Legislature(2017 - 2018)HOUSE FINANCE 519

02/05/2018 01:30 PM House FINANCE

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Heard & Held
-- Public Testimony --
Moved CSHB 91(FIN) Out of Committee
+ Bills Previously Heard/Scheduled TELECONFERENCED
                  HOUSE FINANCE COMMITTEE                                                                                       
                     February 5, 2018                                                                                           
                         1:32 p.m.                                                                                              
1:32:54 PM                                                                                                                    
CALL TO ORDER                                                                                                                 
Co-Chair Foster  called the House Finance  Committee meeting                                                                    
to order at 1:32 p.m.                                                                                                           
MEMBERS PRESENT                                                                                                               
Representative Neal Foster, Co-Chair                                                                                            
Representative Paul Seaton, Co-Chair                                                                                            
Representative Les Gara, Vice-Chair                                                                                             
Representative Jason Grenn                                                                                                      
Representative David Guttenberg                                                                                                 
Representative Scott Kawasaki                                                                                                   
Representative Dan Ortiz                                                                                                        
Representative Lance Pruitt                                                                                                     
Representative Cathy Tilton                                                                                                     
Representative Tammie Wilson                                                                                                    
MEMBERS ABSENT                                                                                                                
Representative Steve Thompson                                                                                                   
ALSO PRESENT                                                                                                                  
Representative Sam  Kito, Sponsor; Crystal  Koeneman, Staff,                                                                    
Representative   Sam   Kito;    Alexei   Painter,   Analyst,                                                                    
Legislative   Finance   Division;    Greg   Cashen,   Deputy                                                                    
Commissioner,    Department   of    Labor   and    Workforce                                                                    
Development;  Marie Marx,  Director, Workers'  Compensation,                                                                    
Department of Labor and Workforce Development.                                                                                  
PRESENT VIA TELECONFERENCE                                                                                                    
Heather   Hebdon,   Alaska    Public   Offices   Commission,                                                                    
Anchorage; Charles McKee, Self, Anchorage.                                                                                      
HB 79     OMNIBUS WORKERS' COMPENSATION                                                                                         
          HB 79 was HEARD and HELD in committee for further                                                                     
HB 91     APOC REGISTRATION FEES; LOBBYIST TAX                                                                                  
          CSHB 91(FIN) was REPORTED out  of committee with a                                                                    
          "do pass"  recommendation and with one  new fiscal                                                                    
          impact    note    from     the    Department    of                                                                    
Co-Chair Foster reviewed the meeting agenda.                                                                                    
HOUSE BILL NO. 91                                                                                                             
     "An  Act relating  to fees  for certain  persons filing                                                                    
     disclosure statements or other  reports with the Alaska                                                                    
     Public  Offices  Commission;  relating   to  a  tax  on                                                                    
     legislative lobbyists;  and providing for  an effective                                                                    
1:33:59 PM                                                                                                                    
REPRESENTATIVE SAM KITO, SPONSOR,  shared that the intent of                                                                    
the legislation was to help  provide the resources needed by                                                                    
the Alaska Public  Offices Commission (APOC) to  do the work                                                                    
of  protecting the  public interest  by being  able to  have                                                                    
receipts to support their operations.  He said that the bill                                                                    
reflected  and  estimated  level of  receipt  collection  of                                                                    
approximately $250 thousand; the  receipts collected in past                                                                    
years had  been as much as  $113 thousand. He said  that the                                                                    
commission could only charge fees  as identified in statute;                                                                    
current fees  for registration for each  lobbyist client was                                                                    
$250,  which generated  $113 thousand  per year.  He relayed                                                                    
that  the  commission had  struggled  to  maintain staff  to                                                                    
provide necessary  audits. Auditing  each campaign  and each                                                                    
lobbyist  was  time  consuming  and  sometimes  resulted  in                                                                    
accumulating  penalties, which  were  then forgiven  because                                                                    
the  accumulation occurred  under  circumstances beyond  the                                                                    
auditees  control. The  additional  receipt authority  would                                                                    
help to  support operations  and would  aid in  righting the                                                                    
state's fiscal situation.                                                                                                       
1:37:10 PM                                                                                                                    
Vice-Chair Gara  understood the additional revenue  the bill                                                                    
would  raise, and  he supported  the bill.  He believed  the                                                                    
bill would  enable the commission  to hire staff  to operate                                                                    
APOC  efficiently. He  surmised that  implementation of  the                                                                    
