some time                                                              
to look  at it  and get it  to other task  force members  and come                                                              
back and offer further input.                                                                                                   
CHAIRMAN THERRIAULT said during the  last campaign he heard from a                                                              
constituent  who was a  sole-proprietor doing  drywall work.   The                                                              
constituent complained  that the State required  several licenses,                                                              
insurance  and bonding  and he had  to do  a lot  of work  just to                                                              
cover  those   costs.    He   said  the  constituent   wanted  the                                                              
legislature to  consider going in  the other direction,  which may                                                              
not be realistic.   When he saw  HB 212, he thought it  was a step                                                              
in the  opposite direction  than his  constituent was  encouraging                                                              
him to  go.  He  also heard several  comments from  his colleagues                                                              
that led him to believe the original  version of HB 212 would have                                                              
problems passing  the Senate.  He  asked Mr. Wilson  what comments                                                              
he had heard from his association members.                                                                                      
MR. WILSON said  the association was made up primarily  of general                                                              
contractors.   He said they were  caught in a catch-22  where they                                                              
were  asking   their  sole-proprietor  subcontractors   to  get  a                                                              
workers'  compensation policy  because they  were getting  charged                                                              
for it after the  fact and could not recover the  investment.  The                                                              
sole-proprietor  subcontractor  is not  required  to get  workers'                                                              
compensation  coverage.   He said  they had to  make the  decision                                                              
whether  to operate  illegally and  use the  subcontractor or  add                                                              
them to the payrolls,  which is more expensive  than the insurance                                                              
coverage.    He  said  when  you're   in  business  for  yourself,                                                              
generally the higher  the risk you assume, the  higher the reward.                                                              
The association  members agreed  that you should  be able  to take                                                              
that risk.  However  they did not want to have to pay  for it.  He                                                              
said that  was why  the nature  of work  test in  the CS has  some                                                              
appeal  and  he  felt  his  association  members  would  like  it.                                                              
However, he had  to ask if it provided enough  protection when the                                                              
insurance companies  did their  audits.  He  said at  first glance                                                              
the CS seemed to meet those requirements.                                                                                       
CHAIRMAN THERRIAULT  asked about the workability of  the nature of                                                              
work  test if  a  sole-proprietor  subcontractor  brought his  own                                                              
tools to the job or used a forklift on the jobsite.                                                                             
MR. WILSON  said especially  in custom  homebuilding, the  general                                                              
contractor would  work with the  homeowner to pick  out carpeting.                                                              
Because  the  general contractor  gets  a  better deal  on  carpet                                                              
because of  volume, he would purchase  the carpet.   The installer                                                              
would supply tack  strips, glue, nails, labor and  tools.  He said                                                              
under  the current  nature of  work  test the  installer would  be                                                              
considered  an employee  because the  general contractor  supplied                                                              
the carpet.   He suggested removing "materials"  from subparagraph                                                              
(F) in Sec. 3  of the CS because that word might  put them back in                                                              
the same situation.                                                                                                             
CHAIRMAN  THERRIAULT asked  if there  were any  questions for  Mr.                                                              
Wilson.  There were none.                                                                                                       
MS.   BARBARA   HUFF-TUCKNESS,  Director   of   Governmental   and                                                              
Legislative  Affairs,  Teamsters  Local  959, said  they  were  in                                                              
support of  HB 212.   She said Teamsters  Local 959  represented a                                                              
lot  of truckers,  some of  who were  in  a single  owner-operator                                                              
status, others who worked as owner-operators  for part of the year                                                              
and as subcontractors  for the other  part of the year.   She said                                                              
some  of  the   truckers  would  purchase   workers'  compensation                                                              
insurance    in   accordance   with    the   high-risk    trucking                                                              
classification.   Others would not by calling  themselves business                                                              
managers or by getting a lesser policy.                                                                                         
She said Lynden  Transport hired subcontractors  during peak times                                                              
of  the year  and required  that they  have workers'  compensation                                                              
insurance  or buy  into Lynden's  plan,  which was  a much  higher                                                              
policy.  She  said when the trucking industry  was deregulated the                                                              
truckers  themselves  became  very   regulated.    She  said  some                                                              
truckers did  carry the insurance, but  others did not.   She said                                                              
if you  were looking  at the same  costs, you  would have  a level                                                              
playing  field.   She  noted  that this  was  not a  union  versus                                                              
nonunion issue.  She believed the  policy increased to $3,000 this                                                              
MS. HUFF-TUCKNESS  said a trucker  might decide that they  were an                                                              
