HOUSE FINANCE COMMITTEE March 22, 2011 1:40 p.m. 1:40:01 PM CALL TO ORDER Co-Chair Stoltze called the House Finance Committee meeting to order at 1:40 p.m. MEMBERS PRESENT Representative Bill Stoltze, Co-Chair Representative Bill Thomas Jr., Co-Chair Representative Anna Fairclough, Vice-Chair Representative Mia Costello Representative Mike Doogan Representative Bryce Edgmon Representative Les Gara Representative David Guttenberg Representative Reggie Joule Representative Tammie Wilson MEMBERS ABSENT Representative Mark Neuman ALSO PRESENT John J. Burns, Attorney General, Department of Law; Anne Carpeneti, Assistant Attorney General, Legal Services Section, Criminal Division, Department of Law; Konrad Jackson, Staff, Representative Kurt Olson; Pat Davidson, Legislative Auditor, Division of Legislative Audit; Linda Hall, Director, Division of Insurance, Department of Commerce, Community and Economic Development; Jennifer Senette, Staff, Representative Kurt Olson; Jeanne Ostnes, Staff, Representative Craig Johnson. PRESENT VIA TELECONFERENCE Bob Pickett, Chairman, Regulatory Commission of Alaska; Steve Stephan, Director of Government Relations, National Association Professional Surplus Lines Office; Dale Fosselman, Senior Vice President, Corporate Development, Denali Alaskan Federal Credit Union, Wasilla; Don Rulien, Certified Public Accountant and Member, Legislative Committee, Alaska Society of Certified Public Accountants, Anchorage. SUMMARY HB 8 FEDERAL REGULATIONS & EXECUTIVE ORDERS HB 8 was SCHEDULED but not HEARD. HB 10 NONCOMMERCIAL TRAILER REGISTRATION FEE HB 10 was SCHEDULED but not HEARD. HB 24 EXTEND REGULATORY COMM. OF ALASKA SUNSET CSHB 24(FIN) was REPORTED out of Committee with a "do pass" recommendation and with attached new fiscal note by the House Finance Committee for the Department of Commerce, Community and Economic Development. HB 64 PERMANENT MOTOR VEHICLE REGISTRATION HB 64 was SCHEDULED but not HEARD. HB 97 EXTEND INVASIVE PLANTS LAW HB 97 was REPORTED out of Committee with a "do pass" recommendation and with attached previously published fiscal note: FN 1 (DNR). HB 105 SOUTHEAST STATE FOREST HB 105 was SCHEDULED but not HEARD. HB 127 CRIMES INVOLVING MINORS/STALKING/INFO HB 127 was HEARD and HELD in committee for further consideration. HB 140 APPROP: COMMUNITY QUOTA ENTITY LOAN FUND HB 140 was SCHEDULED but not HEARD. HB 141 LOANS TO COMMUNITY QUOTA ENTITIES/PERMITS HB 141 was SCHEDULED but not HEARD. HB 147 BOARD OF PUBLIC ACCOUNTANCY SECRETARY HB 147 was REPORTED out of Committee with a "do pass" recommendation and with previously published fiscal note: FN 1 (CED). HB 164 INSURANCE: HEALTH CARE & OTHER HB 164 was HEARD and HELD in Committee for further consideration. HB 175 COURT APPEARANCES; ARSON; INFRACTIONS HB 175 was HEARD and HELD in committee for further consideration. SB 76 SUPPLEMENTAL/CAPITAL/OTHER APPROPRIATIONS SB 76 was SCHEDULED but not HEARD. Representative Gara noted that some of the committee members wanted to speak to Commissioner Bryan Butcher and the Department of Natural Resources about royalty relief provisions (connected with House Bill 110). Co-Chair Stoltze responded that the committee would attempt to fit the requested presenters in. HOUSE BILL NO. 127 "An Act relating to the crimes of stalking, online enticement of a minor, unlawful exploitation of a minor, endangering the welfare of a child, sending an explicit image of a minor, harassment, distribution of indecent material to minors, and misconduct involving confidential information; relating to probation; and providing for an effective date." 1:42:21 PM Co-Chair Stoltze noted that his intent was not to report the crime bills [HB 127 and HB 175] out that day, but to begin an in-depth discussion about them. JOHN J. BURNS, ATTORNEY GENERAL, DEPARTMENT OF LAW, testified in favor of both HB 127 and HB 175. He noted that HB 175 was a housekeeping bill that would clarify and correct statutory revisions made the prior year. Attorney General Burns informed the committee that the focus of HB 127 (as proposed by the governor) was to expand the crimes of stalking and misconduct involving the acquisition and misuse of confidential information; it would expand the scope of crimes associated with online enticement and exploitation of minors. He asserted that the state was firmly focused on ending the epidemic of sexual assault and domestic violence that had been plaguing Alaskan communities. He reviewed statistics: · The incidence of sexual abuse among Alaskan children was six times the national average. · Alaskan women were raped two-and-one-half times more often than the national average. · 60 percent of Alaskan women had been physically or sexually assaulted or seriously threatened with assault. Attorney General Burns explained that HB 127 had been built on legislation implemented the prior year, and proposed important changes that would further protect victims from exploitation and assault. In addition to amending and clarifying aspects of existing statutes, HB 127 would expand the crime of stalking by amending the definition of "non-consensual contact" and make it a crime to use a global positioning system (GPS) device to follow or monitor a victim, or to install or attempt to install devices to observe, record, or photograph events occurring in the home, workplace, or vehicle of a victim, or on a victim's personal telephone or computer. 1:45:53 PM Attorney General Burns continued that the amended definition reflected the reality of current technology and the illicit uses to which it was being applied. House Bill 127 would also make it a crime to distribute an explicit image of a minor and to knowingly obtain or misuse confidential information about another person without legal authority or consent. Finally, in addition to various amendments and sentencing reclassifications, HB 127 would improve upon law enacted the prior year to allow the attorney general (or the attorney general's designee) to issue administrative subpoenas to law enforcement officials to obtain limited information from an internet services provider (ISP) if there was probable cause to believe that an internet service account was being used in connection with the crimes of the online enticement of a minor, unlawful exploitation of a minor, or the distribution or possession of child pornography. Attorney General Burns concluded that the objective of HB 127 was consistent with efforts to eradicate sexual assault and domestic violence in Alaska. He urged support of the legislation. Representative Guttenberg queried the administrative subpoena for an internet service provider. He asked how providers from outside Alaska would be dealt with. Attorney General Burns replied that the intent of the proposal was to allow the service of an administrative subpoena either as currently lawfully provided or as acceptable to the internet service provider, in order to facilitate the process of service. Currently, the law related to an administrative subpoena provided for signature only by the attorney general, and the service had to be either through certified mail or by process server. House Bill 127 would facilitate the service of administrative subpoenas through other, additional means. Representative Guttenberg summarized that the subpoena would only be serviceable by mutual consent. Attorney General Burns replied that the subpoena would be allowed as authorized by law or through mutual consent. 1:48:35 PM Representative Wilson questioned the fiscal notes, which she pointed out were indeterminate or zero. She wondered whether there were statistics about who would fall under the categories. ANNE CARPENETI, ASSISTANT ATTORNEY GENERAL, LEGAL SERVICES SECTION, CRIMINAL DIVISION, DEPARTMENT OF LAW, replied that she assumed the question related to the expansion of the definition of non-consensual contact, or stalking. She stated that there were no statistics, because the activities were not currently against the law. She added that there was information from other jurisdictions that the described acts had been done by stalkers. She pointed out that to convict someone of stalking, it had to be proven beyond a reasonable doubt that the accused person committed the acts of non-consensual contact with the intent to terrorize the victim or to put the victim in fear of death or physical injury. The legislation contained a definition of non-consensual contact and what that would include. Representative Wilson asked whether there were statistics from other states with the laws already in place. Ms. Carpeneti responded that she was not familiar with the statistics, but offered to look for more information. Representative Wilson acknowledged that there was a need for the definition. She thought zero and indeterminate fiscal notes made it hard to calculate the financial impact. Ms. Carpeneti responded that the state did not anticipate a large number of cases, but wanted the statute to be changed so that there would be provisions to address the situation if it came up. Representative Costello believed that the bill would prohibit graphic texting, regardless of whether a minor initiated the action or forwarded something. Attorney General Burns responded that she was correct. Representative Costello noted that the bill would clarify that a child under the age of 16 years of age could not be left alone with a person who had to register as a child kidnapper. She asked whether the law already addressed those who had to register as sex offenders. 