Legislature(2015 - 2016)BARNES 124
02/27/2015 03:15 PM House LABOR & COMMERCE
Note: the audio ![]()
and video ![]()
recordings are distinct records and are obtained from different sources. As such there may be key differences between the two. The audio recordings are captured by our records offices as the official record of the meeting and will have more accurate timestamps. Use the icons to switch between them.
| Audio | Topic |
|---|---|
| Start | |
| HB32 | |
| HB116 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB 32 | TELECONFERENCED | |
| *+ | HB 116 | TELECONFERENCED | |
HB 116-EXTEND ALCOHOLIC BEVERAGE CONTROL BOARD
4:16:37 PM
CHAIR OLSON announced that final order of business would be
HOUSE BILL NO. 116, "An Act extending the termination date of
the Alcoholic Beverage Control Board; and providing for an
effective date."
4:17:00 PM
LAURA STIDOLPH, Staff, Representative Kurt Olson, Alaska State
Legislature, on behalf of the House Labor & Commerce Standing
Committee, Representative Kurt Olson, Chair, presented HB 116.
This bill would extend the sunset date for the Alcoholic
Beverage Control (ABC Board) to June 30, 2018. Each year the
Division of Legislative Audit reviews state boards and
commissions to determine whether they should be reestablished
per AS 24.44. The Division of Legislative Audit reviewed the
activities of the Alcoholic Beverage Control Board ("ABC
Board"). The purpose of the legislative audit was to determine
whether there is a demonstrated public need for the ABC Board's
continued existence and whether it has been serving the public's
interest effectively.
MS. STIDOLPH reported that the board has resolved all issues
found in prior audits with two being resolved and one being
partially resolved. She directed attention to the five findings
and recommendations in the most recent audit. First, the
legislative auditors recommended including having the board's
director ensure that all board meetings are properly published
on the state's online public notice system. Second, the
legislative auditors recommended that the board should notify
local governing bodies of applications for new and transfer
licenses within 10 days of receipt. Third, the legislative
auditors recommended that the board should issue catering
permits in accordance with statutory requirements. Fourth, the
legislative auditors recommended that the board should issue
recreational site licenses in accordance with statutes; and
finally, the legislative auditors recommended that the board
should implement a process to monitor and track all complaints
to ensure they are resolved in a timely manner.
MS. STIDOLPH reported that the Division of Legislative Audit
recommended that the ABC Board be extended three years to June
30, 2018. The legislative auditors serve public's interest by
effectively licensing and regulating the manufacture, barter,
possession and sale of alcoholic beverages in Alaska. In
closing, she related the auditors found that the ABC Board
serves 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 this board is very important, she
relayed.
4:19:54 PM
KRIS CURTIS, Legislative Auditor, Legislative Audit Division,
Legislative Agencies and Offices, reported that the division
conducted a sunset review of the ABC Board and concluded it was
serving the public interests; however, the division noted
several operational improvements were needed in the licensing
and general administration of the board. She said that the
board is set to sunset in June 2015 and the legislative audit
recommended a conditional five-year extension. At the time the
audit was completed in May 2014, the outcome of the marijuana
initiative was not yet known, so the audit suggested a three-
year extension, just in case the marijuana initiative passed,
since the initiative will significantly expand the board's
duties.
4:20:45 PM
MS. CURTIS referring to page 9 of the legislative audit,
reviewed the recommendations. She directed attention to
Recommendation 1, which recommended that the board's director
ensure that all board meetings are properly published on the
state's online public notice system. Three of the 25 meetings
held were not publically noticed, she said. Second, referring
to page 10 of the audit, she said that the division's auditors
recommended [Recommendation 2] that the board should notify any
local governing bodies of applications for new and transfer
licenses within 10 days of receipt as required by statutes. The
auditors found the board did not notify local governing bodies
within the required timeframe for two of the ten licenses
tested. She advised that these errors were caused by board
staff not adhering to their policies and procedures.
4:21:21 PM
MS. CURTIS directed attention to audit Recommendation 3, that
the board should issue catering permits in accordance with
statutory requirements. The auditors reviewed four licensees
who had received more than six consecutive catering permits. Of
those, three of the four were non-compliant, which each
represent a statutory violation since the permits were issued
with the intention of serving alcohol on a licensed premises
during the regular operation of the business rather than for a
short-term social gathering or similar event. The board issued
the permits to ensure that the businesses could continue to
operate.
