Legislature(2005 - 2006)CAPITOL 120

04/27/2005 01:00 PM JUDICIARY

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01:22:11 PM Start
01:22:39 PM Board of Governors of the Alaska Bar
01:33:17 PM SB140
01:45:57 PM HB269
02:00:06 PM HB268
02:16:32 PM HB276
02:59:46 PM SB36
03:32:55 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Moved Out of Committee
Moved HCS CSSB 36(JUD) Out of Committee
Moved Out of Committee
Scheduled But Not Heard
+ Bills Previously Heard/Scheduled TELECONFERENCED
Moved CSHB 268(JUD) Out of Committee
Heard & Held
Board of Governors of the Alaska Bar
<Continued from 4/25/05>
HB 276 - BUSINESS LICENSE TOBACCO ENDORSEMENT                                                                                 
2:16:32 PM                                                                                                                    
REPRESENTATIVE  ANDERSON   announced  that  the  next   order  of                                                               
business  would  be HOUSE  BILL  NO.  276,  "An Act  relating  to                                                               
business license  endorsements for  tobacco products,  to holders                                                               
of  business license  endorsements for  tobacco products,  and to                                                               
the  employees   and  agents  of  holders   of  business  license                                                               
endorsements for tobacco products."                                                                                             
[Representative Anderson returned the gavel to Chair McGuire.]                                                                  
MICHAEL O'HARE,  Staff to Representative Pete  Kott, Alaska State                                                               
Legislature,   sponsor,   presented   HB   276   on   behalf   of                                                               
Representative Kott.   He said HB 276 addresses  the amendment of                                                               
AS 43.70.075  regarding the sale  of tobacco products  to minors.                                                               
Basically,  HB   276  increases  financial  penalties   for  non-                                                               
compliance by employees and employers  who sell tobacco products;                                                               
removes   the  automatic   suspension   of  tobacco   endorsement                                                               
provision of  current law; and  increases the minimum  fines, per                                                               
violation,   for  employers   with   education,  monitoring   and                                                               
enforcement programs in place -  from the current levels of $300,                                                               
$500,  $1000 and  $2,500 -  to  $750, $1,000,  $2,500 and  $3,500                                                               
respectively.   The bill  also increases  the minimum  fines, per                                                               
violation,  for  employers  without  education,  monitoring,  and                                                               
enforcement programs  - from  the current  levels of  $300, $500,                                                               
$1,000  and   $2,500  -  to   $500,  $750,  $1,500,   and  $2,500                                                               
respectively,  as   well  as  suspends  the   violator's  tobacco                                                               
endorsement for a predetermined period of time.                                                                                 
MR. O'HARE  said that HB  276 also makes an  employee responsible                                                               
for the sale  of tobacco products to minors  by imposing separate                                                               
fines  for  those  in  violation.   The  bill  allows  qualifying                                                               
employers -  employers with documented education,  monitoring and                                                               
enforcement programs  - to assert  defenses and  provide evidence                                                               
at administrative  hearings of endorsement  suspension regardless                                                               
of  the disposition  of a  case against  the violating  employee.                                                               
Under current law, employers have  little or no chance to present                                                               
their  own cases  if an  employee  pleads no  contest or  guilty.                                                               
This  should  encourage  more   employers  to  create  education,                                                               
monitoring,  and  enforcement programs  to  prevent  the sale  of                                                               
tobacco  products  to  minors.   House  Bill  276  would  require                                                               
employees to sign a statement  that they understand it is against                                                               
the law  to sell tobacco to  minors and that they  will bear some                                                               
of the responsibility, personally, if they violate the law.                                                                     
MR.  O'HARE relayed  that  HB  276 creates  a  separate cause  of                                                               
action against  the employee  for selling  tobacco to  minors and                                                               
imposes  a fine  of $300  to the  employee.   The state  needs to                                                               
continue to  hold employers  responsible in  order that  they may                                                               
improve  their own  internal operations,  and needs  to put  more                                                               
responsibility   on  those   employees  who   either  refuse   to                                                               
participate in  education programs  or intentionally  violate the                                                               
law.   The state  must also  recognize responsible  employers who                                                               
make strong  internal efforts  at curbing  underage smoking  in a                                                               
fair, balanced, and reasonable manner.   These changes could also                                                               
make Alaska one  of the strongest states in the  country in terms                                                               
of  employer-sponsored  education,  monitoring,  and  enforcement                                                               
programs, and could lead to even better federal compliance.                                                                     
REPRESENTATIVE  GARA asked  whether,  under the  bill, a  tobacco                                                               
seller  could  still  lose   his/her  tobacco  endorsement  under                                                               
certain circumstances.                                                                                                          
2:21:17 PM                                                                                                                    
MR.  O'HARE   reiterated  that  HB  276   removes  the  automatic                                                               
suspension  provision while  increasing the  fines for  employers                                                               
who  have  been documented  to  have  education, monitoring,  and                                                               
enforcement programs in place.                                                                                                  
