HOUSE FINANCE COMMITTEE April 15, 2000 9:20 A.M. TAPE HFC 00 - 121, Side 1 TAPE HFC 00 - 121, Side 2 TAPE HFC 00 - 122, Side 1 CALL TO ORDER Co-Chair Therriault called the House Finance Committee meeting to order at 9:20 a.m. PRESENT Co-Chair Mulder Co-Chair Therriault Representative Foster Vice Chair Bunde Representative Grussendorf Representative Austerman Representative Moses Representative J. Davies Representative Phillips Representative G. Davis Representative Williams ALSO PRESENT Representative John Coghill; Jeannie Smith, Staff, Senator MacKie; Guy Bell, Director, Division of Retirement and Benefits, Department of Administration; Dave Gray, Staff, Senator MacKie; George Capacci, General Manager, Alaska Marine Highway System, Department of Transportation and Public Facilities; Patti Swenson, Staff, Representative Bunde; Wendy Redman, Vice President, Statewide Programs, University of Alaska; Jeannie Smith, Staff, Senator MacKie; David Logan, Dentist, Juneau; Larry Persily, Deputy Commissioner, Department of Revenue. TESTIFIED VIA TELECONFERENCE Denny Kay Weathers, Anchorage. SUMMARY HB 121 "An Act relating to patients' rights under a health care insurance plan or contract providing coverage for dental care, and prohibiting certain practices by health care insurers relating to dental care." CSHB 121 (L&C) was REPORTED out of Committee with "no recommendation" and a zero fiscal note by the Department of Community and Economic Development and a zero fiscal note by the Department of Administration, both published on 4/14/00. HB 281 "An Act providing for the issuance of general obligation bonds in the amount of $665,000,000 for the purposes of paying the cost of design, construction, and renovation of public elementary and secondary schools, renovation of state buildings, capital improvements at the University of Alaska, and capital improvements to state harbors; and providing for an effective date." HB 281 was heard and HELD in Committee for further consideration. HB 311 "An Act eliminating a requirement that a social security number be provided by an applicant for a hunting or sport fishing license or tag." CSHB 311 (JUD) was REPORTED out of Committee with "no recommendation" and a fiscal impact note by the Department of Revenue, published 4/10/00. CSSB 85(RLS) "An Act relating to credited service in the public employees' retirement system for temporary employment; and creating a public service benefit in the public employees' retirement system." CSSB 85(RLS) was REPORTED out of Committee with a "do pass" recommendation and with a Department of Administration, published 2/15/00. SB 288 "An Act authorizing the Department of Transportation and Public Facilities to enter into an agreement with the Inter-Island Ferry Authority regarding the operation of the Clarke Bay Terminal, Prince of Wales Island." SB 288 was REPORTED out of Committee with a "do pass" recommendation and with a fiscal impact note by the Department of Transportation and Public Facilities, published 3/24/00. CSSB 192 (FIN) "An Act making and amending capital appropriations and reappropriations and capitalizing funds; and providing for an effective date." CSSB 192 (FIN) was postponed. CS FOR SENATE BILL NO. 85(RLS) "An Act relating to credited service in the public employees' retirement system for temporary employment; and creating a public service benefit in the public employees' retirement system." JEANNIE SMITH, STAFF, SENATOR MACKIE testified in support of SB 85. She noted that the legislation was introduced on behalf of constituents in Kodiak. She stressed that the legislation would be an effective management tool to minimize the impact of current and future budget reductions. The bill would allow employees to meet their retirement eligibility threshold sooner than they would otherwise be able. Employees prone to use this benefit for retirement credit are employees with higher service totals. Employer costs decrease when these employees are replaced through reduced costs to the Supplemental Benefit System (SBS) and the retirement system. The replacement of Tier I and Tier II category employees with new Tier III employees would lower benefit costs. The fiscal note reflects a $4 thousand dollar designated fund source of the Public Employees Retirement Trust Fund. The legislation would be a simple economic tool that may be used to minimize the impact of downsizing Alaska's state government. Ms. Smith noted that the legislation was changed in the Senate Rules Committee to include certain legislative employees. She noted that the full actuarial time would be counted. Co-Chair Therriault questioned if two years service in the Public Employee's Retirement System (PERS) is needed to get the credit in the Teacher's Retirement System (TRS). Ms. Smith explained that the legislation would address employees in the Department of Education and Early Development that switched from PERS to TRS. The intent is for the employee to pay the full actuarial cost of their temporary time, state benefits and interest. The net impact to the state of Alaska is zero. Vice Chair Bunde asked how departments have reacted to the legislation. Ms. Smith responded that other states are allowing flexibility between departments to minimize the impacts of downsizing. She noted that the agencies are supportive. Representative J. Davies