4:21:56 PM
MS. CURTIS referred to page 11 to audit Recommendation 4, which
recommended that the board issue recreational site licenses in
accordance with statutory requirements. She reported that 15 of
32 recreational site licenses active during the audit period, or
40 percent of the businesses, did not meet the criteria for a
recreational site license. She explained that the ineligible
businesses included a sports center and pub, an exercise gym,
gift shop, bowling alleys, theatres, and pool halls. These
business types did not meet the definition of a recreational
site nor were the operations limited to a season. The issuance
of these licenses expanded the number of establishments licensed
to sell alcohol over the number allowed for in statute. She
stated that inquiries with board members revealed that improper
issuance of these recreational site licenses was caused by an
historic misunderstanding of what qualifies as a recreational
event.
4:22:55 PM
MS. CURTIS referred to page 12 to the final audit
recommendation, Recommendation 5, that the board implement a
process to monitor and track all complaints and to ensure that
they are resolved in a timely manner. Although the board had a
process in place3 to receive complaints, complaints were only
tracked if they resulted in an inspection or investigation. If
the complaint was deemed invalid, it was not documented;
furthermore, the basis for a decision not to investigate was not
documented or maintained. She stated that the board director
did not consider tracking all complaints as necessary since
there was not any statutory mandate to do so. She concluded
that the department and the board agreed with all of the audit
recommendations and submitted a corrective action plan.
4:23:35 PM
REPRESENTATIVE JOSEPHSON, in terms of the misunderstanding on
Recommendation 4, asked whether the board currently agrees on
the foregoing interpretation of the statute.
MS. CURTIS answered that the division believes so. The board
and department's response to the audit indicated that the board
had operated under guidance from the assistant attorney general,
but the board has since reconsidered its process, including
taking public testimony, and the board has gone back to a
stricter interpretation of statute.
4:24:34 PM
REPRESENTATIVE JOSEPHSON referred to a proposed rewrite of Title
[4] and to the stakeholders who are working on it. He asked
whether this should give the committee some pause and if it will
lead to a shorter extension given the ABC Board's shared staff
with the proposed marijuana board.
MS. CURTIS answered that the recommendation for extension took
into consideration the results of the audit, including the
findings and recommendations. When the sunset audit was
completed for the ABC Board, the division did not have any idea
if the marijuana initiative would pass. She acknowledged that
the proposed marijuana board envisioned sharing staff with the
ABC Board; however, she did not see a sunset provision for
proposed marijuana board. She suggested that if the two
separate boards plan on sharing staff, it is possible the
extension date could put the sunset dates of each board out of
synch with one another, which could result in inefficient use of
audit resources.
CHAIR OLSON commented that as the bill establishing a marijuana
board continues to move forward through the legislative process,
that he will work to ensure that it shares the same sunset date
as the ABC Board. He also noted that some of the Department of
Commerce, Community & Economic Development's occupational
licensing staff was often shared by boards.
MS. CURTIS agreed.
4:26:55 PM
REPRESENTATIVE HUGHES had questions on some of the proposed
changes to the Title 4 [alcoholic beverage] revisions. She
suggested that three years still works for a proposed sunset.
She asked whether Ms. Curtis had any comments.
MS. CURTIS answered that at the time the field work was done,
which was in late spring, the division was aware of the
stakeholders group, but could not predict any outcome at that
point.
4:27:34 PM
REPRESENTATIVE KITO referred to audit Recommendation 2, in which
two meetings did not have the appropriate notice. He asked
whether there is any cause for the state to find out if
decisions were made without adequate local involvement.
MS. CURTIS answered that the division did not find any
complaints made by the local governing body or any outcome
resulting from the lack of timely noticing.
4:28:36 PM
REPRESENTATIVE KITO related her understanding that the several
violations occurred with Recommendations 3 and 4. He asked
whether the violations were corrected and if the permits been
removed, where appropriate.
MS. CURTIS answered that the audit team does not know that;
however, it will be a good question for the department.
4:29:00 PM
CYNTHIA FRANKLIN, Executive Director, Alcoholic Beverage Control
Board ("ABC Board"), Department of Commerce, Community &
Economic Development (DCCED) introduced herself.
4:29:26 PM
REPRESENTATIVE KITO asked for further clarification on the
sunset audit Recommendations 3 and 4, and if the changes have
been implemented and improper permits have been withdrawn.