REPRESENTATIVE GARA  asked for a  comparison between  current law                                                               
and  the changes  being proposed  by HB  276 as  they pertain  to                                                               
losing a tobacco endorsement.                                                                                                   
2:22:14 PM                                                                                                                    
CYNTHIA DRINKWATER,  Assistant Attorney  General, Commercial/Fair                                                               
Business Section,  Civil Division (Anchorage), Department  of Law                                                               
(DOL), relayed  that she represents the  Division of Occupational                                                               
Licensing  in tobacco-endorsement  matters.   She explained  that                                                               
currently  there  is  a  very strong  incentive  for  vendors  of                                                               
tobacco products  to be  very vigilant  in the  hiring, training,                                                               
and  monitoring of  their employees  who  sell tobacco,  because,                                                               
under  the  current  framework,  if the  holder  of  the  tobacco                                                               
endorsement  is  convicted of  selling  to  a  minor, or  if  the                                                               
employees  or  agents   -  while  acting  within   the  scope  of                                                               
employment or agency  - are convicted of selling  to minors, then                                                               
the holder of  the endorsement is liable and  there are mandatory                                                               
stepped penalties  starting with a  20-day suspension and  a $300                                                               
fine.   Then, if there is  a second conviction within  a two-year                                                               
period, the fine is $500 and  the suspension is 45 days.  Further                                                               
convictions warrant higher fines and longer suspensions.                                                                        
MS. DRINKWATER  went on  to explain  that after  conviction, once                                                               
the holder  of an  endorsement receives  a notice  of suspension,                                                               
there is  an appeal process,  but its currently a  fairly limited                                                               
process.   The legislative  intent was to  create a  framework of                                                               
penalties wherein  the outcome was known,  determinant, and would                                                               
not require lengthy  hearings.  There was  also the consideration                                                               
that the sanctions  that were imposed - both  civil penalties and                                                               
suspension periods  - would essentially  level the  playing field                                                               
for different types of vendors.   For example, for small vendors,                                                               
it is the fine that will  get their attention, whereas for [large                                                               
vendors, it  is the suspension  of the endorsement that  will get                                                               
their attention].                                                                                                               
2:25:48 PM                                                                                                                    
DIANE CASTO,  Section Manager, Prevention and  Early Intervention                                                               
Section, Division of Behavioral  Health, Department of Health and                                                               
Social Services  (DHSS), relayed that  the DHSS is  in opposition                                                               
to HB  276 for  a number  of reasons, two  of them  being primary                                                               
reasons.    She explained  that  the  Tobacco Youth  Education  &                                                               
Enforcement Program  falls under the  purview of the  Division of                                                               
Behavioral Health because the "sell  rate" of tobacco products to                                                               
youth  is   directly  linked  to  the   federal  Substance  Abuse                                                               
Prevention  And  Treatment  (SAPT)  Block  Grant  made  available                                                               
through the federal "Synar legislation."  She went on to say:                                                                   
     The  two  primary  reasons   that  our  department  ...                                                                    
     opposes this  bill is that  first and foremost,  one of                                                                    
     our  main goals  is  to promote  healthy  youth in  the                                                                    
     state  of  Alaska,  and obviously  smoking  is  a  huge                                                                    
     problem  - all  tobacco products  are a  problem -  for                                                                    
     youth in the  state of Alaska, and we  believe that the                                                                    
     current  system   that  we  have  ...   has  been  very                                                                    
     effective  in reducing  access to  tobacco products  by                                                                    
     our youth.   So we hope to continue  the great progress                                                                    
     that  we have  made.  ... The  mandatory suspension  of                                                                    
     tobacco  endorsements began  in July  of [2001],  which                                                                    
     was  the beginning  of  fiscal year  [FY]  02, and  ...                                                                    
     prior  to  fiscal  year  03 we  [were]  ...  always  in                                                                    
     violation  of  the federal  20  percent  sell rate  for                                                                    
     youth.   And  in 2003,  after a  full year  of the  new                                                                    
     regulation, we went down to  a 10 percent sell rate for                                                                    
     youth, which put  us below, at that  time, the national                                                                    
     sell rate average.   Last year ... we  increased just a                                                                    
     little bit ..., up to almost 12 percent. ...                                                                               
2:28:54 PM                                                                                                                    
REPRESENTATIVE GARA asked what "sell rate" refers to.                                                                           
MS. CASTO said  that the "Synar survey" is  conducted between May                                                               
and September  each year, and  it involves  a process of  doing a                                                               
random sample poll of all of  the businesses that have a business                                                               