owner-operator and they wanted to  run the risk that they were not                                                              
going to get in an accident.  She  said the next week that trucker                                                              
might flip  their truck  over and  get hurt or  killed.   She said                                                              
current statute had  a big enough loophole that  those individuals                                                              
could make  that choice.   She said  she did not  wish to  give an                                                              
opinion on  the proposed CS  because she had  not had a  chance to                                                              
discuss it with her colleagues.                                                                                                 
CHAIRMAN  THERRIAULT asked  if there  were any  questions for  Ms.                                                              
Huff-Tuckness.  There were none.                                                                                                
MR. CHARLIE MILLER, Alaska National  Insurance, said he would like                                                              
to touch on a  couple of the questions that came  up earlier.  The                                                              
first  was the  question  of consumer  versus  contractor and  why                                                              
there should  be different  applications  of coverage for  someone                                                              
who laid carpet  in a home one day and for a  contractor the next.                                                              
When  the sole-proprietor  laid carpet  in  a home,  there was  no                                                              
legal  standing  for a  workers'  compensation claim  against  the                                                              
homeowner.   When the  sole-proprietor lays  carpet for  a general                                                              
contractor, there was a potential  cause of action.  He said those                                                              
were two completely  different situations and  the sole-proprietor                                                              
was not being penalized  for doing one job over the  other, it was                                                              
simply a matter of risk incurred.                                                                                               
CHAIRMAN THERRIAULT  said from Mr. Miller's  client's perspective,                                                              
he could  understand that they  would potentially have  to provide                                                              
MR. MILLER  said no  one provided  workers' compensation  coverage                                                              
for homeowners.                                                                                                                 
CHAIRMAN THERRIAULT  said if  a sole-proprietor subcontractor  was                                                              
determined  to   be  an  employee,   Mr.  Miller's   client  would                                                              
potentially have to provide coverage.                                                                                           
MR. MILLER said that was correct.                                                                                               
CHAIRMAN THERRIAULT noted that even  if it was determined that the                                                              
sole-proprietor subcontractor  was not an employee,  there was the                                                              
cost of the litigation to get to that point.                                                                                    
MR. MILLER agreed.                                                                                                              
CHAIRMAN THERRIAULT  asked if  there was no  way to clear  up that                                                              
MR. MILLER said  they had hoped to  do that with HB 212.   He said                                                              
he understood this  was what Chairman Therriault was  trying to do                                                              
with the CS.                                                                                                                    
CHAIRMAN  THERRIAULT  said HB  212  would  clear up  ambiguity  by                                                              
eliminating the question  of who should provide the  coverage.  He                                                              
said there  was still  the issue  of what  rules the person  would                                                              
have to play by  and when it was determined they  had crossed over                                                              
the line into being an employee.                                                                                                
MR. MILLER said  that area was not as predictable  as anyone would                                                              
like.   He  said there  were  two main  solutions  to the  problem                                                              
discussed by  the workgroup.  One of  them was HB 212.   The other                                                              
was somewhat  along the  lines of the  proposed CS, except  with a                                                              
fix at  the end.   He said the  CS did not  address a  solution it                                                              
just codified  the problem.  He  said the approach  they discussed                                                              
would be a  fixed point where there  was no chance for  appeal, no                                                              
chance for  the injured  party to  go before  the board  and claim                                                              
that under  the conditions  of the  relative nature  of work  test                                                              
they were  an employee  despite whatever they  had signed  or what                                                              
the situation  was before.   He  said that  situation would  still                                                              
exist under  the proposed CS.   He noted that he  hadn't discussed                                                              
the  proposed CS  with  his attorneys,  but  he felt  it had  been                                                              
discussed enough for him to feel  confident in this statement.  He                                                              
said cutting  off avenues  of appeal  was an unappealing  solution                                                              
because  there   can  be  situations  where   the  sole-proprietor                                                              
subcontractor felt that  the only way he would get  the job was to                                                              
sign  on as  a subcontractor.    He said  he  didn't feel  anybody                                                              
wanted  to make  a public  policy  call that  cut  off avenues  of                                                              
He said once  there was a  claim for workers' compensation  and no                                                              
premium had been paid, the only rational  cost for the premium was                                                              
the cost  of the  claim.   He said  if someone  were injured,  the                                                              
general  contractor couldn't  be presented  with the  cost of  the                                                              
claim and  it wasn't  reasonable  to expect the  injured party  to                                                              
cover the  cost.   He said it  would be  possible to backdate  and                                                              
