Legislature(1999 - 2000)

03/08/2000 02:20 PM House FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
txt
HOUSE FINANCE COMMITTEE                                                                                                         
March 8, 2000                                                                                                                   
2:20 P.M.                                                                                                                       
                                                                                                                                
TAPE HFC 00 - 68, Side 1                                                                                                        
TAPE HFC 00 - 68, Side 2                                                                                                        
                                                                                                                                
CALL TO ORDER                                                                                                                   
                                                                                                                                
Co-Chair Therriault called the House Finance Committee                                                                          
meeting to order at 2:20 p.m.                                                                                                   
                                                                                                                                
PRESENT                                                                                                                         
                                                                                                                                
Co-Chair Mulder                                                                                                                 
Co-Chair Therriault    Representative Foster                                                                                    
Vice Chair Bunde   Representative Grussendorf                                                                                   
Representative Austerman   Representative Moses                                                                                 
Representative J. Davies   Representative Phillips                                                                              
Representative G. Davis   Representative Williams                                                                               
                                                                                                                                
ALSO PRESENT                                                                                                                    
                                                                                                                                
Mike Tibbles, Staff, Representative Therriault; Kevin Hand,                                                                     
Staff, Representative Halcro; Paul Grossi, Director,                                                                            
Division of Workers' Compensation, Department of Labor; Don                                                                     
Etheridge, Lobbyist, AFL/CIO; Dwight Perkins, Deputy                                                                            
Commissioner, Department of Labor and Workforce Development;                                                                    
Remond Henderson, Director, Division of Administrative                                                                          
Services, Department of Labor and Workforce Development;                                                                        
Don Shannon, Alaska Safety Advisory Council, Fairbanks; Bear                                                                    
Piekarski, District Council of Labors, and Workers'                                                                             
Compensation Board, Anchorage; Kevin Smith, Risk Manager,                                                                       
Alaska Municipal League.                                                                                                        
                                                                                                                                
TESTIFIED VIA TELECONFERENCE                                                                                                    
                                                                                                                                
Leandra Estep, Joint Insurance Association, Alaska Municipal                                                                    
League, Anchorage; Glen Smith, Risk Manager, Municipality of                                                                    
Anchorage.                                                                                                                      
                                                                                                                                
SUMMARY                                                                                                                         
                                                                                                                                
HB 218 "An Act relating to property loaned to or held by                                                                        
museums."                                                                                                                       
                                                                                                                                
 CSHB 218 was moved from Committee on 3/3/00. The                                                                               
Committee reviewed the committee substitute as it                                                                               
incorporated conceptual amendments made at that                                                                                 
time. There were no changes and the bill was                                                                                    
forwarded to the Chief Clerk's Office.                                                                                          
                                                                                                                                
HB 378 "An Act eliminating certain taxes under AS 21.09                                                                         
on premiums from the sale of workers' compensation                                                                              
insurance; relating to the establishment,                                                                                       
assessment, collection, and accounting for service                                                                              
fees for state administration of workers'                                                                                       
compensation and worker safety programs;                                                                                        
establishing civil penalties and sanctions for                                                                                  
late payment or nonpayment of the service fee; and                                                                              
providing for an effective date."                                                                                               
                                                                                                                                
 CSHB 378 (FIN) was REPORTED out of Committee with                                                                              
"no recommendation" and five fiscal impact notes:                                                                               
one by the Office of the Governor; one by the                                                                                   
University of Alaska; two by the Department of                                                                                  
Labor and Workforce Development, dated 2/16/00;                                                                                 
and one by the Community and Economic Development,                                                                              
dated 2/16/00.                                                                                                                  
                                                                                                                                
HJR 58 Respectfully requesting the members of the Alaska                                                                        
Congressional delegation to sponsor and support                                                                                 
passage of an amendment to the statute relating to                                                                              
the disposition of federal funds received by the                                                                                
state from oil and gas leases in the National                                                                                   
Petroleum Reserve - Alaska to authorize use of the                                                                              
funds for the state's power cost equalization                                                                                   
program.                                                                                                                        
                                                                                                                                
