HOUSE FINANCE COMMITTEE February 22, 1995 8:00 A.M. TAPE HFC 95-27, Side 1, #000 - end. TAPE HFC 95-27, Side 2, #000 - end. TAPE HFC 95-28, Side 1, #000 - 145. CALL TO ORDER Co-Chair Mark Hanley called the House Finance Committee meeting to order at 8:05 a.m. PRESENT Co-Chair Hanley Representative Martin Co-Chair Foster Representative Mulder Representative Brown Representative Navarre Representative Grussendorf Representative Parnell Representative Kelly Representative Therriault Representative Kohring ALSO PRESENT Kevin Richie, Executive Director, Alaska Municipal League; Bruce Ludwig, Alaska Public Employees Association; Susan Cox, Assistant Attorney General, Department of Law, Mary Hughes, Municipal Attorney, Anchorage; Duane Udland, Alaska Association of Chiefs of Police; Don Otis, Alaska Peace Officers Association. SUMMARY HB 120 An Act relating to public employers defending and indemnifying public employees and former public employees with respect to claims arising out of conduct that is within the scope of employment. CSHB 120 (FIN) was reported out of Committee with a "do pass" recommendation and with three zero fiscal notes; two by the Department of Administration, dated 2/10/95; and one by the Department of Law. HB 183 An Act extending the requirements of preliminary evaluation, notice, and prior legislative approval of certain lease-purchase agreements to include proposed improvements to real property; and providing for an effective date. 1 CSHB 183 (FIN) was reported out of Committee with a "do pass" recommendation and with a zero fiscal note by the Department of Administration. HJR 5 Proposing amendments to the Constitution of the State of Alaska relating to terms of legislators. CSHJR 5 (FIN) was reported out of Committee with a "do pass" recommendation and with a zero fiscal note by the Office of the Governor, dated 2/3/95. HOUSE BILL NO. 183 "An Act extending the requirements of preliminary evaluation, notice, and prior legislative approval of certain lease-purchase agreements to include proposed improvements to real property; and providing for an effective date." Representative Martin provided members with a substitute to Amendment 1, introduced in Committee on 2/20/95 (Attachment 1). Representative Martin MOVED to adopt Amendment 1. Representative Kohring OBJECTED for purpose of discussion. He inquired about other entities similar to AHFC. Representative Martin stated that the Alaska Industrial Development and Export Authority (AIDEA) and the Alaska Railroad Corporation are similar in regards to their bonding capabilities. He asserted that it would be better to address AIDEA and the Alaska Railroad Corporation in HB 189. Representative Kohring WITHDREW his objection. There being NO OBJECTION, Amendment 1 was adopted. Representative Mulder MOVED to report CSHB 183 (FIN) out of Committee with individual recommendations and with the accompanying fiscal note. There being NO OBJECTION, it was so ordered. CSHB 183 (FIN) was reported out of Committee with a "do pass" recommendation and with a zero fiscal note by the Department of Administration. HOUSE JOINT RESOLUTION NO. 5 Proposing amendments to the Constitution of the State of Alaska relating to terms of legislators. Representative Therriault provided members with Amendment 1, 9-LS0226\M.3 (Attachment 2). He observed that the amendment deletes language regarding terms served through appointment. He maintained that the language is redundant in lieu of 2 language added by the House State Affairs Committee. The amendment by the House State Affairs Committee clarifies that members who reach the end of their term limit while partially through an elected term will be allowed to finish the term. Co-Chair Hanley observed that the amendment eliminates all references to appointment. If a member is appointed to a regular legislative session the session served would be counted as if the member were elected. Representative Therriault MOVED to adopt Amendment 1. Representative Kelly OBJECTED for purpose of discussion. Representative Kelly indicated his intention to offer a conflicting amendment. Representative Kelly WITHDREW his objection. There being NO OBJECTION, Amendment 1 was adopted. Representative Kelly provided members with Amendment 2 (Attachment 3). He explained that Amendment 2 would place a 16 year term limit on the legislature and allow that no more than 8 years be served in a single body without taking a break during two regular sessions. Representative Therriault argued against the adoption of Amendment 2 In response to a question by Representative Grussendorf, Co- Chair Hanley clarified that "session" refers to a regular 121 day legislative session. Special sessions would not be counted. Co-Chair Hanley expressed concern that 16 year term limits are too long. He stressed that an inequity would exist between House districts since half of the district representatives