Legislature(2015 - 2016)HOUSE FINANCE 519
03/19/2015 01:30 PM House FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| HB116 | |
| HB49 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | HB 49 | TELECONFERENCED | |
| + | HB 116 | TELECONFERENCED | |
| + | TELECONFERENCED |
HOUSE BILL NO. 116
"An Act extending the termination date of the
Alcoholic Beverage Control Board; and providing for an
effective date."
1:32:04 PM
LAURA STIDOLPH, STAFF, REPRESENTATIVE KURT OLSON, reviewed
the sponsor statement with the committee.
HB 116 extended the sunset date for the Alcoholic
Beverage Control (ABC) Board to June 30, 2018. Each
year the Division of Legislative Audit reviewed boards
and commissions to determine if they should be
reestablished in accordance with Title 24 and Title 44
of the Alaska Statutes. The Division of Legislative
Audit reviewed the activities of the Alcoholic
Beverage Control Board. The purpose of the audit was
to determine whether there was a demonstrated public
need for the board's continued existence and whether
it had been operating in an effective manner.
The board had addressed all issues found in prior
audits with two being resolved and one being partially
resolved. As the members might have noted from the
most recent audit there were five findings and
recommendations. First, the board's director should
ensure that all board meetings were properly published
on the State's Online Public Notice System. Second,
the board should notify local governing bodies of
applications for new and transfer licenses within 10
days of receipt. Third, the board should issue
catering permits in accordance with statutory
requirements. Fourth, the board should issue
recreational site licenses in accordance with
statutory requirements. Finally, the board should
implement a process to monitor and track all
complaints to ensure they were resolved in a timely
manner.
As the members noted in their review of the audit in
their packets it was the opinion of the Division of
Legislative Audit that the board be extended three
years to June 30, 2018. In the opinion of the auditors
the board was serving the public's interest by
effectively licensing and regulating the manufacture,
barter, possession, and sale of alcoholic beverages in
Alaska. To speak to the recommendations mentioned
earlier, Kris Curtis, Legislative Auditor, Alaska
Division of Legislative Audit and Cynthia Franklin,
Director, Alaska Alcoholic Beverage Control Board were
available online from Anchorage.
In closing, the ABC Board served an important role in
guarding the health and safety of Alaskans by
protecting the general public through the issuance,
renewal, revocation, and suspension of alcoholic
beverage licenses. The continuation of the board was
very important.
Ms. Stidolph thanked committee members for supporting HB
116.
Representative Wilson asked about the fiscal note. She
noted there was money coming from the general fund. She
wondered why the fees collected from serving alcohol did
not pay for operating expenditures making the program cost
neutral.
1:34:38 PM
CYNTHIA FRANKLIN, EXECUTIVE DIRECTOR, ALCOHOLIC BEVERAGE
CONTROL BOARD, DEPARTMENT OF COMMERCE, COMMUNITY AND
ECONOMIC DEVELOPMENT (via teleconference), spoke to
Representative Wilson's question. She explained that if the
licensed premise was inside a municipality, by statute the
entire fee was refunded to the municipality for law
enforcement efforts to do with Title 4 provisions. Many of
the licensing fees in alcohol were returned to the
individual communities where the licensed premise existed.
In non-municipality settings the license fees were placed
into the general fund. Although the ABC Board collected
licensing fees its costs were not technically cancelled out
by the licenses because the bulk of the funds received were
returned to the municipalities by statute.
Representative Wilson asked if the municipalities were
required to provide enforcement having to do with ABC Board
issues in their communities. She wondered about enforcement
outside of a municipality.
Ms. Franklin responded that the refunds were based on
enforcement of Title 4. Over previous years she reported
there had been different definitions of the statute.
Currently, the ABC Board required municipalities to report
their Title 4 activities annually. The report included the
number of Title 4 violations filed and prosecuted in their
jurisdiction. Presently, the board had five officers
statewide that were employed by the state that conducted
special enforcement efforts. The Alcoholic Beverage and
Control Board had a couple of programs that were law
enforcement related centering on preventing underage access
to alcohol. Officers of the ABC Board performed special
enforcement whereas municipalities focused on everyday
enforcement of Title 4 laws and rules around alcohol.
