Legislature(2017 - 2018)HOUSE FINANCE 519
02/19/2018 01:30 PM House FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| HB79 | |
| HB197 | |
| HB216 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | HB 197 | TELECONFERENCED | |
| + | HB 216 | TELECONFERENCED | |
| += | HB 79 | TELECONFERENCED | |
| + | TELECONFERENCED |
HOUSE BILL NO. 79
"An Act relating to workers' compensation; repealing
the second injury fund upon satisfaction of claims;
relating to service fees and civil penalties for the
workers' safety programs and the workers' compensation
program; relating to the liability of specified
officers and members of specified business entities
for payment of workers' compensation benefits and
civil penalties; relating to civil penalties for
underinsuring or failing to insure or provide security
for workers' compensation liability; relating to
preauthorization and timely payment for medical
treatment and services provided to injured employees;
relating to incorporation of reference materials in
workers' compensation regulations; relating to
proceedings before the Workers' Compensation Board;
providing for methods of payment for workers'
compensation benefits; relating to the workers'
compensation benefits guaranty fund authority to claim
a lien; excluding independent contractors from
workers' compensation coverage; establishing the
circumstances under which certain nonemployee
executive corporate officers and members of limited
liability companies may obtain workers' compensation
coverage; relating to the duties of injured employees
to report income or work; relating to
misclassification of employees and deceptive leasing;
defining 'employee'; relating to the Workers'
Compensation Board's approval of attorney fees in a
settlement agreement; and providing for an effective
date."
1:38:59 PM
Co-Chair Foster noted the committee had adopted committee
substitute (CS) version R and two amendments at the
previous meeting.
MARIE MARX, DIRECTOR, DIVISION OF WORKERS' COMPENSATION,
DEPARTMENT OF LABOR AND WORKFORCE DEVELOPMENT, was
available for questions.
Co-Chair Foster referenced the two fiscal notes from the
Department of Labor and Workforce Development (DLWD).
PALOMA HARBOUR, DIRECTOR, DIVISION OF ADMINISTRATIVE
SERVICES, DEPARTMENT OF LABOR AND WORKFORCE DEVELOPMENT,
addressed the first fiscal note: OMB Component Number 344
for the Division of Worker' Compensation. The note
reflected a revenue change for the department of $1.8
million from general funds to the Workers' Safety and
Compensation Administration Account beginning in FY 19. The
note also reflected a savings of $59,800 beginning in FY 20
resulting from a switch to electronic filing.
Representative Wilson pointed to page two of the fiscal
note where it specified the state would mandate the
electronic filing of documents. She asked for verification
that mandate was no longer required as a result of an
amendment that had been passed by the committee.
Ms. Harbour believed the department had the option to set
the method for filing. She believed the division director
could set the method as electronic filing.
1:42:48 PM
Representative Wilson stated that perhaps she had
misunderstood the amendment. She asked whether the
commissioner or someone in the department could mandate the
filing method.
Ms. Harbour answered that it was pertaining to insurance
companies or self-insured employers filing reports of
injury. She recalled that Ms. Marx had specified that if an
individual working through their employer was not getting
their incident report filed, the division would work with
the individual to receive their report in whatever way they
could provide it.
Representative Wilson stated that the money had previously
come from general funds, which the bill would change to a
designated general fund (DGF) account. She asked for
verification that no savings would occur and that the
switching of accounts merely constituted a fund source
change.
DAVID TEAL, DIRECTOR, LEGISLATIVE FINANCE DIVISION,
answered that the fiscal note maintained the 2.7 percent
premium tax; employers would not be paying any more than
they had been. He elaborated that a larger percentage or
$1.8 million of the 2.7 percent tax would go into the
Workers' Safety Fund. There was a loss of GF revenue of
$1.8 million because of the fund source change. The
Legislative Finance Division (LFD) questioned the reason
for the change - it did not see any spending of the fund,
only a change of revenue. He questioned what good it did to
merely put revenue into a fund. He asked where and how it
got spent. He turned to a table on page 3 of the fiscal
note [OMB Component Number 344] and referred to the bottom
row "revenue less appropriations (negative indicates
unsustainable spending)." He pointed out there were
numerous negative numbers in the row, which meant that
prior to FY 09 the Workers' Safety Fund had been building a
balance as high as $11 million. Through higher expenditures
than revenue, the balance had been spent down and it had
fallen to $3 million in FY 18. Roughly over a ten-year
period, the fund had been overspent by $8 million. He
pointed out that by FY 20 there would be no balance.