would not have a Senate seat open at the end of their eight year terms. Half of the House members would not be able to extend their service past 8 years by moving to the Senate. Representative Kelly emphasized that consideration be given to what is fair to the district. Co-Chair Hanley argued that the amendment is inequitable to half the districts. He summarized that Amendment 2 would treat the House and Senate differently. Representative Therriault echoed concerns regarding the inequity between bodies as provided in Amendment 2. A roll call vote was taken on the MOTION to adopt Amendment 2. IN FAVOR: Brown, Grussendorf, Kelly, Mulder OPPOSED: Kohring, Martin, Navarre, Parnell, Therriault, Hanley, Foster 3 The MOTION FAILED (4-7). Representative Brown provided members with Amendment 3 (Attachment 4). She explained that the amendment would trigger term limits beginning in the year 2000 if the constitutional amendment is ratified in 1996. She explained that the effective dated is delayed to allow a Senate term beginning in 1996 to be finished. Representative Brown MOVED to adopt Amendment 3. Representative Martin spoke in support of Amendment 3. Representative Brown clarified that all previous service would be counted beginning in the year 2000. Representative Therriault stated that he considered adopting the approach taken by the amendment. He expressed concern that the amendment may affect the passage of the legislation. Co-Chair Hanley felt that the amendment would prevent the legislation's passage. Representative Martin asserted that the amendment is a good compromise from an immediate effective date. Representative Grussendorf noted that he would oppose the amendment. He stated that he would support the amendment if it is introduced as a House floor amendment. A roll call vote was taken on the MOTION to adopt Amendment 3. IN FAVOR: Martin, Navarre, Parnell, Brown OPPOSED: Grussendorf, Kelly, Kohring, Mulder, Therriault, Foster, Hanley The MOTION FAILED (4-7). Co-Chair Foster spoke in opposition to HJR 5. He pointed out that the political strength of the Municipality of Anchorage can only be countered by rural areas through seniority of rural members. Representative Therriault pointed out that members can return to service after the two year break. Representative Kelly spoke against term limits. He observed that national term limits are disadvantageous to the State of Alaska. He noted the position the Alaskan Congressional Delegation has recently gained through seniority. He maintained that citizens' constitutional right to elect whoever they choose must be considered. Representative Grussendorf observed the high rate of 4 turnover in the Alaska State Legislature. He noted that his district encourages long service by their representatives. Representative Martin pointed out that the Constitution is a contract with the people they elect to govern them. He observed that the contract can be changed by the people. He maintained that the framers of the Constitution intended that the Constitution remain flexible. He emphasized that the constitutional amendment would be voted on by the citizens of the state. (Tape Change, HFC 95-27, Side 2) Representative Mulder questioned who and what is driving the push and urgency of the concept of term limits. He stressed that the framers included limits in other governing bodies. He supposed that the framers did not want to limit the voters' range of choices. He maintained that voters are frustrated by a lack of contact with their legislators. He noted the large turnover of members in the previous election. Representative Brown asserted that term limits are a "double edged sword". She emphasized that the balance of power would be changed between the legislative and executive branch of government by the adoption of term limits. She acknowledged that term limits would be an improvement to the accumulation of power that long time members have acquired. She stressed the weight of incumbent financing. She maintained that due to incumbent financing members may be returned to the legislature regardless of their representation. She summarized that she would like to see more turnover and greater representation by women and minorities. She surmised that term limits will benefit under-represented groups. She stated that she would support HJR 5. Representative Navarre stated his intention to support HJR 5. He expressed his doubt that term limits would fix legislative problems. He hypothesized that voter apathy would be increased by term limits. He observed that the public does not have access to the same amount of information as their elected representatives. He emphasized that members must try to digest the information available to them and make the best decision in the public's interest. He stated that term limits in Alaska are not necessarily needed. He maintained that if term limits serve to take away a negative perception by the public in regards to the legislative process than term limits would be useful. Representative Therriault reminded members that HJR 5 will place the question before the voters. 