bill would raise the cost  of running the commission to $245                                                                    
thousand per year.                                                                                                              
Representative  Kito  replied  that  at  present  there  was                                                                    
receipt  authority  available to  the  commission  of up  to                                                                    
$145,000.  He stated  that providing  the receipt  authority                                                                    
would  not  give the  commission  excess  authority and  the                                                                    
commission would  still need to  present to  the legislature                                                                    
before  adding additional  staff. Currently,  the commission                                                                    
did  not  have   the  authority  to  be   able  to  generate                                                                    
additional revenue.                                                                                                             
1:39:27 PM                                                                                                                    
Co-Chair  Foster noted  that  Representative Guttenberg  and                                                                    
Representative Pruitt had joined the meeting.                                                                                   
Vice-Chair  Gara  understood  the bill  would  increase  the                                                                    
receipt  authority of  designated  general  funds (DGF).  He                                                                    
asked about  the $220 thousand  under Personnel  Services on                                                                    
the fiscal note.                                                                                                                
CRYSTAL KOENEMAN,  STAFF, REPRESENTATIVE SAM  KITO, answered                                                                    
that the  fiscal note indicated  that funding  was necessary                                                                    
on the  personal services  line to  decrease the  vacancy in                                                                    
APOC; by reducing  the vacancy they would be  able to better                                                                    
provide service to the public.                                                                                                  
Representative Wilson  asked whether  the money  funds would                                                                    
be DGF.                                                                                                                         
1:41:26 PM                                                                                                                    
Representative  Kito answered  that the  funds would  be DGF                                                                    
and made available  to the level of the APOC.  He added that                                                                    
the if fund exceeded the  costs of facilitating the program,                                                                    
they could  return to  the legislature for  an audit  of the                                                                    
Representative  Wilson  asked  about  the  agency's  current                                                                    
receipt  authority.   She  asked  whether  the   bill  would                                                                    
increase the amount of receipt authority.                                                                                       
Representative   Kito  responded   increasing  the   receipt                                                                    
authority  would  allow  APOC  to  decrease  the  amount  of                                                                    
general fund that they were expending.                                                                                          
Representative  Wilson wanted  to make  sure that  the money                                                                    
from  an  increase  in  the   fees  would  be  used  as  the                                                                    
legislation intended.  She referred  to Page  1 of  the bill                                                                    
and  asked  about "non-group"  entities  and  how much  they                                                                    
would pay in registration fees.                                                                                                 
Representative  Kito answered  that all  entities would  pay                                                                    
the same registration fees.                                                                                                     
Ms. Koeneman  elaborated that any  non-group entity  with an                                                                    
annual operating budget  of $250, or less,  would be exempt.                                                                    
They  would  be able  to  fundraise  to take  in  additional                                                                    
monies  but  if their  annual  operating  expense was  under                                                                    
$250, they would be exempt.                                                                                                     
Representative Wilson  understood that the language  did not                                                                    
pertain to volunteer groups, without operating expenses.                                                                        
Ms.  Koeneman  replied  in  the  affirmative;  the  language                                                                    
included personal services and office space.                                                                                    
Representative Kawasaki  spoke to  people that may  not have                                                                    
the ability  to pay  if the fee  was increased.  He wondered                                                                    
whether the fees could be waived.                                                                                               
1:45:27 PM                                                                                                                    
Representative Kito  answered that  there was a  currently a                                                                    
process whereby  a candidate could  file an  exempt campaign                                                                    
where they were not subject to  any of the fees that applies                                                                    
to candidates.  He understood that  the election  filing fee                                                                    
would still  need to be paid  but they would be  exempt from                                                                    
paying the registration fee to APOC.                                                                                            
Representative  Kawasaki  asked  for  clarification  on  the                                                                    
answer from APOC.                                                                                                               
HEATHER HEBDON, ALASKA  PUBLIC OFFICES COMMISSION, ANCHORAGE                                                                    
(via teleconference),  asked for Representative  Kawasaki to                                                                    
repeat the question.                                                                                                            
Representative Kawasaki complied.                                                                                               
Ms. Hebdon  replied that  there was  a provision  in statute                                                                    