questioned if the credit from the first service would be transferred to the second service. Ms. Smith clarified that the legislation would allow the service to be transferred. In response to a question by Co-Chair Therriault, Ms. Smith clarified that temporary time could be added to their threshold, but that it is impossible to use the time to change their Tier I or Tier II status. GUY BELL, DIRECTOR, DIVISION OF RETIREMENT AND BENEFITS, DEPARTMENT OF ADMINISTRATION provided information on the legislation and provided a brief summary of the three sections. Section 1 would allow employees to use temporary time for 20/30 and out. Currently, employees have to have 20 or 30 years of membership service depending on their employment. They can purchase their temporary time toward an actuarially adjusted higher benefit, but not to add years toward their retirement. The legislation would allow temporary time toward their retirement. An employee with 29 and a half years of service and 6 months of temporary time could pay for the temporary time in order to retire. Mr. Bell noted that the second provision would address legislative employees prior to 1979. These employees were classified as temporary and their time did not count in PERS. Their status was changed in 1979 and they were allowed to claim the service until 1980. The legislation would reopen the window and allow employees to purchase their time toward the conditional legislative retirement benefit of five legislative sessions. This provision would apply to a small number of people at no state cost. Mr. Bell discussed the third provision of SB 85. Individuals with a minimum of two years paid up service in PERS would be allowed to combine their service with TRS to reach the five- year vesting requirement for a retirement benefit. The Department of Administration would assure that the employee and employer contribution meets the actuarial for the benefit requirement. An actuarial adjustment could be made. The provision would only apply to a small number of people. Mr. Bell noted that there would be a small fiscal cost [$4 thousand dollars]. Vice Chair Bunde reiterated that only a small number of people would be affected. Mr. Bell gave the example of an individual that worked in the Department of Transportation and Public Facilities and then transferred to the Department of Education and Early Development. Some of his service is in TRS and some is in PERS. The total is more than 5 years, but he is not vested in either system. Mr. Bell observed that the agencies have not expressed concern with the legislation and that the bill is very limited in scope. Representative Foster MOVED to report CSSB 85 (RLS) out of Committee with the accompanying fiscal note. There being NO OBJECTION, it was so ordered. CSSB 85(RLS) was REPORTED out of Committee with a "do pass" recommendation and with a Department of Administration, published 2/15/00. CS FOR SENATE BILL 288 "An Act authorizing the Department of Transportation and Public Facilities to enter into an agreement with the Inter-Island Ferry Authority regarding the operation of the Clarke Bay Terminal, Prince of Wales Island." DAVE GRAY, STAFF, SENATOR MACKIE testified in support of SB 288. He explained that the legislation would authorize the Inter-Island Ferry Authority to assume operation of the Hollis terminal. The Inter-Island Ferry Authority is made up of five municipalities and six unincorporated communities that are primarily on Prince of Wales Island. The Authority has been working for the past five years to provide service between Prince of Wales Island and Ketchikan and Petersburg. The Authority is ready to go to bid on their first ship, which would be ready by June. Legislative authority is required before the Authority can take over operation of the Hollis terminal. The Authority will do the ticketing and docking on the Hollis side. The Authority will own the ships they operate. There will eventually be a new terminal on the northern end of the island. The state will retain operation of the Ketchikan and Petersburg facilities. Co-Chair Therriault questioned how many employees would be affected by the legislation. Vice Chair Bunde clarified that the state of Alaska will no longer provide service from Hollis. Mr. Gray observed that additional state service could occur on occasion. GEORGE CAPACCI, GENERAL MANAGER, ALASKA MARINE HIGHWAY SYSTEM, DEPARTMENT OF TRANSPORTATION AND PUBLIC FACILITIES provided information on SB 288. He clarified that the Authority will be responsible for maintenance and care of the facility. There are three state employees associated with the Hollis terminal. Two would be eliminated with the transfer of responsibilities to the Authority. One employee would remain to maintain the Craig reservation office and handle through traffic reservations throughout the system. Co-Chair Therriault noted that there would be a $141 thousand dollars savings to the state that would begin in the year 2002. Representative Foster MOVED to report SB 288 out of Committee with the accompanying fiscal note. There being NO OBJECTION, it was so ordered. SB 288 was REPORTED out of Committee with a "do pass" recommendation and with a fiscal impact note by the Department of Transportation and Public Facilities, published 3/24/00. HOUSE BILL NO. 121 "An Act relating to