Legislature(1997 - 1998)
04/10/1997 03:23 PM House L&C
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
SSHB 159 - TOBACCO PURCHASE, POSSESSION, SALE, ETC. Number 1071 CHAIRMAN ROKEBERG announced the next order of business would be SSHB 159, "An Act relating to sale, gift, exchange, possession, and purchase of tobacco and tobacco products; and providing for an effective date," sponsored by Representative Pete Kott. He informed the committee there is a committee substitute for the sponsor substitute, Version K. He said he would entertain a motion to adopt the committee substitute. Number 1096 REPRESENTATIVE COWDERY moved to adopt CSSSHB 159(L&C), Version K. Hearing no objection, CSSSHB 159(L&C), Version K, LS0287/K, Ford, 04/09/97, was adopted. Number 1113 REPRESENTATIVE PETE KOTT came before the committee to explain differences between SSHB 159 and CSSSHB 159(L&C). He said the age is being changed from 19 to 21. He noted the changes occur several times in the legislation. Representative Kott said Alaska has a serious problem with minors consuming tobacco products. The legislation is an attempt to help that problem. Representative Kott stated it is his understanding that 21 percent of high school students smoke some form of tobacco product. He noted that across the United States it is even a wider problem with over a million kids that are starting to use tobacco products. REPRESENTATIVE KOTT informed the committee that there are currently state laws that restricts youth from purchasing tobacco products if they're under the age of 19. He said based on the numbers, 21 percent of high school students smoke. The current laws aren't working and the legislation is a tool that might help ridge the problem. Number 1210 REPRESENTATIVE KOTT said the committee substitute for the sponsor substitute puts more esteem into the laws that are designed to protect the kids from smoking. It raises the age of consent to 21 and all people under 21 who purchase or possess tobacco products are subject to punishment. Punishment for the first offense is $250, $500 for the second offense and $1,000 for the third offense. Second, it makes it illegal to sell or give a tobacco product to a minor under the age of 21. The penalties are $250 for the first offense, $500 for the second offense and $1,000 for the third offense. The legislation also requires the merchants to check identification of people who they have reason to believe that they are under the age of 27. He indicated this would be added protection. The merchants will tell their employees about this law and they will have their employees sign a statement saying they know about the law. REPRESENTATIVE KOTT explained the legislation also contains some strict guidelines on the governing of sale of tobacco by vending machines. It is designed to ensure that persons under 21 will not be able to purchase tobacco from vending machines. REPRESENTATIVE KOTT informed the committee members there is a provision in the bill that encourages municipal enforcement by requiring the court to separately account for fines that are assessed based on a conviction. The language in the legislation offers some opportunity to provide some of the monies collected back to the municipal law enforcement authorities. The legislature can appropriate money back to law enforcement for enforcement. REPRESENTATIVE KOTT stated there is a provision that after a couple of times of being delinquent, a merchant could lose their license to sell tobacco products. Number 1444 REPRESENTATIVE RYAN indicated that some clerks are under 21 and handle tobacco products. REPRESENTATIVE KOTT said he doesn't believe that was addressed in the bill. He said it would be prudent, on behalf of the individual merchant, to hire someone that is of age. REPRESENTATIVE RYAN noted there are high school students who work at gas stations, et cetera. He said he was wondering if they would be able to sell tobacco. REPRESENTATIVE KOTT said he doesn't want anybody under 21 to be able to sell tobacco products. He noted existing law doesn't cover that either. Number 1520 REPRESENTATIVE KUBINA said he would think that if you can't possess cigarettes, you couldn't sell them. He asked if marijuana should be included. REPRESENTATIVE KOTT said he wouldn't want to venture into that area since it is already an illegal substance. REPRESENTATIVE KUBINA asked how the law would work on a military base. REPRESENTATIVE KOTT indicated the similar procedures would implemented that were used when the drinking age was raised. REPRESENTATIVE KUBINA questioned how mail orders would be controlled. REPRESENTATIVE KOTT said he would suspect that since a person is required to be of age to purchase tobacco, if they ordered tobacco and weren't 21, they would be in violation. He said he would think the wholesalers would come up with a mechanism either through sending a driver's license or some kind of confirmation to work out those details. Number 1616 REPRESENTATIVE KUBINA asked, "If we can't get anybody to enforce our laws at 19, how are we going to get them to enforce them at 21?" REPRESENTATIVE KOTT said there is a misconception that the laws aren't being enforced. He informed the committee members it is his understanding that last year in Juneau and Anchorage there were approximately 1,000 citations issued for underage smoking. It's not like it's not being done, but certainly it's a lot more widespread than the fines would indicate. Representative Kott said with the provision that would suggest that the legislature can look at reimbursing or submitting to the municipalities or boroughs a portion of the fines collected, it may act as an incentive. Number 1676 REPRESENTATIVE RYAN asked "Representative Kott, would you entertain taking some of the recommendations that were previously said to put up the level of the fines and give those to the municipalities in which the enforcement took place, and then to withhold the business license fees if the municipalities don't feel they want to participate in the enforcement of this law? It would