charge   a  standard   premium  for   the  amount   of  time   the                                                              
subcontractor-come-employee  had been on  the job.  In  that case,                                                              
he said  you already  knew you had  lost.  He  said that  was like                                                              
betting  on a game  that had  already  been played.   He said  the                                                              
injured  party avoided  their responsibility  to  prepare for  the                                                              
possibility of an injury but received  the same benefit as someone                                                              
who paid the premiums and prepared for that possibility.                                                                        
MR. MILLER  said the comment made  earlier was that it  was unfair                                                              
to force sole-proprietors to buy  workers' compensation insurance.                                                              
He  said  workers' compensation  is  a  long-established  no-fault                                                              
system.  He said  if a contractor were to cause  a situation where                                                              
someone  got injured  the contractor  couldn't  be sued  or if  an                                                              
employee came  to work  drunk or  disregarded safety protocol  the                                                              
contractor had  no recourse to deny  the claim.  He  said everyone                                                              
who   hired   employees   was  required   to   purchase   workers'                                                              
compensation insurance.  He said  when a contractor didn't require                                                              
someone who  might be  working in the  gray area between  employee                                                              
and  subcontractor to  pay  for workers'  compensation  insurance,                                                              
they were  giving them the benefit  that was allowed to  all their                                                              
other employees.   He said  it could be  looked at in  a different                                                              
way; instead  of forcing  a sole-proprietor  subcontractor  to buy                                                              
the insurance, HB  212 really tried to make them  play by the same                                                              
rules that  everybody else had  to play by.   He said if  you gave                                                              
them the benefits  without requiring them to pay  into the system,                                                              
every other  worker who paid into  the system would be  paying for                                                              
their benefits.   He said  this argument  might be similar  to the                                                              
debate that's brought up in political  science class that you have                                                              
the right to free speech but does  that give you the right to yell                                                              
fire in  a crowded theater.   He said you  have a right to  take a                                                              
chance that you may be injured.                                                                                                 
He said  the system didn't  forget an injured  party.  He  said an                                                              
injured person would need to go to  the doctor and they would need                                                              
money  to  cover  their  rent.   He  said  that  person  would  be                                                              
receiving all  the benefits  of having a  policy even  though they                                                              
had not  participated in the  system to that  date.  He  said just                                                              
because they  apply for a claim  doesn't mean they're going  to be                                                              
successful  but   that  still  costs  the  system   in  litigation                                                              
expenses.   There was  still some degree  of confidence  that they                                                              
wouldn't  be forgotten.   He  said it  seemed unfair  to let  them                                                              
avoid  the  cost of  the  protection  because  they wanted  to  be                                                              
independent.   He noted that they  were not independent  after the                                                              
injury.  They became  very dependent on one part  of the system or                                                              
another.   He said  that situation  was what  made the task  force                                                              
decide against that  solution.  He said the other  approach seemed                                                              
to be more  rational because if  everyone who thought  they didn't                                                              
need the coverage  didn't get it, it  would be chaos.   He said no                                                              
one expected to have an injury that  prevents him or her from ever                                                              
working in that field again.                                                                                                    
He said HB  212 does not allow  any profit margin increase  to the                                                              
insurance industry.   He said the added policies  would go through                                                              
the residual  market and be assigned  to a particular pool  and no                                                              
insurance company makes  money off of that.  In fact,  in the past                                                              
several years,  the pool  lost money and  the premium  payers were                                                              
subsidizing  it.   He said  everything seemed  to be  lined up  in                                                              
favor of  HB 212 except  for the fact  that it was  unpalatable to                                                              
tell someone they have to do something  to protect themselves when                                                              
they felt that they didn't need to.                                                                                             
CHAIRMAN THERRIAULT asked if there  were any further questions for                                                              
Mr. Miller.  There were none.                                                                                                   
MS.  SARA MCNAIR-GROVE,  Property  Casualty  Actuary, Division  of                                                              
Insurance, Department  of Community  & Economic Development,  said                                                              
the Division  participated in the  discussions and the  task force                                                              
that came  up with  HB 212.   She said  there were two  approaches                                                              
that were discussed.   One was the solution that  was presented in                                                              
HB  212.   She said  the workgroup  also discussed  as their  most                                                              
desirable  solution a  way to  define when  a sole-proprietor  was                                                              
acting  as an independent  contractor.   She said  several  of the                                                              