MS. FRANKLIN answered that with respect to Recommendation 3, the
catering permits were for individual events that had been held
prior to the audit, that catering events are held for specific
events, and represent short-term permission in which sellers
serve alcohol. She elaborated that what happened with the
catering permits predated her tenure with the board as of last
September. She related her understanding that there was a
practice during the liquor license transfers such that the new
licensees had the expectation of approval. During this
timeframe catering permits were issued that allowed the
establishment to continue to sell or serve alcohol. In
particular, this occurred with respect to stock transfers, in
which ownership of the organization changed but the day-to-day
operations were not changing. She said the agency was issuing
catering permit to allow for "non-interruption" of service in
the license; however, it was determined to violate the permit
statute. She reported that the practice had already been
discontinued by September 2014, and the ABC Board does have
safeguards in place to check all catering permits to ensure that
the activity is not happening. She said that involves some
coordination between the licensing and enforcement sections,
which was not previously occurring. She stated that this
practice has ceased.
4:31:43 PM
MS. FRANKLIN said it is a little more complicated in terms of
the recreational site licenses. She explained that liquor
licenses were issued to businesses that did not technically
qualify for recreational site licenses. For example, a
recreational site license was issued to the Alaska Club South
location. However, the facility is a gym that operates every
day and does not qualify for an event. Since they have a liquor
license, the ABC Board will not be able to review the license
until renewal. However, the board is very aware it overstepped
its bounds in issuing that and several other recreational site
licenses. She anticipated that the issue will be addressed when
these licenses come up for renewal.
4:32:46 PM
REPRESENTATIVE KITO asked whether provisions allow for
transition of facilities. He related his understanding that
gaps could exist when transferring ownership and there is a gap;
however, he asked whether another method for issuing
transitional licenses exists.
MS. FRANKLIN answered not really. She characterized this as
being "chicken and egg" problem in terms of stock transfers,
depending on the individual transfer. For example, in
Anchorage, a beverage license dispensary license was sold by the
Sourdough Mining Company to the Texas Roadhouse with the
intention that Sourdough Mining Company would come in and
acquire a restaurant eating place license that would allow it to
continue selling beer and wine with meals. However, this effort
requires engaging in careful planning, and had he applied ahead
of time, nothing would have prevented approval or a smooth
transition when he sold his beverage dispensary license. Due to
the way the business transition occurred, the beverage
dispensary license was sold, followed by an application being
submitted for a restaurant eating place license. It led to an
interruption in alcohol service at Sourdough Mining Company, she
said; however, if the person seeking transfers could have
planned better.
4:35:02 PM
MS. FRANKLIN stated that the ABC Board works to accommodate its
licensees. In this instance the statutes did not authorize the
board to issue catering permits to Sourdough Mining Company so
it could continue to serve alcohol to its customers while the
business obtained its other license. Although the board works
to assist its licensees, in some instances it is out of the
board's control if licensees wait too long to apply.
4:35:44 PM
REPRESENTATIVE KITO, referencing audit Recommendation 4,
expressed concern that some facilities may be operating
illegally if they received their permits in error. He expressed
further concern that some operators should have sought an
alcoholic beverage license, but now have recreational site
licenses, especially since these establishments may not have
been granted a license.
MS. FRANKLIN responded that she did not believe these facilities
are operating in violation of the law since the operators
legally obtained their licenses from the ABC Board. She agreed
with the audit finding that the definition of recreational site
license had been stretched beyond its original intent. However,
those decisions were apparently made upon advice of legal
counsel. She did not think anyone could argue that those
licensed establishments were operating in violation of the state
law, in particular, since they obtained their licenses lawfully
with local approval and other approval that must occur before
the licenses are issued. Further, after the licenses were
issued, the ABC Board received an opinion from the auditing
agency that the licenses "stretched the boundaries" of the
statutory definition of what would have been allowed, but she
did not believe that statement would invalidate the licenses.
4:37:52 PM
MS. FRANKLIN understood his concern and said the board will take
up those individually as they come up for renewal. In addition,
this agency also changed departments during the audit period and
the assistant attorney general changed, as well. Thus, the ABC
Board has a fresh outlook on this statute. She said she has
faith that the licenses in question will ultimately be strictly
reviewed during the renewal process, which occurs every other
year.
4:38:51 PM
REPRESENTATIVE COLVER directed attention to the fiscal note. He
said that the FY 16 budget is $3.35 million, with a fund source
of $1.575 million in general fund monies and approximately $1.8
million in program receipts. He said he was interested in the
program receipts from the industry and how much goes to the
general treasury. He acknowledged that a number of alcohol
taxes also generate revenue and he was also interested in the
tax collections.