Typically municipalities had their own conditional use
permits or zoning requirements for alcohol licenses.
However, the responsibility of renewing licenses, preparing
for board meetings, and other activities fell on ABC Board
employees.
1:37:44 PM
Representative Wilson asked if there was anything
preventing the legislature from changing the fee structure.
She was not opposed to municipalities getting monies back
if they were doing enforcement. However, if the state was
also doing some of the enforcement activity she believed
the cost needed better distribution. She wondered if there
was a way to track the fees.
Ms. Franklin stated that there was a desire and an effort
to see that more of the licensing receipts remained within
the agency for the purpose of funding the ABC Board's
efforts. She mentioned that there was a 2.5 year Title 4
stakeholder process that began in May 2012 which resulted
in a Title 4 revision package that was currently in the
hands of the legislature but not introduced in the session
in progress. In the course of the stakeholder's
(stakeholders included Department of Public Safety,
Department of Health and Social Services, and members of
the public sector) review the board's licensing fees were
found to be too low and had not been raised for several
decades. She reported that most of the fees were returned
to the municipalities. She elaborated that the idea behind
the rewrite was to raise fees and to include in legislation
an outline of where the fees were distributed including
dispersal to the ABC Board for licensing and enforcement.
The draft bill had not yet been introduced but hoped that
it would be in the current session.
Co-Chair Thompson asked if the bill would have additional
fiscal impacts. Ms. Franklin responded affirmatively. She
indicated that the rewrite was extensive and increased
licensing fees. She opined that the question as to whether
it added money was difficult to answer because there was
nothing in the language that was submitted that would
direct the money anywhere. The legislation did increase
licensing fees. The fiscal note before the committee
reflected the fees currently in statute under Title 4.
There was no specific funding mechanism that related the
licensing fees to the cost of the agency.
Co-Chair Thompson recognized Representative Pruitt at the
table.
1:40:31 PM
Representative Wilson wanted to better understand the fees
that were currently in place. She was unclear why certain
board funds were placed in the general fund versus other
accounts. She wanted to be able to better assess fee
increase amounts. She suggested the legislature would be
asking for increases high enough to cover expenses in order
for each board to become self-sufficient. She requested a
copy of a stakeholder report if there was one.
Co-Chair Thompson noted that his staff would try to find a
copy of the report and provide it to committee members.
Representative Gattis asked about the three-year extension
and the fiscal note. She noticed that the out-year
estimates were predicted at a flat rate. She wondered about
raises and inflation rates. Ms. Franklin asked if
Representative Gattis was referring to the out-year
estimates.
Representative Gattis responded that she was referring to
the three years including the out-years. Ms. Franklin
stressed that the out-years were very difficult to predict
due to the new substance assigned to the agency by AS
17.38. She did not have any idea how regulating a new
substance was going to affect the agency financially and
whether tax revenues would be directed to the agency to
offset costs. She added that in other states where
marijuana was legal costs of regulating the substance had
been offset by taxes received. She was not aware of any
place in statute that offset costs with licensing fees
having to do with the regulation of alcohol. It was her
understanding that offsets did not occur because of refunds
to municipalities. She pointed out that the first refund
check to the municipalities for a six month period totaled
$660 thousand. The entire budget of the agency prior to
adding marijuana was $1.75 million. She continued that when
discussing $1.2 million per year in refunds to
municipalities it came close to equaling the ABC Board's
entire budget. There was a large sum of money going back to
the municipalities. She suggested that in the future years
until certain questions were answered concerning tax
revenue and how many positions would be needed at the ABC
Board to safely regulate the new substance the out-years
would be difficult to predict.
1:44:58 PM
Representative Gattis clarified that she was only looking
at FY 16, FY 17, and FY 18. All three years appeared
relatively flat according to the fiscal note in terms of
raises or increases. She wanted to know if an awareness of
the state's fiscal crunch was reflected in the fiscal note.