 CSHJR 58 was REPORTED out of Committee with a "no                                                                              
recommendation" and with a zero fiscal note by the                                                                              
House Finance Committee.                                                                                                        
HOUSE BILL NO. 218                                                                                                              
                                                                                                                                
"An Act relating to property loaned to or held by                                                                               
museums."                                                                                                                       
                                                                                                                                
CSHB 218 was moved from Committee on 3/3/00 with a                                                                              
conceptual amendment. Members were provided with the House                                                                      
Finance Committee version of HB 218, version 1-LS0786\I,                                                                        
dated 3/7/00.                                                                                                                   
                                                                                                                                
MIKE TIBBLES, STAFF, REPRESENTATIVE THERRIAULT explained                                                                        
that if the changes made to the bill to incorporate the                                                                         
conceptional amendment are in keeping with the Committee's                                                                      
intent no further action is needed. He reviewed CSHB 218                                                                        
(FIN).                                                                                                                          
                                                                                                                                
On page 2, lines 14 and 15: language requiring "a statement                                                                     
that the museum will acquire title to the property if a                                                                         
valid claim to the property is not made in 90 days" was                                                                         
replaced with "a statement that outlines the schedule and                                                                       
requirements for the museum to acquire title under this                                                                         
section."                                                                                                                       
                                                                                                                                
Language was amended on page 2 from line 28 to page 3 line 1                                                                    
requiring the museum: To publish the last date that the                                                                         
newspaper article will run (four weeks) and provide a                                                                           
statement that the individuals will lose title and the                                                                          
museum will acquire title within 46 days. The owner would                                                                       
have 45 days from the date of the last article.                                                                                 
                                                                                                                                
Mr. Tibbles observed that the Committee discussed a 30-day                                                                      
acquisition period. He explained that if there is not an                                                                        
address and a newspaper article is run for four weeks, then                                                                     
by the beginning of the fourth week only three weeks would                                                                      
have lapsed. The additional time was added to assure due                                                                        
process. Corresponding changes were made to reflect the                                                                         
forty-sixth day.                                                                                                                
                                                                                                                                
A conflicting definition of "notice" was also deleted to be                                                                     
consistent.                                                                                                                     
                                                                                                                                
KEVIN HAND, STAFF, REPRESENTATIVE HALCRO stated that the                                                                        
sponsor supports the change.                                                                                                    
                                                                                                                                
Representative J. Davies stated that he appreciated and                                                                         
concurred with the changes that were made.                                                                                      
                                                                                                                                
CSHB 218 was moved from Committee on 3/3/00. The Committee                                                                      
reviewed the committee substitute as it incorporated                                                                            
conceptual amendments made at that time. There were no                                                                          
changes and the bill was forwarded to the Chief Clerk's                                                                         
Office.                                                                                                                         
HOUSE JOINT RESOLUTION NO. 58                                                                                                   
                                                                                                                                
Respectfully requesting the members of the Alaska                                                                               
Congressional delegation to sponsor and support passage                                                                         
of an amendment to the statute relating to the                                                                                  
disposition of federal funds received by the state from                                                                         
oil and gas leases in the National Petroleum Reserve -                                                                          
Alaska to authorize use of the funds for the state's                                                                            
power cost equalization program.                                                                                                
                                                                                                                                
Co-Chair Mulder explained that the resolution requests                                                                          
Congress to amend federal statutes to allow National                                                                            
Petroleum Reserve Alaska (NPRA) funds to be used to fund                                                                        
Power Cost Equalization (PCE). He observed that under                                                                           
federal statutes NPRA funds can be used for: planning,                                                                          
construction, maintenance and operation of essential                                                                            
facilities, and other necessary provisions of public                                                                            
service. Federal statutes also provide that the state in                                                                        
allocation of such funds shall give priority to use by                                                                          
subdivisions within the state most directly or severely                                                                         
impacted by development of oil and gas leasing. He explained                                                                    
that there is currently $40 to $41 million dollars in the                                                                       
NPRA account and gave a brief history of NPRA funding.                                                                          
                                                                                                                                