patients' rights under a health care insurance plan or contract providing coverage for dental care, and prohibiting certain practices by health care insurers relating to dental care." Representative Con Bunde, Sponsor spoke in support of HB 121. He noted that the legislation no longer prohibits insurers from reimbursing a covered person at a different rate because of the person's choice of dentist. He observed that the legislation was introduced to aid dentists to serve their patients effectively. He maintained that the House Labor and Commerce Committee version is supported by the parties impacted by the legislation. The legislation supports consumers by allowing them the right to receive full information regarding their care options without fearing adverse actions from insurance companies. The bill also allows patients to take civil action against health care insurers to enforce their rights and requires a dental treatment plan review or utilization review to be conducted by a dentist. PATTI SWENSON, STAFF, REPRESENTATIVE BUNDE provided information on the legislation. She noted that the legislation was amended in the House Labor and Commerce Committee on page 2, line 8 - 13 to allow individuals to use a dentist outside of the dental preferred provider organization. The language was added to satisfy union opposition to the bill. In response to a question by Representative Phillips, Ms. Swenson stated that the legislation would apply anywhere there is a dental preferred provider organization. Representative J. Davies asked for more information regarding arbitration. Ms. Swenson explained that insurance companies have a formal system of arbitration. The arbitration is to be a final agreement. If the parties do not agree a civil action can take place. Representative Bunde added that the arbitrator's decision is the end of the process. Patients can go on to sue. Representative J. Davies expressed concern that there be a time limit to the arbitration. He asked if arbitrators must act in a specified time period. Ms. Swenson did not know if a time limit exists, but stressed that it would cost the insurance company to continue the arbitration. DAVID LOGAN, DENTIST, JUNEAU spoke in support of the legislation as an advocate for patients. He pointed out that dentists do not receive an economic benefit from the legislation. Each company has a different arbitration plan. Most plans do not have a time specification. He pointed out that patients would have rights with the Insurance Commission to expedite the process. Representative Foster MOVED to report CSHB 121 (L&C) out of Committee with the accompanying fiscal note. There being NO OBJECTION, it was so ordered. CSHB 121 (L&C) was REPORTED out of Committee with "no recommendation" and a zero fiscal note by the Department of Community and Economic Development and a zero fiscal note by the Department of Administration, both published on 4/14/00. HOUSE BILL NO. 311 "An Act eliminating a requirement that a social security number be provided by an applicant for a hunting or sport fishing license or tag." REPRESENTATIVE JOHN COGHILL, SPONSOR testified in support o HB 311. The legislation would repeal the requirement to provide a social security number on hunting or sport fishing licenses or tags. He observed that there is a larger issue regarding the use of social security numbers for identification. He observed that federal law requires the use of social security numbers for a number of documents including recreational licenses. He suggested that the use of social security numbers on hunting or sport fishing licenses or tags is less secure than on other records such as marriage licenses. The federal code does not specifically identify that licenses being addressed. Representative Coghill referred to a memorandum by Terry Lauterbach dated March 23, 1999. Ms. Lauterbach concluded that the legislation could jeopardize federal funds for child enforcement. He noted that other states have challenged the federal requirement without consequences. He observed that "recreational license " is not defined in federal code. He suggested that the federal requirement could be challenged on the basis of security. Recreational licenses are sold in a number of businesses in the state of Alaska. He observed that the effective date would be January 1, 2001. He maintained that it would be easier to obtain social security numbers from hunting and fishing licenses than from a marriage or driver's license. Co-Chair Therriault observed that cases of stolen identity have occurred through the use of social security numbers. It can be difficult and expensive to straighten out cases of stolen identity. Representative J. Davies observed that social security numbers were added on hunting and fishing licenses when state welfare reform legislation was updated to comply with federal code. He expressed concern that overturning the federal requirement would create difficulty. Co-Chair Therriault observed that the original legislation, which was passed, to come into compliance had a sunset date. (TAPE CHANGE, HFC 00 - 121, SIDE 2)  Co-Chair Therriault noted that states that have not included hunting and fishing licenses did not lose funds. Representative Coghill spoke in support of the legislation. He noted that the whole issue has to be revisited in the next year under