Legislature(2021 - 2022)BARNES 124
04/27/2022 03:15 PM House LABOR & COMMERCE
| Audio | Topic |
|---|---|
| Start | |
| SB186 | |
| SB190 | |
| SB193 | |
| HB405|| HB406 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | HB 382 | TELECONFERENCED | |
| + | SB 45 | TELECONFERENCED | |
| += | HB 405 | TELECONFERENCED | |
| += | HB 406 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| + | SB 186 | TELECONFERENCED | |
| + | SB 190 | TELECONFERENCED | |
| + | SB 193 | TELECONFERENCED | |
ALASKA STATE LEGISLATURE
HOUSE LABOR AND COMMERCE STANDING COMMITTEE
April 27, 2022
3:18 p.m.
MEMBERS PRESENT
Representative Zack Fields, Co-Chair
Representative Ivy Spohnholz, Co-Chair
Representative Calvin Schrage
Representative David Nelson
Representative James Kaufman
Representative Ken McCarty
MEMBERS ABSENT
Representative Liz Snyder
COMMITTEE CALENDAR
SENATE BILL NO. 186
"An Act extending the termination date of the Board of Examiners
in Optometry; and providing for an effective date."
- HEARD & HELD
CS FOR SENATE BILL NO. 190(FIN)
"An Act extending the termination date of the Regulatory
Commission of Alaska; relating to Regulatory Commission of
Alaska regulations regarding refuse utilities; relating to the
powers and duties of the legislative audit division; and
providing for an effective date."
- HEARD & HELD
CS FOR SENATE BILL NO. 193(FIN)
"An Act extending the termination date of the Board of
Chiropractic Examiners; requiring a report on audit compliance
by the Board of Chiropractic Examiners; and providing for an
effective date."
- HEARD & HELD
HOUSE BILL NO. 405
"An Act relating to the establishment of trusts; requiring the
filing of certain trust information; and requiring compliance
with a federal law."
- HEARD & HELD
HOUSE BILL NO. 406
"An Act relating to the validity of trusts involving persons
sanctioned by the United States Department of the Treasury; and
relating to the recording of documents conveying land to persons
sanctioned by the United States Department of the Treasury."
- HEARD & HELD
HOUSE BILL NO. 382
"An Act relating to insurance coverage for pharmacy services."
- BILL HEARING CANCELED
COMMITTEE SUBSTITUTE FOR SENATE BILL NO. 45(FIN)
"An Act raising the minimum age to purchase, sell, exchange, or
possess tobacco, a product containing nicotine, or an electronic
smoking product; relating to selling a tobacco product; relating
to possession of tobacco, electronic smoking products, or
products containing nicotine by a person under 21 years of age;
relating to the definition of 'nicotine'; relating to
transporting tobacco, a product containing nicotine, or an
electronic smoking product; relating to the taxation of
electronic smoking products; relating to electronic smoking
products; relating to the marketing of electronic smoking
products; relating to tobacco products; and providing for an
effective date."
- BILL HEARING CANCELED
PREVIOUS COMMITTEE ACTION
BILL: SB 186
SHORT TITLE: EXTEND BOARD OF EXAMINERS IN OPTOMETRY
SPONSOR(s): SENATOR(s) STEVENS
02/09/22 (S) READ THE FIRST TIME - REFERRALS
02/09/22 (S) L&C, FIN
03/07/22 (S) L&C AT 1:30 PM BELTZ 105 (TSBldg)
03/07/22 (S) Moved SB 186 Out of Committee
03/07/22 (S) MINUTE(L&C)
03/08/22 (S) L&C RPT 3DP
03/08/22 (S) DP: MICCICHE, GRAY-JACKSON, STEVENS
03/21/22 (S) FIN AT 9:00 AM SENATE FINANCE 532
03/21/22 (S) Heard & Held
03/21/22 (S) MINUTE(FIN)
03/23/22 (S) FIN AT 1:00 PM SENATE FINANCE 532
03/23/22 (S) Moved SB 186 Out of Committee
03/23/22 (S) MINUTE(FIN)
03/25/22 (S) FIN RPT 5DP
03/25/22 (S) DP: STEDMAN, BISHOP, HOFFMAN, WILSON,
WIELECHOWSKI
03/28/22 (S) TRANSMITTED TO (H)
03/28/22 (S) VERSION: SB 186
04/04/22 (H) READ THE FIRST TIME - REFERRALS
04/04/22 (H) L&C, FIN
04/25/22 (H) L&C AT 3:15 PM BARNES 124
04/25/22 (H) <Bill Hearing Postponed to 4/27/22>
04/27/22 (H) L&C AT 3:15 PM BARNES 124
BILL: SB 190
SHORT TITLE: REGULATORY COMMISSION AK/REFUSE UTILITIES
SPONSOR(s): SENATOR(s) MYERS
02/15/22 (S) READ THE FIRST TIME - REFERRALS
02/15/22 (S) L&C, FIN
02/28/22 (S) L&C AT 1:30 PM BELTZ 105 (TSBldg)
02/28/22 (S) Heard & Held
02/28/22 (S) MINUTE(L&C)
03/14/22 (S) L&C AT 1:30 PM BELTZ 105 (TSBldg)
03/14/22 (S) Moved CSSB 190(L&C) Out of Committee
03/14/22 (S) MINUTE(L&C)
03/15/22 (S) L&C RPT CS 5DP SAME TITLE
03/15/22 (S) DP: COSTELLO, GRAY-JACKSON, STEVENS,
MICCICHE, REVAK
03/21/22 (S) FIN AT 9:00 AM SENATE FINANCE 532
03/21/22 (S) Heard & Held
03/21/22 (S) MINUTE(FIN)
03/23/22 (S) FIN AT 1:00 PM SENATE FINANCE 532
03/23/22 (S) Heard & Held
03/23/22 (S) MINUTE(FIN)
03/28/22 (S) FIN AT 9:00 AM SENATE FINANCE 532
03/28/22 (S) -- MEETING CANCELED --
03/30/22 (S) FIN RPT CS 3NR 3DP NEW TITLE
03/30/22 (S) DP: BISHOP, HOFFMAN, WIELECHOWSKI
03/30/22 (S) NR: STEDMAN, WILSON, OLSON
03/30/22 (S) FIN AT 9:00 AM SENATE FINANCE 532
03/30/22 (S) Moved CSSB 190(FIN) Out of Committee
03/30/22 (S) MINUTE(FIN)
04/08/22 (S) TRANSMITTED TO (H)
04/08/22 (S) VERSION: CSSB 190(FIN)
04/09/22 (H) READ THE FIRST TIME - REFERRALS
04/09/22 (H) L&C, FIN
04/25/22 (H) L&C AT 3:15 PM BARNES 124
04/25/22 (H) <Bill Hearing Postponed to 4/27/22>
04/27/22 (H) L&C AT 3:15 PM BARNES 124
BILL: SB 193
SHORT TITLE: EXTEND BOARD OF CHIROPRACTIC EXAMINERS
SPONSOR(s): SENATOR(s) MICCICHE
02/15/22 (S) READ THE FIRST TIME - REFERRALS
02/15/22 (S) L&C, FIN
02/28/22 (S) L&C AT 1:30 PM BELTZ 105 (TSBldg)
02/28/22 (S) Heard & Held
02/28/22 (S) MINUTE(L&C)
03/21/22 (S) L&C AT 1:30 PM BELTZ 105 (TSBldg)
03/21/22 (S) Moved CSSB 193(L&C) Out of Committee
03/21/22 (S) MINUTE(L&C)
03/23/22 (S) L&C RPT CS 4DP NEW TITLE
03/23/22 (S) DP: COSTELLO, GRAY-JACKSON, STEVENS,
MICCICHE
03/28/22 (S) FIN AT 9:00 AM SENATE FINANCE 532
03/28/22 (S) -- MEETING CANCELED --
03/30/22 (S) FIN AT 9:00 AM SENATE FINANCE 532
03/30/22 (S) Heard & Held
03/30/22 (S) MINUTE(FIN)
04/05/22 (S) FIN AT 9:00 AM SENATE FINANCE 532
04/05/22 (S) Moved CSSB 193(FIN) Out of Committee
04/05/22 (S) MINUTE(FIN)
04/06/22 (S) FIN RPT CS 5DP 2NR NEW TITLE
04/06/22 (S) DP: BISHOP, HOFFMAN, WILSON, OLSON, VON
IMHOF
04/06/22 (S) NR: STEDMAN, WIELECHOWSKI
04/08/22 (S) TRANSMITTED TO (H)
04/08/22 (S) VERSION: CSSB 193(FIN)
04/09/22 (H) READ THE FIRST TIME - REFERRALS
04/09/22 (H) L&C, FIN
04/25/22 (H) L&C AT 3:15 PM BARNES 124
04/25/22 (H) <Bill Hearing Postponed to 4/27/22>
04/27/22 (H) L&C AT 3:15 PM BARNES 124
BILL: HB 405
SHORT TITLE: ESTABLISHMENT OF TRUSTS
SPONSOR(s): LABOR & COMMERCE
04/04/22 (H) READ THE FIRST TIME - REFERRALS
04/04/22 (H) L&C
04/08/22 (H) L&C AT 9:00 AM BARNES 124
04/08/22 (H) -- MEETING CANCELED --
04/15/22 (H) L&C AT 9:00 AM BARNES 124
04/15/22 (H) Heard & Held
04/15/22 (H) MINUTE(L&C)
04/18/22 (H) L&C AT 3:15 PM BARNES 124
04/18/22 (H) Heard & Held
04/18/22 (H) MINUTE(L&C)
04/20/22 (H) JUD REFERRAL ADDED AFTER L&C
04/20/22 (H) BILL REPRINTED
04/22/22 (H) L&C AT 9:00 AM BARNES 124
04/22/22 (H) Heard & Held
04/22/22 (H) MINUTE(L&C)
04/25/22 (H) L&C AT 3:15 PM BARNES 124
04/25/22 (H) <Bill Hearing Postponed to 4/27/22>
04/27/22 (H) L&C AT 3:15 PM BARNES 124
BILL: HB 406
SHORT TITLE: MORATORIUM ON TRUSTS/PROPERTY ACQUISITION
SPONSOR(s): LABOR & COMMERCE
04/04/22 (H) READ THE FIRST TIME - REFERRALS
04/04/22 (H) L&C
04/08/22 (H) L&C AT 9:00 AM BARNES 124
04/08/22 (H) -- MEETING CANCELED --
04/15/22 (H) L&C AT 9:00 AM BARNES 124
04/15/22 (H) Heard & Held
04/15/22 (H) MINUTE(L&C)
04/20/22 (H) JUD REFERRAL ADDED AFTER L&C
04/20/22 (H) BILL REPRINTED
04/22/22 (H) L&C AT 9:00 AM BARNES 124
04/22/22 (H) Heard & Held
04/22/22 (H) MINUTE(L&C)
04/25/22 (H) L&C AT 3:15 PM BARNES 124
04/25/22 (H) <Bill Hearing Postponed to 4/27/22>
04/27/22 (H) L&C AT 3:15 PM BARNES 124
WITNESS REGISTER
SENATOR GARY STEVENS
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Testified as the prime sponsor of SB 186.