that  allowed for  an exempt  campaign;  campaigns that  had                                                                    
limited financial  activity of  less than $5,000  during the                                                                    
duration of  the campaign could file  an exemption statement                                                                    
and not have to report. She  said that the exemption was not                                                                    
available  on  a  statewide  level and  only  applied  to  a                                                                    
municipal or judicial retention candidate.                                                                                      
Representative Kawasaki  asked whether anyone had  ever come                                                                    
to  APOC wanting  to file  but had  been unable  to pay  the                                                                    
filing fee.                                                                                                                     
Ms. Hebdon answered that it was  a new fee, which meant that                                                                    
there was not history of such a circumstance.                                                                                   
1:48:05 PM                                                                                                                    
Representative Ortiz asked whether  there had been a further                                                                    
reduction in appropriated APOC funds since FY16.                                                                                
Ms. Hebdon  replied that  the agency had  received a  cut in                                                                    
program authority the previous  session, from $242.6 million                                                                    
to  $143.3  million.  She  said   that  the  fees  had  been                                                                    
unrealized as  there had not  been fees in statute  to allow                                                                    
receipt authority up to the full $242.6 million.                                                                                
Representative Ortiz  surmised that the agency  had remained                                                                    
flat  funded  since FY16,  and  receipt  authority had  been                                                                    
reduced for receipts that had never been collected anyway.                                                                      
Ms. Hebdon answered in the affirmative.                                                                                         
Representative  Ortiz  asked  how   long  the  current  $250                                                                    
lobbying registration fee been in place.                                                                                        
Ms. Hebdon  did not know  the origination date, but  the fee                                                                    
had been increased to $250 in 2003.                                                                                             
1:50:25 PM                                                                                                                    
Representative Guttenberg offered  a hypothetical of someone                                                                    
exceeding  the $250  in operating  expenses, but  in in-kind                                                                    
donations, he  wondered where  this would  fit in  under the                                                                    
Ms. Hebdon did  not believe the hypothetical  was the proper                                                                    
definition of non-group entity.  She said a non-group entity                                                                    
was defined  as a  person, other  than an  individual, whose                                                                    
primary purpose  was to influence an  election. Those people                                                                    
had to  meet certain criteria  and could not  participate in                                                                    
business  activities, they  did  not  have shareholders  and                                                                    
were   independent   from    the   influence   of   business                                                                    
corporations. She said  that to her knowledge  only one non-                                                                    
group  entity  had  ever  registered  with  APOC,  but  that                                                                    
Citizens  United had  rendered the  definition obsolete  and                                                                    
groups  no longer  had to  go through  the steps  to achieve                                                                    
non-group status,  instead they registered as  an entity and                                                                    
could make unlimited independent expenditures.                                                                                  
1:52:46 PM                                                                                                                    
Vice-Chair  Gara did  not believe  in holding  a bill  for a                                                                    
technical  question that  could be  fixed on  the floor.  He                                                                    
pointed  to an  exemption on  Page 2,  line 3  for municipal                                                                    
office holders.  He surmised  that APOC did  not have  a fee                                                                    
for Tribal office holders.                                                                                                      
Ms. Hebdon answered that the  office did not regulate Tribal                                                                    
Vice-Chair Gara  surmised that village office  holders would                                                                    
not be charged a fee.                                                                                                           
Ms. Hebdon answered in the affirmative.                                                                                         
Vice-Chair Gara  spoke to the  fee for a  lobbying contract.                                                                    
He understood  that the  fee was for  each contract  and not                                                                    
per lobbyist.                                                                                                                   
Ms.  Hebdon replied  in  the affirmative;  the  fee was  per                                                                    
Representative Wilson  surmised that  a group  of volunteers                                                                    
that raised  $3,500 for  a local  election would  be charged                                                                    
the same  fee as a  larger organization that raised  tens of                                                                    
thousands of dollars.                                                                                                           
Ms. Hebdon answered in the affirmative.                                                                                         
Representative  explained that  the fee  was not  a tax.  He                                                                    
said registering  to participate  in the process  would cost                                                                    
the same for  small or large entities. He said  that the fee                                                                    
was  nominal  at $100  and  would  not  apply to  those  who                                                                    
qualifies for an exemption.                                                                                                     
Representative Wilson  thought that  the tier  for lobbyists                                                                    