MS. FRANKLIN answered that she doesn't have the tax receipts on
hand. She agreed that the receipts for fees for alcohol
licensing are reflected in the fiscal note, which includes money
for agency as expanded. In November, with passage of ballot
measure 2, the agency scope has expanded to include marijuana.
What is not reflected in the fiscal note would be the receipts
from the proposed licensees since the ABC Board is not sure how
many licenses will be issued or the amount of the potential
receipts. Thus more funds are reflected in the budget for the
first year of marijuana licensing, but it isn't possible to
project receipts until the licenses issued, which is a first
year problem for the agency.
4:41:48 PM
REPRESENTATIVE COLVER said he did not have access to last year's
information so he cannot compare the board's budget. He
surmised that the $1.575 million is being charged off to new
regulations. He asked whether Ms. Franklin could provide the
committee with how much of the funding is to regulate the new
industry and the agency budget.
MS. FRANKLIN answered that the ABC Board FY 15 budget was $1.75
million and the FY 16 budget for regulating the new substance
includes a large one-time appropriation for a database to
replace the current paper-based agency. Thus far she has
received a substantial number of questions and demand for data.
The fiscal note includes $500,000 for a database. She explained
that the budget doesn't double since it does not double the
agency, but proposes to add six employees through an FY 15
supplemental budget and FY 16 budget request. She stated that
the agency budget would expand from 10 to 16 statewide positions
to regulate the substances. She clarified that it appears to
mirror the budget since it has a one-time expense for the
database.
4:44:10 PM
REPRESENTATIVE COLVER referred to the fiscal note for FY 17-FY
19 seems to show the same increment, which doesn't reflect a
one-time database upgrade. He suggested that he may wish to
tweak the out years.
MS. FRANKLIN agreed.
4:44:44 PM
REPRESENTATIVE HUGHES referred to the proposed Title 4 revisions
and asked for further clarification on how the three-year
extensions might impact the ABC Board.
4:45:21 PM
MS. FRANKLIN offered her belief that the three-year extension is
a good plan. She explained that the Title 4 revisions will be
introduced by Senator Micciche [by the Senate Rules Committee].
She reported that the group has finished its work. In response
to earlier questions, she stated that no work went beyond the
auditor's findings regarding these specific issues, in
particular, the permit issues. She suggested that the board
needs to stick to the strict statutory interpretations. She
emphasized the stakeholders' intention that the board strictly
follow the statutes when issuing the two types of permits. She
stated that the revisions to Title 4 are very expensive but
since the two-board one agency set up is reflected in SB 60 [and
HB 123], she thought a three-year timeline will be appropriate.
4:47:00 PM
REPRESENTATIVE JOSEPHSON asked for further clarification on
whether the stakeholders group was a balanced membership and for
the groups that were represented.
MS. FRANKLIN answered that the Title 4 stakeholder group was
balanced with multiple representatives from public health
sector, including that many of the subcommittee chairs were from
the health sector. She reported that L. Diane Casto,
[Behavioral Health], Department of Health & Social Services
chaired the underage drinking subcommittee and Jess Jessee,
Executive Director, Alaska Mental Health Trust, chaired the
licensing subcommittee. Bob Klein, Chair, ABC Boar, and
[Aleesha Towns-Bain] of the Rasmuson Foundation served on the
steering committee. She said that the stakeholders consisted of
representatives from every sector of liquor industry, including
manufacturers, breweries, retail package stores, bar and
restaurant eating places. In addition, the group consisted of
numerous municipal members providing local government
representation. She stated that the group issued a report
["entitled Alaska Title 4 Review for the Alaska Alcoholic
Beverage Control Board dated November 2014]. She offered to
share the report with the committee, which also lists the [70]
participants, as well as a PowerPoint that shows the composition
of each subcommittee. She stated that the Title 4 group has
done substantial work since May 2012, noting that as some
members dropped off, others joined. She characterized the
entire process as being a fairly incredible process.
4:49:27 PM
CHAIR OLSON, after first determining no one wished to testify,
closed public testimony on HB 116.
4:49:48 PM
REPRESENTATIVE JOSEPHSON remarked that it is evident that the
Alcoholic Beverage Control Board (ABC Board) will exist. He
said he has heard that Ms. Franklin is doing a great job. He
recommended the committee move the bill out of committee.
4:50:14 PM
REPRESENTATIVE HUGHES moved to report HB 116 out of committee
with individual recommendations and the accompanying fiscal
notes. There being no objection, HB 116 was reported from the
House Labor and Commerce Standing Committee.