KRIS CURTIS, CPA, CISA, Legislative Auditor
Division of Legislative Audit
Juneau, Alaska
POSITION STATEMENT: Provided invited testimony on SB 186.
SARA CHAMBERS, Director
Division of Corporations, Business and Professional Licensing
Department of Commerce, Community, and Economic Development
Juneau, Alaska
POSITION STATEMENT: Answered questions during the hearing on SB
186 and CSSB 193(FIN).
DAMIEN DELZER, OD, DipABO, Chair
Board of Examiners in Optometry
Division of Corporations, Business and Professional Licensing
Department of Commerce, Community, and Economic Development
Fairbanks, Alaska
POSITION STATEMENT: Provided invited testimony on SB 186.
JESSICA GIESEY, OD
Alaska Eyecare Center
Anchorage, Alaska
POSITION STATEMENT: Provided invited testimony in support of SB
186.
SENATOR ROBERT MYERS
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Testified as the prime sponsor of CSSB
190(FIN).
DAWSON MANN, Staff
Senator Robert Myers
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: On behalf of Senator Myers, prime sponsor,
provided the sectional analysis for CSSB 190(FIN).
KRIS CURTIS, CPA, CISA, Legislative Auditor
Division of Legislative Audit
Juneau, Alaska
POSITION STATEMENT: Provided invited testimony during the
hearing on CSSB 190(FIN) and CSSB 193(FIN).
KEITH KURBER, Commissioner
Regulatory Commission of Alaska
Anchorage, Alaska
POSITION STATEMENT: Answered questions during the hearing on
CSSB 190(FIN).
MADISON GOVIN, Staff
Senator Peter Micciche
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Presented CSSB 193(FIN) on behalf of
Senator Micciche, prime sponsor.
CHRIS LAUER, Esq.
Anchorage, Alaska
POSITION STATEMENT: During the hearing on HB 405 and HB 406,
expressed his concerns with HB 405.
MATTHEW BLATMACHR, President & CEO
Peak Trust Company
Anchorage, Alaska
POSITION STATEMENT: During the hearing on HB 405 and HB 406,
expressed his concern with the bills.
ABIGAIL O'CONNOR, Esq.
Anchorage, Alaska
POSITION STATEMENT: During the hearing on HB 405 and HB 406,
testified in opposition to both bills.
LINDA HULBERT
Fairbanks, Alaska
POSITION STATEMENT: During the hearing on HB 405 and HB 406,
testified in opposition to both bills.
HARRY NEED
Anchorage, Alaska
POSITION STATEMENT: During the hearing on HB 405 and HB 406,
testified in opposition to HB 405.
STEPHEN GREER, Esq.
Anchorage, Alaska
POSITION STATEMENT: During the hearing on HB 405 and HB 406,
testified in opposition to both bills.
JAMIE DELMAN, Esq.
Anchorage, Alaska
POSITION STATEMENT: During the hearing on HB 405 and HB 406,
testified in opposition to both bills.
ROBERT SCHMIDT, Director
Division of Banking and Securities
Department of Commerce, Community, and Economic Development
Juneau, Alaska
POSITION STATEMENT: During the hearing on HB 405 and HB 406,
answered questions.
TRACY RENO, Chief of Examinations
Division of Banking and Securities
Department of Commerce, Community, and Economic Development
Anchorage, Alaska
POSITION STATEMENT: During the hearing on HB 405 and HB 406,
answered a question.
ACTION NARRATIVE
3:18:47 PM
CO-CHAIR ZACK FIELDS called the House Labor and Commerce
Standing Committee meeting to order at 3:18 p.m.
Representatives Schrage, McCarty, Nelson, Spohnholz, and Fields
were present at the call to order. Representative Kaufman
arrived as the meeting was in progress.
SB 186-EXTEND BOARD OF EXAMINERS IN OPTOMETRY
3:19:12 PM
CO-CHAIR FIELDS announced that the first order of business would
be SENATE BILL NO. 186, "An Act extending the termination date
of the Board of Examiners in Optometry; and providing for an
effective date."
3:19:25 PM
SENATOR GARY STEVENS, Alaska State Legislature, as the prime
sponsor, presented SB 186 and urged that the Board of Examiners
in Optometry be extended. He stated that optometrists provide
most of the eye care to patients across Alaska, plus an in-
person examination by a Doctor of Optometry is recognized as the
standard for ensuring healthy vision. He pointed out that over
270 serious health conditions can be detected through eye exams,
including diabetes, high blood pressure, autoimmune diseases,
and cancers. The Board of Examiners in Optometry is essential
to the practice of optometry in Alaska, he continued. It is
self-funded and is the regulatory body that helps protect the
public by implementing standards of care, ongoing education, and
training in the field of optometry. The board, he reported,
received an overall favorable audit indicating its work is an
important public service.
3:21:16 PM
CO-CHAIR FIELDS opened invited testimony on SB 186.
3:21:29 PM
KRIS CURTIS, CPA, CISA, Legislative Auditor, Division of
Legislative Audit, provided invited testimony on SB 186. She
spoke from the written audit report in the committee packet
titled "A Sunset Review of the Department of Commerce,
Community, and Economic Development, Board of Examiners in
Optometry (board)," dated 6/9/21. She stated that, overall, the
audit concluded [pages 5-8 of the report] that this board
conducted it meetings in compliance with state laws, effectively
licensed optometrists, and actively amended regulations to
address statutory changes and improve the licensing function.
However, she specified, the audit also found that the Division
of Corporations, Business and Professional Licensing (DCBPL)
staff did not serve the public's interest by not consistently
recording the existence of a [federal] Drug Enforcement
Administration (DEA) number in the DCBPL database, by not
ensuring continuing education audits were conducted timely, and
by not monitoring licensees' compliance with continuing
education in pain management and opioid use and addictions. Ms.
Curtis said the division is therefore recommending a six-year
extension for this board, two years less than the eight-year
maximum allowed under statute, reflecting the need for more
timely oversight given the audit findings.
MS. CURTIS drew attention to page 9 [Exhibit 2] of the audit
report and noted that as of [1/31/21] there were 218 licensed
optometrists, an 18 percent increase since the board's last
sunset date of 2013. She then drew attention to page 10
[Exhibit 3] depicting the board's schedule of revenues and
expenditures and discussed the board's deficit of approximately
$52,000 as of 1/31/21. She said a fee increase recommended in
April 2020 was not made due to the governor's direction not to
increase the fees of occupational boards to help mitigate the
financial impact of the COVID-19 pandemic.
MS. CURTIS reviewed the audit recommendations on pages 13-15 of
the audit report. The first recommendation, she related, is
that the DCBPL director dedicate resources to ensure that the
existence of a DEA license number is accurately reported in the
DCBPL database. This information, she explained, is important
to allow electronic crossmatch with the controlled substance
prescription database to monitor the requirement to register
with the controlled substance prescription database. Staff were
provided instructions on how to do this, she noted, but did not
follow the instructions. According to DCBPL management, she
continued, regular turnover in the board's licensing examiner
and supervisor positions contributed to this. She said the
second recommendation is that the board chair and DCBPL director
should change the license renewal form to allow the board to
monitor compliance with continuing education requirements. A
change effective July 2018, she explained, required licensees to
obtain two hours of continuing education in pain management and
opioid use and addiction. This change was two years prior to
license renewal, but auditors found that the December 2020
license renewal form was not changed to require licensees to
report compliance with this new requirement. The third
recommendation, Ms. Curtis stated, is that DCBPL's director
should ensure adequate resources are available to perform
continuing education audits. These audits, she explained, are
DCBPL's main internal control to ensure that licensees comply
with continuing education requirements. The audit found that it
took two and a half years to complete the continuing education
audits that were due during the audit period, which was due to
multiple licensing staff vacancies and turnover.
MS. CURTIS concluded with a review of the management's response
to the audit on pages 25-27 of the audit report. She stated
that the DCBPL commissioner concurs with the conclusions and
recommendations. She said the commissioner noted that the
licensing examiner for this board turned over five times during
the three-and-a-half-year audit period and the supervisor
position turned over four times. That turnover, Ms. Curtis
added, contributed to all the findings. She related that the
board chair's response states that the deficiencies in the
application of the renewal form will be corrected before the
next renewal cycle.
3:25:34 PM
CO-CHAIR SPOHNHOLZ inquired about the reason for the staffing
turnover.