seem to me that if we had an incentive that would help them cover their costs, we might get a lot more cooperation out of them rather than to just have them ignored because it was said they have a lot more serious things - rape, robberies, drive-by shootings, burglaries and they - - probably this is way down the priority list because it takes manpower and expense and they can't justify it with the magnitude of other things, but if they were going to get $500 every time they stopped a kid with a cigarette in his hand it would pay off." REPRESENTATIVE KOTT said he wouldn't have a problem reimbursing municipal officials the entire amount if that could be done. He said he believes the only way that could be done is to provide legislative intent into the statute itself. REPRESENTATIVE KOTT said he would like to note some suggested changes. He directed the committee to page 4, line 4, which read, "$100 for a first offense within a two-year period,..." He said to be consistent with the other areas of the bill he would recommend that the amount be changed to $250. Representative Kott said another change he would like to suggest is on page 3, line 2, delete, "for consumption on the licensed premises,". The reason for the deletion is that there is no provision in the bill that would afford vending machines to be located in package stores. He said it conforms to existing law. He noted there was a concern by the Division of Licensing in that if a license is revoked, there shouldn't be the ability to go back to the division under a different name and purchase another license. CHAIRMAN ROKEBERG suggested Representative Kott prepare an amendment in writing. Number 1936 CHAIRMAN ROKEBERG referred to Version H of SSHB 159 and read page 2, lines 30 and 31, "The sale of a tobacco product through a vending machine is permitted if the vending machine is located in a place that is open to the public but to which a person under the age of 21 is denied access;". He questioned what these places are besides licensed premises. He asked what places would they be denied access if they weren't licensed premise. REPRESENTATIVE KOTT indicated it could be bars. CHAIRMAN ROKEBERG referred to using the age of 27 of a perspective purchaser to ask for identification and asked if that is a federal requirement. REPRESENTATIVE KOTT indicated it is a federal requirement. Number 2060 CHAIRMAN ROKEBERG said he has concern about what he considers the fiscal note to the private sector. He said the cost to employers to have to inform their sales clerks, signing forms and keeping the records for a period of time might seem minor, but it can start adding up, particularly with large retail organizations. REPRESENTATIVE KOTT said he has weighed all the evidence and it is his belief the positives that would be obtained from the bill certainly outweigh the negatives. There will be a small amount of details involved by the private sector. He said he would suspect that what would happen is that there would be some kind of a stamp placed on the back of an employment application which is generally kept until an employee terminates. He said he doesn't think an undo amount of burden will be created. Number 2190 REPRESENTATIVE COWDERY said if there is an added burden to the retailers, the retailer will adjust the price of the product to take care of that. He said that was the answer he got regarding similar legislation he had introduced. REPRESENTATIVE KOTT said he believes this is really an added protection for the employer in case there is a revocation hearing involved. If he/she has it on file, it will be a lot easier to go before the board under the Administrative Procedures Act (APA). He said it may be only a penny per application. Number 2285 CHAIRMAN ROKEBERG said, "Basically the fiscal note as it relates to the fact that the court has to forward to the Department of Commerce and Economic Development a record of all this and then the court additionally has to separate the monies and the fines in the accounts. In your bill, the money goes into the general fund with a potential appropriation by the legislature and local law enforcement here, which is like a permissive indirect dedicated fund. I mean in light of the testimony you heard today, I think this committee would like you to look into -- I think this committee would like to see some kind of incentive to the municipalities to enforce the law with that direct portion, and as we mentioned the ABC beverage prototype. You might want to look at that." REPRESENTATIVE KOTT said they could certainly look at that. He said the fiscal note is a little over $8,000. The court, currently, forwards information. He said what they are being asked to do is separate the information within their computer system. They currently don't have that ability. There will have to be a one-quarter time person to determine what portion of the revenue is then sent to the Department of Commerce and Economic Development comes from fines. He noted they are in the process of updating their computer system. The software package was supposed to have been on-line and if it were on-line, there wouldn't be a fiscal note at all. Number 2451 REPRESENTATIVE RYAN said by allowing the municipality or whomever to keep the fine, the court system can levy their charges or costs against the individual... TAPE 97-38, SIDE A Number 0001 REPRESENTATIVE RYAN continued, "This would be a wonderful opportunity to really add some teeth to these people and for practical purposes, eradicate juveniles from having tobacco." Number 0040 REPRESENTATIVE KOTT noted the purpose of the bill is to curve tobacco use among youth and not to raise revenue. Hopefully, with the fines in the bill, there will be considerations before someone attempts to purchase tobacco. He said with attempting to purchase there would be a fine. A person can currently try to purchase tobacco and there is no law against it. Number 0094 CHAIRMAN ROKEBERG asked Representative Kott to review the loose cigarette bill that he had introduced the previous session. Chairman