Mr. Teal explained that although there was no appropriation
of the money, Workers' Compensation would continue to spend
at approximately the current levels. The tables on page 3
and 4 of the fiscal note showed a slightly negative cash
flow. He explained that LFD had asked why only $1.8 million
would be taken because it looked like there was
overspending by $2 [million] to $2.1 [million]. The answer
from DLWD had been that it anticipated additional
efficiencies. He noted that the only efficiencies shown on
the fiscal note were on page 1 in the amount of $59,800
[annually) due to the elimination of one staff position. He
did not know how additional savings would be shown; they
should occur, but they were not on the fiscal note. He
explained the division was already spending money and it
was an awkward fiscal note to prepare.
Mr. Teal summarized that the direct answer to
Representative Wilson's question was yes - $1.8 million
previously classified as GF would flow to the Workers'
Safety Fund.
1:47:27 PM
Representative Wilson referenced the deficit shown in the
fiscal note tables and asked if committee members could
assume that undesignated general funds (UGF) would be
utilized. She reasoned that it was not possible to spend in
the negative; therefore, she wondered if a growth in UGF
would occur to make up the difference.
Mr. Teal replied that the table on page 4 of the fiscal
note showed several options including the governor's
budget. He pointed out that the FY 23 beginning balance was
highly negative [$5.4 million], which was not possible.
Under the second option [column 2] that included the
governor's budget with the Appeals Commission (HB 69), the
account went negative as well. Under HB 79, the balance
would remain positive. If both HB 69 and HB 79 passed, the
balance would hold up well. He anticipated a $2 million
request for GF if HB 79 did not pass.
Representative Wilson surmised the $2 million request would
be the same - instead of putting the money in the GF, it
would go to "what it's being paid on behalf of."
Mr. Teal answered in the affirmative. He detailed $1.8
million would be diverted from GF into the Workers' Safety
Fund, which would spend as a designated fund; or the GF
could be spent - it came out the same.
1:49:24 PM
Ms. Harbour addressed DLWD fiscal note OMB Component Number
2342 related to the elimination of the Second Injury Fund.
The note reflected savings anticipated in the future
related to eliminating the Second Injury Fund program. She
reported it would take time to realize savings because many
of the injuries were permanent, partial disabilities;
therefore, benefits to individuals lasted the recipient's
lifetime. She explained that the eventual savings would be
realized by employers - their premium costs would decrease.
Self-insured employers (e.g. State of Alaska) would
experience savings as savings occur.
Co-Chair Foster asked to hear from the Department of
Administration (DOA) and the Office of the Governor in
relation to their fiscal notes.
SCOTT JORDAN, DIRECTOR, RISK MANAGEMENT, DEPARTMENT OF
ADMINISTRATION, addressed the DOA fiscal note, OMB
Component Number 71. The costs in the note reflected the
requirement to electronically file reports of injury. The
cost in FY 19 would be $40,000 to cover forms that were
billed out at $1.25 by a third-party administrator as well
as the programming for the first year. The outyears were
$12,900 that would cover $1.25 per form - the department
anticipated about 1,900 forms per year submitted to the
Division of Workers' Compensation.
Representative Wilson remarked that the electronic filing
would cost more. She asked if the electronic filing savings
would be reflected on the Division of Workers' Compensation
fiscal notes.
Mr. Jordan answered that he could not comment on savings on
the Division of Workers' Compensation side. Currently,
doing the work manually was not costing DOA any more. Doing
the work electronically would cost the department $1.25 per
form to submit to the Division of Workers' Compensation
1:52:54 PM
Representative Wilson wondered if it would cost the state
more money to do the process electronically. She wondered
if there would be savings as the committee had been told in
one of the other fiscal notes. She surmised that DOA was
fast at the forms and could do them manually just as
quickly as it could electronically.