1:52:24 PM Ms. Carpeneti responded that the item was considered a housekeeping amendment; the statute prohibited a parent from leaving a child under 16 years of age with a person who was required to register as a sex offender; for some reason, it did not include people who had to register as child kidnappers. Representative Doogan queried how harassment would be applied by the bill. Ms. Carpeneti answered that the amendment to the harassment statute in HB 127 was only conforming, to make it clear that the "sexting" provision (created in another section) was not duplicative in the harassment section. Co-Chair Stoltze queried the word "sexting." Ms. Carpeneti replied that the word was not in the bill, but was in common usage. Representative Doogan asked how the issue of misconduct involving confidential information would be applied in the bill. Ms. Carpeneti responded that the item would be a new crime. Representative Doogan queried the issue of probation. Ms. Carpeneti answered that current statute required that the Department of Corrections (DOC) provided qualified probation officers to the superior court. She added that superior court meant felony crimes. Historically, Alaska had never had probation officers for supervised probation for misdemeanants, primarily because it would be enormously expensive. However, there had been an experimental program tried by a group of people in the criminal justice system (the PACE [Probationer Accountability with Certain Enforcement] program); a discreet group of misdemeanor defendants were stringently supervised during probation to ascertain what difference could be made. House Bill 127 would clarify that courts would not be able to appoint probation officers to every misdemeanant, unless the commissioner of DOC agreed. Representative Gara expressed concerns about the administrative subpoena. He pointed out that historically, a subpoena could only be issued by a court; the prior year, legislative authority had been given to allow the attorney general to issue some subpoenas. He asked what form would have to be used so that the defendant knew they got the subpoena and had the time to challenge its validity. Ms. Carpeneti replied that at the current time, there would not be a defendant to notify. She referred to testimony by Sgt. DeGraff the prior year related to investigations based on probable cause that a particular internet account was being used to perpetrate child pornography crimes or online enticement of a minor. The bill would allow law enforcement to obtain information about the account from an internet service provider; the administrative subpoenas would only go to internet service providers, so there would not be a defendant at that point. 1:57:37 PM Representative Gara summarized that the person gone after would not know. Ms. Carpeneti responded that he was correct. She added that there would be limited information about an identity; at a certain point, the defendant would have the right to get the information, if there were criminal charges. Representative Gara asked why the state could not simply rely on the courts to determine whether a subpoena was valid. Ms. Carpeneti replied that crimes involving computer and internet use and involving child and pornography moved swiftly; the information had to be obtained as quickly as possible in order to isolate the computer being used. The alternative was to go to the judge and get a search warrant, but for a quicker investigation with limited information. She noted the provision was the same as the one passed the previous legislative session to find out where the computer was. Co-Chair Stoltze observed that the stakes were high for the children involved. Vice-chair Fairclough asked whether the bill could be applied to the activities of the Transportation Security Agency (TSA). She referred to concerns that the images taken in airports could be used as inappropriate material. She believed pat-down procedures were being conducted at an unnecessary rate and raised questions about inappropriate touching. She wanted to fight for Alaskans' rights to privacy. Mr. Burns responded that issues relative to the TSA were being evaluated. 2:02:14 PM Representative Edgmon thanked the governor for his emphasis on the issue represented in HB 127. He referred to the bill heard earlier during the session related to synthetic marijuana. He wondered about rural Alaska and getting ahead of the technology curve with the legislation. Mr. Burns responded that the department was trying to keep up with the technology; he thought the present use of the internet for the described uses was "appalling." He stated that HB 127 intended to achieve the ability for law enforcement to intercept through the administrative subpoena process; it would not take the place of a warrant, but would allow law enforcement to hone in on the activity. Representative Edgmon remarked that GPS units were used throughout the state. He wondered whether the GPS device would have state application. Mr. Burns responded in the affirmative. Ms. Carpeneti commented that the additions to the definition of non-consensual contact were part of the stalking statute, which provided that a person committed the crime if they recklessly placed another person in fear of death or physical injury by engaging in a course of conduct that reasonably frightened them. The proposed new ways of contacting a person would be in addition to those already stipulated in statute. Vice-chair Fairclough remarked that victims of rape, incest, or child abuse felt the same as those who were patted down by the agents of the TSA. She expressed frustration. Representative Guttenberg asked how an individual ISP could be focused on in public places that had many computers, such as internet cafes. He described experience with wireless routers. He wondered whether there was something in the bill that would help focus on a perpetrator. 2:08:12 PM Co-Chair Stoltze pointed out that there would be more details when the American Civil Liberties Union (ACLU) took the state to court. Representative Gara pointed to a provision on page 3, line 24 and wondered whether an amendment would be needed. He noted that the provision related to "sexting" was aimed at preventing abuse of people under 16 years of age, and that certain body parts (which he would not read into the record as they sounded bad) applied. However, the bill did not say that the body parts had to be uncovered. He queried the intent. Ms. Carpeneti replied that the terms were used in many places in Title 11; the intent related to unclothed body parts. Representative Gara asked whether it was written anywhere in the statutes that the body parts had to be unclothed in order to prosecute someone. He asked whether the word "genitals" was defined in relation with being uncovered. Ms. Carpeneti answered that the issue had never come up; she assumed the meaning was unclothed. Representative Gara expressed discomfort with the language; he wanted more than intent. He did not want a person to be prosecuted for texting clothed body parts. He was not convinced that the language in the bill was clear enough and questioned the need for an amendment. 2:11:40 PM Ms. Carpeneti responded that the item was defined as an explicit image. She thought a court decision addressing the issue could be found. She added that the intent was not to prohibit sending pictures of clothed people. Vice-chair Fairclough opined that people could be clothed and the image could still be explicit. She thought the current language had been sufficient in the past. She pointed out that people could dress children up in sexually provocative ways before creating inappropriately explicit images. Vice-chair Fairclough believed Representative Gara's intent had been put into the record. She thought it was right to point out there could still be a violation with the presence of clothing. Representative Doogan believed the bill would do two things: raise the classification in three cases from Class B to Class C felonies, and insert a few new crimes that were Class B felonies. He asked why the penalties needed to be increased in the first cases. Ms. Carpeneti believed there had been a misunderstanding; the new crimes added were misdemeanors, not felonies. The bill would raise the crime of online enticement of a minor (currently a Class C felony for most first-time offenders and a Class B felony for sex offenders or child kidnappers) up one level. The rationale was that the crimes were very serious and caused enormous harm to children. Ms. Carpeneti continued that the crime of the unlawful exploitation of a minor (the creation of child pornography using children) would be raised to a Class B felony for all offenders; under current law, the crime was a Class B felony for the first offense and a Class A felony for a second conviction of the offense. The rationale for the increase was the seriousness of the conduct. 