MS. CURTIS replied that she doesn't recall a reason.
CO-CHAIR SPOHNHOLZ remarked that it is a significant turnover
occurring on a routine basis and it undermines the board's
ability to function. She stated that for some licensing boards
the salaries are defined in statute, but she doesn't remember if
this is one of those boards.
MS. CURTIS deferred to the DCBPL director to provide an answer.
3:26:11 PM
SARA CHAMBERS, Director, Division of Corporations, Business and
Professional Licensing (DCBPL), Department of Commerce,
Community, and Economic Development (DCCED), answered that DCBPL
regularly has turnover as well as challenges in adequate
resourcing. She explained that this position is especially
difficult because the Board of Examiners in Optometry does not
warrant the workload of a full position control number (PCN), so
it is a part of a PCN and, as part of a PCN, this position
sometimes gets moved around. However, she explained further,
the work this examiner does is deep, so the audit, which is
complex in some of the statutory compliance elements, requires
supervisory oversight. The day-to-day work for this board is
not especially challenging but when routine issues come up, like
renewal and audits every two years, then more hands-on is needed
and those things require more institutional memory and training.
This is endemic to some of the challenges that the committee has
been talking about with the division, Ms. Chambers added. She
further advised that these are classified positions as opposed
to established in statute.
3:28:08 PM
CO-CHAIR SPOHNHOLZ asked what the [division] is planning to do
to ensure that the issue is not experienced again in another six
years if the sunset extension is approved as proposed in SB 186.
MS. CHAMBERS responded that, except for the audit, the first two
findings were related to the new prescription drug monitoring
program (PDMP) legislation. She explained that DEA registration
and opioid education were new statutes being implemented for
this board at this moment for the first time; those will not
come up again because that work has already been done. She
related that the division has now put into place several steps
to have a fail-safe with continuing education audit training and
calendaring. She said oversight by the division's paralegal has
been added to ensure that in addition to the supervisor, there
are eyes on this program's audits as well as all program audits.
So, she advised, all these findings have been resolved.
CO-CHAIR SPOHNHOLZ recalled legislation in 2018 that expanded
the legal scope of optometrists to be consistent with the
training of optometrists. She asked whether adopting the
regulations to implement that legislation was part of the issue.
MS. CHAMBERS replied that the board has not had any issues
implementing the elements of that law. The findings of the
audit, she explained, are administrative oversight or problems
that are the responsibility of the division rather than concerns
over scope of practice or elements that the board is held
responsible for, so they are not at all related.
3:31:11 PM
REPRESENTATIVE MCCARTY inquired whether licensees were asked to
engage a DEA number. He further inquired whether a biennial
license is done online and, if so, whether there is room for the
licensee to provide a DEA number along with other information to
expedite the process for the division.
MS. CHAMBERS answered that the problem relevant to DEA numbers
was that the division had to make changes to its system to
accommodate and implement the new PDMP law. The division had to
change its procedures in the database, she continued, and while
DCBPL had published instructions and supervisors had issued
instructions to examiners, the examiner did not make that change
and the old way was not sufficient to meet the new standards of
the PDMP. The DEA information was being collected but was being
deposited in a different part of the database which made it hard
to reconcile. That has been rectified, she specified.
REPRESENTATIVE MCCARTY restated his question about the ability
to renew a license online and whether the licensee can provide
the information in a manner that expedites going into the state
system and bypasses the examiner having to manually enter that
information.
MS. CHAMBERS replied yes, the division has online renewals for
all 43 of its licensing programs, and this would be included.
REPRESENTATIVE MCCARTY asked whether the DEA number is in the
online request or must still be added to that.
MS. CHAMBERS responded that the DEA number is collected in the
initial application, but she doesn't recall whether the DEA
number must be asked for again at renewal. She said she doesn't
think DEA numbers change, but if it was required to be on the
renewal the online application would mirror the paper
application, so all the questions about opioid education, DEA,
prescribing, and dispensing would be online as well as on paper.
The online would make it more efficient to enter that data
automatically.
REPRESENTATIVE MCCARTY asked whether this could be expedited by
removing the paper process and making it all online so that the
licensee would be doing everything, so less load on staff to re-
enter things.
MS. CHAMBERS responded that the division is currently working on
technology improvements to automate more of what the division is
providing to its consumers and put that more in the hands of the
applicant so it would bypass manual data entry. The division is
looking forward to implementing that type of technology for all
its programs, she said.
3:35:41 PM
CO-CHAIR FIELDS [continued] invited testimony.
3:35:50 PM
DAMIEN DELZER, OD, DipABO, Chair, Board of Examiners in
Optometry, Division of Corporations, Business and Professional
Licensing (DCBPL), Department of Commerce, Community, and
Economic Development (DCCED), provided invited testimony on SB
186. He stated he has practiced optometry in Alaska for nearly
29 years and has served eight years on the Board of Examiners in
Optometry, serving as chair for the last three.
DR. DELZER explained that the board is charged with commission
of public protection through vetting of new applicants, assuring
appropriate continuing competency of licensees, addressing
inquiries from the public, investigating any complaints, and
crafting and enforcing regulations to implement legislative
statutory change. The board implemented nearly 20 regulatory
changes over the past three years, he related, including issues
such as continuing education requirements like opioid education,
scope of practice, military exemptions, specialty designations,
modernizing the law examination, modernizing prescription
requirements, and modifying emergency regulation during the
recent COVID-19 pandemic.
DR. DELZER noted there have been no reported PDMP violations
during his eight years on the board. The board is self-funded
through license fees, he said, and board travel expenses have
been minimized through exclusive use of Zoom meetings over the
past three years. The board chair, he added, participates in
bi-weekly board chair meetings and bi-weekly PDMP meetings.
3:37:41 PM
JESSICA GIESEY, OD, Alaska Eyecare Center, provided invited
testimony in support of SB 186. She stated she has been
practicing optometry in Alaska for eight years. She said the
Board of Examiners in Optometry is vital to the practice of
optometry in Alaska, acting to protect the public by ensuring
that only qualified practitioners are licensed in Alaska and
making sure that all optometrists licensed in Alaska follow
continuing education guidelines. The board, she continued,
regularly updates regulations ? (indisc. audio interruption)
training from accredited schools and colleges of optometry.
3:38:36 PM
REPRESENTATIVE MCCARTY asked whether optometrists are having
difficulty getting their continuing education units (CEUs) post-
COVID-19.
DR. DELZER replied that he has not seen any issues with that.
After the audit findings, he related, a continuing education
audit was done in a very timely manner, and it does not appear
that anyone is having difficulty finding appropriate virtual or
live CEUs.
[SB 186 was held over.]
SB 190-REGULATORY COMMISSION AK/REFUSE UTILITIES
3:39:38 PM
CO-CHAIR FIELDS announced that the next order of business would
be CS FOR SENATE BILL NO. 190(FIN), "An Act extending the
termination date of the Regulatory Commission of Alaska;
relating to Regulatory Commission of Alaska regulations
regarding refuse utilities; relating to the powers and duties of
the legislative audit division; and providing for an effective
date."
3:39:46 PM
The committee took a brief at-ease.
3:40:24 PM
SENATOR ROBERT MYERS, Alaska State Legislature, as the prime
sponsor, he testified that CSSB 190(FIN) would extend the
termination date of the Regulatory Commission of Alaska (RCA)
until 6/30/30, in alignment with the recommendations of the
legislative auditor. He explained that the RCA is an
independent, quasi-judicial regulatory body formed by the
legislature in 1999 to replace the Alaska Public Utilities
Commission. The RCA, he continued, monitors active certificates
for public utilities and pipelines, with these certificates
covering a broad range of activities from provisional
certificates for small village water and wastewater systems to
fully regulated telecommunications, electric, and natural gas
monopolies. He noted that the changes made in the Senate
Finance Committee were simple housekeeping that he supports as
they address the refuse utility backlog by adding them to the
simplified rate filing procedure and removing an extra RCA
annual report review process on the advice of the legislative
auditor.
3:41:58 PM
DAWSON MANN, Staff, Senator Robert Myers, Alaska State
Legislature, on behalf of Senator Myers, prime sponsor, provided
the sectional analysis for CSSB 190(FIN). He spoke from the
written sectional analysis titled "SB 190 Ver. W Sectional
Analysis," which stated [original punctuation provided]:
Section 1: Page 1, Lines 6-11
This section adds intent language that the Regulatory
Commission of Alaska shall adopt regulations specific
to refuse utilities to provide for sufficient public
notice and time for ratepayers to meaningfully comment
on rate filings.
Section 2: AS 42.05.381(e) Page 1, Lines 12-14, Page
2, Lines 1-8
This section amends AS 42.05.381(e) to include refuse
utilities. AS 42.05.381(e) is the section of law that
provides for a simplified rate filing procedure.
Section 3: AS 44.66.010(a)(3) Page 2, Lines 9-11
This section extends the termination date for the
Regulatory Commission of Alaska until June 30, 2030.
Section 4: AS 24.20.271(11) Page 2, Line 12
This section repeals AS 24.20.271(11), a requirement
for the legislative audit division to conduct an audit
every two years of information found in the annual
reports regarding compliance by the Regulatory
Commission of Alaska.
Section [5]: Page 3, Line 13
This section establishes an immediate effective date.
3:42:37 PM
CO-CHAIR FIELDS asked what prompted the addition of the language
in Section 1 on page 1, lines 6-11.
MR. MANN offered his understanding that the intent language was
added [in the Senate Finance Committee] to make clear that the
RCA was going to adopt internal rules to make sure there is
public notice in relation to refuse utilities as per the change
made in Section 2.
MR. MANN returned to the sectional analysis and pointed out that
the inclusion of refuse utilities in Section 2 was an addition
made in the Senate Finance Committee. He further pointed out
that the repeal in Section 4 of the audit under AS 24.20.271(11)
was added by the Senate Finance Committee on recommendation of
the legislative auditor.