the current statute. He maintained that a challenge to the federal requirement is worthy and necessary. Vice Chair Bunde stated that he knows someone who had his or her identity stolen through his or her social security number. He observed that the person's credit was negatively impacted for five years. While he acknowledged the problem he expressed concern that the legislation is "like plugging a hole in a dike." He suggested that it is easy to obtain social security numbers in a variety a ways. He stated that he would support the proposal if it wouldn't result in the loss of federal funds. He added that social security numbers on hunting and fishing licenses has assisted child support enforcement. Representative Austerman observed that there is a bigger long-term issue. He referred to the memorandum by Ms. Lauterbach and noted that funds could be affected. Representative Coghill acknowledged that the legislation would not resolve the greater problem [of identity theft] but emphasized that the dialog needs to be started. He maintained that the challenge is worthy and pointed out that there is a security issue. Representative Coghill maintained that the legislation would be a vote of confidence in the people of Alaska. He stressed that the federal government would assume that the state of Alaska is willing to incorporate the information without a challenge. Representative Phillips questioned the impact to the state. She observed that the Department of Fish and Game would have costs associated with changing forms. She stressed that there is no way to assure safety in this day and age of technology. Representative Coghill observed that the effective date was chosen to allow the department to print forms for the following year without additional cost. In response to a question by Representative Austerman, Representative Coghill pointed out that inclusion of the social security number is mandatory. Representative J. Davies acknowledged that identity theft is a problem, but did not think the legislation was the way to solve the problem. He observed that there are businesses that will research a person's social security number and other financial information for $35 dollars. He expressed concern that TANF and other federal funds could be lost. He observed that other states have begun challenges and recommended that the state of Alaska wait to see where the challenges go or at least get an opinion from the Attorney General. DENNY KAY WEATHERS, ANCHORAGE testified via teleconference in support of the legislation. She observed that her son lost a piece of identification that was found and used to run up phone charges. She does not have a social security number and is not employed. She pointed out that a social security number is only required for employment by the federal government, however the state of Alaska requires social security numbers (SSN) for hunting and fishing licenses. She stressed that non-residents are not required to have a social security number. She provided members with CRS Report for Congress, November 21, 1991, The Social Security Number: Chronology of Federal Developments Affecting Its Use (copy on file). She reviewed the report. The federal Tax Reform Act of 1976 authorizes states to use Social security numbers in administration of any tax, general public assistance, driver's license or motor vehicle registration law and to require individuals affected by such laws to furnish their SSNs to the states. In addition, states are permitted to use Social security numbers for requests for information from any agency operating pursuant to the Aid to Families with Dependent Children program and the Child Support and Establishment of Paternity program. The Commercial Motor Vehicle Safety Act of 1986 gave the secretary of Transportation authority to require that states to include a SSN on commercial vehicle licenses. Ms. Weathers stressed that SSN information was intended to be confidential. She observed that SSNs are required for commercial fishing permits. Fishing tenders come from all over. Commercial fishermen are required to give their SSN and name to fish tenders. Ms. Weathers continued support for a challenge to the federal requirement to include social security numbers. She observed that other states are challenging the federal mandate for inclusion of Social security numbers. She observed that there are challenges in the states of Idaho, New Mexico, Michigan, Montana and North Carolina. She added that some individuals do not give their Social security numbers on religious basis. She concluded that section 3 of the Statehood Act states that anything repugnant to the United States Constitution or the principals of the Declaration of Independence would be unlawful. She concluded that allowing the federal government to legislate for the state is against these principals. She maintained that there are no federal laws requiring social security numbers, only federal mandates. Ms. Weathers quoted Article I, Section 2 state of Alaska Constitution: "All political power is inherent in the people. All government originates with the people, is founded upon their will only, and is instituted solely for the good of the people as a whole." She urged the legislature to uphold the people's right to not have a social security number. LARRY PERSILY, DEPUTY COMMISSIONER, DEPARTMENT