Rokeberg indicated the committee would take testimony on Representative Kott's bill. Number 0183 BOBBY SCOTT, Jan's Distributing, Incorporated, testified via teleconference from Anchorage. He indicated his business is a wholesale business that does business throughout the state of Alaska. Mr. Scott said he would like to commend Representatives Kott, Ryan, Mulder, Kohring and Sanders for their effort to put a bill forward to help prevent youth from getting access to and using tobacco products. He explained his business has a lot of walk-in customers that come into their shop and they are asked for identification when they come in. Mr. Scott informed the committee they service between 300 and 400 customers. In speaking with his customers, they indicated they are in favor of tougher laws as opposed to an increased tax, thus it would eliminate a lot of theft that they are currently dealing with such as robbing stores. He thanked the committee for listening. Number 0314 REPRESENTATIVE COWDERY referred to name brand cigarettes and generic brand and asked Mr. Scott if he has an idea of what our youth predominately buys. MR. SCOTT said when he attended other meetings at the schools, he noticed a majority are smoking brand name cigarettes. He said with an increased tax, a lot of them will probably switch to generic brands as opposed to quitting. REPRESENTATIVE COWDERY questioned what the price differences are. MR. SCOTT replied that it is approximately $1 difference per pack. Number 0427 CHAIRMAN ROKEBERG asked what their geographic boundary is for wholesale. MR. SCOTT informed the committee they are in Anchorage, Eagle River, Wasilla, Talkeetna, Fairbanks and down the peninsula. He noted they also have a bush site that does ship out to other parts of the state of Alaska, including the rural areas. CHAIRMAN ROKEBERG asked if there is any way to check the age of the people who order by mail. MR. SCOTT said other than with a credit card, he doesn't know of any other way. CHAIRMAN ROKEBERG asked if it would be possible that someone would make a mail order and not be of age. MR. SCOTT said that could very well happen. He said when the tobacco shops opened, kids were making orders using their cat's name and were getting cigarettes sent to them. CHAIRMAN ROKEBERG pointed out Mr. Scott said he was a wholesaler and asked if the people he deals with has to have some kind of a license or endorsement. MR. SCOTT said his business basically sells to retail outlets such as store chains, independent mom and pop gas stations, et cetera. CHAIRMAN ROKEBERG questioned if his business also sells to the general public. MR. SCOTT indicated that they do. CHAIRMAN ROKEBERG questioned what licenses or endorsements his business holds. MR. SCOTT said he believes a business license and a tobacco license. Number 0527 REPRESENTATIVE COWDERY asked what the size is of the normal mail order relating to tobacco. MR. SCOTT indicated he didn't have that information with him. He noted they do not sell individual packages, all of their sales are basically by the carton. REPRESENTATIVE COWDERY said he would like an idea of the minimum amount they sell by mail order. MR. SCOTT indicated he would get the information. He noted it would depend on if they are shipping out to a bush grocery store or to a customer who is at home. REPRESENTATIVE COWDERY noted he would also like to know if it is one brand or if it is a mixture of brands. Number 0685 REPRESENTATIVE KOTT asked Mr. Scott if he distributes as a wholesaler only to retailers or do they have a retail license as well. MR. SCOTT said they are strictly wholesale. REPRESENTATIVE KOTT said if a retailer has a computer system and someone e-mailed them a request to purchase a case of cigarettes and provided their name, address, et cetera. They would also have to indicate age. He asked if there is currently a way to verify age via e-mail. MR. SCOTT said he doesn't believe there is any way to do that. He referred to there being pornography on the Internet and said there is no way to actually guard against anybody being under 21. Number 0765 REPRESENTATIVE COWDERY asked if there is any way to keep someone from ordering cigarettes at a lower price from a source in the Lower 48. MR. SCOTT said earlier in the month he had faxed to the committee a copy of an address he got off the Internet that was actually selling cartons of Marlboros for around $13 or $14 a carton to your door. Number 0828 SYLVIA SCOTT testified via teleconference from Anchorage on behalf of herself. She informed the committee she has four children and four grandchildren and none of them smoke. They don't smoke because she taught them right from wrong regarding smoking. Ms. Scott noted that even though their father did smoke, he has since quit. She said SSHB 159 will receive a positive and praising response from a large group of people, including herself. Ms. Scott said a lot of people have pushed for an increase in the tobacco tax as a way to stop children from smoking or using tobacco. She said although she feels it won't work, tougher laws would be a better way and HB 159 covers (indisc.) laws against youth consumption and possession. Ms. Scott relayed a situation she encountered where she came out of a store and there were three policemen talking to some kids. She said she walked down to see if they were giving them tickets for smoking. When she asked what the tickets were for, the policemen said it was because of having skateboards on the sidewalk. She said we need to toughen our laws and get our priorities where they should be. Ms. Scott indicated she has spoke to teens regarding the increased cigarette tax and they said it wouldn't bother them, they'll still get them. Number 0992 SUSAN FRICHETTI testified via teleconference from Anchorage in support of SSHB 159. She said she believes this is the direction that the legislature should be heading if we're really going to discourage tobacco use amongst our kids. Ms. Frichetti said she also believes that the legislation will help with enforcing the laws