3:44:59 PM
CO-CHAIR FIELDS asked whether the intent language was prompted
by rates going up sharply somewhere in the state.
SENATOR MYERS replied that this is not due to a jump in waste
utility rates, but rather to waste utilities trying to expand
outside some of their traditional areas within city limits but
the regulations have not been allowing them to do so.
Currently, he explained, due to the way waste utilities are
regulated, it takes about two years to go through the entire
process to update a utility's rates. He deferred to the RCA and
the legislative auditor to expand further.
3:46:01 PM
CO-CHAIR FIELDS opened invited testimony.
3:46:25 PM
KRIS CURTIS, CPA, CISA, Legislative Auditor, Division of
Legislative Audit, provided invited testimony during the hearing
on CSSB 190(FIN). She spoke from the written audit report in
the committee packet titled "A Sunset Review of the Department
of Commerce, Community, and Economic Development, Regulatory
Commission of Alaska (RCA)," dated 9/21/21. [Referring to pages
3-4 of the report], she said the audit concluded that RCA
operated in an effective manner and served the public's interest
by: assessing the capabilities of utility and pipeline
companies to safely serve the public; evaluating tariffs and
charges made by regulated entities; verifying the pass-through
charges to consumers from electric and natural gas utilities;
adjudicating disputes between ratepayers and regulated entities;
providing consumer protection services; and conducting financial
reviews as part of the power cost equalization program. She
stated that the division is therefore recommending the maximum
eight-year extension.
MS. CURTIS discussed the survey conducted by the division as
part of the sunset audit (Appendix B pages 19-20). She said the
survey was sent to 188 stakeholders that were party to a docket
or a tariff filing during the audit period, with 59 responding.
She noted that by far the responses to the survey questions are
positive or neutral, with only a small percent negative. She
listed the four questions that were asked: Overall, how
satisfied are you with the following services provided by RCA?
To what extent do you agree that RCA acts in the public's
interest? Based on your experience, how often does RCA meet its
statutory timelines? To what extent do you agree that RCA
effectively communicates?
MS. CURTIS returned to page 4 of the audit report. She said the
division concluded that RCA resolved most of its consumer
complaints within its internal, non-statutory, measure of 30
days. To provide an idea of the types of complaints received by
RCA, she drew attention to the listing of consumer complaints in
Exhibit 3 on page 5. She revisited page 4 and said the division
also concluded that RCA processed tariff filings and dockets
within the statutory and regulatory timelines.
MS. CURTIS turned to page 9 of the report and pointed out that
the audit makes one administrative recommendation, which is
related to RCA's monthly meetings. Regulations for RCA require
meetings twice a month, she said, but in instances where there
are no agenda items RCA has been cancelling the meetings.
During the audit period, she related, 25 of 88 scheduled
meetings were cancelled, including six instances where meetings
were consecutively cancelled. According to RCA management, she
related, regulations require the meetings, but regulations also
allow RCA to waive a regulatory requirement by its own motion.
Auditors confirmed that there is an ability to waive but that it
must be an official motion, she continued, so these were
cancelled without official motion. It is certainly reasonable
to cancel a meeting when there is nothing on the agenda, she
allowed, but it does not explicitly comply with the regulations,
so this was brought to RCA's attention.
MS. CURTIS directed attention to pages 23-26 and stated that
both the DCCED commissioner and the RCA board chairman are
supportive of the eight-year extension.
3:50:51 PM
The committee took a brief at-ease.
3:50:57 PM
CO-CHAIR FIELDS requested background on the integration of
expansion of refuse collection and utility service areas into
the bill.
3:51:27 PM
KEITH KURBER, Commissioner, Regulatory Commission of Alaska
(RCA), responded that two separate issues were brought up by
Senator Myers. Regulated and non-regulated utilities require a
Certificate of Public Convenience and Necessity (CPCN), he
explained, and an expansion of service area is typically done
through amendment of a CPCN. It is routine and not time
consuming, he stated, the commission just revalidates the
utility's previously validated fitness, willingness, and ability
to accomplish its task. He said he doesn't know what prompted
[the Senate Finance Committee's] change, but that RCA Chairman
Picket stated in his testimony on the Senate side that this is
not a difficult task for the commission to re-do a regulation
docket to assess and modify the commission's regulations to
allow for simplified rate filing for refuse utilities. Mr.
Kurber specified that both full-blown rate cases and simplified
rate filings require standard public notice requirement, with
timelines typically shorter for simplified rate filings and
hence the term simplified. Quite a bit of expense can be
involved in doing a full-blown rate case, he noted, and smaller
utilities, whether electric cooperatives in rural areas or
refuse utilities, may not have the staff to do some of the
calculations necessary to produce the final result. He said he
therefore speculates that this could be an assistance to some of
the smaller rate regulated refuse utilities.
3:54:24 PM
SENATOR MYERS added that refuse utilities, for the most part,
have existed and operated within a city - the city requires
residential trash pickup, so the rates reflect that basically
everybody is getting trash pickup. Refuse utilities are trying
to expand outside of the city limits, he explained. For
example, in Fairbanks they are trying to expand north of the
city limits and pick up more customers, which requires
experimenting with their rates to make them work. The problem,
he said, is that the current process for altering rates takes
about two years. So, if the utility picks a number that is too
high or too low it takes a long time for that to get fixed and
creates a backlog within the RCA to address those changes.
Hence, he continued, the suggestion was made in the Senate
Finance Committee to put it into the simplified rate filing
process so that those changes can be addressed within a few
months rather than about two years.
3:55:48 PM
REPRESENTATIVE MCCARTY asked whether this [proposed] process
will allow for people in the expanded service area to have
feedback on whether they want to be part of a collection.
SENATOR MYERS answered that the proposed new process does not
require somebody to be a refuse customer, as opposed to people
living within city limits being required to sign up. Simplified
rate filings still provide time for public feedback as the rates
change, he explained, but because the simplified rate process is
a shorter time period there are also limits as to how much the
rate can change within that time period. A refuse utility
wanting a larger change, he specified, would have to go through
the original longer process. In further response, Senator Myers
confirmed that this would not force people to pay a business,
they could choose to take their garbage to the dump themselves.
3:57:37 PM
[CSSB 190(FIN) was held over.]
SB 193-EXTEND BOARD OF CHIROPRACTIC EXAMINERS
3:57:42 PM
CO-CHAIR FIELDS announced that the next order of business would
be CS FOR SENATE BILL NO. 193(FIN), "An Act extending the
termination date of the Board of Chiropractic Examiners;
requiring a report on audit compliance by the Board of
Chiropractic Examiners; and providing for an effective date."
3:58:00 PM
MADISON GOVIN, Staff, Senator Peter Micciche, Alaska State
Legislature, presented CSSB 193(FIN) on behalf of Senator
Micciche, prime sponsor. She stated that the bill would extend
the sunset date for the Board of Chiropractic Examiners by five
years, making the new sunset 6/30/27. She said the bill would
also require that a report from the Division of Legislative
Audit be submitted to the Legislative Budget and Audit Committee
on the board's compliance with this year's audit.
MS. GOVIN explained the changes made in CSSB 193(FIN). She
spoke from the document in the committee packet titled "Senate
Bill 193 Extend Board of Chiropractic Examiners, Explanation
of Changes, Version I to Version G," which stated [original
punctuation provided]:
Page 1, Line 2
Inserts into the title "requiring a report on audit
compliance by the Board of Chiropractic Examiners."
Sec. 1 AS 08.03.010(c)(5) Page 1, Line 6
Extends the board extension from two years to five
years.
Sec. 2 Page 1, Lines 8-14
Adds a requirement for the legislative audit division
to prepare and submit to the Legislative Budget and
Audit Committee a report on the compliance of the
Board of Chiropractic Examiners with the
recommendations of the June 22, 2021 audit of the
board.
3:59:23 PM
CO-CHAIR FIELDS opened invited testimony.
3:59:52 PM
KRIS CURTIS, CPA, CISA, Legislative Auditor, Division of
Legislative Audit, provided invited testimony during the hearing
on CSSB 193(FIN). She spoke from the full audit report in the
committee packet titled "DEPARTMENT OF COMMERCE, COMMUNITY, AND
ECONOMIC DEVELOPMENT BOARD OF CHIROPRACTIC EXAMINERS SUNSET
REVIEW," dated 6/22/21. She said the audit found that the board
served the public's interest by conducting its meetings in
accordance with state laws, by amending certain regulations to
improve the chiropractic profession, and by effectively
regulating and licensing chiropractic physicians. The audit
also found, she continued, that one board member did not comply
with the statutory requirements for appointment and that
additional resources were needed to investigate cases in a
timely manner. She related that a five-year extension is
recommended rather than the eight-year maximum allowed for in
statute. This recommendation, she explained, is based on an
issue identified during the audit that may impact the board's
ability to protect the public, details of which are not included
in the public audit report to preserve the confidentiality of an
ongoing investigation.
4:00:42 PM
CO-CHAIR FIELDS asked what the legislature has done in the past
when it is found that a board member doesn't meet the statutory
requirements for appointment.
MS. CURTIS responded that the legislature doesn't act because
usually her recommendation is to the governor's office, which
typically removes the board member and appoints someone else,
and which was done in this case. In further response, she said
the governor's office has reported that this was done, but she
cannot verify it.
4:01:15 PM
REPRESENTATIVE MCCARTY asked whether this person was appointed
and confirmed or was in the appointment process.
MS. CURTIS replied that this person was appointed and confirmed.