was  questionable. She  asked whether  it would  take longer                                                                    
for  APOC  to track  a  donation  of $100,000,  rather  than                                                                    
1:57:25 PM                                                                                                                    
Ms.  Hebdon answered  that the  amount  did not  necessarily                                                                    
change the number  of reports submitted, but  it changed the                                                                    
amount of audit hours tracking the transactional history.                                                                       
Representative  Wilson   asked  why  the  amount   had  been                                                                    
selected for the lobbyist tiers.                                                                                                
Representative Wilson answered that  the lobbying side began                                                                    
at $250 per  client. He believed that the  $100 was nominal,                                                                    
but $250 was not for  an organization raising only $1000 was                                                                    
not. The ranges  of client volume reviewed by  APOC fit more                                                                    
effectively to  have a tiered  structure for  lobbyists that                                                                    
allowed a nominal fee to  be identified for clients spending                                                                    
less money to lobby the legislature.                                                                                            
1:59:07 PM                                                                                                                    
Co-Chair  Seaton   asked  whether   independent  expenditure                                                                    
groups  were not  covered in  the bill  because of  Citizens                                                                    
Ms. Hebdon  believed they  would be  covered under  the term                                                                    
Co-Chair Seaton  asked whether  the term  "non-group entity"                                                                    
did not apply because every  non-group entity would be under                                                                    
the definition of a "group." definition of a group.                                                                             
Ms. Hebdon  answered that, technically, it  would be defined                                                                    
as a person, which included a group.                                                                                            
Co-Chair  Seaton expressed  curiosity about  fees not  being                                                                    
collected because a credit or debit card could not be used.                                                                     
Ms.  Hebdon   answered  that  the  issue   had  been  fixed;                                                                    
lobbyists could  now use a  credit card. The issue  had been                                                                    
that  the   agency  had  lacked  a   programmer  to  process                                                                    
electronic payments.                                                                                                            
Co-Chair Seaton asked for  verification that that electronic                                                                    
payment process included candidate payments.                                                                                    
Ms.  Hebdon answered  that currently  the  only people  that                                                                    
paid fees to APOC were lobbyists.                                                                                               
Co-Chair Seaton  understood that if the  bill passed, anyone                                                                    
paying fees to APOC could do so with a credit card.                                                                             
2:03:13 PM                                                                                                                    
Ms. Hebdon answered in the affirmative.                                                                                         
Representative  Kawasaki   asked  how  the  fees   would  be                                                                    
assessed on  individuals that were paid  monthly, salary and                                                                    
Ms. Hebdon deferred to the  sponsor. Currently everyone paid                                                                    
the same  fee regardless  of how  they were  compensated. He                                                                    
said  that  APOC  would entertain  regualtion  in  order  to                                                                    
clarify any nuances.                                                                                                            
Representative   Pruitt   asked   for  the   definition   of                                                                    
"representational lobbyist."                                                                                                    
2:06:27 PM                                                                                                                    
Ms.  Hebdon replied  that  representational lobbyists  filed                                                                    
registration  but did  not submit  reports  and received  no                                                                    
compensation  or fees  other than  reimbursement for  travel                                                                    
and personal living expenses.                                                                                                   
Vice-Chair  Gara  asked whether  a  lobbyist  on a  contract                                                                    
could avoid the fee.                                                                                                            
Ms. Hebdon answered that they  would pay a fee regardless of                                                                    
Representative Kito  understood there  was a  conceptual and                                                                    
other amendment. He did not object to either.                                                                                   
2:08:53 PM                                                                                                                    
Representative Kawasaki MOVED to ADOPT Amendment 1:                                                                             
     Page 3, lines 2-5:                                                                                                         
          Delete all material and insert:                                                                                       
               "(1) $150 for a contract with a value of                                                                     
          less than $10,000;                                                                                                
               (2) $350 for a contract with a value of at                                                                   
          least $10,000 but less than $25,000;                                                                              
               (3) $650 for a contract with a value of at                                                                   
          least $25,000 but less than $45,000; and                                                                          
               (4) $850 for a contract with a value of                                                                      
          $45,000 or more."                                                                                                 
Representative Wilson OBJECTED for discussion.                                                                                  
