Legislature(2003 - 2004)

05/05/2003 09:16 AM FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
HOUSE BILL NO. 155                                                                                                            
                                                                                                                                
     An   Act  relating   to   the  submission   of   payroll                                                                   
     information    by   contractors    and    subcontractors                                                                   
     performing work  on a public construction  contract; and                                                                   
     providing for an effective date.                                                                                           
                                                                                                                                
Co-Chair  Harris  MOVED  to ADOPT  work  draft  #23-GH1119\S,                                                                   
Craver,  5/1/03,  as  the  version of  the  bill  before  the                                                                   
Committee.  There being NO OBJECTION, it was adopted.                                                                           
                                                                                                                                
GREG  O'CLARAY,   COMMISSIONER,   DEPARTMENT  OF  LABOR   AND                                                                   
WORKFORCE   DEVELOPMENT,   provided   an  overview   of   the                                                                   
differences between the bills.   He pointed out that the only                                                                   
change had  been made to  Page 2, Line  26, and  that section                                                                   
was deleted.  It addressed "lease  hold improvements" and was                                                                   
controversial.                                                                                                                  
                                                                                                                                
GRAY  MITCHELL, DIRECTOR,  DIVISION  OF  LABOR STANDARDS  AND                                                                   
SAFETY,  DEPARTMENT  OF  LABOR   AND  WORKFORCE  DEVELOPMENT,                                                                   
offered to answer questions regarding the fiscal note.                                                                          
                                                                                                                                
Co-Chair Harris noted  that the bill would raise  revenue for                                                                   
the  State, however,  he asked  if  it would  be costing  the                                                                   
State more money for those contracts.                                                                                           
                                                                                                                                
Commissioner O'Claray replied  that was correct.  There would                                                                   
be a small increase  in costs to cover those  contract costs.                                                                   
Prior to the  bill, the State was "eating"  that cost through                                                                   
the general  fund  budget.  He  thought that  it amounted  to                                                                   
about 1% of the  contract price.  It will be  a "pure revenue                                                                   
generator" and  in the Murkowski Administration  terminology,                                                                   
it acts as a "user fee".  Prior  to this time, the Department                                                                   
had  not  been charging  contractors  for  investigation  and                                                                   
compliance  of the  certified  payroll for  the minimum  wage                                                                   
rate.   The legislation  has those that  use the  service pay                                                                   
for the services.                                                                                                               
                                                                                                                                
Co-Chair Harris pointed  out that the bill places  a user fee                                                                   
on contractors.   He questioned  if any of those  funds would                                                                   
be   available  for   further   training  and/or   retraining                                                                   
displaced workers.   Commissioner O'Claray replied  there was                                                                   
no money allocated  for that concern.  The  Administration is                                                                   
not "warm  and fuzzy"  about program  receipt authority.   He                                                                   
referenced  other special  funds  such as  the Worker's  Comp                                                                   
Safety Fund.                                                                                                                    
                                                                                                                                
Representative Croft asked which  fiscal note would accompany                                                                   
the bill.                                                                                                                       
                                                                                                                                
Commissioner O'Claray responded  that the correct fiscal note                                                                   
indicates  a $2.5  million dollar  change in  revenue with  a                                                                   
total   general   fund   source    of   $53.9   dollars   for                                                                   
reclassification  of a position  within that Department,  who                                                                   
will receive  the on-line  and hard  copy certified  payroll.                                                                   
He  added   that  the  position   would  be  changed   to  an                                                                   
accounting-tech position.                                                                                                       
                                                                                                                                
Representative  Whitaker referenced  the fiscal  note in  the                                                                   
amount  of $2.5 million  general fund  dollars generated  per                                                                   
year.  He asked  if that fee would be paid  by contractors or                                                                   
through the  State contracts.   He accessed that  through the                                                                   
preparation of  the bids, each contractor would  include that                                                                   
cost and would be essentially  charging the State more money.                                                                   
                                                                                                                                
Commissioner O'Claray advised  that the money would come from                                                                   
a larger "pot".   There is a cap on each of  the fees with no                                                                   
more  than  $5,000  per  public   contract.    Representative                                                                   
Whitaker  inquired  if the  federal  dollar  amount would  be                                                                   
reduced for the charges.  He requested further explanation.                                                                     
                                                                                                                                
Commissioner  O'Claray  addressed  the "relativity"  of  that                                                                   
amount.   He used the example  of building a road,  a project                                                                   
in the amount of  a $20 million dollars, and  then adding the                                                                   
$5,000 fee to  that job.  Prior to the  proposed legislation,                                                                   
the Legislature was funding positions,  which were being used                                                                   
to investigate  and enforce  Title 36 laws.   That  money was                                                                   
coming  directly   from  the  general  fund.     Through  the                                                                   
legislation,   those   funds    would   come   from   federal                                                                   
construction dollars.                                                                                                           
                                                                                                                                
Co-Chair Harris  inquired what  the $2.5 million  dollars was                                                                   
intended  to be used  for.   Commissioner O'Claray  explained                                                                   
that  it was  his plan  to replace  the  entire general  fund                                                                   
budget for  the Division  of Labor  Standards and Safety  and                                                                   
that amount  would adequately  cover those  costs.   However,                                                                   
the Governor  has submitted  several user  fees and  position                                                                   
revenue generating  legislation and that HB  155 was included                                                                   
in those pieces.                                                                                                                
                                                                                                                                