In further response, she confirmed that after confirmation it
was found that the appointee didn't qualify. She stated that
this was an issue in the prior sunset audit as well. It is
usually not a risky area, she advised, so for all of Alaska's
boards [the Division of Legislative Audit] doesn't necessarily
send a notice to the public member to ensure that the member is
qualified. But, she continued, since there was a prior
recommendation related to this board, [the division] confirmed
the public member. It usually has to do with whether the member
has a direct financial interest in the health care industry, she
explained. In this case it was found that the board member was
a licensed emergency medical technician (EMT), so the member had
an interest in the health care industry and therefore didn't
comply with statutory requirements that prohibit this. The
public member must have that consumer perspective, she added,
and in this case the member didn't.
4:02:16 PM
CO-CHAIR FIELDS asked whether it is fair to characterize this as
an inadvertent violation.
MS. CURTIS replied yes.
4:02:24 PM
MS. CURTIS resumed her invited testimony. She drew attention to
page 5 [Exhibit 2] of the audit and reported that as of January
2021 there were 306 licensed chiropractors. She turned to the
board's schedule of revenues and expenditures on page 6 [Exhibit
3] and noted that [over the past four fiscal years] the board
alternated between a deficit and a surplus. She related that
according to management at the Division of Corporations,
Business and Professional Licensing (DCBPL), the deficit was
within a reasonable range and a fee increase was not
recommended. She pointed out the board's schedule of fees on
page 7 [Exhibit 4].
MS. CURTIS moved to pages 9-11 and outlined the two
recommendations made by the Division of Legislative Audit. She
said the first recommendation is that the governor should make
board appointments in compliance with statutory requirements.
The second recommendation, she related, is that the DCBPL
director should allocate sufficient resources to ensure cases
are investigated in a timely manner. The audit found that 11
cases had been open for over 180 days, she stated, and seven of
those cases were related to the same chiropractor and had been
combined into one case. For that one combined case the audit
found four periods of unjustified inactivity that ranged from
55-208 days, she continued, and according to DCBPL investigative
staff the inactivity was the result of competing priorities and
insufficient resources.
MS. CURTIS proceeded to pages 21-22 and discussed management's
response to the audit. She related that the commissioner of the
Department of Commerce, Community, and Economic Development
(DCCED) states that the department has hired two additional
investigative positions and the commissioner believes that will
increase the quality and timeliness of investigations. She
turned to the governor's response on page 23 and related that
the governor agrees with the recommendation and states that the
public member was removed. Ms. Curtis then reviewed the board
chair's response on pages 25-28. She reported that the chair
does not agree with the recommended extension of five years and
requests an eight-year extension because he believes the board
is being unfairly penalized by action of the division or the
governor's office.
4:04:20 PM
CO-CHAIR SPOHNHOLZ returned to the second recommendation on page
10 of the audit report. Regarding the 11 cases that were open
over 180 days between July 2017 and January 2021, she asked
whether each of the 11 cases was open 180 days or whether the
cases were cumulatively open 180 days.
MS. CURTIS responded that it was each of them. She noted that
180 days is an internal performance measure used by DCBPL. Lots
of reasons can cause a case to remain open, she noted, so the
Division of Legislative Audit looks at whether it is justified
and there are reasons a case is open. In these cases, she said,
the audit saw extended periods of inactivity, but with no
justification; it was found that it is an issue with resources
and competing priorities.
4:05:44 PM
REPRESENTATIVE MCCARTY asked whether this is a situation of the
division not being able to assist the board or the board not
taking responsibility to do such things as verifying a case.
MS. CURTIS answered that the board is kept outside the
investigative process so it can rule on the results of the
investigation in a quasi-judicial manner. Sometimes a board
member might be used for expertise, but then that board member
is not allowed to weigh in on the result, she noted. So, the
board typically monitors the cases on an upper level and doesn't
get into the details until the investigation is complete and
brought to the board.
REPRESENTATIVE MCCARTY inquired about whether the sunset should
be effective for the board when the division is supposed to be
assisting the board. He said it appears that the Board of
Chiropractic Examiners is doing fine as a board and that there
should be a sunset for the board and an annual sunset for the
division to ensure that the division is doing its job to help
the board.
MS. CURTIS replied that oftentimes board chairs do bring that up
and that some things are not within their control. It might be
considered a penalty or a discipline from the board chair's
perspective, she stated, but from her perspective and the law's
perspective, this is a legislative oversight process, this is
the legislature's ability to evaluate how this board is
operating and that includes the division's support to this
board. She explained that her recommendation for extension
reflects how timely she recommends the legislature come back to
review regulation of this specific occupation. She advised that
while the question is termed, "Should this board be extended or
not and for how long?" it could be phrased, "How much time
between now and when the legislature comes back in to review?"
4:08:47 PM
CO-CHAIR SPOHNHOLZ drew attention to the DCCED commissioner's
response to the audit on pages 21-22. She inquired about the
efforts taken by DCCED to ensure adequate staffing, whether the
specific 11 cases have been resolved, and what the current
timeframe is for processing complaints against a chiropractor.
4:09:29 PM
SARA CHAMBERS, Director, Division of Corporations, Business and
Professional Licensing (DCBPL), Department of Commerce,
Community, and Economic Development (DCCED), responded that page
22 outlines the steps that were taken. One step, she specified,
is that the division has added an additional senior investigator
position to provide more supervisory oversight and ensure that
investigators are following the division's procedures for
documentation. The concern is not so much whether there is or
isn't case activity, she explained, but that it hasn't been
documented and so there is no way for the auditor or anyone
looking at the case management systems to know whether activity
has taken place on those cases. She said DCBPL agrees that that
is not up to its stated standards, so adding another supervisor
position has been helpful. A zero-tolerance position on the
lack of documentation has been taken, she advised, and the
division is actively supervising and ensuring that DCBPL
investigators are acutely aware of the requirement to document
within every 30-45 days even if there is no case activity and to
describe what is being waited on and what is the process so that
anyone can evaluate whether a case is being properly managed.
Ms. Chambers stated that every case is different, so 180 days
could be appropriate management for some cases and for other
cases it could be more days or less days. Much of that is in
the hands of the respondent, she pointed out, and whether an
expert witness is needed. She related that the seven cases
rolled into one have made progress and are being actively
managed.
4:12:19 PM
CO-CHAIR SPOHNHOLZ observed on page 22 that an additional
Investigator III position has been added to the healthcare
licensing team. She inquired about the number of people on the
healthcare team and the number of healthcare licensing boards
for which the team is responsible for providing licensing
investigations and processing.
MS. CHAMBERS answered that she will get back to the committee
with those specific numbers, including the structure of today's
healthcare team as far as numbers of staff and the boards they
serve. She explained that those fluctuate with the demands of
the casework where there may be increases in complaints or an
increase in complexity requiring an investigator to manage a
lower caseload. She explained that DCBPL can have investigators
moving off and on that team; the division has partial
investigators assigned to certain boards and then some boards
like nursing and medical have multiple investigators due to the
high volume.
CO-CHAIR SPOHNHOLZ requested that the follow-up to the committee
be in writing so it can be distributed to members. She said she
wants to understand how the oversight is managed, particularly
for chiropractors. She stated that the one chiropractor with
seven complaints and the investigations not being followed up in
a timely manner could be impacting many Alaskans during this
amount of time.
MS. CHAMBERS offered her appreciation for Co-Chair Spohnholz'
comments. She stated that DCBPL is a public safety division and
part of what it does is protect the rights of the licensee. So,
she explained, the division has certain processes that it is
required to follow and sometimes cases are very unusual and may
be delayed when early action could jeopardize the case because
of those due process standards. She offered her reassurance to
the committee that these are of high importance to DCBPL.
4:16:04 PM
The committee took an at-ease from 4:16 p.m. to 4:20 p.m.
4:20:01 PM
CO-CHAIR FIELDS invited further questions from the committee on
CSSB 193(FIN).
4:20:24 PM
REPRESENTATIVE MCCARTY, regarding the prescription drug
monitoring program (PDMP), asked about the number of
investigations that occurred because of deficiencies in the
division's system versus a licensee wrong. He recalled that in
the past Ms. Chambers shared that licensees were investigated
but it was problems in the system that created an anomaly which
had to be investigated. Representative McCarty further inquired
about the sunset extension of two years versus five years.
MS. CHAMBERS responded that she doesn't understand the first
question because the division has not had system deficiencies
resulting in unwarranted investigation. She said the division
does have quite a few investigations that it must investigate
due to public complaints that don't result in discipline because
they are found to be not jurisdictional, unwarranted, or not
within the division's scope so it was more appropriate for
criminal law enforcement or the consumer protection unit under
the Department of Law. She offered to answer the question
further if the representative wished to rephrase it.
REPRESENTATIVE MCCARTY restated his question about a sunset
extension of two years versus five years.
MS. CHAMBERS replied that the auditor's recommendation was for a
five-year extension, the Senate Labor and Commerce Standing
Committee reduced the extension to two years, and then the
Senate Finance Committee reversed it back to the auditor's
recommendation.
[CSSB 193(FIN) was held over.]
HB 405-ESTABLISHMENT OF TRUSTS
HB 406-MORATORIUM ON TRUSTS/PROPERTY ACQUISITION
4:23:24 PM
CO-CHAIR FIELDS announced that the final order of business would
be HOUSE BILL NO. 405, "An Act relating to the establishment of
trusts; requiring the filing of certain trust information; and
requiring compliance with a federal law." and HOUSE BILL NO.
406, "An Act relating to the validity of trusts involving
persons sanctioned by the United States Department of the
Treasury; and relating to the recording of documents conveying
land to persons sanctioned by the United States Department of
the Treasury."
CO-CHAIR FIELDS opened public testimony on HB 405 and HB 406.
He said the committee has been reading the written testimony and
is working on amendments in response to that testimony. He
stated that the committee would listen to today's testimony and
potentially respond at the next hearing.