previous  testifiers   had  addressed   the  problems   with  that                                                              
approach.  She  said the current solution was a  compromise and it                                                              
would provide certainty.                                                                                                        
She said she  looked at the proposed  CS and would like  more time                                                              
to study it.   She said if  there were clear guidelines  on how to                                                              
determine  whether somebody  was an independent  contractor  or an                                                              
employee  and   make  that  determination   stick,  it   would  be                                                              
preferable.  One  of the problems with that was  the premium audit                                                              
that  takes  place   after  a  job  ended.     She  said  workers'                                                              
compensation  policies were  based on payroll,  so the  contractor                                                              
estimated what their payroll was  going to be.  After the job, the                                                              
contractor  was audited  to determine if  their estimated  payroll                                                              
met the  actual payroll.   She said if  someone was  determined at                                                              
the  beginning of  the job  to be  an  independent contractor  and                                                              
broke one  of the conditions of  the relative nature of  work test                                                              
and was subsequently determined to  be an employee, there would be                                                              
an additional  premium based on  the audit.   She said if  you can                                                              
clearly   determine  what   situations  merit   a  premium   being                                                              
collected, the general  contractor could plan for  those costs and                                                              
wouldn't  be surprised  during the  audit.   She  said that  still                                                              
wouldn't eliminate the problem.                                                                                                 
CHAIRMAN THERRIAULT asked what triggered  the determination that a                                                              
subcontractor was actually an employee during the audit process.                                                                
MS.  MCNAIR-GROVE said  they  went  back and  looked  at what  the                                                              
individual did  to determine  whether they had  been acting  as an                                                              
employee or not.                                                                                                                
CHAIRMAN  THERRIAULT  asked  if  there  was  a  specific  list  of                                                              
MS.  MCNAIR-GROVE said  there  was  a list  of  questions but  she                                                              
didn't know what those questions were.                                                                                          
CHAIRMAN THERRIAULT  asked what caused  those back premiums  to be                                                              
MS. MCNAIR-GROVE  said she  didn't know the  specifics.   She said                                                              
she could get  a list of the  types of things that were  looked at                                                              
that  was  suggested  by  the  National  Council  on  Compensation                                                              
CHAIRMAN  THERRIAULT asked  if there  were any  questions for  Ms.                                                              
McNair-Grove.   There were  none.  He  asked if there  was anybody                                                              
else who wished to testify on HB 212.  There was nobody.                                                                        
HB 212 was held in committee.                                                                                                   
The final order of business before the committee was HB 300.                                                                    
              HB 300-PROCUREMENT OF TRAVEL SERVICES                                                                         
REPRESENTATIVE  JOE  HAYES read  the  following  from the  sponsor                                                              
     HB 300  will allow  for the  exemption of contracts  for                                                                   
     certain  types  of travel  services  including  airplane                                                                   
     travel, hotel accommodations  and travel agency services                                                                   
     from the procurement procedures of AS 36.30.                                                                               
     In  February  2002,  Alaska Airlines  adopted  a  policy                                                                   
     similar  to other  major airlines  capping travel  agent                                                                   
     commissions  from 5% of  the total  ticket price to  $10                                                                   
     and  $20  for one-way  and  roundtrip  airline  tickets,                                                                   
     respectively.   March  2002 brought  even worse news  to                                                                   
     the  agencies  when  the  airlines   declared  that  all                                                                   
     airline  commissions would cease.   Alaska Airlines  has                                                                   
     not yet cut  their commissions to travel  agents, but it                                                                   
     is expected  that they  will by  May 2002.   Due to  the                                                                   
     abatement  of commissions, it  has become necessary  for                                                                   
     many travel agencies  to rely on agency fees  to stay in                                                                   
     Since HB  300 will exempt  certain travel services  from                                                                   
     procurement   procedures    codified   in    AS   36.30,                                                                   
     administrative  agencies will be  able to choose  travel                                                                   
     providers  on a case-by-case  basis.   This will  foster                                                                   
     competition  by allowing  for the  consideration of  all                                                                   
     Passing  the  bill  will give  all  travel  agencies  an                                                                   
     opportunity  to provide  state  travel, thus  protecting                                                                   
     and fostering  Alaskan jobs and  businesses.  I  ask for                                                                   
     your support in passing this legislation.                                                                                  
REPRESENTATIVE HAYES said the events  of September 11  contributed                                                              
to the situation because people weren't  flying, which caused huge                                                              
losses for  the airline industry.   He said most state  travel was                                                              