Representative Kawasaki  explained that the  amendment would                                                                    
keep the original  concept of a progressive  system being in                                                                    
place for contracts.                                                                                                            
Representative Wilson  wondered how  the sponsor  felt about                                                                    
the figures in the amendment.                                                                                                   
Representative Kito  replied that he  had not worked  on the                                                                    
numbers in the  amendment, but he did not  disagree with the                                                                    
concept.  He agreed  that there  were lobbying  clients that                                                                    
did not  spend as much  in Juneau  and believed that  it was                                                                    
appropriate to be  sure that they were  not making excessive                                                                    
payments to come to Juneau.                                                                                                     
Representative Wilson WITHDREW her OBJECTION.                                                                                   
There being NO OBJECTION, Amendment 1 was ADOPTED.                                                                              
Co-Chair  Foster MOVED  to ADOPT  Conceptual Amendment  2 to                                                                    
alter  the bill's  effective date  from January  1, 2018  to                                                                    
January 1, 2019.                                                                                                                
There being NO OBJECTION, it was so ordered.                                                                                    
2:13:06 PM                                                                                                                    
Representative  Pruitt offered  Conceptual  Amendment 3.  He                                                                    
explained the requirement that APOC  have an office in every                                                                    
senate  district was  not currently  enforced  and was  also                                                                    
unnecessary. He moved that  the statutory language requiring                                                                    
an  APOC office  in every  senate district  be removed  from                                                                    
Co-Chair Seaton OBJECTED for discussion.                                                                                        
2:14:17 PM                                                                                                                    
AT EASE                                                                                                                         
2:14:51 PM                                                                                                                    
Representative Pruitt WITHDREW the conceptual amendment.                                                                        
Vice-Chair   Gara  reviewed   the  fiscal   note  from   the                                                                    
Department of  Administration, OMB Component Number  70. The                                                                    
note  reflected  operating  expenditures of  $226.6  through                                                                    
Representative Wilson pointed  to Page 2 of  the fiscal note                                                                    
related to  the vacancy  rate. She understood  that although                                                                    
the agency did  not have the authority to use  the funds for                                                                    
personal  services, the  fiscal note  implied that  maybe it                                                                    
could;  she   expressed  confusion  about  the   vacancy  as                                                                    
addressed in the fiscal note.                                                                                                   
2:17:18 PM                                                                                                                    
Ms.  Hebdon relayed  that  the agency  would  be looking  at                                                                    
adding at least one more position.                                                                                              
Representative Wilson  wondered how a change  in the vacancy                                                                    
rate would affect the legislation.                                                                                              
Representative  Kito   answered  that  the   department  was                                                                    
authorized a certain  number of positions not  funded to the                                                                    
full level  of positions. He  said that if the  vacancy rate                                                                    
were reduced it  would create an opportunity for  one of the                                                                    
positions  to be  filled utilizing  the  receipts that  were                                                                    
Representative Wilson  felt that vacancy rates  were usually                                                                    
addressed  in appropriation  bills. She  expressed confusion                                                                    
about the 2 positions reflected in the note.                                                                                    
2:19:16 PM                                                                                                                    
Representative Kito  answered that adding 2  positions would                                                                    
increase the  PCN count, but  they would still not  have the                                                                    
funding to fill  the position. If the  filled positions were                                                                    
existing PCNs,  the vacancy rate  would remain the  same. He                                                                    
related  that the  challenge was  that a  certain number  of                                                                    
PCNs had been  authorized but there was not  funding to fund                                                                    
the PCNs.                                                                                                                       
Representative Wilson  wanted assurances  that the  bill was                                                                    
not acting as an appropriation bill.                                                                                            
2:20:42 PM                                                                                                                    
Co-Chair  Seaton explained  that  if the  bill passed  there                                                                    
would be $220,500 appropriated  for personal services within                                                                    
APOC.  He asserted  that  the bill  did  not circumvent  the                                                                    
appropriation process.                                                                                                          
Representative Wilson understood.                                                                                               
2:22:45 PM                                                                                                                    
ALEXEI  PAINTER,  ANALYST,   LEGISLATIVE  FINANCE  DIVISION,                                                                    