license with a tobacco endorsement  that are accessible to youth.                                                               
Last year the sample included  just under 400 businesses.  During                                                               
the aforementioned months,  departmental tobacco investigators go                                                               
out  with  confidential  youth  informants  to  those  businesses                                                               
selected via  the random  sample and  attempt to  buy cigarettes.                                                               
If  the   confidential  youth   informants  are   successful  and                                                               
"complete a sell," those [sales] go into the "sell rate."                                                                       
MS. CASTO,  in response  to a question,  said only  one attempted                                                               
buy  occurs at  each  business.   She  reiterated  that once  the                                                               
mandatory suspension of the tobacco  endorsement went into place,                                                               
the sell rates dropped significantly,  and the DHSS believes that                                                               
that  drop was  a result  of the  possible consequence  of losing                                                               
one's  tobacco endorsement.    Such a  loss  can cost  businesses                                                               
money, much more money than  the fines, which were not successful                                                               
in  reducing  sell  rates.     Additionally,  there  has  been  a                                                               
significant  reduction, overall,  in  smoking among  youth -  the                                                               
rate dropped from  37 percent to 19 percent, which  is lower than                                                               
the national rate.   In conclusion, she said that  the DHSS feels                                                               
very encouraged by this reduction  and feels that the endorsement                                                               
suspension  provision of  current law  has been  a great  part of                                                               
that  reduction.   She  provided the  committee  with the  DHSS's                                                               
tobacco vendor education packets.                                                                                               
REPRESENTATIVE   COGHILL   raised   the   issue   of   individual                                                               
MS. CASTO said:                                                                                                                 
     We believe it's a  mutual responsibility.  Obviously it                                                                    
     is [the]  responsibility of the  employee to  not sell,                                                                    
     and I think that through  ... vendor education - if our                                                                    
     retailers  are providing  the vendor  education as  was                                                                    
     pointed out  in the  introduction of  this bill  - that                                                                    
     they  do have  responsibility  and they  should not  be                                                                    
     selling.   And there  is a fine  both for  the employee                                                                    
     and   that   employer,   as   well   as   the   tobacco                                                                    
     [endorsement] suspension.                                                                                                  
2:33:56 PM                                                                                                                    
CHRISTIE  GARBE, Chief  Executive  Officer  (CEO), American  Lung                                                               
Association of  Alaska, relayed that  she would be  testifying in                                                               
opposition  to  HB 276  on  behalf  of  the group,  Alaskans  for                                                               
Tobacco-Free  Kids, an  alliance  of a  number of  health-focused                                                               
nonprofit  organizations.    She   indicated  that  Alaskans  for                                                               
Tobacco-Free Kids  believes that  HB 276 will  effectively weaken                                                               
the enforcement  component - the  cornerstone - of  the statewide                                                               
comprehensive  tobacco control  program, and  that it  strikes at                                                               
the heart of efforts to deter kids from smoking.                                                                                
MS. GARBE said  that Alaskans for Tobacco-Free  Kids would remind                                                               
members of  the amazing progress  made in the reduction  of youth                                                               
tobacco  consumption  as  measured  by the  Youth  Risk  Behavior                                                               
Survey (YRBS),  which shows a  50 percent reduction  in cigarette                                                               
smoking  among Alaska  high school  students from  1995 to  2003.                                                               
Another  YRBS  statistic  indicates   that  Alaska  students  who                                                               
reported  purchasing  cigarettes  at  a  store  also  dropped  50                                                               
percent in that  same time period.  She said  that the bill will,                                                               
for all  practical purposes, eliminate  the ability to  take away                                                               
vendors'  rights to  sell tobacco.   Without  this ability  there                                                               
will be  no financial incentive on  the part of the  vendor - the                                                               
party  profiting  from the  sale  of  tobacco  - to  comply  with                                                               
current  law.   In fact,  history has  shown that  suspension has                                                               
been a necessary component of enforcement.                                                                                      
MS.  GARBE opined  that  companies which  have  the privilege  of                                                               
holding  a license  to  sell tobacco  - a  legal  yet deadly  and                                                               
addictive  product -  must also  bear the  serious responsibility                                                               
for selling  this product to  Alaska's children.  The  company is                                                               
the  entity making  the  profit  from the  sales  of tobacco  and                                                               
therefore it is the company  that must bear the responsibility to                                                               
hire  capable, responsible,  trainable,  competent employees  who                                                               
follow the policy  of not selling tobacco to those  under the age                                                               
of  19.    It  just  doesn't  seem  that  difficult  a  rule  for                                                               
management  to  train  employees  to  follow,  she  opined.    In                                                               