and will prevent a black market sales. It would be wise to pass the bill in order to help solve the issue of kids starting to smoke. She said she thinks retailers would be able to absorb the guidelines in the legislation. The bill would be viewed as a positive action. Number 1051 NANCY KUHN was next to testify via teleconference from Fairbanks. She noted she has four children. Ms. Kuhn said she thinks that SSHB 159 would be a step backwards in the fight against teen tobacco and so she opposes the bill. Kids smoke to rebel, to be cool and to be in with their peers. The rebellion is more frightening if you make them criminals. Teenage smoking is a health problem and not a criminal problem. Kids should not be made criminals because of smoking. The responsibility to stop the sale of tobacco to children should be with the adults who sell it, particularly those who have a financial interest in the tobacco sales. She thanked the committee members for their time and for the interest in considering the bill. REPRESENTATIVE COWDERY asked Ms. Kuhn if she thinks traffic fines stop speeders. He said that is also a penalty. We now have existing laws that says teenagers can't get alcohol, but a few still get it. Number 1173 MS. KUHN said, "I have (indisc.) with those four children and I don't think that a traffic fine ever seemed to keep them from having to show a power or anything. It was the person who held the purse strings on accessing the vehicle that got them into trouble to begin with. That was the problem or whether the responsibility lies in allowing the kids to even have access to something. So I don't think that fining kids is going to keep them from buying that tobacco. I think you have to fine the parents or fine the sellers." Number 1213 JENNY MURRAY testified via teleconference from Anchorage. She said while SSHB 159 is a bill that would strengthen the laws of restricting youth access to tobacco, it almost seems that it is a wolf in sheep's clothing. The bill seems to increase the license fee for tobacco merchants -- increases the penalties for illegal sales to underage kids. She said the bill provides no resource or mechanism for effective enforcement of the law and it would prohibit the use of the most effective enforcement mechanism which is (indisc.) coming from underaged buyers. Ms. Murray explained SSHB 159 would make it illegal for you to even attempt to purchase tobacco without providing any sort of exemption for necessary law enforcement activities. She said the real impact of the bill would be to discourage effective enforcement, while at the same time it would criminalize kids. Ms. Murray urged the committee not to move the bill. REPRESENTATIVE KOTT said he would like to point out that there is no criminal element in the legislation. It is nothing more than something very similar to a citation. You are issued a fine which you'll pay. If you're caught twice during a two-year period, the first time you'd be fined $250 and the second time it would be $500. That is $750 a kid will have to fork out. If you look at it from a cigarette tax perspective at $1 per pack, that is the equivalent of 75 cartons of cigarettes. Number 1326 ERIC MYERS testified via teleconference from Anchorage on behalf of himself. He said SSHB 159 has been disturbing to watch as it has evolved. Originally introduced, this was a classic tobacco industry (indisc.) with all of the favorite provisions. The provision that would have reinstated the possibility of using electronic switching devices was an issue that was specifically addressed, debated and rejected in 1992. He said the driver license revocation provision, which was originally in the bill, is classic and makes criminals out of victims. Mr. Myers said the subject is switched in that the attention is being focused on the kids and it avoids the topic of who is really at fault, the vendors. He said some of the most (indisc.) elements still remain in the bill such as on page 2, line 7. He said by prohibiting the attempt to purchase, this bill would gut the most effective enforcement mechanism that's available. The signage and signature provisions are simply window-dressing provisions. He pointed out kids are getting busted, but the real issue is what's happening to vendors. We already have tough laws, but they've never been enforced. Mr. Myers said the CSSSHB 159(L&C) is a desperate ploy to bump the age from 19 to 21. He indicated the average age of smoking initiation is about 14 and about 90 percent of the smokers are already hooked by the age of 19. The tobacco tax is endorsed by all leading health authorities in the nation. He stated it is the tobacco industry that is promoting SSHB 159. CHAIRMAN ROKEBERG said the committee has not heard any testimony specifically and directly that the tobacco industry supports the bill. MR. MYERS said the tobacco wholesalers strike him as being the essence of the tobacco industry. He asked if he is missing something. CHAIRMAN ROKEBERG asked Mr. Myers if he has any other evidence about the tobacco industry promoting the bill. MR. MYERS stated all of the elements in the bill are similar elements that have been used elsewhere by the tobacco industry. He said the tobacco industry is using this bill as a vehicle to distract attention from the tobacco tax. Number 1664 REPRESENTATIVE KOTT clarified that the legislation was not brought to him by the tobacco industry and it is not a bill, as far as he knows, that is promoted by the tobacco industry. It is a measure that has been acknowledged as a positive step by the American Legislative Exchange Council as well as the National Conference of State Legislators. Number 1687 DIANA KUHNS, Chief Operating Officer, Western Pacific Division, American Cancer Society, testified via teleconference from Anchorage against SSHB 159. She said her organization's position has been (indisc.) by the Surgeon General's 1994 report titled, "Preventing Tobacco Use Among Young People." The report states laws prohibiting minors possession of tobacco should be addressed only after