Co-Chair Mulder emphasized that it is time to establish a                                                                       
long-term solution to fund PCE through an endowment, which                                                                      
would spin off interest each year. He acknowledged that the                                                                     
North Slope Borough would not support the approach. He                                                                          
provided members with a list of projects listed on the North                                                                    
Slope Borough's Impact Mitigation Program application (copy                                                                     
on file). He stressed that a funding mechanism for PCE would                                                                    
be in the interest of all of rural Alaska. The NPRA funding                                                                     
provides an opportunity to develop an endowment for PCE. He                                                                     
maintained that the projects requested by the North Slope                                                                       
Borough, while worthy, do not come to the same level of                                                                         
prioritization as PCE. He maintained that all rural Alaska                                                                      
should share the benefits of NPRA leasing and drilling.                                                                         
                                                                                                                                
Representative Grussendorf spoke in support of the                                                                              
resolution. He pointed out that it could take time to get                                                                       
the changes past Congress and questioned what other sources                                                                     
of funds are being considered.                                                                                                  
                                                                                                                                
Co-Chair Mulder observed that changes to the federal statute                                                                    
would not be needed if the North Slope Borough concurred                                                                        
with the use of NPRA funds for an endowment.                                                                                    
                                                                                                                                
Representative J. Davies felt that language on page 3, line                                                                     
18 was ambiguous: "to authorize annual appropriation of                                                                         
money received from this source". He questioned if the                                                                          
intent is to have a mechanism to allocate the money that is                                                                     
available to the state of Alaska. He asked if all the money                                                                     
available from the source would be appropriated.                                                                                
                                                                                                                                
Co-Chair Mulder responded that the intent is to appropriate                                                                     
the entire $41 million dollars to be part of an endowment.                                                                      
He discussed the overall proposal. He estimated that                                                                            
resolution of the Four Dam Pool would result in funding for                                                                     
use in a PCE endowment. He estimated that an endowment using                                                                    
NPRA funds and money from the sale of the Four Dam Pool                                                                         
could total $120 - $125 million dollars. This would provided                                                                    
$8 to $10 million dollars a year in interest. In addition,                                                                      
there is a possibility of assistance from the Alaska housing                                                                    
authorities. The housing authorities are willing to be part                                                                     
of a long-term solution. A portion of the AIDEA dividend                                                                        
could be used to fill in the gap between the endowment and                                                                      
the $15.7 million dollars needed to fund PCE. He clarified                                                                      
that interest from the $41 million dollars will generate                                                                        
approximately $2.5 to $3 million dollars a year. Combined                                                                       
with funding generated from the Four Dam Pool or from its                                                                       
sale to the communities would provide the additional amount.                                                                    
                                                                                                                                
Co-Chair Therriault explained that there would be an annual                                                                     
appropriation from the interest on the $41 million dollars                                                                      
in NPRA funds.                                                                                                                  
                                                                                                                                
Representative J. Davies questioned if there would be                                                                           
additional funds. Co-Chair Mulder could not say if there                                                                        
would be future funds available. He suggested that "annual"                                                                     
could be deleted to allow additional appropriations.                                                                            
                                                                                                                                
Representative J. Davies agreed with the deletion of                                                                            
"annual" on line 18, page 3 and suggested that "the" be                                                                         
added before "money".                                                                                                           
                                                                                                                                
Co-Chair Therriault MOVED to ADOPT Amendment 1: that                                                                            
"annual" be deleted from line 18, page 3 and "the" be added                                                                     
before "money". There being NO OBJECTION, it was so ordered.                                                                    
                                                                                                                                
Representative Austerman recalled that Senator Stevens                                                                          
indicated that the issue of PCE funding is an Alaskan                                                                           
problem.                                                                                                                        
                                                                                                                                