conclusion, she asked the committee  not to fix something that is                                                               
not broken,  and characterized  "this proposal"  as a  giant step                                                               
backward  for efforts  to prevent  youth  tobacco addiction;  the                                                               
current  law has  effectively done  the job  of reducing  tobacco                                                               
sales to youth and therefore does not need any further changes.                                                                 
2:37:12 PM                                                                                                                    
MS. GARBE, in  response to a question,  offered her understanding                                                               
that under  the bill, vendors  would have  the ability to  put in                                                               
place an educational  program of some sort that  they consider to                                                               
be adequate  and then,  once they  have done  that, they  will be                                                               
immune from suspension of their tobacco endorsement.                                                                            
2:38:10 PM                                                                                                                    
MIKE ELERDING,  Northern Sales Company  of Alaska,  Inc., relayed                                                               
that  Alaska's  tobacco  industry  supports  HB  276  because  it                                                               
believes  that the  bill  corrects a  deficiency  in current  law                                                               
while  continuing  to  provide  enforcement  officials  with  the                                                               
powerful tools  necessary to assist  them in keeping  tobacco out                                                               
of the hands of children.   He offered the industry's belief that                                                               
Alaska  retailers, in  partnership with  the State,  are doing  a                                                               
good job  of keeping tobacco out  of the hands of  children.  The                                                               
results of  the Synar  surveys indicate that  the state  has made                                                               
huge progress  in becoming and  remaining compliant  with federal                                                               
guidelines.  Nationally,  for 2003 and 2004, Alaska  ranks in the                                                               
top one-third of all states for "Synar scores."                                                                                 
MR.  ELERDING offered  his belief  that HB  276 will  continue to                                                               
provide  the  state with  the  tools  to penalize  non-conforming                                                               
retailers  while not  unjustly punishing  the retailers  that are                                                               
doing everything  within their  power to  comply with  state law.                                                               
The problem with the current law,  he opined, is that the penalty                                                               
range   does    not   distinguish   between    different   retail                                                               
classifications or size of retail  operations.  As a consequence,                                                               
the  penalty   for  a  violation  impacts   different  businesses                                                               
differently.  For example, if a  business sells a large volume of                                                               
tobacco  products  -  or  sells   only  tobacco  products  -  the                                                               
suspension of  its tobacco  endorsement is going  to have  a much                                                               
more severe impact on it  than would an endorsement suspension on                                                               
a business that sold very little  in the way of tobacco products.                                                               
Furthermore, license  suspensions are currently mandatory  and do                                                               
not  take  into  account  any mitigating  circumstances  such  as                                                               
whether the retailer had a training program in place.                                                                           
MR. ELERDING concluded by offering  his understanding that HB 276                                                               
changes  the license  suspension phase  and continues  to provide                                                               
the DHSS  with the right  to impose license suspensions  but only                                                               
after initiating a proceeding that  examines a retailer's efforts                                                               
to comply  with state  law regarding  the prohibition  of tobacco                                                               
sales to minors.  This  change is significant because it provides                                                               
retailers that have  an effective training program  in place with                                                               
an   affirmative  defense   and  also   provides  retailers   the                                                               
opportunity to have a hearing  before the imposition of a license                                                               
suspension.   He said, "We support  HB 276 and would  like to see                                                               
the committee pass this bill out."                                                                                              
[Following was a brief discussion  regarding a possible amendment                                                               
Mr. Elerding suggested for a different bill.]                                                                                   
2:46:29 PM                                                                                                                    
STEVE RUSH,  Holiday Stationstores,  Inc., after  mentioning that                                                               
Holiday   Stationstores  owns   and  operates   approximately  30                                                               
convenience stores in Alaska, said  that Holiday Stationstores is                                                               
in favor of HB  276 and believes that it should  be enacted for a                                                               
number  of  reasons.    He  offered  his  belief  that  the  bill                                                               
substantially  stiffens  the  penalties for  selling  tobacco  to                                                               
minors -  those fines being  the highest he's ever  encountered -                                                               
and  also encourages  employers to  implement the  aforementioned                                                               
education, monitoring,  and enforcement  programs.   Current law,                                                               
he  opined,  provides little  incentive  for  employers to  train                                                               
employees, since  [all vendors]  are treated the  same.   He said                                                               
that Holiday Stationstores has  a very comprehensive, proprietary                                                               
computer-based  training  program, and  is  quite  proud of  that                                                               