Representative  Croft  MOVED  to  ADOPT  Amendment  #1,  #23-                                                                   
GH1119\S.1, Craver, 5/5/03.  (Copy on File).                                                                                    
                                                                                                                                
Co-Chair Williams OBJECTED.                                                                                                     
                                                                                                                                
Representative Croft  acknowledged that there  had been "good                                                                   
work  done"  dividing  up  responsibilities  of  the  general                                                                   
contractors  and  the  sub  contractors.    The  way  current                                                                   
language  reads,  the  Department could  withhold  an  amount                                                                   
sufficient to  pay what needs to compensate  for enforcement.                                                                   
If a  one-sub contractor  was underpaying  their worker,  the                                                                   
difference  would   be  the  "hammer   that  you   have",  in                                                                   
opposition stating that they had  not properly filed or paid.                                                                   
Then  the entire  payment could  be withheld  until that  was                                                                   
remedied.    Representative  Croft  stated  that  the  entire                                                                   
payment should  be subject but  rather that he would  like to                                                                   
see  them  have the  right  to  withhold against  the  prime.                                                                   
Amendment #1 addresses that concern.                                                                                            
                                                                                                                                
Commissioner  O'Claray  responded  that  the  Department  had                                                                   
dealt   with  the   Associated   General  Contractors   (AGC)                                                                   
regarding the  compromise.  He indicated that  the Department                                                                   
would be  more comfortable  leaving the language  as is.   He                                                                   
acknowledged  that an "aggressive  approach to control  would                                                                   
happen" with some of the changes proposed.                                                                                      
                                                                                                                                
A roll call vote was taken on the motion.                                                                                       
                                                                                                                                
IN FAVOR:      Croft, Joule, Moses                                                                                              
OPPOSED:       Stoltze, Whitaker, Chenault, Hawker, Meyer,                                                                      
               Williams, Harris                                                                                                 
                                                                                                                                
Representative Foster was not present for the vote.                                                                             
                                                                                                                                
The MOTION FAILED (3-7).                                                                                                        
                                                                                                                                
Representative Croft  MOVED to ADOPT Amendment #2.   (Copy on                                                                   
File).                                                                                                                          
                                                                                                                                
Co-Chair Williams OBJECTED.                                                                                                     
                                                                                                                                
Representative  Croft  explained  that  the  amendment  would                                                                   
delete the  definition of contractor,  as there  currently is                                                                   
an adequate  definition in statute.   Additionally,  it would                                                                   
give the Commissioner of the Department  of Labor & Workforce                                                                   
Development  the authority  to receive  the money as  program                                                                   
receipts for  running that Department.   Representative Croft                                                                   
acknowledged that  the Administration does not  like the idea                                                                   
of program receipts, noting that  he had spoken to the Cheryl                                                                   
Frasca, Office  of Management and Budget, regarding  a reform                                                                   
of that idea.   He added that those fees are  as good as "any                                                                   
other" to have as program receipts.                                                                                             
                                                                                                                                
Commissioner O'Claray reiterated  that under the direction of                                                                   
the  Office  of  Management and  Budget  and  the  Governor's                                                                   
Office, he would not support the amendment.                                                                                     
                                                                                                                                
Representative   Croft   reiterated    that   the   fee   was                                                                   
appropriate.                                                                                                                    
                                                                                                                                
A roll call vote was taken on the motion.                                                                                       
                                                                                                                                
IN FAVOR:      Croft, Joule, Moses, Harris                                                                                      
OPPOSED:       Whitaker, Chenault, Hawker, Meyer, Stoltze,                                                                      
               Williams                                                                                                         
                                                                                                                                
Representative Foster was not present for the vote.                                                                             
                                                                                                                                
The MOTION FAILED (4-6).                                                                                                        
                                                                                                                                
Representative Whitaker referenced  Page 2, Section 2, asking                                                                   
how many  primary contracts  there had  been per year,  which                                                                   
would  apply   to  that   section.    Commissioner   O'Claray                                                                   
responded around 1,000 contracts.                                                                                               
                                                                                                                                
Representative  Whitaker commented  that if  there were  that                                                                   
many,  how  would  the  fiscal   note  work.    Mr.  Mitchell                                                                   
explained  that they had  provided a  five-year average  with                                                                   
approximately 1,000 projects per  year.  The average value of                                                                   
those projects was roughly $250,000  per project and which is                                                                   
how the $2.5 million dollar fiscal note came to be.                                                                             
                                                                                                                                
Co-Chair Harris  pointed out  that the bill  called for  a 1%                                                                   
contract price not to exceed $5,000  dollars.  Representative                                                                   
Whitaker  replied  that  he  was  now  comfortable  with  the                                                                   
number.                                                                                                                         
                                                                                                                                
Vice-Chair  Meyer MOVED  to report  CS  HB 155  (FIN) out  of                                                                   
Committee  with  individual  recommendations   and  with  the                                                                   
accompanying fiscal  note.  There being NO  OBJECTION, it was                                                                   
so moved.                                                                                                                       
                                                                                                                                
CS  HB  155   (FIN)  was  reported  out  of   Committee  with                                                                   
"individual recommendations"  and with  a new fiscal  note by                                                                   
the Department of Labor & Workforce Development.                                                                                
                                                                                                                                

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