5 Representative Kohring MOVED to report CSHJR 5 (FIN) out of Committee with individual recommendations and with the accompanying fiscal note. There being NO OBJECTION, it was so ordered. CSHJR 5 (FIN) was reported out of Committee with a "do pass" recommendation and with a zero fiscal note by the Office of the Governor, dated 2/3/95. HOUSE BILL NO. 120 "An Act relating to public employers defending and indemnifying public employees and former public employees with respect to claims arising out of conduct that is within the scope of employment." REPRESENTATIVE BRIAN PORTER, sponsor of HB 120, gave a brief overview of the legislation. He noted that the bill passed the House last year but failed to pass the Senate. He observed that the legislation would place current state policy regarding the indemnification of public employees in statute. The legislation indemnifies public employees who are acting within the scope of their employment, from normal acts and/or omissions from civil tort suit. He asserted that the legislation will provide security for individuals who could be named in a civil suit based on their position or line of authority. He observed that an individual's credit rating is effected by a lack of indemnification. Representative Porter pointed out that the legislation precludes any requirement for the government to protect an employee against punitive damages. The legislation does not require protection of a person who has committed gross negligence or an intentional reckless act. Representative Porter observed that most represented employees receive these protections through labor contracts. He noted that the legislation does not cover school district, University of Alaska, and REAA employees since they are already covered in another statute. In response to a question by Representative Mulder, Representative Porter clarified that probation and correctional officers are not currently protected by labor contract. They would be covered by the legislation. Representative Brown asked if legislators and legislative employees would be covered by the legislation. Representative Ported stated that it is his understanding that all public employees, not currently covered, would be covered under the provisions of HB 120. 6 Representative Brown presented members with Amendment 1 9LS0502\C.1 (Attachment 5). Amendment 1 inserts after "state" on page 5, line 5, "including the executive, legislative, and judicial branches of state government." Representative Brown expressed concern that the injured third party would not receive recovery in acts of gross negligence. Representative Porter stated that it would not be good public policy to provide total protection to someone who commits gross negligence or intentional wrongful acts. He observed that the injured third party can sue the responsible party. In addition, the state is not precluded from providing coverage on a case by case basis. Representative Brown noted that the employer is also excluded from the requirement to provide defence or indemnification when the case involves a disciplinary, administrative or criminal matter brought against the employee or when the employee has been convicted of a criminal offense or terminated from employment because of the conduct. Representative Porter clarified that the state would not be required to provide indemnification for the defense, unless provided by a labor contract, in a case brought by the state against an employee. The state would be responsible for indemnification if the act led to a civil suit. Representative Brown referred to the Greenfield versus State case. Representative Porter observed that the case involved an Alaska Psychiatric Institute (API) employee who allegedly was forced to quit their employment. The court agreed with the employee and awarded punitive damages. He noted that the legislation would not effect the awarding of punitive damages. He observed that any case that can now be brought to court would still be allowed after the passage of the legislation. The legislation only provides a statutory guarantee in simple negligent cases that the state or municipal entity protect their employee by defense and by indemnification. DON OTIS, ALASKA PEACE OFFICERS ASSOCIATION (APOA) testified via the teleconference network from Haines. He noted that the APOA strongly supports HB 120. He note that APOA listed indemnification as one of its highest priority issues in 1992. He read a position paper by APOA in support of HB 102 (Attachment 6). MARY HUGHES, MUNICIPAL ATTORNEY, ANCHORAGE testified via the teleconference network from Anchorage. She noted that the Municipality of Anchorage has adopted the policies outlined by HB 102. She