planned by  travel agents  who did  not charge  a fee because  the                                                              
State said  they would use their  services as long as  they didn't                                                              
charge a fee.                                                                                                                   
He said  Southeast Alaska  had to  bid their  travel services  out                                                              
because there weren't  enough travel agents in the  area.  He said                                                              
US  Travel held  that contract  and charged  $8 for  a round  trip                                                              
ticket and  $4 for  a one-way ticket.   He  said the letter  dated                                                              
April 5, 2002 from the Department  of Administration to AAA Travel                                                              
that was  in the bill packets  exemplified what HB 300  was trying                                                              
to achieve.  He  said HB 300 was an issue of fairness  to him.  If                                                              
we requested services from businesses  in our communities, he said                                                              
it was only fair that we compensated them for those services.                                                                   
CHAIRMAN THERRIAULT asked if the fiscal note had been higher.                                                                   
REPRESENTATIVE  HAYES said  the fiscal note  was always  $228,000.                                                              
He  said this  number  was based  on the  prices  that were  being                                                              
charged by  US Travel.   He said the  State believed  the contract                                                              
with US  Travel would  probably have  to be  renegotiated and  the                                                              
fees would  probably increase.  He  said we were going  to have to                                                              
pay the  same price whether  we dealt  with one agency  or several                                                              
because of economy of scales.                                                                                                   
CHAIRMAN  THERRIAULT said  his personal  preference was to  remove                                                              
the findings and intent section of  HB 300.  He asked if there was                                                              
anything in the section that was necessary.                                                                                     
REPRESENTATIVE HAYES  said that was the way the  bill was drafted.                                                              
He said it could be done in a letter  if it pleased the committee.                                                              
CHAIRMAN  THERRIAULT  asked  if   there  were  any  questions  for                                                              
Representative Hayes.  There were none.                                                                                         
MR.  VERN   JONES,  Chief   Procurement  Officer,  Department   of                                                              
Administration (DOA),  said in the past, travel  agencies received                                                              
their  revenue from  airlines, hotels  and  rental car  companies.                                                              
The consumers, including the State,  did not have to pay for their                                                              
services.   He  said  that  had changed  since  all  of the  major                                                              
airlines had  or were  soon going  to cut commissions  completely.                                                              
He  said it  was  the  State's policy  to  get services  for  free                                                              
whenever possible and  only after they could not  get the services                                                              
for free  would they bid  out for services.   He said  this policy                                                              
resulted  in contracts  in Juneau,  Wrangell, Petersburg,  Haines,                                                              
Cordova, Seward and Dillingham.                                                                                                 
MR.  JONES  said   HB  300  would  not  prevent   the  State  from                                                              
establishing travel  agency contracts  but DOA intended  to follow                                                              
the intent of  the bill and work with industry  representatives to                                                              
establish a  fee schedule  of what the  State would be  willing to                                                              
pay  for the  services.   He said  any agency  willing to  provide                                                              
their  services at  or  below the  costs set  forward  in the  fee                                                              
schedule would  be eligible  to receive State  business.   He said                                                              
once  the travel  agents  met those  requirements,  the choice  of                                                              
agents would  be at the discretion  of the traveler,  the division                                                              
or  the  department.   He  noted  that  HB  300 would  not  affect                                                              
existing state contracts  because they were legal  and binding and                                                              
the State had an obligation to fulfill them.                                                                                    
He said HB  300 was not without  cost.  He said DOA  estimated the                                                              
difference between competitively  awarded contracts and negotiated                                                              
fees to be  around $8 per ticket.   Based on the volume  of travel                                                              
conducted by  the State,  that would be  about $230,000  per year.                                                              
He said the State bought about 50,000  tickets per year, 11,000 of                                                              
which were  purchased directly from  the airlines.   The remaining                                                              
39,000 tickets  were purchased through  travel agencies.   He said                                                              
he believed $8 was a conservative estimate.                                                                                     
CHAIRMAN THERRIAULT  asked if anything in the  findings and intent                                                              
section of HB 300  needed to remain in the bill  as a directive to                                                              
MR. JONES  said DOA  would perform  the same  with or without  the                                                              
intent language.   He said HB 300 wouldn't prevent  DOA from doing                                                              
a competitive  procurement if they  thought it was  necessary, but                                                              
it was DOA's intent to follow the intent of the bill.                                                                           
CHAIRMAN  THERRIAULT asked  if there  were any  questions for  Mr.                                                              
Jones.  There were none.                                                                                                        
MS.  SALLY HUNTLEY,  Frontier Travel,  said her  company has  done                                                              