shared  that   the  fiscal  note   in  itself  was   not  an                                                                    
appropriation, but typically  fiscal notes were incorporated                                                                    
into the  operating budget  during conference  committee. He                                                                    
stated that  the additional funding  included in  the fiscal                                                                    
note would be added into the budget were the bill to pass.                                                                      
Representative  Wilson  understood. She  maintained  concern                                                                    
that the  vacancy rate  was being  discussed under  the bill                                                                    
rather than in the operating budget process.                                                                                    
Mr. Painter  answered that the  budgeted vacancy  rate would                                                                    
not  necessarily   change.  However,  currently   there  was                                                                    
funding for  5 of the 7  positions. The bill would  give the                                                                    
funding for the remaining 2 positions.                                                                                          
2:24:55 PM                                                                                                                    
Vice-Chair Gara understood that  there were vacancy factors,                                                                    
and then  there were  vacancies of  positions that  could be                                                                    
funded.  He  did not  recognize  the  discussion of  vacancy                                                                    
factor  in the  fiscal note  that Representative  Wilson had                                                                    
Co-Chair  Seaton  MOVED  to  REPORT   CSHB  91(FIN)  out  of                                                                    
committee   with   individual    recommendations   and   the                                                                    
accompanying fiscal  note. There being NO  OBJECTION, it was                                                                    
so ordered.                                                                                                                     
Representative Wilson  OBJECTED. She expressed  concern with                                                                    
the tier levels for lobbyists. She WITHDREW her OBJECTION.                                                                      
CSHB 91(FIN) was REPORTED out of committee with a "do pass"                                                                     
recommendation and with                                                                                                         
2:27:30 PM                                                                                                                    
AT EASE                                                                                                                         
2:31:28 PM                                                                                                                    
HOUSE BILL NO. 79                                                                                                             
     "An  Act relating  to workers'  compensation; repealing                                                                    
     the  second injury  fund upon  satisfaction of  claims;                                                                    
     relating to  service fees and  civil penalties  for the                                                                    
     workers' safety programs  and the workers' compensation                                                                    
     program;  relating   to  the  liability   of  specified                                                                    
     officers  and members  of  specified business  entities                                                                    
     for  payment  of  workers'  compensation  benefits  and                                                                    
     civil  penalties;  relating   to  civil  penalties  for                                                                    
     underinsuring or failing to  insure or provide security                                                                    
     for  workers'   compensation  liability;   relating  to                                                                    
     preauthorization   and  timely   payment  for   medical                                                                    
     treatment and  services provided to  injured employees;                                                                    
     relating  to incorporation  of  reference materials  in                                                                    
     workers'   compensation    regulations;   relating   to                                                                    
     proceedings  before  the Workers'  Compensation  Board;                                                                    
     providing   for  methods   of   payment  for   workers'                                                                    
     compensation   benefits;  relating   to  the   workers'                                                                    
     compensation benefits guaranty  fund authority to claim                                                                    
     a   lien;   excluding  independent   contractors   from                                                                    
     workers'   compensation   coverage;  establishing   the                                                                    
     circumstances    under   which    certain   nonemployee                                                                    
     executive  corporate officers  and  members of  limited                                                                    
     liability  companies may  obtain workers'  compensation                                                                    
     coverage; relating  to the duties of  injured employees                                                                    
     to    report    income    or    work;    relating    to                                                                    
     misclassification of  employees and  deceptive leasing;                                                                    
     defining   'employee';   relating   to   the   Workers'                                                                    
     Compensation  Board's approval  of attorney  fees in  a                                                                    
     settlement  agreement; and  providing for  an effective                                                                    
2:31:40 PM                                                                                                                    
Co-Chair Foster invited testifiers to the table.                                                                                
GREG CASHEN,  DEPUTY COMMISSIONER,  DEPARTMENT OF  LABOR AND                                                                    
WORKFORCE    DEVELOPMENT,    introduced    the    PowerPoint                                                                    
presentation, "Workers' Compensation:  HB 79" dated February                                                                    
5, 2018 (copy on file). He spoke to Slide 3:                                                                                    
     HB 79: Workers' Compensation Efficiencies Bill                                                                           
     ? Speed up dispute resolution                                                                                              
     ? Improve the delivery of medical care to injured                                                                          
     ?   Strengthen    provisions   to    prevent   workers'                                                                    
     compensation fraud by employers and employees                                                                              