2:16:32 PM Representative Doogan pointed to Section 9 of the sectional analysis, which he thought communicated that the bill would create a new crime that was a Class B felony. Ms. Carpeneti replied that Section 9 would create misconduct involving confidential information in the first and second degree (Class A and Class B misdemeanors). Representative Doogan referred to the sections in which the felony level would be raised up and asked whether the levels had been set the previous session. Ms. Carpeneti replied that the particular crimes and levels had not been created recently. She added that unlawful exploitation of a minor was created when the criminal code was created in 1978 and had been enacted in 1980; online enticement of a minor was enacted in the early 2000s. HB 127 was HEARD and HELD in committee for further consideration. HOUSE BILL NO. 175 "An Act relating to an appearance before a judicial officer after arrest; relating to penalties for operating a vehicle without possessing proof of motor vehicle liability insurance or a driver's license; relating to penalties for certain arson offenses; amending Rule 5(a)(1), Alaska Rules of Criminal Procedure, and Rule 43.10, Alaska Rules of Administration; and providing for an effective date." 2:18:46 PM JOHN J. BURNS, ATTORNEY GENERAL, DEPARTMENT OF LAW, explained that HB 175 would provide statutory clarifications. ANNE CARPENETI, ASSISTANT ATTORNEY GENERAL, LEGAL SERVICES SECTION, CRIMINAL DIVISION, DEPARTMENT OF LAW, provided details about the legislation. House Bill 175 would solve four inconsistencies between the court rules and the statutes. She explained that three of the inconsistencies had been created over the years with statutes enacted in one year and later changed; she took personal responsibility for the fourth one, which resulted from the comprehensive updating and revision of bail statutes that was passed the year prior. There was one mistake: the bill changed the deadline before which a person arrested for a crime had to be brought before a judicial officer from 24 hours to 48 hours. She added that the law still provided that a person arrested had to be brought in front of a judicial officer without unnecessary delay; however, there were cases in which 48 hours was much more practical, such as arrests made in the early-morning hours. There were also cases in which it was not possible to find the victim in time to provide notification of the arraignment. Ms. Carpeneti noted that the issue had been discussed extensively the previous year. The court rules had been changed (at the department's suggestion), but the statute had not been brought before the legislature to be changed. She detailed that HB 175 would change the statute in the arrest law and in the extradition law. Ms. Carpeneti reviewed the first of three other inconsistencies that would be addressed by HB 175. She detailed that there was an inconsistency regarding the penalty for failing to carry a driver's license when operating an automobile; it was currently a Class B misdemeanor, but under the bail schedules in the court rules, it was also a $50 correctable offense. The legislation would make the offense of failing to carry a driver's license an infraction rather than a Class B misdemeanor. Ms. Carpeneti reviewed the second inconsistency in the law, related to failure to carry proof of automobile insurance while driving. Under Title 28, the offense was a Class B misdemeanor; it was also on the bail schedules as a correctable offense with a mandatory fine of $500 dollars. House Bill 175 would make the activity an infraction with a mandatory fine of $500 dollars for failure to carry proof of insurance, but it would be correctable; a person could bring proof of insurance to the police department and the offense would be dismissed. Ms. Carpeneti reviewed a [third] inconsistency related to the arson law. In 2006, the legislature created the Knik River Public Use Area. The Department of Natural Resources was asked to adopt regulations regarding conduct in the area, and required the court system to establish a bail schedule for the offenses. One of the offenses was burning a vehicle in the public use area, which carried a $50 fine in the bail schedule. Two years later in 2008, legislation was adopted making the offense of burning a vehicle on any public property a Class C felony. Therefore it was currently a Class C felony to set fire to a vehicle on property in any place besides the Knik River Public Use Area, where it would still result only in a $50 fine. 2:24:34 PM Representative Joule queried the issue of not possessing a driver's license while driving. He wondered whether it helped if a person knew the pertinent information (such as the driver's license number and expiration dates). Ms. Carpeneti believed the situation could depend on how well the officer who stopped the person knew them. In any case, a person could later bring the license into the police department, and the charge would be dismissed or voided. HB 175 was HEARD and HELD in committee for further consideration. HOUSE BILL NO. 127 "An Act relating to the crimes of stalking, online enticement of a minor, unlawful exploitation of a minor, endangering the welfare of a child, sending an explicit image of a minor, harassment, distribution of indecent material to minors, and misconduct involving confidential information; relating to probation; and providing for an effective date." Representative Gara returned to discussion of HB 127. He questioned the intent of the bill regarding texting images of body parts. He wanted to know whether the intent was to refer to body parts that were only uncovered. Ms. Carpeneti stated that the intent of the legislation related to unclothed body parts; in sexual assault and sexual abuse situations, the terms generally meant unclothed. Representative Wilson wondered whether dressing a 12-year- old in lingerie would be allowable. She thought there were more issues that needed to be discussed. Ms. Carpeneti responded that the House Judiciary Committee had reviewed the bill and limited it because of concerns about the breadth of scope and constitutional issues. The proposed law was more limited than it had been originally. She asked whether the committee intended to broaden it. Representative Wilson thought that the intent needed to be clear if the state was going to be able to protect children. Ms. Carpeneti added that HB 127 had a fairly limited focus. She pointed out that there were other provisions (related to "unlawful exploitation of a minor") that would cover more serious conduct. The provisions prohibited putting children in certain positions and creating images of them. Representative Gara did not understand how a bill that would create new crimes that could result in people going to jail could have a zero Department of Corrections fiscal note. HOUSE BILL NO. 24 "An Act extending the termination date of the Regulatory Commission of Alaska; and providing for an effective date." 2:29:02 PM Co-Chair Stoltze explained that the proposal to extend the Regulatory Commission of Alaska (RCA) had been previously included in another bill, and had been separated out into HB 24 in order to simplify the issue. KONRAD JACKSON, STAFF, REPRESENTATIVE KURT OLSON, explained that HB 24 would extend the RCA's sunset date to June 30, 2019. He pointed to the summary and the Legislative Audit recommendation for an eight-year extension. Legislative Audit had noted that the RCA had taken steps to address issues raised in the 2006 audit, even though everything was not completely resolved. Co-Chair Stoltze noted that the proposed eight-year extension was an indication that there were still problems. He wondered whether it would be fair to say that the state would continue to have a regulatory commission. Mr. Jackson responded in the affirmative. He added that the intent was an eight-year extension. He believed Legislative Audit was comfortable with the process, since they had recommended the extension. Vice-chair Fairclough stated that she held the RCA responsible for the energy shortage in Southcentral Alaska. She stated her intent to file an amendment to make the proposed extension much shorter. She wanted to have an extensive conversation about the shortfalls and to hear the challenges faced by those who had to go to the RCA. She supported having a consumer protection agency, but she was concerned about brownouts and blackouts in the Anchorage area. 2:34:12 PM Co-Chair Stoltze pointed out that there were people absent from the hearing. PAT DAVIDSON, LEGISLATIVE AUDITOR, DIVISION OF LEGISLATIVE AUDIT, explained that during the audit, the agency had made a recommendation for an eight-year extension; inherent in the recommendation was the continuing every-two-year audit requirement in place to review whether the RCA was meeting its statutory timelines with regard to the cases in dockets. Additionally, information included in the annual report was in the missions and measures, and any other performance objectives that management decided to adopt. The every-two-year audit was one of the reasons the recommendation was for an eight-year extension. Representative Edgmon noted that he had served on the House Special Committee on Energy and appreciated the work of the RCA. He recalled seeing the organizational chart listing the accounting and finance staff; he thought the lineup was inadequate. He asked whether the number of staff had been an issue. Ms. Davidson replied that the audit noted that the RCA was experiencing staff turnover; however, the audit did not specifically evaluate the adequacy of the number of staff. Representative Edgmon questioned whether the staffing issue was important to focus on, given all that the RCA had to oversee. He asked whether Legislative Audit had been directed to consider staffing. Ms. Davidson replied that the audit looked more at the outcomes and found that the commission was meeting its statutory timelines. She added that some of the surveys done with some of the utilities and customers had been generally supportive of the statutory timelines, although some of the timelines were seen to be more generous than some might have wanted. 