Co-Chair Mulder responded that Alaska is not asking the                                                                         
federal government to fund PCE. Representative Austerman                                                                        
pointed out that the resolution asks the federal government                                                                     
to step into the issue. Co-Chair Mulder stressed that Alaska                                                                    
should have a voice in how the money is spent.                                                                                  
                                                                                                                                
Representative Austerman clarified that he is a strong                                                                          
supporter of the endowment concept for PCE.                                                                                     
                                                                                                                                
Co-Chair Therriault suggested that Senator Stevens would                                                                        
consider the rest of Alaska's plan regarding PCE funding.                                                                       
Representative Austerman noted that the plan is not beyond                                                                      
the conceptional stage. Co-Chair Mulder spoke in support of                                                                     
developing a plan. He stressed the need to address the                                                                          
issue.                                                                                                                          
                                                                                                                                
Representative J. Davies pointed out that NPRA land is part                                                                     
of the federal public domain. Co-Chair Mulder observed that                                                                     
the federal government gives the state 50 percent of the                                                                        
revenue and reiterated that the state should have some say                                                                      
over how the money is spent.                                                                                                    
                                                                                                                                
Co-Chair Therriault pointed out that there is a zero fiscal                                                                     
note.                                                                                                                           
                                                                                                                                
Co-Chair Mulder MOVED to report CSHJR 58 (FIN) out of                                                                           
Committee with the accompanying fiscal note.                                                                                    
                                                                                                                                
Representative J. Davies OBJECTED. He questioned if anyone                                                                      
opposing the bill had been contacted. Co-Chair Therriault                                                                       
responded that no one contacted his office.                                                                                     
                                                                                                                                
A roll call vote was taken on the motion.                                                                                       
                                                                                                                                
IN FAVOR: Austerman, Bunde, Davis, Foster, Phillips,                                                                            
  Williams, Moses, Therriault, Mulder                                                                                           
OPPOSED: Davies, Grussendorf                                                                                                    
                                                                                                                                
The MOTION PASSED (9-2).                                                                                                        
                                                                                                                                
CSHJR 58 was REPORTED out of Committee with a "no                                                                               
recommendation" and with a zero fiscal note by the House                                                                        
Finance Committee.                                                                                                              
HOUSE BILL NO. 378                                                                                                              
                                                                                                                                
"An Act eliminating certain taxes under AS 21.09 on                                                                             
premiums from the sale of workers' compensation                                                                                 
insurance; relating to the establishment, assessment,                                                                           
collection, and accounting for service fees for state                                                                           
administration of workers' compensation and worker                                                                              
safety programs; establishing civil penalties and                                                                               
sanctions for late payment or nonpayment of the service                                                                         
fee; and providing for an effective date."                                                                                      
                                                                                                                                
PAUL GROSSI, DIRECTOR, DIVISION OF WORKERS' COMPENSATION,                                                                       
DEPARTMENT OF LABOR testified in support of the legislation.                                                                    
He explained that the legislation eliminates the premium tax                                                                    
on workers' compensation insurance polices, enacts a user                                                                       
fee and establishes a special account for funding workers'                                                                      
compensation and safety programs. Currently, all employers                                                                      
are required to cover their employees for workers'                                                                              
compensation. Employers can use a workers' compensation                                                                         
insurance policy, which requires a premium tax. Larger                                                                          
employers could also self-insure. A self ensured employer                                                                       
does not pay a fee or tax. Public entities can form a Joint                                                                     
Insurance Arrangement to cover their liabilities. The                                                                           
legislation eliminates the premium tax. The premium tax                                                                         
collected $3.5 million dollars in 1998. The fee that the                                                                        
legislation would enact is designed to collect approximately                                                                    
$3.5 million dollars. This would be used to fund the                                                                            
Division of Workers' Compensation and the Occupational                                                                          
Safety and Health Division (OSH). The fee will start at 3.3                                                                     
percent and graduate down to 2.6 percent. Self-insurers                                                                         
would be phased in. Eventually everyone would pay at the                                                                        
same rate, according to their use of the system. Employers                                                                      
would pay according to their amount of injuries. He stressed                                                                    
that the legislation would provide an incentive for a safer                                                                     
work place and requires all employers to pay at the same                                                                        
rate. He added that the legislation would reduce the                                                                            
dependence on general funds.                                                                                                    
                                                                                                                                