Ms. Franklin responded affirmatively. She elaborated that
the agency's decision was a reflection of not knowing what
the requirements might be to safely regulate the new
substance. She did not have a financial estimate
anticipating future staff needs. However, the board, with
all other things being equal, anticipated trimming costs
along with all state agencies.
Co-Chair Neuman referred to the fiscal note. He opined that
the fiscal note should be more detailed. He commented that
the fiscal notes for the marijuana policy board were much
more detailed. He asked Co-Chair Thompson for a revised
fiscal note.
Co-Chair Thompson responded that there would be some major
questions regarding present legislation.
1:48:46 PM
Representative Gara noted that the legislative audit
summarized the duties of the ABC Board which included
protecting the public's health and safety. He was concerned
about two neighborhoods within his district. He wanted to
know more about what was being done. He discussed a
particular assault in Anchorage. He asked if the board had
the power to take proactive steps to work with bars on
public safety matters or did the ABC Board wait until after
an incident or at the time of relicensing. Ms. Franklin
asked if Representative Gara's question was directed
towards her.
Representative Gara responded affirmatively. He restated
the question. He wondered if the board had the power and
took proactive steps to protect public safety. He wondered
if the board waited until after a violation to respond. Ms.
Franklin answered that the board did both. She explained
that the board had some proactive education-type activities
that it engaged in including attending the Anchorage
Downtown Partnership meetings. The board did not have the
power to proactively take a license without some other
occurrence. She furthered that a municipality in which a
licensed premise was located had the option to protest the
issuance, transference, or renewal of a license and could,
mid-renewal period, protest the continued operation of a
license. The board worked in cooperation with the
municipalities and local governing bodies to identify
problem operators and licensees. There could be some
reliance on municipal governments to identify the operators
by their protest tool. She reported the board was aware of
the current problems in downtown Anchorage and was in
communications with individual liquor licensees and with
the Anchorage Downtown Partnership. However, the statutes
did not permit the board to revoke a license in response to
a violation of Title 4.
Representative Gara wanted to make sure that the ABC Board
was taking proactive safety steps in working with bars
before incidents occurred. He wanted to reconfirm that she
was responding affirmatively to his question. Ms. Franklin
responded in the affirmative. She furthered that the board
identified a bouncer safety course and had started
recommending that licensees engage in the educational
course. She relayed that all of the board's Anchorage
enforcement officers attended the course, which was
originally offered by CHARR [Alaska Cabaret, Hotel,
Restaurant and Retailers Association]. She added that the
course information was also listed on the ABC Board's
website.
1:52:59 PM
Representative Gara asked about another neighborhood at
13th and Gamble in Anchorage. He explained that there were
two liquor stores across the street from each other and had
one of the highest concentrations of publicly intoxicated
people in Anchorage. He wondered if the board had the power
to grant two liquor stores in such a close distance from
one another. He wondered if it was beyond the board's power
to avoid issuing two licenses in the same area.
Ms. Franklin explained Title 4 was structured such that
local governing bodies were responsible for informing the
board about community issues concerning the location or
zoning of a licensee. She reported that the board was aware
of the stores Representative Gara was referring to. As the
Anchorage municipal prosecutor she had visited the area
several times. The board was aware that there had been
controversy regarding the licenses. She informed the
committee that Title 4 allowed protests of renewals,
transfers, initial applications for licensees or potential
licensees. At any time a governing body could protest a
licensee's continued operation even at a mid-renewal
period. Once a protest was issued the ABC Board would
uphold the protest according to AS 4.11.480 unless the
board found that the protest was arbitrary, capricious, and
unreasonable. She relayed that it was up to the Anchorage
Assembly to file a protest against the particular stores.
1:56:27 PM
Co-Chair Thompson suggested that Representative Gara
approach his municipality. He reported a problem in
Fairbanks where three liquor stores had similar issues with
public intoxication. The municipality told each of the
stores that it was going to protest their license renewals
unless they did something. He reported that they were all
working on reducing their hours of operations at the times
in which problems were occurring.