2:39:17 PM Co-Chair Stoltze queried audit findings related to staff and operational or continuity issues that the length of the sunset would have bearing on. Ms. Davidson responded that no new recommendations had been made in the audit report. However, it was noted that the RCA was still working on implementing one of the prior audit's recommendations related to developing regulations to establish standards for certain aspects of discovery. Co-Chair Stoltze recalled past six-month extensions. Representative Costello pointed to timelines intended to elicit results in an expedient manner and questioned the reason for stop-the-clock activities. BOB PICKETT, CHAIRMAN, REGULATORY COMMISSION OF ALASKA (via teleconference), was not aware of "stop-the-clock" actions. He referred to a provision in statute for extensions; a docket could be extended by agreement of all the parties to that docket, or the commission could extend up to a period of 90 days (one time) on its own motion, for good cause. Vice-chair Fairclough queried the timing of the previous audit's recommendation for the implementation of regulations. Ms. Davidson replied that the recommendations had been made in the audit that was released at the end of 2006. Vice-chair Fairclough pointed out that the agency had had at least four full years to implement the recommendations. Co-Chair Stoltze invited the RCA chairman to make statements. Mr. Pickett reported that the RCA had been supportive of the Legislative Audit's recommendations for the eight-year extension primarily identified for stability. He added that four years prior, there had been a joint executive- and legislative-branch task force on the RCA; at that time, clear issues relating to the ability to attract and retain personnel were identified. He wished he could report that substantial progress had been made on the issues, but he could not. Mr. Picket continued that since a Department of Administrative (DOA) effort and study made in August of 2010, the RCA had experienced 100 percent turnover in its tariff department, and decades of experience had left the agency to take positions at utilities and higher-paid employment in other sectors. The turnover came at the time the agency was preparing for the Trans-Alaska Pipeline (TAPS) rate cases. He noted a "challenging situation" in the finance department, but added that there had been some progress in the last 60 days with the new administration at DOA. He pointed out that starting in the fall of 2011, there would be eight weeks of hearings with the Federal Energy Regulatory Commission related to strategic refiguration cases. He maintained that the activity would put a burden on the RCA. 2:44:40 PM Mr. Pickett did not want to lose additional staff because of uncertainty about the timing of the extension. He said that he shared frustrations related to the Cook Inlet gas issues. He noted that he had been on the commission for three years and was astounded that things had gotten to the point they were at. Mr. Pickett acknowledged that the RCA had made decisions in 2006 that he would change, given the chance. He pointed out that in the past couple of years, the RCA had approved five natural-gas supply contracts, natural-gas storage through the new utility, and was confronted with an excess of approximately $1 billion of capital expenditures on which the commission would be making decisions in the next few years. He maintained that all of the activities required competent staff, commitment, and some level of stability. Mr. Picket explained that the RCA dealt with contentious issues and that everybody involved was rarely happy. He stated that he had worked to ensure that anyone who came before the commission was treated fairly and evaluated properly. Vice-chair Fairclough acknowledged the complexity of the work. She asked why the 2006 audit recommendations had not been completed. Mr. Pickett responded that it had been a matter of prioritization. The commission had started a process of soliciting input from the industry and the impacted parties, and had worked with Legislative Audit when it was at the commission during the fall of 2010. He maintained that there was currently a higher level of emphasis on the issue. Mr. Pickett stressed that the issue was not easy, as there were so many different perspectives; expediting the process from any one party's perspective would impede the rights of another party. He believed progress could be made in the near future. Vice-chair Fairclough asked whether salary issues made it hard to retain staff, or whether there were other reasons. 2:48:14 PM Mr. Pickett responded that all possible reasons were considered. He stated that the working environment was very stressful. He noted that the tariff division was being restaffed and that he was comfortable with the people hired. Vice-chair Fairclough questioned whether staff reported directly to him. Mr. Pickett responded that there was middle management, including an advisory section chief, a commission section chief, and a chief administrative law judge. In response to a question by Vice-chair Fairclough, Mr. Pickett replied that the tariff department was the most extreme example. Representative Costello questioned how many of the commissioners were assigned to the TAPS rate case. Mr. Pickett replied that all five commissioners were assigned to the case. Representative Costello asked what would happen to the workload not related to the case. She wondered whether other work would be put on hold. Mr. Pickett replied that with statutory deadlines, the RCA did not have the option to put work on hold. He noted that past rate cases had required all five commissioners, especially when the judicial branch came into the process and there were remands. He believed all the commissioners were needed for the TAPS case. Representative Costello clarified that it was not a statutory requirement to assign all five commissioners, but a management decision. Co-Chair Stoltze OPENED and CLOSED public testimony. 2:51:48 PM AT EASE 2:56:38 PM RECONVENED Vice-chair Fairclough MOVED Conceptual Amendment 1: Line 5, change "2019" to "2015" Representative Doogan OBJECTED. Mr. Jackson stated that the sponsor felt that the year 2015 was a step in the right direction. He did not think two years was sufficient. Mr. Pickett stated that he had no comment on the amendment. Co-Chair Stoltze asked whether he thought four years was better than two, but still worse than eight years. Mr. Pickett agreed that the assessment was correct. Representative Gara asked whether a four-year extension made any difference to the operation of the agency. Mr. Pickett responded that the situation would depend on the individual assessments of employees at the RCA and the commissioners. Co-Chair Stoltze believed Mr. Pickett was supportive of the eight-year extension. Mr. Pickett agreed. 2:59:16 PM Representative Wilson queried the number of vacancies at the RCA and how long they had been vacant. Mr. Pickett responded that there were about eight vacancies. He offered to get more information. Vice-chair Fairclough recognized the difficulty of the RCA's job and commended the work of the chairman and commissioners. She argued that recommendations had been made and regulations had not been created in the four years allowed. She hoped to come back to the legislature to provide the correct incentives to adequately compensate staff. She felt recommendations were needed sooner than in eight years. Representative Gara requested an explanation of why the RCA had not adopted the regulations. Mr. Pickett replied that the rule-making process had never been instituted; once a rule-making process officially began at a public meeting, there was a two-year clock that began as well. Currently, the RCA was at the point of framing what the draft regulations might look like in order to begin moving forward. He believed that the process had not begun in 2006 and 2007 because there had been other priorities. 