Mr. Grossi pointed out that Alaska is one of only six states                                                                    
that fund their programs through general funds. Thirty-four                                                                     
states pay for their programs through special accounts. Ten                                                                     
states use a combination. Sixteen states have a similar                                                                         
mechanism to the legislation.                                                                                                   
                                                                                                                                
Mr. Grossi acknowledged that there is opposition to the                                                                         
legislation. He pointed out that the opposition has come                                                                        
from employers that have not had to pay under the current                                                                       
system.                                                                                                                         
                                                                                                                                
Vice Chair Bunde questioned if school districts oppose the                                                                      
legislation. He noted that self-insurers pay for the                                                                            
liability on claims. Mr. Grossi responded that self-insurers                                                                    
don't pay for administration of the workers' compensation                                                                       
system: hearings to resolve disputed cases and work place                                                                       
safety programs.                                                                                                                
                                                                                                                                
In response to a question by Representative Phillips, Mr.                                                                       
Grossi explained that employers pay based on their number of                                                                    
claims times the multiplier.                                                                                                    
                                                                                                                                
Discussion ensued regarding support for the legislation. Mr.                                                                    
Grossi acknowledged that the Alaska Municipal League and the                                                                    
city of Anchorage have testified against the legislation.                                                                       
                                                                                                                                
Representative Austerman questioned what the affect would be                                                                    
of exempting the public sector.                                                                                                 
                                                                                                                                
Mr. Grossi explained that the total liability for                                                                               
municipalities is approximately $270 - $300 thousand dollars                                                                    
or 10 percent of the total.                                                                                                     
                                                                                                                                
Co-Chair Therriault observed that the administrative cost                                                                       
would be shared over a wider pool. He questioned the impact                                                                     
on small business. Mr. Grossi stated that small business                                                                        
should pay less because the pool is larger.                                                                                     
                                                                                                                                
Vice Chair Bunde concluded that the cost of administration                                                                      
would be spread but that the Division would not receive more                                                                    
funding. He recounted testimony that the Division of                                                                            
Workers' Compensation is not supportive of workers. He                                                                          
questioned the net gain of the legislation. Mr. Grossi                                                                          
responded that if workers' compensation remains a general                                                                       
fund program it would be subject to reductions. The Division                                                                    
has received $500 thousand dollars in cuts over recent                                                                          
years. Combined with inflation this is approximately 40                                                                         
percent less than what was available in 1998. He                                                                                
acknowledged that service has been reduced but pointed to                                                                       
budget reductions as the cause. The legislation was not                                                                         
designed to increase revenue.                                                                                                   
                                                                                                                                
Representative Austerman questioned the cost to                                                                                 
municipalities. Mr. Grossi responded that municipalities                                                                        
would pay 2.6 percent of claims. Single employers currently                                                                     
pay their workers' compensation liabilities.                                                                                    
                                                                                                                                
DWIGHT PERKINS, DEPUTY COMMISSIONER, DEPARTMENT OF LABOR AND                                                                    
WORKFORCE DEVELOPMENT provided information on the                                                                               
legislation. He noted that the city and borough of Juneau                                                                       
had $716,490 dollars in workers' compensation claims in                                                                         
1998. Based on a phased in approach the city and borough of                                                                     
Juneau would pay $5,911 dollars the first year and $18,629                                                                      
thousand dollars on the fourth year, if their safety record                                                                     
did not change.  He emphasized that the Division is having a                                                                    
hard time keeping their doors open due to budget reductions.                                                                    
He pointed out that the change would take $1.5 million                                                                          
dollars off budget in FY01 and an additional $2 million                                                                         
dollars the following year. Payment is only on services.                                                                        
Most other states require users to pay.                                                                                         
                                                                                                                                