business with  the State since  1982 and hired  staff specifically                                                              
to  work with  the State.   She  said they've  never received  any                                                              
money from the  State.  She said competition between  agencies has                                                              
kept  the cost  for  State tickets  fairly  low.   She  encouraged                                                              
support of HB 300  because it would keep a lot  of people employed                                                              
and it would  keep the State's ticket costs competitive  and fair.                                                              
She said  car companies  and hotels have  also cut commissions  to                                                              
travel agencies.  She said travel  agencies provided an incredible                                                              
service and would like to continue to do so.                                                                                    
MS. HUNTLEY  said the State did  a phenomenal amount  of business.                                                              
She  said at  the  pre-bid meeting  that  morning the  prospective                                                              
bidders asked  for an  idea of  how much  the contract was  worth.                                                              
She said  they were  not able to  get an answer  and did  not know                                                              
what  they were  getting into  with the  contract.   She said  she                                                              
would be  able to take  on several million  more dollars  worth of                                                              
business,  but she  could not  take on  five or  ten million  more                                                              
dollars worth of business because  of the size of her agency.  She                                                              
said she  could continue  providing  service at  the level  she is                                                              
providing currently if HB 300 passed.                                                                                           
SENATOR PHILLIPS asked if she came  down from Anchorage to testify                                                              
on HB 300.                                                                                                                      
MS. HUNTLEY  said she  had because  she felt  very strongly  about                                                              
this bill.                                                                                                                      
CHAIRMAN THERRIAULT asked if there  were any further questions for                                                              
Ms. Huntley.  There were none.                                                                                                  
MR. BILL BECK, President of Airlines  Online, said they have seven                                                              
staff  and  15 independent  contractors  who  work  through  their                                                              
office.  He said they support HB  300.  He said competition is the                                                              
best motivator to keep service standards  high.  He said there was                                                              
an advantage to  establishing a fee structure  and allowing choice                                                              
based on that fee  structure.  He said he was  also at the pre-bid                                                              
conference and said DOA wanted bids  for 17 areas around the state                                                              
but  could not  give any  estimates  of how  much those  contracts                                                              
would be  worth, which made  it very difficult  to come up  with a                                                              
bid and provide for the appropriate  amount of staff to handle the                                                              
contract.  He noted that the Juneau  contract with US Travel would                                                              
have to  be renegotiated and  that cost was  likely to go up.   He                                                              
said  support  of HB  300  would  provide better  competition  and                                                              
CHAIRMAN  THERRIAULT asked  if there  were any  questions for  Mr.                                                              
Beck.  There were none.                                                                                                         
MS. CINDY  BETTINE said  she owned two  travel agencies  in Palmer                                                              
and Wasilla, employing 13 women,  4 of which were certified travel                                                              
counselors.  She  requested support of HB 300.  She  said the lack                                                              
of commission  and net compensation  was a  big issue but  was not                                                              
the most  important issue.   She said  all travel agents  were not                                                              
created equal.   She  said some agencies  were waiving  their fees                                                              
and assigning  the least experienced  agent to the  State account.                                                              
She said  the State may be  saving $20 to  $30 in fees but  may be                                                              
paying much more  for their ticket because they  were working with                                                              
inexperienced  agents.   She said  this  was especially  important                                                              
when considering the fiscal note.   She said it was important that                                                              
the travel business  remain competitive and HB  300 would probably                                                              
achieve that.  She  would like to see the bill  passed through the                                                              
committees  and  to the  Senate  floor  so travel  agencies  could                                                              
continue providing service and saving travelers money.                                                                          
CHAIRMAN  THERRIAULT asked  if there  were any  questions for  Ms.                                                              
Bettine.   There were none.   He asked  if committee  members felt                                                              
the  same  way he  did  about  removing  the findings  and  intent                                                              
SENATOR PHILLIPS moved Amendment #1, deleting Sec. 1.                                                                           
CHAIRMAN THERRIAULT asked if there  was any objection to Amendment                                                              
There being no objection, Amendment #1 was adopted.                                                                             
SENATOR PHILLIPS moved SCSHB 300(STA) out of committee with                                                                     
attached fiscal note and individual recommendations.                                                                            
There being no objection, SCSHB 300(STA) was moved out of                                                                       
committee    with   attached    fiscal    note   and    individual                                                              
There being no further business before the committee, the Senate                                                                
State Affairs Committee meeting was adjourned.                                                                                  

Document Name Date/Time Subjects