3:02:32 PM Representative Doogan WITHDREW his OBJECTION. Representative Gara OBJECTED to the amendment. He described history; when he had first come to the legislature, the RCA had been embroiled in fights between different companies and there had been a lot of pressure placed on the RCA. He thought a shorter extension would put more pressure on the RCA to cede independence that was already granted to cover consumer matters. He thought a longer extension would give the commission the green light to act as an independent agency. Vice-chair Fairclough concurred and stated that she would not have offered a conceptual amendment if previous audit recommendations from 2006 had been complied with. She felt the RCA had already been given four years to come into compliance; she wanted to hold commissions and boards accountable for audit recommendations. She noted that she did not choose a two-year extension in the amendment because she realized that the commission had a difficult job. Co-Chair Stoltze spoke to the issue of legislative involvement, pointing out that there had been no amendments of substance offered by anyone. He thought the extension was fairly simple, but believed it was possibly too long. 3:05:27 PM Representative Doogan spoke in support of the amendment. He had wanted to support the eight-year proposal, but found the argument by Vice-chair Fairclough to be compelling. He referred to agencies that had not complied with audits. He did not know whether shortening the time would force the RCA to comply, but he thought there had to be some kind of consequence for non-compliance. Representative Wilson spoke in support of the amendment. She wanted to send a message to the RCA about expectations of consistency and an effort towards correction in response to audits. She referred to other, similar legislation. Representative Guttenberg asked how long the TAPS tariff rate case would take. Mr. Pickett responded, "That is an open question." He said that there were a number of parties involved and the issue was contentious. Representative Guttenberg spoke in support of the amendment, but had concerns that the same problems would come up again in four years, and then the agency would be in the middle of a contentious issue. He thought big politics would be involved, and pressure would be put on the board. 3:09:05 PM Representative Doogan stated that he would support an eight-year extension if the RCA could fix what needed to be fixed by the following year, which would address concerns about having to get re-authorization in the middle of a contentious rate case. Vice-chair Fairclough stated for the record that no one had spoken to her other than Mr. Pickett about problems with the RCA. She stated that she was not involved in "phone wars" and did not want to be. However, she believed that recommendations made by auditors had to be complied with. Representative Gara MAINTAINED his OBJECTION to Conceptual Amendment 1. A roll call vote was taken on the motion. IN FAVOR: Gara OPPOSED: Joule, Wilson, Costello, Doogan, Fairclough, Guttenberg, Thomas, Stoltze Representative Neuman was absent from the vote. The MOTION PASSED (8/1). Conceptual Amendment 1 was adopted. 3:11:27 PM Vice-chair Fairclough MOVED to report CSHB 24(FIN) out of committee with individual recommendations and the accompanying fiscal note. There being NO OBJECTION, it was so ordered. CSHB 24(FIN) was REPORTED out of committee with a "do pass" recommendation and with the attached new fiscal note by the House Finance Committee for the Department of Commerce, Community and Economic Development. 3:12:30 PM AT EASE 3:15:15 PM RECONVENED HOUSE BILL NO. 164 "An Act relating to insurance; relating to health care insurance, exemption of certain insurers, reporting, notice, and record-keeping requirements for insurers, biographical affidavits, qualifications of alien insurers assuming ceded insurance, risk-based capital for insurers, insurance holding companies, licensing, federal requirements for nonadmitted insurers, surplus lines insurance, insurance fraud, life insurance policies and annuity contracts, rate filings by health care insurers, long-term care insurance, automobile service corporations, guaranty fund deposits of a title insurer, joint title plants, delinquency proceedings, fraternal benefit societies, multiple employer welfare arrangements, hospital and medical service corporations, and health maintenance organizations; and providing for an effective date." 3:15:37 PM KONRAD JACKSON, STAFF, REPRESENTATIVE KURT OLSON, explained that the Department of Commerce, Community, and Economic Development (DCCED) was the requestor of the bill. He added that the purpose of the bill was to clean up language and terminology related to insurance. In addition, the legislation would deal with issues that would bring the state into compliance with federal regulations. LINDA HALL, DIRECTOR, DIVISION OF INSURANCE, DEPARTMENT OF COMMERCE, COMMUNITY, AND ECONOMIC DEVELOPMENT, explained that HB 164 was long; some of the items were required, and some represented streamlining activities that would update consumer protections. She explained the subject grouping in the bill and her intent to provide an overview by section. Ms. Hall began with Section 1, which covered a small change in statute (also reflected in Section 22) that would allow insurance companies selling group insurance to be exempt from the state's licensing statutes if they had less than $50,000 in premiums. For example, one company (the Texas Health Insurance Policy) was headquartered in Texas and covered five employees in Alaska; the division did not think it necessary for the company to go through the entire licensing process to get a certificate of authority to be able to continue to write health insurance for only five employees. Ms. Hall informed the committee that the terminology section was intended to bring various Alaska statutes into conformity with each other. The term "managed care entity" would be taken out and replaced with "health care insurer" throughout the following 21 sections. She detailed that the term "managed care" was only found in AS 21.07; changing the terminology would reduce confusion and create consistency. 3:19:38 PM Ms. Hall directed attention to pages 15 through 22, containing a variety of technical changes related to solvency oversight. She described the primary mission of the Division of Insurance as solvency oversight of the insurance companies doing business in the state. The division's general philosophy was that if there was not money to pay a claim when a consumer had one, the rest of it did not matter. Other things (such as measuring capital and risk) followed solvency. Ms. Hall referred to sections in which the National Association of Insurance Commissioners model laws had changed. The current issue was "risk-based capital"; instead of a formula for determining the amount of capital and surplus, there was a different type of evaluation that dealt with the risk taken by companies. She referred to past investments in sub-prime mortgages; these would be considered "high-risk," and would not be allowed. Ms. Hall pointed that there were very different types of risk. For example, there were insurance companies dealing with earthquake insurance, and others dealing with brick dwellings in the middle of the country and not on a fault. Much of the language in HB 164 dealt with risk-based capital and changes in the way that was evaluated. In addition, the bill would increase the level at which regulators took action from 250 percent to 300 percent. Ms. Hall noted that some of the sections required the reporting of electronic mailing addresses. She reminded the committee about a past discussion about how the division communicated with those it regulated; it was allowed to collect electronic mailing address so that it could be more efficient in its communications. Record maintenance requirements would also be made more stringent. Ms. Hall pointed out that the division tried to meet national standards set by the National Association of Insurance Commissioners so that financial examinations were capable of being used by other states. 3:23:13 PM Ms. Hall turned to the section labeled "Licensing," which would streamline the way the state licensed agents. There would no longer be an individual or firm license; the license would belong to the individual and if the individual changed employment, the license would go with them. The need to report to the division would be eliminated if the individual turned in the license and got a new one. The process would save work and eliminate penalties for not doing things in a timely fashion. Both the way the division licensed and the very complex fee structure would be changed. Ms. Hall continued that the statute would require an employment contract so the individual agent working in a firm could operate under the appointments by the insurance companies that the firm was allowed to do business with. In addition, the fiduciary accounts and records could be used. Ms. Hall highlighted Section 38, which would remove the requirement that non-residents be fingerprinted. She noted that there was a national standard to no longer fingerprint agents to be in compliance with a federal law (the Gramm- Leach-Bliley Act). The statute would still require the firm to be responsible for the individuals working under it, but the individual agents would have more flexibility. The streamlining of agent licensing would allow people to conduct business in a more efficient manner. Representative Wilson asked for clarification related to resident and non-resident fingerprinting. Ms. Hall responded that a non-resident individual would be fingerprinted in their home state. The issue was reciprocity; there was a national standard of not fingerprinting. Representative Wilson asked whether there was a reason Alaska required fingerprinting. Ms. Hall replied that she did not know the reason for fingerprinting, as it pre-dated her (she had been doing insurance business in Alaska for over 20 years). She added that the general idea across the country was that background checks included questions about convictions of felonies; one of the standard criteria to become an insurance agent was trustworthiness. 