Representative Phillips clarified that the state of Alaska                                                                      
has never charged for processing workers' compensation                                                                          
claims. Mr. Perkins suggested that businesses take advantage                                                                    
of the consultation side of the OSH program.                                                                                    
                                                                                                                                
Co-Chair Therriault referred to the fiscal notes. He                                                                            
observed that there would be a decrease in revenues from the                                                                    
deletion of the insurance tax. This would be offset from OSH                                                                    
and workers' compensation funds. He questioned the cost for                                                                     
an assessment fee under Risk Management.                                                                                        
                                                                                                                                
REMOND HENDERSON, DIRECTOR, DIVISION OF ADMINISTRATIVE                                                                          
SERVICES, DEPARTMENT OF LABOR AND WORKFORCE DEVELOPMENT                                                                         
explained that the state of Alaska would also pay the fee.                                                                      
                                                                                                                                
Mr. Grossi explained that the cost would be spread across                                                                       
agencies as interagency receipts. Mr. Perkins explained that                                                                    
the estimated cost from state employee claims is $75.8                                                                          
thousand dollars in FY01. After the phase in (forth year)                                                                       
this would be $238.9 thousand dollars. He added that this                                                                       
amount would be charged off proportionately to federal                                                                          
receipts that the state receives.                                                                                               
                                                                                                                                
Representative J. Davies questioned if interagency receipts                                                                     
would be based on each department's claims.                                                                                     
                                                                                                                                
Tape Change, HFC 00 - 68, Side 2                                                                                                
                                                                                                                                
Representative Foster noted that municipalities and schools                                                                     
pool together for self-insurance. He questioned if air taxis                                                                    
are combined into self-insured pools. Mr. Grossi clarified                                                                      
that there are no self-insurance pools of air taxis.                                                                            
                                                                                                                                
In response to a question by Representative Foster, Mr.                                                                         
Grossi acknowledged that there would be an additional cost                                                                      
to the state of Alaska, but emphasized that there would also                                                                    
be a reduction of $1.5 million dollars in general fund                                                                          
support.                                                                                                                        
                                                                                                                                
LEANDRA ESTEP, MANAGER, JOINT INSURANCE ASSOCIATION (JIA),                                                                      
ALASKA MUNICIPAL LEAGUE, ANHCHORAGE spoke in support of a                                                                       
municipal exemption. She stressed that municipalities have                                                                      
already take substantial cuts in state support. She                                                                             
expressed concern that a user fee would be assessed on every                                                                    
dollar paid on claims. This would include medical benefits,                                                                     
attorney fees, defense costs, and contractual fees. Every                                                                       
employer pays into the Second Injury Fund. The city and                                                                         
borough of Anchorage paid between 5 and 6 percent into the                                                                      
Second Injury Fund over the last several years. She proposed                                                                    
that the user fee only be paid on indemnity claims. Medical-                                                                    
only claims should be exempted, since they are not generally                                                                    
denied or litigated.                                                                                                            
                                                                                                                                
In response to a question by Vice Chair Bunde, Ms. Estep                                                                        
explained that the municipalities pay injured employees.                                                                        
State support is given when cases are litigated and through                                                                     
hearing officers. The state also receives notice of claims                                                                      
and assigns a case number.                                                                                                      
                                                                                                                                
Vice Chair Bunde questioned why the claim would be filed                                                                        
with the state. Ms. Estep explained that there is a                                                                             
statutory requirement that the state be notified of all                                                                         
injuries.                                                                                                                       
                                                                                                                                