effective regulation and enforcement at the (indisc.) in place. Effective regulation enforcement of illegal tobacco sales are not yet in place in Alaska. Ms. Kuhns said SSHB 159 would increase the fines for minors who possess tobacco and would further criminalize kids who attempt to purchase tobacco. Until those (indisc.) from the sale of tobacco are held accountable under the current law, her organization vigorously opposes any future penalties for the children. Ms. Kuhns stated tobacco taxes have been proven to be highly effective and one reason is because they are simple. They don't require police involvement or community vigilance. She referred to a recent New York Times article and said the tobacco industry has found ways around everything we have done to reduce smoking by teenagers, but they can't repeal the laws of economics. REPRESENTATIVE KOTT informed the committee members that last year when representatives of the American Cancer Society visited his office, he ran his ideas by them and they endorsed every one of them, including the increased fine. He said it's strange how things change in one year. Number 1825 CATHERINE REARDON, Director, Division of Occupational Licensing, Department of Commerce and Economic Development, came before the committee. She said she is in attendance because the Division of Occupational Licensing administers the business license program which has the tobacco endorsement attached to it. Ms. Reardon said it is her suggestion that a business, with a business license with a tobacco endorsement, that is under suspension or revocation, be prevented from obtaining another business license with a tobacco endorsement during that time of suspension or revocation. She said because business licenses are basically a revenue generator for the state, one owner is able to obtain multiple business licenses under different business names. She said she thinks that there is the likelihood that someone whose tobacco endorsement has been suspended or revoked might choose the option of paying another $50 and slightly alter their business name. Ms. Reardon said she believes it would fit in with the intent of the legislation that that be prohibited. MS. REARDON indicated she had another suggestion. She said on page 6, where the different suspensions and penalties are mentioned, it talks about a violation of a provision of this section. She referred to line 5 which read, "violates a provision of this section or a regulation implementing this section adopted under AS 43.70.090." She stated that AS 43.70.090 is a statute which says that the Department of Commerce and Economic Development may adopt regulations necessary to determine and collect the fees imposed by this chapter. She suggested deleting on line "adopted under AS 43.70.090" so that it would also apply to other regulations that they had adopted concerning tobacco endorsements. It also appears on line 11 and 14. She said, "A connected wish in order to enable us to even think about enforcing against people who violate the endorsement regulations would be the department be given authority to adopt regulations to administer the tobacco endorsement program as a whole." That would require a minor amendment to AS 43.70.090. Number 2002 REPRESENTATIVE KOTT asked if the department will have a zero fiscal note. MS. REARDON referred to the increase of $25 to $100 for the tobacco endorsement and said it would show an increase in revenue. The anticipated increase in revenue would be $66,300 in even years and $49,200 in odd years. This is because of the two-year cycle. She noted they have more business with tobacco endorsements during even years than odd years. MS. REARDON referred to possible costs and said the system is that if someone is ever convicted of selling tobacco improperly, which hasn't occurred to her knowledge, then that information would be forwarded to the Department of Commerce and Economic Development and they would suspend the endorsement as specified by the bill. She explained that if someone were to be convicted, the department would have to file an accusation and give them an administrative hearing under the APA to basically prove that, "Yes, you were convicted; yes, you are going to get your license or endorsement suspended." There hasn't been any costs, to date, because it hasn't occurred, but she would have to assume that there is some intention to somehow provide resources to municipal police or to someone to do enforcement behind this bill. She said she would assume that she would get a notice of convictions and have to go through the hearing process. Ms. Reardon said, "One suggestion would be that perhaps someone has already had adequate due process through the conviction by the court, and so as you did with the hunting guide law last year, perhaps you could say that a hearing is not required to suspend the license. It will be an automatic result. The court convicts -- just a line that says there will be no hearing provided to suspend is based on a court conviction." She said they would have had better due process than she could have provided. That would also speed the suspension going into effect as she could be working on a hearing for six months. Ms. Reardon said if she does give a second hearing to prove that a person has been convicted, if there are going to be ten convictions a year -- in talking with the Attorney General's Office, they suggested at their $87 per hour rate that they charge the department to deal with the hearings, there would probably five days of legal costs which would be $32,600. MS. REARDON informed the committee members that there is no enforcement staff for unlicensed business activity which means that if someone chooses not to get a tobacco endorsement for their business license and continues to sell, there isn't anybody who goes out, catches them and punishes them. She said that is because the Division of Occupational Licensing is running completely off of license fees from occupations, she can't say that she will take some of the doctor's fees and spend it