3:27:12 PM Representative Wilson expressed concerns about the section. She did not want people to be fingerprinted in order to prove trustworthiness. She wanted to know where the section came from. She did not think it was a national standard, since only 24 states required fingerprinting. Representative Guttenberg pointed out that the bill could easily have said that agents were not required to be fingerprinted if they were fingerprinted in another state where their jurisdiction was, since less than half the states required fingerprinting. He thought there were three different things going on in the section: meeting the national standard of the insurance commissioners, some federal law issues, and the division's recommendations for changes in statute. He wondered whether three bills conforming to three different things would have helped. Representative Guttenberg asked that the three categories be delineated, if the bill was not held over. Ms. Hall replied that the fingerprinting was part of a national standard; all states did background checks, although they might not go so far as doing them by fingerprinting. She maintained that the state would not be in compliance with some of the national standards if the fingerprinting provision was changed. Ms. Hall noted that there were different levels in the bill. There were changes in federal law that had to be complied with. There were changes in accreditation standards. There were also things she would like to see, such as the streamlining of agent licensing. In addition, there was the section on long-term-care statutes, which were 20 years old and did not reflect the marketplace. There were consumer items that were not required by federal law or accreditation standards; however, her goal as the director of the division was protections for Alaska consumers. Ms. Hall acknowledged that all the various pieces had been gathered together in one bill. She noted that there had been significant discussion about whether to separate the issues into multiple bills. She said that the decision to have one bill had been made in conjunction with Representative Olson. 3:31:35 PM Ms. Hall stated that she could probably make HB 164 into four bills on different topics. Representative Wilson clarified that she supported background checks, but questioned the need for fingerprinting. She queried the extent of federal requirements. Ms. Hall replied that federal law did not call for fingerprinting, but the national standards had been adopted as the goal for how all states should do the background check. House Bill 164 would not add fingerprinting; Alaska had been fingerprinting for at least 24 years. She did not know why the requirement had started, but it was very old. Representative Wilson did not think "we've always done it" was a good enough reason. She thought the requirement for fingerprinting needed to be taken out of the bill unless there was a good justification for it. Representative Doogan queried the state's reason for fingerprinting. He wanted to check his assumption that people's identities were checked because they handled money and Alaska wanted to know whether they had been in trouble in some other state. Ms. Hall responded that the reason for fingerprinting was indeed related to handling money, but that was not the only reason for it. She referred to the example of a licensee who had issued false insurance certificates to people without collecting money (although that had happened as well); there were various types of crimes of fiduciary lack of responsibility. She noted that there was a federal law requiring any felon working in any aspect of the insurance business (even in the mailroom) to apply to the division. 3:35:19 PM Ms. Hall stated that fingerprinting seemed to help people remember that they had a felony in their background, although that was not common in Alaska. She added that there was a national database with the information about felons. The state checked license actions in the same way. Vice-chair Fairclough pointed to page 25 and asked for information about the new section allowing employment contracts. Ms. Hall answered that the state would require an employment contract. When the state changed the way it licensed (no longer had individuals in a firm license), it would require that a firm had a contract with the employees who would work under the firm license and under the appointment with the insurance company. Many of the agencies that did business in Alaska were called "independent agencies" with appointments with multiple insurance companies. She referred to Alaska National, the largest insurance company headquartered in Alaska. She described a possible situation involving an insurance agency with an appointment with insurance company A (such as Alaska National). The individuals working in the firm would use the appointment to transact business; they were enabled to write business under the appointment held by the firm. She added that the insurance companies did not normally appoint individuals in such cases. For example, Marsh (a large brokerage in Anchorage) probably had appointments with 45 companies and 50 to 70 employees; those employees could transact business with the 45 companies because of the single appointment. The division wanted there to be a connection so that the individual agent could work under the appointment, the records could be considered theirs, and the accounting of monies could be shared. 3:38:45 PM Vice-chair Fairclough summarized that the appointment was the contract between an insurance agency and someone being insured. Ms. Hall corrected her; the appointment was between the insurance company and the agency that would sell their product. The employment contract was between the agency selling the product and the individual agent working for the firm. Vice-chair Fairclough had questions related to payroll and accounting, but she said she was totally confused. Ms. Hall explained that the appointment was between those offering a product and the agency selling the product. The consumer would buy the product from the agency selling the product; the consumer did not buy the product directly from the insurance company offering the product. Vice-chair Fairclough questioned how the employment contracts were handled related to payroll. She wondered whether an employment contract could shelter an agency from a wrongdoing by the employee, whether they were handled as employees or contracts. Ms. Hall replied they were handled as an employee; the contract was not intended to make them an independent contractor. Vice-chair Fairclough asked whether the contract would provide protection from liability because of an independent employment contract with the person selling the product to the consumer. Ms. Hall replied in the negative. She pointed to page 25 (d), which stated that a firm would be responsible for the actions and the individual transacting insurance under the firm's employment; the intent was that the firm would continue to be responsible for the actions of the agent working under the contract. She emphasized that the contract was not a shelter from liability or responsibility. Ms. Hall continued her review of the legislation with what she felt was the most important section of the bill. She relayed that in June 2010, a federal law was passed called the Non-admitted and Reinsurance Reform Act. The law dealt with the premium tax of non-admitted or surplus-lines insurance. She detailed that there were two ways that insurance companies wrote business. The first, traditional way (pertaining to 90 percent of Alaskan insurance) was selling as an admitted insurer with a certificate of authority to operate in the state; premium tax was paid. 3:42:50 PM Ms. Hall continued that the state collected about $50 million in premium tax and about $47 million of that tax was from the admitted insurance market. The second way was called non-admitted or surplus-lines insurance; this pertained to insurers who decided they did not do enough business in Alaska to go through the rigors of becoming licensed and having forms and rates approved. The second group of insurers did business through a brokerage arrangement; the brokerage paid the premium tax for $3.5 million worth of business. The federal law referred to the second type of business, surplus lines. The second type of business was regulated differently, was not covered by the guarantee fund disclaimers, and was sold differently. Ms. Hall detailed that the federal law passed in June of 2010 pre-empted the states to the extent of changing the way the state could collect the premium tax. Instead of being collected only for the portion of the (multi-state) risk in Alaska, each state needed to pass legislation to collect 100 percent of the premium tax for a company whose home state was Alaska. Ms. Hall gave the example of a cruise-ship business that was headquartered in California but had risk in the form of lodges and docks in Alaska. A portion of the company's insurance risk was in Alaska. Alaska would collect premium tax on the pieces of