Representative Gara indicated that the local municipality
was currently working on the issue. He had just wanted to
hear from the ABC Board.
Vice-Chair Saddler asked about licenses for clubs,
particularly patriotic clubs. He mentioned a previous bill
that passed allowing spouses of service members and certain
under aged service members to attend functions at patriotic
clubs without drinking. He wanted to know about any
problems to do with alcohol control enforcement resulting
from the legislation. Ms. Franklin responded in the
negative. She relayed that clubs had been very orderly,
quiet, and respectful of the rules.
1:58:13 PM
Vice-Chair Saddler indicated that some ABC enforcement
agents wanted to obtain access cards to certain patriotic
clubs. He wondered if the effort was still underway. Ms.
Franklin believed the issue had been resolved. She had not
had the issue come up in the prior six months.
Vice-Chair Saddler said that the administrative home of the
board had changed from Department of Public Safety to
Department of Commerce, Community and Economic Development.
He wanted to know if the change had diminished the ABC
Board's ability to achieve either its commerce supporting
role or its public safety enforcement role.
Ms. Franklin relayed that she had only been a part of the
agency since it had been under the umbrella of commerce.
She opined that the board was functioning well following
the change. She believed that licensees were satisfied with
the board's performance in meeting its public safety
mission and making sure licensees understood specific
rules. The tone of the agency and its relationship with
DPS, DHSS, and with licensees was excellent. She suggested
the success of the board was due to the move between
departments as well as the legislative audit. She discussed
the stakeholders' workgroup in which members were forced to
talk through some very difficult issues. She reported that
the three board meetings she attended had focused
significantly on public safety. The ABC Board took its job
seriously and had a fresh perspective with the change to
DCCED.
Vice-Chair Saddler commented that the results of the ABC
Board's survey on page 23 of the audit indicated
participants thought there would be a need for new laws or
regulations. He wondered what type of new laws would be
needed.
Ms. Franklin shared that some of the details were decided
in the stakeholders group. She did not know what laws were
indicated in the survey. Department of Public Safety was at
the table in the stakeholders group when discussing large
issues regarding Title 4. She relayed that one of the
public safety issues that came up had to do with dry
villages and bootlegging penalties. The perception from law
enforcement was that the penalties were not effective. The
way in which the group addressed the problem was to rewrite
the penalties so that the amount of alcohol that was
brought into a dry village resulted in increased penalties.
In other words, a fine structure was tied to the amount of
alcohol imported into a dry village. This was an example of
the issues addressed with the stakeholders' workgroup.
2:02:24 PM
Representative Wilson asked that the revised fiscal note
include a list of categories, a breakdown of license fees
collected within each category, and the amount of fees
given to municipalities. She felt the information would
help in determining a revised fee structure aiming for
self-sufficiency.
Co-Chair Thompson directed Ms. Franklin to provide the
information to his staff to distribute to members. Ms.
Franklin would provide the information.
Representative Edgmon asked about new areas of regulation.
He wondered about powdered alcohol and whether it would be
included in the rewrite of the bill that was coming
forward. He wanted to know if powdered alcohol was under
the current jurisdiction of the ABC Board. Ms. Franklin
reported powdered alcohol was already illegal in Alaska.
She referred to AS 04.16.110 and conveyed that a person may
not sell alcoholic beverages in powdered form if intended
for human consumption. The law was enacted in 1995 and was
a Class "A" misdemeanor. The board was very satisfied with
the powdered alcohol prohibition and had no intention of
revisiting its corresponding law. She was aware of its
recent publicity but felt that the issue was already
addressed in statute.
2:04:02 PM
Representative Guttenberg asked about the authorities being
extended. He relayed that her position had moved over from
public safety. He suggested that the board would have more
to do with the agricultural community with the growing,
sale, and distribution of marijuana. He wanted her
perception of how the board was handling the marijuana
initiative.