on the hearing. That would be contrary to the statutory setup they have for licensing fees. She explained that business license fees and tobacco endorsement money goes into the general fund, although the legislature does permit her to spend a certain amount of it on administering business licenses. To this point, that has not included paying for any enforcement staff or attendant legal activities. Ms. Reardon explained when someone calls her and tells her that someone doesn't have a tobacco endorsement, either because they lost it or never got one, her division has resorted to sending them a letter with an application. Number 2248 REPRESENTATIVE COWDERY referred to a business not having a tobacco license endorsement and asked what the division does about that. MS. REARDON said, "We send them a letter saying, `It looks like maybe you're out of compliance with the business license law.' But since the whole goal of the business license law has been as a tax - as a revenue generator, we sit there and say, `Well, the license is only $50. Is it worth the government spending more than $50 trying to go to court against the person?' And I think the answer has been, `No.' But the tobacco endorsement is intended to have a kind of regulatory function now. One of your punishments for selling illegally is losing this right to sell tobacco and if that's going to truly be a scary potential outcome, my little letter is probably not going to hurt enough to worry people." Ms. Reardon said it all comes back to enforcement. REPRESENTATIVE COWDERY asked Ms. Reardon if she has found that most of the businesses conform to the requirement of obtaining a business license. MS. REARDON responded that she doesn't know what the compliance rate is. She noted there about 67,000 business license holders in the state. Ms. Reardon said she would say a good amount have business licenses and the division tries to make it easy to get them. She said she thinks that people will get business licenses and tobacco endorsements initially, but she thinks that if they have that endorsement suspended or taken away so that it is actually impinging on their ability to make a living through cigarette sales, that is when that voluntary, "yeah, we'll cooperate with the government, we'll get the tobacco endorsement, we'll do what government says," may break down. Number 2366 REPRESENTATIVE COWDERY said that every Sunday in the Anchorage paper there is a section of (indisc.) and some say, "We're licensed and bonded," and some don't say anything. He said maybe a high percentage don't have licenses. Representative Cowdery questioned whether until there is a complaint, nobody would know. MS. REARDON said if it is something like a construction, they do have enforcement for that and it's paid for by the license fees of construction contractors. She said when they get complaints or if they notice something flagrant in the yellow pages, they do have a manner of going about it. However, that money can only be spent on construction contractors and it can't be spent on the business license part of things. Number 2411 REPRESENTATIVE COWDERY referred to the tobacco issue of tax and asked how the division would address a problem if there is a tax and cigarettes were to be bootlegged. MS. REARDON said she would probably turn to the Department of Revenue that actually collects the tobacco tax and say, "What do you do now when people don't pay tobacco tax?" She said she would assume that the Department of Revenue does have some enforcements efforts for the tobacco tax. Number 2459 BOB BARTHOLOMEW, Deputy Director, Income and Excise Audit Division, Department of Revenue, came before the committee. He said that currently as both the compliance and audit functions have been shrunk by budgets over time, Representative Cowdery's statement about priorities and dollar values do drive what they do. Tobacco has been almost a completely voluntarily.... TAPE 97-38, SIDE B Number 0001 MR. BARTHOLOMEW continued, "...with the tobacco tax given that if you were to pass that significant of an increase, the priorities are going to change because there is going to be quite a bit more money involved. So, for some of our programs, given there is no resources for auditor compliance or we prioritize, there has been very little other than voluntary compliance." He noted they follow up on tips and leads which generally comes from the industry itself. If they find somebody who is not following the business laws, that upsets them, so they will provide information to the department. Number 0032 CHAIRMAN ROKEBERG asked Ms. Reardon if she thinks that the committee should include a fine for doing business without a license and maybe institute a finder's fee to help promote the enforcement of that. MS. REARDON said she believes that it is currently a criminal misdemeanor to practice without a license. She noted the statute is vague because it is an old statute. Ms. Reardon stated she doesn't know how finder's fee might work, but she would be interested in anything that would help enforcement. Number 0069 CHAIRMAN ROKEBERG said the legislation provides for the APA to be followed and, therefore, the hearing, if there is a finding for revocation or suspension, the standard would be criminal negligence. He said he is concerned about the height of that standard. He referred to Ms. Reardon's suggestion that perhaps we could have it automatic without going through the APA and said it seems to him that if there could be an exemption, there wouldn't be a problem. But then there could be a problem as to the due process portion of it. He indicated he doesn't know how it would work, particularly with criminal negligence. MS. REARDON said, "Mr. Chair, you're correct that if I had to determine whether - not just the person was convicted, but they were convicted and criminally negligent - if it's some different standard than just convicted, I would probably have to give them a chance to defend themselves -- no it wasn't criminally negligent. But if it were an automatic trigger, if