OF REVENUE testified in opposition to HB 311. He observed that the Child Support Enforcement Division statutes sunset in the next year. He stressed that there is legislation in Congress to overturn requirements for SSN on hunting and fishing and recreational licenses. He suggested that a resolution could be passed requesting Congress to overturn the requirement. He acknowledged that there are some individual states fighting the requirement. Indications are that the federal government will penalize states that do not enforce federal requirements and that they will loss their federal funds for child support and TANF. He pointed out that there were options to avoid vendors from seeing SSNs. Applicants can go to a Fish and Game office or apply by mail. If someone does not have a SSN they can fill out an affidavit and attach it to their application. He observed that the Child Support Enforcement Division cannot suspend a recreational license. Only those convicted of criminal non-support or contempt can loose their license. Personal uses and subsistence uses are unaffected. Co-Chair Therriault noted that the zero fiscal note shows the potential loss of revenue. Co-Chair Mulder MOVED to report CSHB (JUD) out of Committee with the accompanying fiscal note. There being NO OBJECTION, it was so ordered. CSHB 311 (JUD) was REPORTED out of Committee with "no recommendation" and a fiscal impact note by the Department of Revenue, published 4/10/00. HOUSE BILL NO. 281 "An Act providing for the issuance of general obligation bonds in the amount of $665,000,000 for the purposes of paying the cost of design, construction, and renovation of public elementary and secondary schools, renovation of state buildings, capital improvements at the University of Alaska, and capital improvements to state harbors; and providing for an effective date." Co-Chair Mulder explained that HB 281 contains the school- construction package. Members were provided with a proposed committee substitute, work draft 1-LS1201\V, 4/15/00 and a spreadsheet listing schools that would be included (copies on file). Schools, the university and ports and harbors would receive funding. The total cost of the package would be $269,595.8 million dollars and tobacco bond revenues would fund the legislation. He observed that: "It is the intent of the legislature that the sale of a portion of the revenue derived from tobacco settlement litigation described under sec. 3(a) of this Act result in funding of $1,400,000 annually for smoking education and cessation programs administered by the state." In response to a question by Co-Chair Therriault, Co-Chair Mulder clarified that the student housing identified in the legislation would be at the Alaska Vocational Technical Center in Seward. There is a piece of property that is across the street that would be used to build additional housing. Co-Chair Therriault asked for more information regarding the University of Alaska, Mat-Su Ortner building replacement. WENDY REDMAN, VICE PRESIDENT, STATEWIDE PROGRAMS, UNIVERSITY OF ALASKA explained that the Mat-Su Ortner building replacement has been on the University of Alaska's capital list for many years. She observed that the facility would be for the maintenance shop. They are currently using a classroom. It is high on the Board of Regent's priority list. Ms. Redman noted that the definition under the projects should be broader than "deferred maintenance". She observed that "deferred maintenance/renewal and replacement/ code compliance" has been used in the past. She suggested that the legislation be amended on page 5, lines 16, 21, and 24 to include the broader definition. Vice Chair Bunde noted that "construction and renovation" is used on line 12. Ms. Redman noted that the terms were not used in the budgeting process. Vice Chair Bunde referred to page 2, section 1. He observed that funding would not be reduced below $1.4 million dollars. He questioned if the language should be more flexible to allow additional money to be appropriated if there is a surplus. Co-Chair Therriault stressed that the legislature could appropriate additional money and agreed that the language could be clarified. Representative Phillips recommended that "GO" be replaced with "revenue" bonds. Representative Williams asked how many projects could be completed with the tobacco securitization. Co-Chair Therriault responded that $269 million dollars is the total amount. Co-Chair Mulder explained that a higher amount could increase the cost of the bonds from 6.5 to 7 percent or higher. Representative Williams recommended that the state use as much as possible. Co-Chair Mulder stressed that the settlement would continue in perpetuity, if the bonds proceeds are realized in the level that is anticipated that they would be retired in 20 years and the MSA could be leveraged again. If there are problems in realizing the income stream as established in the MSA then risk is born by the holders of the bonds. There is a potential to be extended to 40 years. Co-Chair Therriault reviewed questions that arose during the meeting. (TAPE CHANGE, HFC 00 - 122, SIDE 1)  Co-Chair Mulder requested that the legislation be held to further review the suggestions. HB 281 was heard and HELD in Committee for further consideration. ADJOURNMENT The meeting was recessed at 10:55 a.m.