noted that passage of HB 102 would clarify 7 for employees their indemnification by the Municipality. DUANE UDLAND, ALASKA ASSOCIATION OF CHIEFS OF POLICE testified via the teleconference network from Anchorage. He expressed support for HB 102. He pointed out that public employees who are not indemnified may have difficulty obtaining personal loans. BRUCE LUDWIG, BUSINESS MANAGER, ALASKA PUBLIC EMPLOYEES ASSOCIATION referred to the provisions of AS 39.55.010 (b)(3). He expressed concern that an employer may think that they can escape a liability through the termination of an employee. He noted that if the termination was incorrect the employer would have to pay attorney fees and the employee's back wages. Mr. Ludwig maintained that if an employee acts intentionally within the scope of their employment and punitive damages are found against them then the employer should pay the consequences. He asserted that if the employee acts within the scope and course of their employment all their acts and consequences should be covered by the employer. He recommended that the language "or terminated from employment by the public employer" be deleted in AS 39.55.010 (b)(3). He suggested that AS 39.55.010 (d) be deleted. KEVIN RICHIE, EXECUTIVE DIRECTOR, ALASKA MUNICIPAL LEAGUE stated that the AML supports HB 102. He emphasized the positive effect the legislation would have on small communities. He asserted that the legislation is good for both employer and employee. SUSAN COX, ASSISTANT ATTORNEY GENERAL, DEPARTMENT OF LAW responded to questions raised by the Committee. She clarified that the state covers the legislative branch when personal injuries occur in the course and scope of the legislator's business. She indicated that an amendment to clarify that all three branches of state government would not be objectionable. Ms. Cox pointed out that the state does not want to give public employees a blank check or encourage employees not to be careful and cautious. A third party injured by the gross negligence of a public employee can sue the public employee directly. The allegation of gross negligence in the complaint will not deny the employee defense by the state. She noted that most cases are brought against both the employee and employer. In most cases the employer settles both claims against the employee and employer. She noted that the language regarding "gross negligence" and "intentional willful misconduct" is taken from existing collective bargaining agreements. 8 Ms. Cox did not think that the provisions of AS 39.55.010 (b)(3) would provide incentive to the employer to terminate an employee. She pointed out that the employer is vicariously liable for the action of the employee. If the employee is found to be grossly negligent or committed intentional misconduct the employer would not be responsible. She discussed cases of employee gross negligence. She noted that (f) stated that whether or not the state provides defense or indemnification of an employee "does not constitute a waiver, limitation, or expansion of sovereign immunity or of other immunity." The legislation does not change anyone's rights in terms of suing the state or the state's immunity. The third party's right to sue the employer is not altered by HB 102. Ms. Cox addressed AS 39.55.010 (b)(2). (Tape Change, HFC 95-28, Side 1) Ms. Cox discussed the Greenfield case. She noted that the way the state handled the defense and indemnification of the individual would not have been changed by the legislation. She noted that the Superior Court determined that the state could be held liable for punitive damages under the whistle blower law. The court concluded that the legislature intended to waive the state's immunity from punitive damage liability in whistle blower actions. Representative Brown summarized that the state does not have to pay a judgement against the employee in cases where the employee is grossly negligent. Ms. Cox agreed with Representative Brown's conclusion. Representative Martin express concern that citizen's ability to receive justice would be inhibited. Ms. Cox pointed out that the public employee the injured third party wishes to sue will be backed by the employer's funding. She reiterated that state policy will not be changed by the legislation. The legislation codifies current policy. Representative Brown MOVED to adopt Amendment 1, 9- LS0502\C.1. She stressed that the amendment would clarify that "state" does include all the branches of government. There being NO OBJECTION, it was so ordered. Ms. Cox confirmed that the employees of the University of Alaska, a municipal school district, or a Rural Educational Attendance Area, excluded on page 5, are already covered. Representative Mulder MOVED to report CSHB 120 (FIN) out of Committee with individual recommendations and with the 9 accompanying fiscal notes. ADJOURNMENT The meeting adjourned at 9:49 a.m. 10