convicted -- criminally negligent or not, just if convicted they shall be suspended for a set period of time. Not maybe and not the `up to' where we had to make a subjective decision, then I think at least the hunting guide bill allowed some of this automatic triggering with no additional APA hearing." Number 0168 LOREN JONES, Director, Division of Alcoholism and Drug Abuse, Department of Health and Social Services, came before the committee. He said the Department of Health and Social Services certainly supports enforcement activities as one of the tools for denying access or decreasing access to persons under 19. The department shares concerns of how the enforcement takes place and that there be some real enforcement done. He said as Representative Kott has testified, there certainly is enforcement against the youths who use. There has been no convictions of vendors, partly because it takes the resources of the local law enforcement. Mr. Jones said they would support looking at the structure that the ABC Board has. He said in Title IV, the ABC Board or the Department of Revenue collect the license fee for a person who is licensed to sell alcohol. That then is refunded back to the municipality in which that business does business with the restriction that the local municipality must enforce state and local ordinances and laws. He said it's not that they get back any fines that are collected from that, but they get back the actual license fee itself. Mr. Jones said for this particular case, the $100 license endorsement fee would be the pool of money that could be sent back to the municipalities as opposed to the fines collected because no fines have ever been collected. He stated there are fines for the kids and those are being collected. Mr. Jones referred to the statute regarding refunds to municipalities and said there is a structure to refund to the municipalities the actual license fee that is collected for an individual who is licensed to sell alcohol. Number 0268 CHAIRMAN ROKEBERG said the sponsor of the bill may want to consider increasing that licensure endorsement fee to generate a bigger pool of income to implement the enforcement. MR. JONES said, "I don't know if this an annual figure or biannual figure -- every two years, but I believe they refund back to municipalities close to $900,000 based on the fees that are collected." He said this would get enforcement back to local communities. MR. JONES indicated he hasn't seen the proposed committee substitute, so the department doesn't have an opinion on raising the age from 19 to 21. He said their general position is that the department does support an increase in enforcement activities if there is a viable process that results in increased enforcement, not only on the youth but also on the vendors. He noted they also view that as not a substitute for the tax. It is part of a process, but the largest impact on youth use will still be from increased taxes. Number 0387 REPRESENTATIVE ROKEBERG asked Mr. Jones if there is any way he could formulate a policy decision on the age being changed from 19 to 21. MR. JONES indicated he would and it would be fairly soon. CHAIRMAN ROKEBERG said he thinks that is a very important point. He said he would note, for the record, that he is very concerned about this and is disturbed with it being an ex-miliary person in the U.S. Army. He said the purpose of the taxation is to keep youth from commencing or taking up smoking. He said it seems like anything, you get a point of diminishing returns once you get to a certain age level. He asked what benefits are going to accrue to society by prohibiting 20-year olds from smoking. Chairman Rokeberg again asked Mr. Jones to review the age listed in the bill and get back to the committee. He also asked him if he would also check the information regarding approximately 1,000 citations issued for underage smoking in Anchorage and Juneau. Some corroboration for that would be good for the record. REPRESENTATIVE KOTT indicated he has those numbers in his office and they were provided to him last week by the Municipality of Anchorage and the City and Borough of Juneau. Number 0628 REPRESENTATIVE KOTT asked Mr. Jones if he would advocate that a tobacco board should be created similar to the ABC Board. MR. JONES said as you look at the way the enforcement bills are going, and in terms of Representative Kott's bill and others, there are restrictions on sales. He referred to Representative Cowdery's bill saying it has to be a face-to-face sale and the tobacco has to be behind a secure counter and said those issues are very similar to alcohol sales. Currently, the ABC Board has powers to investigate and they have investigators. They have powers to restrict and revoke licenses without taking individuals to court. They can take individuals to court, but they also have a procedure in statute. He said as opposed to the Department of Commerce and Economic Development and Department of Revenue, which don't have enforcement people, some of the powers to have the license to collect the fees and enforce the restrictions on the license and the sales, if the legislature desired, probably could be transferred to the ABC Board. He noted he has raised this issue with the ABC Board as a potential mechanism because they are currently in that business. Mr. Jones pointed out in many states tobacco and alcohol sales occur in grocery stores side-by-side. To his knowledge about five states have, because of Synar Amendment and tobacco enforcement, turned their tobacco enforcement over their alcohol beverage control people because they're in the same businesses and are using some of the same procedures to monitor sales. He noted the attorney general for the state of Virginia recently turned that type of enforcement over their ABC Board. Number 0768 REPRESENTATIVE KOTT said the ABC Board then returns the license fees to the local municipalities and boroughs. MR. JONES indicated that is correct. REPRESENTATIVE KOTT said, "So that's a certain designated amount that the municipalities