Ms. Franklin reported that the ABC Board was working very
diligently in regards to the marijuana initiative. The
board's management team met with state regulators of
Colorado. State regulators from Oregon and Colorado meet
with the Alaska team to discuss in detail the challenges
they faced. She reported that marijuana was a very
different substance from alcohol and that cultivation and
growing were new areas to the ABC Board. She detailed that
she and her enforcement officer spent time with the owner
of Bells Nursery in Anchorage to better understanding about
growing plants indoors in Alaska and what type of issues
and challenges that might arise. She also reported spending
time with Department of Environmental Conservation
discussing testing facilities, labs, and standards for a
plant and how to write them into regulations. She
maintained that the agency's experienced licensing and
enforcement staff could be counted on to deal with the new
challenge.
2:07:07 PM
Representative Guttenberg noted the federal banking
restrictions that made it illegal for marijuana businesses
to do their banking in the United States. He wondered how
the ABC Board was addressing a change in banking
regulations the marijuana community.
Ms. Franklin mentioned that the ABC Board was working with
Ms. Kevin Anselm, Director, Division of Banking and
Securities, Department of Commerce, Community and Economic
Development, regarding associated issues. She pointed out
that Ms. Anselm attended a conference in the fall of 2014
with other banking regulators from legalized marijuana
states and would have an answer for Representative
Guttenberg's questions. She assured the committee that the
banking experts at state agencies were involved,
interested, and engaged in figuring how to bank the
marijuana industry.
Representative Wilson made some calculations from the
information on the fiscal note and pointed out that the
operation cost of the ABC Board totaled $279,208 per month.
She wondered if it would be more cost effective to
subcontract the board's duties more affordably. She thought
the figure was high. Ms. Franklin asked if Representative
Wilson was referring to the fiscal note that included
marijuana.
Representative Wilson responded affirmatively. She added
that she was unable to tell how much of the amount applied
to marijuana and how much applied to the ABC Board. Ms.
Franklin informed the committee that the previous year's
budget for the board was $1.75 million. She believed the
work of the board's relatively small staff could not be
contracted out more economically. There were 10 statewide
employees and herself, the director. She clarified in the
fiscal note the board had to include marijuana with the
passing of legislation. The budget in the fiscal note
reflected six additional employees to handle marijuana
issues for the period of FY 15 and FY 16. She reviewed
there were 16 employees statewide to enforce marijuana and
alcohol regulations in statute. In comparing Alaska's 16
employees to the number of regulators in other states such
as Colorado and Washington and adjusting for population,
she concluded that the state was getting the best bang for
its buck with the current employees in the division. She
did not think a private company could carry out duties more
efficiently. She pointed out that ABC Board shared many
resources with the rest of DCCED and across agencies. She
did not believe it was possible to scrape any closer to the
bone in the agency's budget.
2:10:48 PM
Representative Wilson clarified that her question was not
intended to imply that agency employees were not working
diligently. She believed that $279 thousand was a
significant amount of money per month. She surmised that
perhaps the costs reflected what the legislature had asked
the agency to do based on statute. She asked Co-Chair
Thompson about whether it was appropriate to have the
fiscal note detail the costs for both marijuana and
alcohol. She was wondering if the information would be
provided in lieu of or additionally in another piece of
legislation. She highlighted that the cost to the state was
$136 thousand per month to regulate and monitor alcohol.
She was unclear about potential duplication.
Co-Chair Thompson relayed that the bill would not be passed
out of committee because of so many unanswered questions.
He relayed that his office would try to get a breakdown of
costs associated with alcohol and with marijuana. He
reiterated that the new bills could influence the policies
around marijuana.
2:12:15 PM
Co-Chair Thompson asked about the five recommendations from
the legislative audit report. He wondered about the status
of addressing each of the issues. Ms. Franklin indicated
that all five issues had been addressed. A couple of them
had been address prior to her recent tenure in September.