Mr. Jordan answered that the process would not cost the
department any more, but the third-party administrator
submitting the forms to the Division of Workers'
Compensation charged a $1.25 fee per form. It would cost
DOA more to process the forms, but it would not require
additional personnel.
Representative Wilson asked which department would be
paying interagency receipts.
Mr. Jordan deferred to the Office of Management and Budget
(OMB).
Co-Chair Foster asked OMB to address fiscal note OMB
Component Number 0.
CAROLINE SCHULTZ, OFFICE OF MANAGEMENT AND BUDGET, OFFICE
OF THE GOVERNOR, relayed that the interagency receipt funds
that would go to the Division of Risk Management would come
from all executive branch agencies. The Division of Risk
Management was the state's self-insured workers'
compensation manager. The division charged rates for all
personal service budgets for all agencies. The rates were
calculated annually; therefore, OMB had elected to reflect
the costs in an OMB various note.
1:54:49 PM
Co-Chair Seaton asked if overall, electronic filing would
cost the state more or less.
Mr. Teal answered that Risk Management would be spending an
additional $12,900 per year to pay a third-party to handle
the forms. The charge did not go only to the Division of
Workers' Compensation - it went to every allocation in
every agency. The change would mean a small percentage
increase in the working reserve rate. The legislature could
fund the fiscal note (the money would go to OMB to spread
out to various agencies). He explained that the Division of
Risk Management would incur costs that would be passed to
other agencies (it reflected the nature of interagency
receipts). He elaborated there had to be cash backing the
payments to Risk Management - each agency would pay a small
portion. Even if the legislature did not fund the fiscal
note in FY 19, the rates would be built into personal
service costs beginning in FY 20. The rates would go into
the adjusted base - the committee really would not see them
- it would see the transactions, but the committee would
not discuss them because they were automatically assumed to
be approved and each agency would receive a small amount of
money to pay the costs. He reiterated it would cost an
additional $12,900 to process the forms.
Representative Wilson surmised that the increase was due to
the third-party. She thought the purpose of the bill was to
save money. She was trying to determine where the savings
would come in. She wondered why the bill should be passed
if there were no savings.
Mr. Teal believed the question was probably better answered
by DLWD. He stated that the Division of Workers'
Compensation anticipated savings and the elimination of one
position. Based on a table attached to DLWD fiscal note,
OMB Component Number 344, anticipated savings were around
$200,000 per year. Additionally, there was the elimination
of the Second Injury Fund, which would save money for all
employers including the state. Putting it all together was
more difficult than one may think. He explained that every
fiscal note was prepared by a single allocation and there
had been some coordination problems trying to make them
match.
1:59:19 PM
Co-Chair Seaton MOVED to REPORT CSHB 79(FIN) out of
committee with individual recommendations and the
accompanying fiscal notes.
Representative Wilson OBJECTED. She supported portions of
the bill that she thought were needed. She was concerned
about the representation of the person. She stated the
representation of who it could be was based on the same
committee the person would be in front of. She thought it
was a conflict of interest. She thought it was better but
had hoped an amendment would address the issue in a
different way.
Co-Chair Seaton clarified his motion pertained to version R
as amended.
Representative Wilson MAINTAINED her OBJECTION.
A roll call vote was taken on the motion.
IN FAVOR: Grenn, Guttenberg, Ortiz, Kawasaki, Foster,
Seaton
OPPOSED: Pruitt, Thompson, Tilton, Wilson
Vice-Chair Gara was absent from the vote.
The MOTION PASSED (6/4).
There being NO further OBJECTION, CSHB 79(FIN) was REPORTED
out of committee with three "do pass," two "do not pass,"
three "no recommendation," and two "amend" recommendations;
and with two new fiscal impact notes from the Department of
Labor and Workforce Development; one new fiscal impact note
from the Office of the Governor; and one new fiscal impact
note from the Department of Administration.
2:01:51 PM
AT EASE
2:03:21 PM
RECONVENED