     ? Reduce administrative costs                                                                                              
     ? Ensure adequate funding for the administration of                                                                        
     the workers' compensation and workers' safety programs                                                                     
Mr.  Cashen shared  that  the  legislature had  consistently                                                                    
endeavored  to create  a workers'  compensation system  that                                                                    
delivered   benefits  quickly,   efficiently,  fairly,   and                                                                    
predictably  to  injured workers  at  a  reasonable cost  to                                                                    
employers, as mandated  by statute. He said  that the system                                                                    
had not  been significantly reformed  in over 10  years; the                                                                    
improvements  in the  bill  addressed  rising costs,  recent                                                                    
legal  development,  and  new   approached  to  improve  the                                                                    
systems  efficiency  and fairness.  He  said  that the  bill                                                                    
focused  mainly on  efficiencies  and  modernization of  the                                                                    
currently  system,  while  recognizing that  benefit  issues                                                                    
like  reemployment also  needed attention.  He related  that                                                                    
reemployment  benefits  were  being  addressed  in  separate                                                                    
legislation. He  described the  various ways  the department                                                                    
had worked with stakeholders to craft a comprehensive bill.                                                                     
2:34:28 PM                                                                                                                    
MARIE MARX,  DIRECTOR, WORKERS' COMPENSATION,  DEPARTMENT OF                                                                    
LABOR  AND WORKFORCE  DEVELOPMENT,  turned to  Slide 2.  She                                                                    
highlighted the pillars of  the Alaska Workers' Compensation                                                                    
System as listed on the slide:                                                                                                  
     • Quick                                                                                                                    
     • Efficient                                                                                                                
     • Fair                                                                                                                     
     • Predictable                                                                                                              
     • Reasonable Cost                                                                                                          
Ms. Marx  asserted that balancing  these pillars  guided the                                                                    
divisions  administration.  She   explained  that  that  the                                                                    
division   ensured  compliance   with  the   state  workers'                                                                    
compensation act, conducted  workers' compensation hearings,                                                                    
operated  an  appeals  program, processed  Fishermen's  Fund                                                                    
claims, and administered  vocational rehabilitation benefits                                                                    
and training program for injured workers.                                                                                       
2:35:37 PM                                                                                                                    
Ms. Marx  explained that HB  79 addressed all  the statutory                                                                    
pillars,  focusing especially  on  fairness, quickness,  and                                                                    
efficiency in the workers' compensation process.                                                                                
2:36:24 PM                                                                                                                    
Ms.  Marx addressed  Slide 4  [Secretary Note:  The numbered                                                                    
items under "Current Law" correlate  with the numbered items                                                                    
under "HB 79" for the duration of this transcription]:                                                                          
     Speeds Up Dispute Resolution:                                                                                            
          Secs. 8-10, 19-21, 39                                                                                               
     Current law                                                                                                            
        1. A party requests hearing on claim                                                                                    
        2. Non-attorneys may represent parties                                                                                  
        3. Board must approve attorney fees in settlement                                                                       
        4. Division petitions Board to assess a civil                                                                           
          penalty against uninsured employer                                                                                    
     HB 79                                                                                                                  
        1. Board will schedule a hearing shortly after claim                                                                    
          is filed (Secs. 19, 21)                                                                                               
        2. Any person authorized by regulation of the Board                                                                     
          (Sec. 20)                                                                                                             
        3. Board does not need to approve if fees are sole                                                                      
         issue that needs Board approval (Sec. 39)                                                                              
        4. Division assesses civil penalty against uninsured                                                                    
          or underinsured employer; party may appeal                                                                            
          assessment to Board (Secs. 8-10)                                                                                      
Ms.  Marx explained  that the  board  conducted hearings  as                                                                    
part of a panel but separately had regulatory authority.                                                                        
2:37:45 PM                                                                                                                    
Ms. Marx spoke to Slide 5:                                                                                                      
     Improve the Delivery of Medical Care:                                                                                    
          Secs. 14, 23, 25-26                                                                                                 
     Current law                                                                                                            
        1. No language addressing if and when a provider's                                                                      