The first addressed notifications to municipalities. There
was a staff change and with the changeover corrected the
notification procedure so that the 10-day deadline was
currently being met. All of the recommendations were
accepted by the agency and had been corrected. She
addressed the issue of multiple fiscal notes and multiple
marijuana bills, it was her understanding that it was
required that the agency had a fiscal note attached to each
bill because it was unknown whether any individual bill
would pass. She explained that it might be that in other
bills regarding marijuana a fiscal note for the staffing
and board to effectively regulate the substance. A fiscal
note was in each bill.
Representative Gara commented that the board was roughly
$1.5 million short of the fees the agency took in and
expenditures. He asked Ms. Franklin if he was accurate. Ms.
Franklin responded positively.
Representative Gara asked if all of the fees that the
agency took in were from liquor license sales or from other
fees. Ms. Franklin answered the fees that were taking in
were from liquor license fees. The reason the amount fell
short was because the agency did have a fee structure for
marijuana at present. She indicated that the agency would
not be able to determine the quantity of licenses that
would be issued or for what dollar amount prior to the
industry start-up. The fiscal note that was before the
committee reflected financial outlays for the regulation of
marijuana without any revenue currently. She spoke of the
City of Denver with 650 thousand people, 100 less people
than in Alaska, had issued approximately 900 marijuana
licenses. In 2014 Denver took in $15.9 million in taxes and
added 37.5 fulltime employees solely for the regulation of
marijuana. The employees' costs were fully covered by the
tax revenues collected.
Representative Gara asked if the ABC Board would be
breaking even without the marijuana component. Ms. Franklin
responded approximately.
Representative Gara asked if there was any way for the
state to benefit from the sales of liquor licenses rather
than any windfall going to a bar owner. He purported that
what happened was that there was a limited number of
licenses that people sold them for a significant amount of
money. Was there any way to restructure the transferring of
a license and if so, would it have to be changed in
statute.
Ms. Franklin agreed that the secondary market value of
liquor licenses came from a combination of the population
limits on licenses creating a limited availability. She was
unaware of any other way to correct the issue of
transferability for alcohol licenses except to rewrite the
statute. She was advocating for non-transferable licenses
without population limits for marijuana.
Co-Chair Thompson invited Ms. Franklin to make any closing
comments. Ms. Franklin thanked committee members for their
time.
2:17:50 PM
Co-Chair Thompson reiterated that the bill would be set
aside.
HB 116 was HEARD and HELD in committee for further
consideration.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB049 Explanation of changes_H to E.pdf |
HFIN 3/19/2015 1:30:00 PM |
HB 49 |
| HB049 Sectional Analysis Ver E.pdf |
HFIN 3/19/2015 1:30:00 PM |
HB 49 |
| HB049 Sponsor Statement.pdf |
HFIN 3/19/2015 1:30:00 PM |
HB 49 |
| HB049 Supporting Document-2015 Legal FAQS-B Lab.pdf |
HFIN 3/19/2015 1:30:00 PM |
HB 49 |
| HB049 Supporting Document-2015 Sampling of Benefit Corporations.pdf |
HFIN 3/19/2015 1:30:00 PM |
HB 49 |
| HB049 Supporting Document-2015 States with Benefit Corporations.pdf |
HFIN 3/19/2015 1:30:00 PM |
HB 49 |
| HB049 Supporting Document-Letter Diane E. Hughes 2-4-2014.pdf |
HFIN 3/19/2015 1:30:00 PM |
HB 49 |
| HB049 Supporting Document-Letter Grodon Blue 2-2-2015.pdf |
HFIN 3/19/2015 1:30:00 PM |
HB 49 |
| HB116 Supporting Documents - Legislative Audit 05-30-14.pdf |
HFIN 3/19/2015 1:30:00 PM |
HB 116 |
| HB116 Sponsor Statement.pdf |
HFIN 3/19/2015 1:30:00 PM |
HB 116 |
| HB 49 New FN DCCED.pdf |
HFIN 3/19/2015 1:30:00 PM |
HB 49 |
| HB 49 Support Letter.pdf |
HFIN 3/19/2015 1:30:00 PM |
HB 49 |