property or liability risk that were in Alaska. Under the new federal law, California would collect 100 percent of the premium tax. Therefore, the federal law encouraged the states to either join a compact or to find some other procedure of collecting the taxes and re-allocating them back to the states. The taxing rate was not changed and a company would pay the same amount of tax if its home state was Alaska, but would pay all of the taxes to Alaska. Ms. Hall emphasized that the federal law intended each state to adopt uniform forms and procedures for reporting the collection and allocation of the premium tax. 3:46:20 PM Ms. Hall informed the committee that the section of the bill from pages 27 to 37 would change how the state would collect tax and would authorize the director to join a clearinghouse. She referred to significant national debate on the best way to implement the federal law. Regulators formed an implementation taskforce and studied various ways to implement the law, including asking legislatures for authority to join a compact, keeping whatever the state was entitled to keep, or asking for authority to join a clearinghouse. Ms. Hall pointed out that there were perimeters in the bill that would protect the revenue stream, which was fairly small for Alaska; of the roughly $50 million of premium tax collected in the state, the number was probably $0.5 million. Ms. Hall noted that the section on surplus lines needed to be changed to achieve compliance with the federal law; it also needed an adoption of the definition of "home state" so that Alaska could collect 100 percent of the tax of any company that happened to be a multi-state company domiciled in Alaska. The bill would then allow the allocation of taxes and authorize the division to join a clearinghouse operation (a streamlined way of collecting and disbursing the taxes). Ms. Hall added that the division already had taxing authority and collected premium tax; it was not done through the Department of Revenue. Therefore, the taxation issue was not new authority. She noted that the perimeters of the clearinghouse were very small. 3:49:10 PM AT EASE 3:51:58 PM RECONVENED Vice-chair Fairclough OPENED public testimony. STEVE STEPHAN, DIRECTOR OF GOVERNMENT RELATIONS, NATIONAL ASSOCIATION PROFESSIONAL SURPLUS LINES OFFICE (via teleconference), testified both in support of and in opposition to HB 164. He explained that the National Association Professional Surplus Lines Office (NAPSLO) supported the proposed provision to tax 100 percent of the in-state risk. The association opposed the part of the bill that would delegate authority to the commissioner to enter into an interstate compact or agreement. He felt that the agreement that had been drafted was too burdensome a method of collecting taxes and would require numerous data elements and the construction of a bureaucracy to collect the taxes. He emphasized that there would be 30 data elements for each policy, which would need to be entered before inputting data to allocate taxes. Mr. Stephan continued that NAPSLO was not opposed to the states trying to share taxes with each other, but he felt the burden would fall on the broker. He stated that the association would support a method of sharing taxes that did not burden the broker. Mr. Stephan reported that part of the concern was that the computation of casualty risks would be required for the first time, which added a whole new burden on the broker. Currently, brokers did not typically divide things like director officer's insurance, umbrella, and excess; those types of risks were usually considered home-state risks. The agreement known as the non-admitted, multi-state agreement would require the broker to input all the data for the first time for the purpose of trying to pay taxes. Mr. Stephan added that there was a concern about legislative transparency; NAPSLO believed the agreement would change the tax laws of the state. An Alaska corporation with sales in Florida would be taxed at the higher Florida rate (in excess of 10 percent); a tax increase would have to be levied on some policy holders. The details of the agreement would also have to do with the amount of Alaska tax revenue that would be sent to other states. The association believed those things should be in a statute so that brokers, policy holders, and the brokerage insurance community could see and understand what the arrangement was. 3:56:19 PM Mr. Stephan continued that the admitted side (where 89 percent of the business was written) generally did not attempt to allocate things like health care; the allocation effort was focused on the small segment of the insurance community. Mr. Stephan pointed out that in general, the vast majority of policies in a normal state were single-state policies; most of the policies would be taxed by Alaska currently and would be taxed by Alaska following the introduction of the legislation. In a normal state, the amount might be 90 to 95 percent; Alaska would be different because it did not border other states. Multi-state risks would be difficult because contractors and others could not easily move from state to state. He guessed that the amount of multi-state risk written in Alaska would be very small. Mr. Stephan concluded with concerns about the long-term viability of an agreement between the states to share tax revenue, because a state would normally object to putting more money into a system than it got back out, and would drop back out. The concern was that the difficult and burdensome system for the broker would be built and then fall apart shortly afterwards because any state that put more money in than it got back out would drop back out of the system. Vice-chair Fairclough asked Mr. Stephan for a written copy of his comments. Mr. Stephan agreed to supply written testimony the following day. Ms. Hall commented that the goal of the national group of insurance regulators was not to create an additional burden on the brokers. She referred to the National Interstate Fuel Tax Agreement (NIFTA), which the Non-admitted Insurance Multi-State Agreement (NIMA) was modeled after; it was a simplified way of allocating collected tax. She stated that there would be no change in the tax rate. Ms. Hall added that she strongly disagreed with Mr. Stephan's statement that Alaskans would be taxed at the Florida tax rate. She said that everyone would be taxed at the individual state tax rate that they currently had. An Alaskan company headquartered in Alaska with a $5 million building in Tampa (Florida) would currently be taxed at Florida rates on the building and taxed at Alaska rates on the rest of the account; that would not change with HB 164. She emphasized that the legislation clearly spelled out that the tax rates of each state would be applied to the portion of the risk in that state. She disagreed that Alaska did not allocate casualty; she had checked with commercial brokers, who told her that they allocated their casualty account when doing multi-state accounts. Vice-chair Fairclough requested that the written testimony submitted by Mr. Stephan include specific page and section numbers in the legislation so that Ms. Hall could respond. 4:00:21 PM Representative Gara asked how many other states were dealing with the provision in the manner Mrs. Hall had recommended it be dealt with. Ms. Hall responded that at last count, there were 17 states that had introduced the type of legislation represented in HB 164; another 14 were contemplating the same clearinghouse arrangement. There were about 10 states that had introduced a compact-type of legislation, 5 states that had both, and 11 states were still thinking about the issue. She emphasized that a far greater number of states were considering the simplified structure represented in HB 164. Representative Gara did not think many legislators understood the bill. 4:02:14 PM DALE FOSSELMAN, SENIOR VICE PRESIDENT, CORPORATE DEVELOPMENT, DENALI ALASKAN FEDERAL CREDIT UNION, WASILLA (via teleconference), testified in opposition to Section 79 of the legislation. He detailed that the credit union had 55,000 members and over 500 sponsor employers, the vast majority of whom employed less than 50 workers. He spoke to Section 79 of HB 164, which would address individual health care insurance policies in the group market. The credit union felt that the language in the section would severely limit both employer and employee choice of health care insurance, and would leave employees without insurance options for extended periods of times. Mr. Fosselman provided the example of a hypothetical employer forced to drop group health insurance coverage due to declining profitability, the increasing cost of insurance, or a combination of both factors. According to the proposed language in HB 164, no insurer could issue a policy to those employees for six months after the group- plan coverage ended. He believed the restriction was "quite onerous" and was poor public policy on several levels. Mr. Fosselman believed employers and employees should have more options to obtain health insurance in the described circumstances, instead of facing restricted access to health insurance. He thought the language of Section 79 was so broad as to seemingly prohibit even the discussion of individual health insurance policies with