know they have. They are then policing primarily the retailers. Don't you think it would be more effective because it would give police - Municipality of Anchorage or Juneau - more of an incentive to rebate, in some form or fashion, fines that are collected? They're not only doing the retail establishments, but they're also hitting on the underage kids or those who might be providing tobacco products to underage kids - just the neighbor walking on the street." MR. JONES explained the statute reads that they will refund back to the municipality those fees. The statute then goes on to state that the commissioner of the Department of Revenue shall withhold that refund if the commissioner of the Department of Revenue determines that they are not enforcing all state laws, local ordinances or federal rules regarding alcohol. He said most police departments receive that money. Mr. Jones said, "In the City and Borough of Juneau, which I am the most familiar with having lived here for so long and been involved in this, that money because they are not allowed to dedicate funds, basically is shown as a general fund and then shown back as a receiving of the police department. And enforcing of minor consuming, enforcing drunk driving statutes, enforcing non-sales to an intoxicated persons, no open container -- all of those are local ordinances or state laws around alcohol that they enforce. It is not simply an enforcement back on the vendors. They justify with minor consuming which is a law." He said he would assume the same thing would apply. Mr. Jones pointed out that what is missing in enforcement to date is enforcement on the vendor. Local enforcement officers are currently arresting the kids. A conviction on the vendor has never been done because it is a resource issue with the police. It takes time, effort and resources. That is what an ABC Board investigator could do. Number 0768 REPRESENTATIVE KOTT said he believes there are federal requirements for the state to come up with some enforcement with the vendors. They do spot checks, et cetera, in order to receive some federal money. He said when you look at the number of retail establishments, bars and restaurants that sell alcohol, they're dealing with a license that is worth quite a bit more than what currently exists to sell tobacco. He said even if the fee is raised to $100, we've learned from Ms. Reardon's testimony that the most we can generate is $66,000. That's half of a police officer in Anchorage. MR. JONES said, "I think I heard two questions there. One is on the federal rules what's called Synar. We are in fact required to do compliance checks to determine what the percentage of successful sales are and with the goal of by the year 2000, reducing that to 20 percent or less. That has been a responsibility of my division because if the state fails to reach that level, then there is a penalty against the substance abuse treatment and prevention block grant which comes into my division to pay for treatment and prevention programs around alcohol and drug abuse. We do those compliance checks. We are not, through that process, collecting evidence for criminal cases. We are simply attempting to find out if vendors sell and recording that as statistical information. The federal government is very clear that compliance check is not to be used for enforcement, that enforcement is a separate activity. So we are doing compliance checks. The results last year, statewide, were about 32 percent of the time a youth doing that with us could successfully purchase. That's very good compared to a lot states and it shows that 68 percent of the vendors are in fact complying with the law." MR. JONES referred to the dollar amount and said, "You're correct that $100 the way it is now -- I believe in discussion with Catherine, currently if you get a business license to operate a retail outlet and you operate five or six different stores, you have one business license. You get one tobacco endorsement for those five stores, that's $100. Catherine has talked about the possibility of saying you need a separate tobacco endorsement for each, which would certainly increase the revenues and would be more similar to a liquor outlet if you held multiple licenses -- you have to have separate licenses for each place where you sell alcohol -- that would increase the fees. You certainly, as a legislature, could raise that to $200 or $300. Some liquor licenses now for two years are up to $1,500. It depends on the amount of revenues you want to share back to municipalities to incentifize (ph) to enforce this - to give them some of the resources they need." Number 0934 REPRESENTATIVE KOTT said that was the point he was trying to make. There is not enough incentive even if it is raised four times the amount. With the number of citations that would be issued and the potential court appearances, the city would be losing money. MR. JONES said the ABC Board has at times received either federal money or some other processes whereby they have issued grants to local municipalities to pay the overtime to the police officers. He said he believes the last time they issued grants, they had about $80,000 or $90,000. The local police departments applied for a grant and they paid overtime. Mr. Jones said he and Mr. Bartholomew had discussed what they would buy and given the amount a police officer makes, if the overtime costs any where from $40 to $70 and hour, you would for $90,000 get about 2,000 hours down to about 1,300 hours depending on the price, of added enforcement if a police would in fact apply through that grant process. That's another mechanism based on a different fee and a different structure, that's in no bill that I know of now but certainly one that could be put together." Mr. Jones said if a police department wishes to enforce, they would certainly encourage them to. CHAIRMAN ROKEBERG indicated there were no further witnesses to testify. He said SSHB 159 would be held over for further consideration.
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