4:24:19 PM
CHRIS LAUER, Esq., expressed his concerns with HB 405. He noted
that before becoming an estate planning attorney he worked as an
anti-money laundering consultant where he assisted in the
development and implementation of anti-money laundering measures
for mid-size banks. That work, he said, directly and indirectly
led to the identification, prosecution, and imprisonment of
financial criminals. He advised that while he is profoundly
sympathetic to the aims of HB 405, the bill illustrates the
difficulty of drafting effective anti-money laundering
legislation that does not unduly burden the law-abiding public.
MR. LAUER stated that while HB 405 and the [2021] Corporate
Transparency Act (CTA) are related, their differences are very
important. He said the CTA is the most recent addition to anti-
money laundering measures that the US has in place, which
include the [1970] Bank Secrecy Act, the [2001] USA PATRIOT Act,
and several other landmark acts. The purpose of the CTA, he
advised, is to make laundering harder to do through shell
companies. Shell companies, he continued, have legitimate uses
for asset protection, legacy planning, and business management,
but bad actors can and do abuse them. The CTA, he explained, is
tailored to minimize the impact of the law on the law-abiding
public while making shell companies inhospitable for criminals.
Under that framework, he stated, the CTA deals with two primary
concepts: reporting companies and beneficial owners.
MR. LAUER explained that reporting companies file reports with
the [Department of the Treasury's] Financial Crimes Enforcement
Network (FinCEN), and these reports contain identifying
information on each company's beneficial owners. He said there
are 24 exceptions to what counts as a reporting company, most of
which is defined to include a corporation, limited liability
company (LLC), or similar entity that is created by the filing
of the document with the secretary of state or similar office;
in Alaska, that would be the Department of Commerce, Community,
and Economic Development (DCCED). Beneficial owners, Mr. Lauer
specified, are defined to be individuals who directly or
indirectly through any contract or arrangement, understanding of
relationship, or otherwise exercise substantial control over a
reporting company or owner control 25 percent or more of the
ownership in trust in that entity. That is a very broad
definition, he stated, and it probably doesn't line up with
[Alaskans'] assumptions about what "beneficial owner" means in
the wild.
4:26:52 PM
MR. LAUER advised that the CTA does not attempt to incorporate
trusts, which the Supreme Court has recognized as relationships,
not entities, into its definition of reporting companies.
Trusts may be a beneficial owner of a reporting company, he
said, someone acting through a trust relationship can exercise
substantial control over one. Final federal regulations are
being awaited to clarify who exactly counts as a beneficial
owner under a trust, he stated. The proposed regulations raise
more questions for trusts than they answer, they do not address
discretionary trusts with multiple beneficiaries, contingent
beneficiaries, powers of appointment unmeasurable in trusts, or
third parties who deal with authority over trusts. He
maintained that turning trusts into reporting companies would
amplify these ambiguities and create additional headaches for
Alaskans. He advised that so far, for trusts that hold a 25
percent or greater membership interest in a reporting company,
it would be suspected that at least the sole permissible
recipient of trust income and principle and anyone with power to
dispose of trust assets would be beneficial owners under the
CTA. Mr. Lauer said the reporting company would still file
beneficial ownership information with FinCEN but a trust that
holds a savings account or securities would not be a beneficial
owner of a reporting company under the federal rules. From an
enforcement perspective this makes a lot of sense, he continued,
it makes it so that bad actors cannot hide behind confidential
LLCs in places like Wyoming or Nevada, but the trustees who hold
title to property in their capacity as trustees would still need
to identify themselves to state banks to satisfy banks'
reporting requirements under the Bank Secrecy Act or the USA
PATRIOT Act.
MR. LAUER stated that HB 405 and the CTA differ significantly in
many respects. He said the CTA focuses on what a trust owns,
not on what a trust is. A revocable trust that only holds an
Edward Jones account is not going to report under the CTA, he
said, because it wouldn't be a reporting company. He stated
that HB 405 is far more expansive and as written he is concerned
that trusts created under a will, revocable trusts that are a
will substitute, charitable trusts, and others would create
risks for anyone who would create them for fines or for the risk
of invalidity of paperwork that is not appropriately filed. The
CTA sets a uniform standard that applies equally to all states,
he conveyed, and HB 405 would impose greater burdens on Alaskans
than those faced by trusts established in any other state. He
said the CTA ends gamesmanship between states and makes it so
that no state can compete against others by offering the most
secretive shell companies. In contrast, Mr. Lauer continued, HB
405 would encourage law abiding Alaskans to form trusts in other
states to avoid penalties for inadvertent reporting errors. As
federal legislation, the CTA can set national standards, he
continued, but he is concerned that a bad actor might form a
trust outside Alaska and use the trust to conduct business
inside Alaska, [and Alaska] would be limited in how it restricts
that type of activity.
4:29:52 PM
CO-CHAIR FIELDS said he would be interested in Mr. Lauer's
perspective on HB 408, the administration's bill that also seeks
to prevent money laundering.
4:30:05 PM
CO-CHAIR SPOHNHOLZ, regarding Mr. Lauer's statement that the CTA
doesn't yet have any guidance that relates to trusts, asked
whether it is going to.
MR. LAUER replied that the proposed regulations have identified
some of the circumstances that FinCEN thinks would be
appropriate for including people involved in trust relationships
as beneficial owners, but there are many open questions as to
who would fit under that. He deferred to the comments of the
American College of Trust and Estate Counsel (ACTEC) that were
submitted to FinCEN during the comment period for those
regulations. He related that for a trust that is fully
discretionary and able to make distributions to any of several
beneficiaries, ACTEC's comments identify that it is unclear
whether all those beneficiaries would need to have their
information disclosed, as well as whether a contingent
beneficiary's information would need to be reported. He said it
is anticipated that these questions will be addressed in the
final regulations that are expected before the end of 2022.
4:31:44 PM
MATTHEW BLATMACHR, President & CEO, Peak Trust Company,
expressed his concerns with HB 405 and HB 406. He noted that
Peak Trust Company has provided fiduciary services to Alaskan
families for over 25 years. He said his company understands the
intent of the bills and would like to work with the legislature
and others in the industry to identify the best path forward.
He maintained that as currently drafted the bills would not
achieve their intended result and would instead harm Alaskans
unintentionally. Mr. Blatmachr said he will discuss three
points: 1) There are existing statutes that make Alaska an
undesirable place for bad actors, and those statutes can be
strengthened; 2) There are some misconceptions regarding trusts;
and 3) There is an issue of privacy and data security related to
these bills.
MR. BLATMACHR spoke to his first point that existing statutes
make Alaska a bad place for bad people. He said the legislature
has worked diligently for over 25 years to build thoughtful and
deliberate statutes that allow for excellent planning while
protecting against abuse. For example, he related, Alaska is
one of the few states that require trusts to be registered.
Registration includes the name of the trust; name and address of
the trustee; and name of the person who created the trust, also
referred to as a settlor or grantor. Another example, he
continued, is that Alaska requires a person to fill out an
affidavit of solvency, an affidavit must be completed by a
person creating an irrevocable trust of which the person is a
potential beneficiary and certify that the transfers or deposits
to the trust are not fraudulent.
MR. BLATMACHR addressed his second point that misconceptions
about trusts are being carried forward. Regarding statements
that trusts are secretive and have no reporting requirements, he
stated that trusts are certainly confidential, but advised that
they do have reporting requirements: one is the registration
requirement, and another is that all US sourced income inside a
trust must be reported on a federal tax return. Depending on
the trust type, either the trust will file its own return, or
the income will be reported on the personal return of the
grantor, the person who created the trust, or the personal
return of a beneficiary, which is a tracking mechanism for that
income. Regarding previous comments about real estate money and
trusts, he continued, there seems to be a conflation between the
two because the issues referenced in the comments about what
occurred in Alaska do not involve trusts. He stated that based
on the information he is aware of, there was money laundering
activity and there were foreign individuals, but trusts were not
part of the nefarious activity. The uncovering of these issues,
he argued, proves that systems are in place that work. Also,
Mr. Blatmachr added, while the Pandora Papers are only a sample
set, the documents do not indicate that Alaska is a haven for
people with nefarious intent. He maintained that with these
bills Alaskans would be potentially punished due to the improper
actions of individuals in other states. Further, he said, the
legislation targets everyone rather than individuals who create
higher risks; it is hard to draft legislation that doesn't throw
everybody into the same pot.
4:35:35 PM
MR. BLATMACHR discussed his third point that there are data and
privacy issues related to the bills. Regarding statements that
the proposed disclosure of personally identifiable information
required in HB 405 would be held in confidence with DCCED and
would not be public information, he said that is understood.
However, he maintained, Alaskans are not going to find this
acceptable - every day a new security or data breach occurs,
including breaches with the Alaska government and other Alaska
institutions. Plus, he said, this dataset would likely be a
target since it would include personally identifiable
information of individuals and families with wealth and assets
in Alaska. He posited that rather than potentially expose this
information to a breach, Alaskans would likely choose to do
business outside of the state, thus continuing the punishment
when they have done nothing wrong.
MR. BLATMACHR stated that he and Peak Trust Company want to be
part of the solution like in years past. He noted that he is a
member of Alaska Trust & Estate Professionals (ATEP), which has
proposed alternatives that he and his company support. He said
he looks forward to further dialogue with the legislature and
other stakeholders.
4:36:41 PM
CO-CHAIR FIELDS stated that the committee has been working on
some of those proposals for HB 406.