GLEN SMITH, RISK MANAGER, MUNCIPALITY OF ANCHORAGE provided                                                                     
information regarding self-insurance. He pointed out that                                                                       
the Alaska Municipal League was created in response to                                                                          
increased insurance costs. He gave a brief history of self-                                                                     
insurance legislation and activities. The 45 percent loss                                                                       
ratio for the Alaska Municipal League is lower than any                                                                         
other industry in Alaska. He discussed the loss ratio. The                                                                      
premium an individual pays is based on the combined loss                                                                        
ratio. Self-insured entities do not make a profit on their                                                                      
programs. The municipality of Anchorage pays for third party                                                                    
administration of claims. He maintained that it should not                                                                      
cost as much to litigate a claim as to process a claim.                                                                         
                                                                                                                                
In response to a question by Representative J. Davies, Mr.                                                                      
Smith noted that there are 3,900 municipal employees. There                                                                     
were 453 workers' compensation claims and $1.9 million                                                                          
dollars in claims payments in 1998. He estimated that $3.4                                                                      
million dollars in claims would be paid for 1999.                                                                               
                                                                                                                                
In response to a question by Representative Foster, Mr. G.                                                                      
Smith observed that the municipality of Anchorage would pay                                                                     
$30 thousand dollars a year based on the legislation. He                                                                        
estimated that there would be a proposal to cap property tax                                                                    
on the November ballot.                                                                                                         
                                                                                                                                
KEVIN SMITH, RISK MANAGER, ALASKA MUNICIPAL LEAGUE stated                                                                       
that the League opposes the bill and wishes to have the                                                                         
public sector excluded. He noted that the JIA was created in                                                                    
1986 to allow public entities to self-insure. There are a                                                                       
number of cities and schools within the JIA program.                                                                            
                                                                                                                                
Mr. K. Smith pointed out that self-insurers buy insurance                                                                       
with a large deductible. There is a premium payment on the                                                                      
reinsurance.  He explained that an additional amount is paid                                                                    
to the Second Injury Fund.                                                                                                      
                                                                                                                                
Mr. K. Smith stated that the legislation represents a cost                                                                      
shift from private insurance companies to the public sector.                                                                    
The state represents the largest portion of the shift.                                                                          
                                                                                                                                
Mr. K. Smith disagreed that claims would be reduced by the                                                                      
legislation. He emphasized that there is sufficient                                                                             
incentive to reduce costs under the current program. He                                                                         
maintained that the legislation would provide a                                                                                 
disincentive. He suggested that the Workers' Compensation                                                                       
Board would have a conflict since it would be supported from                                                                    
payments to claimants. He maintained that safety incentives                                                                     
do not work.                                                                                                                    
                                                                                                                                
Mr. K. Smith suggested the addition of language on page 3,                                                                      
line 20: "except a municipality, a municipal school                                                                             
district, or regional education attendance area".  He added                                                                     
that subsection 6(g) on page 4 should be deleted:                                                                               
                                                                                                                                
(g)  Notwithstanding AS 21.76.020(a), a joint insurance                                                                         
arrangement established under AS 21.76 is subject to                                                                            
the provisions of this section and regulations adopted                                                                          
under this section and, if self-insured, shall pay the                                                                          
annual service fee on behalf of its members.                                                                                    
                                                                                                                                
Vice Chair Bunde asked how many communities are uninsured.                                                                      
Mr. K. Smith clarified that workers' compensation is                                                                            
required by the state of Alaska. There are communities that                                                                     
are having difficulty making payments. The number that is                                                                       
not purchasing some protection is small at this time. He                                                                        
estimated that the number would increase with reductions to                                                                     
municipalities.                                                                                                                 
                                                                                                                                
Representative Foster questioned who would be covered by the                                                                    
legislation if public entities were exempted. Mr. K. Smith                                                                      
explained that private entities would still pay. He                                                                             
maintained that the public sector runs efficiently.                                                                             
                                                                                                                                
Representative Phillips noted that $17,000 - $56,000 dollars                                                                    
a year would be assessed to the Alaska Municipal League. She                                                                    
asked how the additional fee would be assessed to the                                                                           
communities and school districts in the JIA. Mr. K. Smith                                                                       
noted that there are 141 members, of which 20 are school                                                                        
districts. He noted that rates for the coming year have been                                                                    
established and did not know how the increase would be                                                                          
addressed. He spoke in support of a delayed effective date.                                                                     
                                                                                                                                