program;  however, current  law  does nothing  to reward  Holiday                                                               
Stationstores  for  its  efforts  to curb  tobacco  purchases  by                                                               
MR. RUSH  offered his belief  that HB  276 will also  establish a                                                               
more predictable  and fair  due process  for employers.   Current                                                               
law does  provide a  very streamlined process  for going  after a                                                               
license holder,  but it leaves  a license holder with  no defense                                                               
when an  employee sells tobacco to  a minor and pleads  guilty or                                                               
no contest; in  such cases the employer is  held strictly liable,                                                               
pays  the  fine,  and  faces the  20-day  suspension  of  his/her                                                               
tobacco endorsement.  He opined  that this is unfair; instead, an                                                               
employer ought  to be  able to  offer up  all of  his/her efforts                                                               
towards compliance as part of  a defense.  Additionally, the bill                                                               
would encourage  employees to  be more  diligent in  checking IDs                                                               
when selling tobacco, because it  creates a civil penalty for the                                                               
employee who sells tobacco to a  minor, and the employee would be                                                               
required to  sign a  statement acknowledging  that it  is against                                                               
the law  to sell tobacco  to a minor  and thus he/she  would bear                                                               
some of the responsibility for violating the law.                                                                               
MR. RUSH acknowledged that there  is some concern that removal of                                                               
the   current  suspension   provision  might   jeopardize  "Synar                                                               
funding," but  offered his  belief that such  has not  been borne                                                               
out   by  empirical   evidence  from   California,  Oregon,   and                                                               
Washington.     Thus,  he  surmised,   removal  of   the  current                                                               
suspension provision will have no  effect on federal funding.  He                                                               
concluded by asking the committee to pass the bill.                                                                             
2:51:44 PM                                                                                                                    
DAN RILEY, Vice President,  Government Relations, Tesoro Refining                                                               
and  Marketing  Company  ("Tesoro"),  relayed that  he  would  be                                                               
speaking in  support of HB  276.  Tesoro, he  explained, operates                                                               
32  convenience stores  in Alaska  and  is a  strong advocate  of                                                               
preventing  the  selling  of  tobacco products  to  minors.    He                                                               
     We  have  training  programs in  place  to  ensure  our                                                                    
     employees are  aware of  their responsibilities  not to                                                                    
     sell  tobacco   products  to  minors.     All   of  our                                                                    
     convenience store employees are  required to complete a                                                                    
     "new employee"  orientation when they are  hired.  That                                                                    
     employee  orientation  program  contains a  section  on                                                                    
     techniques for alcohol  management and specific lessons                                                                    
     on  restricted  products.    The  training  covers,  in                                                                    
     detail,  procedures regarding  the  sale of  restricted                                                                    
     products,  and   employees  are  required  to   pass  a                                                                    
     validation  test with  a score  of 100  percent at  the                                                                    
     conclusion of  their training.   As  many of  you know,                                                                    
     Tesoro   started  out   in  Alaska;   we  now   operate                                                                    
     convenience  stores in  16  states  across the  western                                                                    
     United States.  I can tell  you that Alaska is the most                                                                    
     stringent, regarding tobacco sales  laws, of any of the                                                                    
     states that we operate in.                                                                                                 
     The  proposed  bill before  you  will  allow Alaska  to                                                                    
     continue to  have the toughest penalties  of any state,                                                                    
     and will  [ensure] that Alaska is  the country's leader                                                                    
     in    terms    of    [employer-sponsored]    education,                                                                    
     monitoring, and enforcement  programs.  Tesoro supports                                                                    
     the   provisions  that   stiffen  penalties   for  non-                                                                    
     compliance;  we also  support the  provision that  will                                                                    
     allow ... employers  with aggressive internal education                                                                    
     and  monitoring  and  enforcement programs  -  like  we                                                                    
     believe we have - to  take credit for those programs as                                                                    
     mitigating  factors  in  administrative hearings.    We                                                                    
     believe  the bill  establishes a  more predictable  and                                                                    
     fair due  process, and encourages employees  to be more                                                                    
     diligent  in checking  IDs at  the  point of  sale.   I                                                                    
     respectfully  request that  you support  HB 276,  and I                                                                    
     would be happy to answer any questions.                                                                                    
2:54:07 PM                                                                                                                    
CHAIR  McGUIRE, after  ascertaining that  no one  else wished  to                                                               
testify, relayed that HB 276 would be held over.                                                                                

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