4:36:46 PM
ABIGAIL O'CONNOR, Esq., testified in opposition to HB 405 and HB
406. She noted that she is an estate planning attorney but is
not testifying in any representative capacity. She further
noted that she is a member and vice president of ATEP, the state
chair-elect of the Alaska Chapter of the American College of
Trust and Estate Counsel, the president-elect of the Anchorage
Estate Planning Council, and an executive board member of the
Estate Planning Section of the Alaska Bar Association. She said
she agrees with the purpose of preventing bad actors from using
Alaska trusts and is sympathetic to the intent of the
legislation. However, she continued, her focus is on the
protection of everyday Alaskans who use trusts as part of their
regular estate planning for their families. She stated that any
legislation that affects trusts for everyday Alaskans must be
done in a thoughtful manner that does not create unintended and
harmful consequences and that does not act as a deterrent to law
abiding Alaskans from creating good estate planning for their
families.
MS. O'CONNOR provided an example of how a typical trust would be
done under current law for people who would not be considered
wealthy: Her clients, Mom and Dad, have come into her office to
do estate planning. They have a house, an investment account,
checking account, family cabin, and each has an individual
retirement account (IRA). One of their two adult children is in
a rocky marriage and the other does not know how to handle
money. Two of their five grandchildren are excelling in school
and want to go to graduate school and they want to help them.
The other grandchildren are all minors. Mom and Dad want to
ensure that their hard-earned nest egg is available to their
children after their deaths without dissipating the resources so
that the money ultimately will be available for the
grandchildren. If Mom and Dad leave the money to their children
outright, then the money will be spent quickly and there will be
nothing left for the grandchildren. Trusts are the answers to
Mom and Dad's problem. The assets can then be held in trust,
Mom and Dad can be the lifetime beneficiaries, they can use a
revocable trust. After Mom and Dad pass away the property can
be held in separate trusts for their children with restrictions
on distributions to ensure that the funds are not dissipated.
After each child dies, his or her separate trust is divided into
further trusts for his or her [children]. This protects the
assets and ultimately provides for Mom and Dad's grandchildren
while allowing the resources to be available in a limited way
for their children. Because Mom and Dad love this idea, Ms.
O'Connor drafts the trust agreement, which Mom and Dad then
sign. She drafts a deed for Mom and Dad's house and a deed for
their cabin; they are deeds from themselves to themselves as
trustees and they sign the deed. They also sign an assignment
of tangible properties from themselves to themselves as trustees
to assign their tangible property to the trust. Ms. O'Connor
helps Mom and Dad fill out paperwork to retitle their investment
account and checking account in the name of the trust. Their
IRAs stay in their own names, and they are payable to each
spouse on death but at the survivor's death they use a special
designation on a beneficiary form to pay the IRAs over to the
trust. All of this is done in Ms. O'Connor's office in one
meeting her clients now have a valid trust. Ms. O'Connor then
records the deeds and sends in Mom and Dad's trust registration
to the court - this is not required as a condition of formation,
but is required for jurisdictional purposes, and that
registration reports only Mom and Dad's names, the name of the
trust, their address, and the date of their trust.
4:41:06 PM
MS. O'CONNOR then explained how this same example would be done
under HB 405 and HB 406 as drafted: First, the trust would not
be enforceable until filing the trust establishment document.
What does that really mean? Mom and Dad already signed deeds,
assigned property to themselves as trustees, they declared that
they were holding property in trust, which is valid and
consistent with hundreds of years of trust law, and their trust
relationship has been established. What does it mean if it is
not enforceable? What happens if the client dies before filing
the trust establishment document? What happens to the property
if the trust is not valid because of HB 405? Second, Mom and
Dad must file the trust establishment apparently with the names
and addresses of all their children and grandchildren because
they are beneficiaries. Third, the requirement is that any time
there is an inaccuracy in the document, which could be caused by
a change, Mom and Dad must file an update. This means that
every time a grandchild changes a dorm room, or somebody moves,
or a grandchild or great-grandchild is born, Mom and Dad must
file an update with the Department of Commerce within 30 days or
face a $500 fine. Fourth, if one of the grandchildren "goes
rogue" and ends up on the [Specially Designated Nationals and
Blocked Persons List (SDN List)], then the entire trust is no
longer valid under HB 406. What does that mean? What happens
to the property? Who receives the property? What are the tax
consequences? What about all the other children and
grandchildren? What about Mom and Dad? What if the trust owns
a partnership interest and is subject to a partnership
agreement, what happens to those partners? What if the trustees
are borrowers on a loan, what happens to the creditor if the
trust is now invalid? There are no answers. Fifth, HB 405
somehow renders the trust a reporting company for purposes of
the Corporate Transparency Act. As Mr. Lauer testified, under
the CTA a trust is not a reporting a company, it is not required
to report to the Financial Crimes Enforcement Unit, but HB 405
now says that the trust is a reporting company. So, Mom and Dad
must file reports with FinCEN for their revocable trust and
follow the CTA rules? But FinCEN is not expecting those reports
because trusts are not reporting companies. What happens if Mom
and Dad don't comply? Well, under federal law they are not
required to report a trust. What is the implication of a state
law that fiddles with the federal law? How do they interact?
Who enforces it? Is the law even enforceable? Or is it
preempted by federal law? Ms. O'Connor said she doesn't know
the answers to these questions.
4:44:13 PM
MS. O'CONNOR continued her testimony. She said Mom and Dad
walked in the door to do relatively simple estate planning and
now these clients are up to their ears in the DCCED reporting
requirement, FinCEN, $500 penalties, and questions of trust
validity for things beyond their control. She said her clients
will tell her to forget about the trust, they do not want to
risk it or deal with these penalties. Or, she continued, Mom
and Dad will ask if there is an alternative and she will tell
them yes - another jurisdiction can be used. This means going
to another state, forming the trust there, and adhering to the
rules of that other state because Alaska will be the only state
that has this requirement. This also likely means that some or
all the assets in the trust need to move away from the Alaska
banks and into the banks in the state where the jurisdiction is.
Plus, she noted, her clients will have to get an attorney and
possibly other professionals involved in that other state to
help advise them. All of this for something that should be very
simple and is an everyday occurrence for estate planning clients
in Alaska. She said there is no question that HB 405 and HB 406
have very good intention. But, she advised, the impact on
everyday Alaskans for their estate planning will be so
significant it is going to turn them away from doing trusts.
4:45:52 PM
CO-CHAIR FIELDS stated that the committee has been working on
some changes based on Ms. O'Connor's recommendations.
REPRESENTATIVE KAUFMAN offered his thanks and appreciation for
Ms. O'Connor's testimony.
4:46:14 PM
LINDA HULBERT, testified in opposition to HB 405 and HB 406.
She noted that she has been in the insurance industry for the
last 33 years, has offices in Fairbanks and Anchorage, and has
clients statewide. She related that over the last six to twelve
months she has discussed wills and trusts with her clients about
40-50 times. She explained that when clients come into her
office she asks them if they have a will and what kind of
planning they have done. She said her job is to help them plan
for the future, look at how they are protecting their families,
how they are growing their income, how they are protecting their
business, and to help them make a plan that is going to last a
long time and protect their assets.
MS. HULBERT explained that many people start with a simple "I
love you will," but after children appear it suddenly is whether
they want secondary beneficiaries with their life insurance and
other assets. She said her clients must plan whether they want
their children to inherit cash or whether they want to direct
how and when their assets can be spent. She said she helps her
clients evolve their planning, starting a will and a trust, and
ultimately her clients will reach the level discussed by Ms.
O'Connor. Many people never get to the level of wealth where
they have a cabin and a house and a lot of discretionary assets,
she specified, but a trust is still very important to them
because they have children and then grandchildren who begin to
grow up. She said this is important to her because these are
Alaskans who are committed to living in the state and who want
to do their planning in the state.
4:49:32 PM
MS. HULBERT noted that she helps people in their planning
through the sale of insurance. She pointed out that, in Alaska,
2.7 percent of every dollar spent on every type of insurance
goes to the State of Alaska as revenue. For example, she
related, 2.7 percent of every annual life insurance premium goes
to the State of Alaska. If trusts and the assets were to move
outside the state, a significant amount of revenue to the State
of Alaska would subsequently be lost. Therefore, Ms. Hulbert
stressed, anything that is done must seriously consider the
long-term best interest of Alaska residents who are planning for
the basis of their family, not just people with significant
assets. As well, she continued, a look must be taken at the
revenue stream that comes into Alaska and how that revenue can
be used for the benefit of all Alaskans.
MS. HULBERT advised that privacy is critical to everyone she
works with. She further advised that many of her clients wish
to leave money in their wills and trusts to charity, and being
required to disclose that would not be in their best interest
either. Plus, she noted, if they changed from one charity to
another they would have to file paperwork for that. She urged
that a plan be found that will work for everybody, especially
Alaskans who prefer to do their planning here, because otherwise
she too will be forced to suggest to her clients that they move
their planning to another state in the interest of privacy.
4:52:28 PM
HARRY NEED, testified in opposition to HB 405. He clarified
that his testimony is his own and does not represent his
employer or the organizations he will be mentioning. He noted
he is Senior Director of Philanthropic Services at the
University of Alaska Foundation; president of the Anchorage
Estate Planning Council, an interdisciplinary association of
estate planning professionals; and a past president of the
Alaska Chapter of the Association of Fundraising Professionals.
MR. NEED explained that charitable trusts are structured for a
donor to either make gifts to charity for several years and
leave the remainder to their heirs or, more commonly, support
their heirs for several years or a lifetime and then give the
rest to charity. Charitable trusts, he related, are responsible
for the majority of the five and six figure deferred gifts that
he has witnessed over his 15-year career in philanthropy, and
they are nearly the exclusive domain of the seven and eight
figure deferred gifts from individuals that he has worked with.
He expressed his concern that if HB 405 creates a chilling
effect on the trust industry in Alaska it will have a
disproportional negative corollary impact on Alaska charity. In
the last several years in his current professional role, he
shared, he is typically working with about 20 of these trust
relationships at any given time and relationships is a crucial
word. Trusts are legal relationships between private entities,
Mr. Need advised, and private papers between private entities
are quintessentially private matters. Charitable trusts involve
such things as personal values of community, religious devotion,
family pride, altruism, and repayment, and Alaska's state
constitution enshrines the right to privacy in Article I,
Section 22. The aforementioned, he continued, are examples of
the unintended consequences that HB 405 may impose upon the
charitable sector first.