employers. Mr. Fosselman proposed enacting legislation that would expressly permit the use of federal tax-favored programs such as health reimbursement accounts (HRAs) when employers eliminated group health insurance benefits. From an employer perspective, he felt HRAs were easy to administer and allowed flexibility in determining contribution levels. From an employee perspective, he thought HRAs allowed the ultimate flexibility in how the dollars were spent, because they could be used for either a specific list of medical expenses (known as 213(d) expenses) or for those that had health insurance, they could be used for co-insurance, co- pays, or deductibles, in conjunction with that insurance. For those without insurance, HRAs could be used to fund health insurance premiums. Unlike flexible spending accounts, there would be no "use-it-or-lose-it" provision. Mr. Fosselman opined that individual policies were better than group policies. For one, individual policies were portable, and not tied to employment, which benefitted seasonal, part-time, and temporary workers. Individual policies typically had more stable pricing, because the risk-rating group was much larger than a smaller employer- based group. Individuals could currently chose from more than 40 plan designs available, in order to optimize coverage and cost at the individual level. The option remained for individuals to apply to the Alaska Comprehensive Health Association if pre-existing conditions prevented an insurer from issuing coverage; in addition, the employer would be able to increase the contribution for the individual employee. Mr. Fosselman concluded that Section 79 created more problems than it solved for working Alaskans and stated that establishing additional alternatives for employees and employers would constitute better public policy. Specifically, he believed that a statute that would absolutely confirm that employers of any size could establish HRAs that could fund individual health insurance expenses without triggering small group health insurance regulation would ably and better serve both employees and employers. 4:06:01 PM Vice-chair Fairclough asked for a written copy of the testimony given. She CLOSED public testimony. Ms. Hall acknowledged the complexity of the bill. She pointed out that there were several sections that she had not had an opportunity to speak to and welcomed individual questions if additional information was needed. HB 164 was HEARD and HELD in Committee for further consideration. HOUSE BILL NO. 147 "An Act setting a monthly salary for the executive secretary of the Board of Public Accountancy." 4:07:14 PM JENNIFER SENETTE, STAFF, REPRESENTATIVE KURT OLSON, SPONSOR, described the legislation as straightforward. She referred to an accounting bill passed unanimously by the legislature the prior session, which had created the position of the executive secretary of the Board of Public Accountancy. The creation of the position was widely supported in the legislature and throughout the state because of the recognition that the all-volunteer Board of Public Accountancy was understaffed and struggling to fulfill its mission. There was broad support for the board's mission of protecting the public interest; the board had jurisdiction over all certified public accountants (CPAs) practicing in the state and could address any violation of its standards. Ms. Senette continued that after the position was created by the legislation, the Department of Administration (DOA) came out as usual with its draft salary determination; the position was placed at a Range 19. The sponsor did not feel that a Range 19 would attract a qualified candidate to the position, and would leave the board in the position of lacking an administrator with the desired expertise to fulfill the board's mission. Ms. Senette added that the fiscal note in the previous bill had called for the position to be at a Range 23; CPAs around the state, along with the state Board of Public Accountancy and the Alaska Society of CPAs, had supported the position at Range 23. She stressed that it was particularly important that the Alaska Society of CPAs supported the range level, because that organization represented Alaska CPAs, and the salary would come out of their licensing fees. She underlined that the state would not pay for the position's salary. Ms. Senette detailed that Range 19 paid approximately $58,000 per year. She noted that a recent graduate in the field without experience could easily make $60,000. On the other hand, a Range 23 began at $77,000. She described the current bill as a legislative fix for the discrepancy between pay ranges. She stressed that there was no opposition and that DOA had signaled its willingness to implement the salary range that the legislature deemed appropriate. 4:11:16 PM Representative Wilson verified that the cost to the state was nothing and that the money would come out of CPA fees. Ms. Senette replied in the affirmative. DON RULIEN, CERTIFIED PUBLIC ACCOUNTANT and MEMBER, LEGISLATIVE COMMITTEE, ALASKA SOCIETY OF CERTIFIED PUBLIC ACCOUNTANTS, ANCHORAGE (via teleconference), spoke in support of the legislation. He informed the committee that he had been on the board of directors for many years; the committee believed it was essential that the pay scale for the position be at Range 23 so that the board could hire a person with the appropriate experience and expertise. Mr. Rulien noted that the board had struggled with past executive administrators due to their lack of expertise in general accounting matters as well as in more technical matters. Past executive directors were shared with other boards, which put the Board of Public Accountancy at risk for missing important issues. He pointed out that the bill had a zero fiscal note and that the CPAs would fully fund the position out of licensing fees they paid to the state. 4:14:22 PM Vice-chair Fairclough CLOSED public testimony. Representative Gara commented that referring to a Range 19 position as "entry level" had been upsetting to some legislative staffers, whom he believed felt the same way. Representative Wilson MOVED to report HB 147 out of committee with individual recommendations and the accompanying fiscal note. There being NO OBJECTION, it was so ordered. HB 147 was REPORTED out of Committee with a "do pass" recommendation and with previously published fiscal note: FN 1 (CED). 4:16:23 PM AT EASE 4:18:02 PM RECONVENED HOUSE BILL NO. 97 "An Act extending a provision relating to noxious weeds, invasive plants, and agricultural pest management and education; providing for an effective date by repealing the effective date of sec. 2, ch. 102, SLA 2008; and providing for an effective date." 4:18:06 PM JEANNE OSTNES, STAFF, REPRESENTATIVE CRAIG JOHNSON, SPONSOR, explained that the legislation would delete a sunset for a position in the Division of Agriculture in the Department of Natural Resources. The position had been created two years prior with a $80,000 fiscal note that provided the employee salary but no travel funds, desk, or computer. She pointed to a packet with an overview of the employee's accomplishments. She noted that the position had been widely used throughout the state by many of the Soil and Water Conservation Districts, the public, the Cooperative Extension Service, as well as other agencies. She highlighted the third page of the overview, which detailed that the employee had brought over twice his salary to the state through writing grants, and would have brought in another $80,000 had there been matching funds available. Vice-chair Fairclough OPENED and CLOSED public testimony. Representative Wilson MOVED to report HB 97 out of Committee with individual recommendations and the accompanying fiscal note. There being NO OBJECTION, it was so ordered. HB 97 was REPORTED out of Committee with a "do pass" recommendation and with attached previously published fiscal note: FN 1 (DNR). HOUSE BILL NO. 8 "An Act relating to certain federal regulations and presidential executive orders; relating to the duties of the attorney general; and providing for an effective date." HB 8 was SCHEDULED but not HEARD. HOUSE BILL NO. 10 "An Act relating to the registration fee for noncommercial trailers and to the motor vehicle tax for trailers." HB 10 was SCHEDULED but not HEARD. HOUSE BILL NO. 64 "An Act relating to permanent motor vehicle registration; and providing for an effective date." HB 64 was SCHEDULED but not HEARD. HOUSE BILL NO. 105 "An Act relating to the Southeast State Forest; and providing for an effective date." HB 105 was SCHEDULED but not HEARD. HOUSE BILL NO. 140 "An Act making a special appropriation to the community quota entity revolving loan fund; and providing for an effective date." HB 140 was SCHEDULED but not HEARD. HOUSE BILL NO. 141 "An Act relating to loans for the purchase of fishing quota shares by certain community quota entities; and providing for an effective date." HB 141 was SCHEDULED but not HEARD. SENATE BILL NO. 76 "An Act making supplemental appropriations, capital appropriations, and other appropriations; amending appropriations; repealing appropriations; making appropriations to capitalize funds; and providing for an effective date." SB 76 was SCHEDULED but not HEARD. 4:23:46 PM ADJOURNMENT The meeting was adjourned at 4:23 PM.