Representative Phillips observed that the effective date is                                                                     
January 1, 2001.                                                                                                                
                                                                                                                                
Co-Chair Therriault pointed out that the JIA has a                                                                              
significant reserve and assets of $15 million dollars.                                                                          
Since, JIA is never exposed to more than $250 thousand                                                                          
dollars on any loss; it would take more large losses in a                                                                       
single year than have been experienced in the past twelve                                                                       
years to exhaust their resources.                                                                                               
                                                                                                                                
Representative J. Davies questioned the number of employees                                                                     
covered by JIA. Mr. K. Smith responded that there are                                                                           
approximately 2,500 employees covered by the JIA.                                                                               
                                                                                                                                
DON SHANNON, ALASKA SAFETY ADVISORY COUNCIL, FAIRBANKS                                                                          
testified in support of the legislation. He noted that                                                                          
Alaska's on the job injury rate is 4 to 5 times higher than                                                                     
other states. He stressed that the legislation would reduce                                                                     
injury. He stated that he was not concern with the Workers'                                                                     
Compensation Board's ability to settle claims fairly if the                                                                     
legislation is in affect.                                                                                                       
                                                                                                                                
DON ETHERIDGE, LOBBYIST, AFL/CIO testified in support of the                                                                    
legislation. He maintained that the legislation would                                                                           
stabilize the Divisions of Workers' Compensation and OSH.                                                                       
The only way public employees can be covered is through the                                                                     
state Division of Occupational Safety and Health.                                                                               
                                                                                                                                
ANDREW (BEAR) PIEKARSKI, BUSINESS MANAGER, DISTRICT COUNCIL                                                                     
OF LABORS, AND MEMBER, WORKERS' COMPENSATION BOARD,                                                                             
ANCHORAGE spoke in support of the legislation. He observed                                                                      
that funding is going down and there is a large turnover in                                                                     
state hearing officers. He observed that many companies do                                                                      
not have workers' compensation. He maintained that a lot of                                                                     
out-of-state companies operating in Alaska do not have                                                                          
workers' compensation programs.                                                                                                 
                                                                                                                                
Vice Chair Bunde questioned if the legislation would capture                                                                    
entities that do not have workers' compensation. Mr.                                                                            
Piekarski responded that a stable funding source would help.                                                                    
                                                                                                                                
Co-Chair Therriault noted that the Office of Management and                                                                     
Budget provided members with a fiscal note (copy on file.)                                                                      
Mr. Henderson explained that the fiscal note shows the cost                                                                     
to each state agency by funding source.                                                                                         
                                                                                                                                
Vice Chair Bunde questioned the cost per agency.  Mr.                                                                           
Henderson reiterated that the cost per agency is based on                                                                       
injuries.                                                                                                                       
                                                                                                                                
Mr. G. Smith stressed that each municipality would be                                                                           
considered as several employers.                                                                                                
                                                                                                                                
Representative Phillips MOVED to report CSHB 378 (L&C) out                                                                      
of Committee with the accompanying fiscal note. Vice Chair                                                                      
Bunde OBJECTED for purpose of discussion.                                                                                       
                                                                                                                                
There being NO OBJECTION, it was so ordered.                                                                                    
                                                                                                                                
CSHB 378 (FIN) was REPORTED out of Committee with "no                                                                           
recommendation" and five fiscal impact notes: one by the                                                                        
Office of the Governor; one by the University of Alaska; two                                                                    
by the Department of Labor and Workforce Development, dated                                                                     
2/16/00; and one by the Community and Economic Development,                                                                     
dated 2/16/00.                                                                                                                  
ADJOURNMENT                                                                                                                     
                                                                                                                                
The meeting was adjourned at 3:55 p.m.                                                                                          
House Finance Committee 12 3/8/00 p.m.                                                                                          

Document Name Date/Time Subjects