MR. NEED, regarding the reporting requirements within HB 405,
advised that many Alaskan nonprofit organizations already act as
trustees. These nonprofits may not employ sophisticated trust
companies or bank departments, he continued, they simply follow
the instructions and donative intent outlined in the trust
documentation. They are not equipped to track or research
dynamic lists of beneficial interests against dynamic lists of
sanctioned individuals, he specified. The new regulations and
proposed penalties, he said, could price out all but the most
well-funded nonprofits from serving their benefactors in a
trustee capacity. Second, he continued, ethical standards in
the fundraising sector hold donor confidentiality sacrosanct.
Registering a list of beneficial interests implies that one is
also not registering other potential beneficial interests. The
choices of benefactors regarding their legacies are immensely
personal and their charitable gifts come at the expense of a
gift to someone else. Mr. Need stated that charities need time
to reconcile HB 405 with their obligations to donor
confidentiality. Meanwhile, he added, he suspects that many
charitable donors may not follow through with the formation of a
charitable trust.
MR. NEED pointed out that many Alaskan nonprofits are the
beneficiaries of trusts. He noted that nonprofit organizations
rely upon volunteer boards that periodically cycle directors and
that nonprofits without brick-and-mortar locations often change
registered addresses, a burden that is placed on trustees.
Nonprofits, he advised, will need to understand how to comply
with the routine resubmissions of their ever-changing
fiduciaries to a regulator. While the bill's objectives come
from a good place, experts throughout the state are flagging a
multitude of unintended consequences. To that, he added, HB 405
will also likely impact the charitable sector negatively. He
urged the committee not to advance the legislation.
4:56:39 PM
CO-CHAIR FIELDS thanked Mr. Need for providing attention to the
charitable sector.
CO-CHAIR SPOHNHOLZ thanked Mr. Need for his service to the
Anchorage Estate Planning Council and to the Association of
Fundraising Professionals.
4:57:10 PM
STEPHEN GREER, Esq., testified in opposition to HB 405 and HB
406. He stated that he has devoted his law practice exclusively
to estate planning for the last 20 years. He noted he is chair
of the Estate Planning and Probate Section of the Alaska Bar
Association, a member of the American College of Trust and
Estate Counsel (ACTEC), and a director for the Alaska Trust and
Estate Professionals (ATEP), but that today he is speaking on
behalf of his clients.
MR. GREER related that when he explains this legislation to his
average client, the client's first response is, "What right does
the government have to intrude into my personal affairs in this
manner?" His clients then decide whether they are going to
further do estate planning. He said he believes his clients are
right estate planning is a personal affair that comes within
[an Alaskan's] right of privacy enumerated in Alaska's
constitution, which is even broader than the federal right. The
legislation must be carefully tailored to consider that
fundamental right, he stated, otherwise the legislation is
ineffective and void. His objection to the [proposed] statute,
he continued, is that it will impede, intrude, and burden this
right of privacy. The legislation is overbroad in its reach and
it's going to create many unintended consequences, he added.
MR. GREER suggested that this whole matter could be addressed to
the Uniform Law Commission, comprised of lawyers and law
professors who are conversant in this area of constitutional
law, to determine what if anything should be done to prevent bad
actors from using state trust laws to further their purposes.
He stated that this legislation should not be hastily passed and
urged the committee not to pass these bills.
5:01:04 PM
JAMIE DELMAN, Esq., testified in opposition to HB 405 and HB
406. He stated he is a past president of the Anchorage Estate
Planning Council and has practiced in estate planning for over
11 years. He said he does not want Alaska's beneficial trust
laws to be used by bad actors to steal wealth. Therefore, he
continued, he strongly supports a review of Alaska's existing
statutory framework in conjunction with members of the
legislature to identify and improve provisions to safeguard
Alaska's statutes against such potential bad actors.
MR. DELMAN said he is concerned that HB 405 and HB 406 could
cause substantial harm to Alaskans. He stated that in addition
to privacy concerns, he is concerned that [the bills] will
create significant open questions that would need substantial
review and study to resolve. He noted that HB 405 provides that
a trust does not become effective or enforceable until the trust
establishment document is filed. But, he cautioned, it is
unknown what it means for a trust to be ineffective or
enforceable. Is an ineffective or enforceable trust treated
like a limited liability company that has been dissolved, in
which case the managers still have an ability to wind up affairs
and transfer assets? If that were the case with an ineffective
trust, he argued, the trust still effectively exists even though
it is considered ineffective and unenforceable. Trusts are
relationships, he said, so to say that a trust is unenforceable
opens the question as to what right cannot be enforced by whom
and against whom.
MR. DELMAN noted that HB 406 provides that a trust is not valid
if an interested party is on the Specially Designated Nationals
and Blocked Persons List (SDN List). He said this similarly
creates a question of what it means for a trust to be invalid.
If a trust is in existence and has one of several beneficiaries
appearing on the list, what happens to the property in the trust
deed's possession? Section 2 of HB 406, he pointed out,
prohibits recording deeds to a person on the SDN List. However,
he advised, if real property is transferred and a deed is
delivered, that is considered an effective transfer regardless
of whether it is recorded. So, he warned, in a way this would
encourage bad actors to make transfers and not record them.
5:04:28 PM
CO-CHAIR FIELDS closed public testimony on HB 405 and HB 406.
He related that former governor Tony Knowles has submitted a
letter.
CO-CHAIR SPOHNHOLZ noted that the Division of Banking and
Securities is the primary regulator for Alaska trust companies.
She requested a description of how oversight is currently
managed for trusts in Alaska.
5:05:28 PM
ROBERT SCHMIDT, Director, Division of Banking and Securities,
Department of Commerce, Community, and Economic Development
(DCCED), replied that the division represents five trust
companies, which are companies whose business it is to
administer trusts. The division licenses those trust companies
and performs due diligence on licensing them, and once they are
licensed they are subject to periodic examination. During that
examination, he continued, the division is looking at their
operations for safety and soundness, for compliance with the
sanctions checklist of the Office of Foreign Assets Control
(OFAC), and for compliance with the Bank Secrecy Act to make
sure that the trust is looking out for what are called Specially
Designated Nationals, persons who are on the sanctions list.
5:07:10 PM
CO-CHAIR SPOHNHOLZ asked whether, in addition to the five trust
companies, other financial institutions are required in Alaska
to comply with the OFAC sanctions list.
MR. SCHMIDT responded that every financial institution in Alaska
is required to comply with OFAC lists and the Bank Secrecy Act,
and he understands that there are criminal penalties for failure
to comply. For example, he continued, a person opening a bank
account in the state of Alaska must provide identifying
information to the bank that establishes who the person is as
the bank must follow what are called "know your customers" laws.
He said the five trust companies, the four state-chartered
banks, and the one state-chartered credit union that the
division regulates are all required to perform due diligence
whenever they open any account with a new customer.
CO-CHAIR SPOHNHOLZ noted that because a trust is a relationship,
not a company, it has its own set of legal documents that must
be provided to the bank when creating a new bank account for the
trust. She asked whether the bank is then responsible for
comparing trustees and beneficiaries of an individual trust
against the OFAC sanctions list.
MR. SCHMIDT answered yes.
CO-CHAIR SPOHNHOLZ asked what a bank's responsibility would be
and what the routing would be to report something that the bank
identified.
MR. SCHMIDT replied that the banks are bound by the Bank Secrecy
Act and various federal laws relative to knowing their customers
and not making themselves safe havens. He explained that a
person might have a common name that shows up on the SDN List or
the OFAC list. There are then processes and procedures, he
continued, for clearing those false positives that would require
confidential information, such as date of birth, driver license
number, and Social Security number, that the bank would use to
determine whether it is dealing with a false or a true positive.
CO-CHAIR SPOHNHOLZ asked how many times in the past few years
the division has identified individuals on the sanctions list.
MR. SCHMIDT deferred to Ms. Tracy Reno to answer the question.
5:10:51 PM
TRACY RENO, Chief of Examinations, Division of Banking and
Securities, Department of Commerce, Community, and Economic
Development (DCCED), responded that she oversees examinations,
while the identifying factors for OFAC are on the licensing side
under a different section. She said she has been with the
division for 10 years and is not aware of any positive OFAC hits
from a license perspective that would have required enforcement.
5:11:18 PM
CO-CHAIR SPOHNHOLZ drew attention to the fiscal note for HB 405
and noted that there are thousands of trusts in Alaska. She
asked how - if a requirement were created that each of those
trusts be filed with the Division of Banking and Securities -
the division would be able to check against the sanctions list
on every trust for the initial filing plus every time a change
was made without additional staffing.
MR. SCHMIDT answered that this substantial undertaking would
require additional staffing of at least one position control
number (PCN). Also, he continued, a third-party vendor with an
automated checking process would need to be utilized for the
necessary additional technology because it is impossible to do
OFAC checks at scale manually. He further advised that because
the division would be housing sensitive information, the
division's systems would need to be adequately hardened so that
people's information is not compromised. He said it is
difficult to say what the cost of those efforts would be.
CO-CHAIR SPOHNHOLZ commented that it would be a significant
undertaking to set up this new structure given it has yet to be
undertaken in any other US state. She asked whether the
division is closely tracking the adoption of regulations related
to the Corporate Transparency Act.
MR. SCHMIDT confirmed that the division is tracking those.
[HB 405 and HB 406 were held over.]
5:13:30 PM
ADJOURNMENT
There being no further business before the committee, the House
Labor and Commerce Standing Committee meeting was adjourned at
5:13 p.m.