          written request for medical care must be                                                                              
        2. No penalty for untimely preauthorization or                                                                          
        3. Medical bills paid within 30 days                                                                                    
     HB 79                                                                                                                  
        1. Requires an employer to preauthorize or deny                                                                         
          medical treatment within 60 days of a medical                                                                         
          provider's written request (Sec. 14)                                                                                  
        2. Penalty for untimely preauthorization or denial                                                                      
          (Secs. 23, 25-26)                                                                                                     
        3. NO CHANGE                                                                                                            
2:38:24 PM                                                                                                                    
Ms. Marx moved to Slide 6;                                                                                                      
     Why the Division is Tackling Misclassification                                                                           
     ? Worker safety                                                                                                            
     ? Risk of uninsured losses                                                                                                 
     ? Law-abiding employers bear greater financial burden                                                                      
Ms. Marx  stated that  a great disservice  was done  to both                                                                    
workers  and  law-abiding  businesses  when  the  issue  was                                                                    
ignored.  She said  that  when  workers were  misclassified,                                                                    
workers died or were  severely injured, and uninsured losses                                                                    
could put  companies out of  business. She relayed  that the                                                                    
bill defined "independent contractor'  and did not keep true                                                                    
independent contractors  from existing and  flourishing. The                                                                    
bill did  not change the  definition but clarified  what was                                                                    
already  in   place,  which   would  help   workers  clearly                                                                    
understand what it meant to be an independent contractor.                                                                       
2:39:31 PM                                                                                                                    
Ms. Marx advanced to Slide 7:                                                                                                   
     Strengthen Fraud Provisions:                                                                                             
          Secs. 7, 9, 11, 25-26, 29, 32-35, 37                                                                                
   Current Law                                                                                                              
     1. No definition of misclassification                                                                                      
     2. No affirmative  duty  to  report  work  or wage-loss                                                                    
     3. No owner  liability for  benefits for  some business                                                                    
        entities and no civil penalty liability                                                                                 
     4. No  definition   of   independent   contractor   and                                                                    
      multi-factor balancing test for employee status                                                                           
     5. Injured  worker  may  file  lien  for  benefits  but                                                                    
        Benefits Guaranty Fund may not                                                                                          
   HB 79                                                                                                                    
    1. Defines misclassification and when it amounts to                                                                         
     2. fraud (Sec. 33)                                                                                                         
     3. Affirmative duty to report (Secs. 33)                                                                                   
     4. More business  entity owner  liability for  benefits                                                                    
        and civil penalties (Secs. 7, 34-35)                                                                                    
     5. Defines   independent   contractor   and   clarifies                                                                    
      statutory definition of employee (Sec. 29, 37)                                                                            
     6. Benefits   Guaranty   Fund   may   file   lien   for                                                                    
      compensation and civil penalties (Secs. 25-26)                                                                            
Representative Wilson asked whether  the same definition for                                                                    
"independent contractor" was used as found in statute.                                                                          
Ms. Marx  answered that there  was currently  no definition,                                                                    
which had been  a problem. The bill would  add a definition,                                                                    
which  had  been  reached through  a  collaborative  process                                                                    
involving many stakeholders.                                                                                                    
Representative   Wilson  asked   for  verification   that  a                                                                    
definition for "independent  contractor" was located nowhere                                                                    
in statute.                                                                                                                     
Ms.  Marx   could  not  speak  to   other  departments.  She                                                                    
clarified that under the  Alaska Workers' Compensation there                                                                    
was  no definition  of  "independent  contractor." She  said                                                                    
that   the  goal   of   defining   something  for   workers'                                                                    
compensation was  different than defining something  for the                                                                    
Internal Revenue Service (IRS).                                                                                                 
Representative  Wilson   thought  there  had   been  several                                                                    
definitions  of  "independent  contractor" in  statute.  She                                                                    
wanted to be as consistent as possible between departments.                                                                     
2:42:46 PM                                                                                                                    
Ms.  Marx  answered  that  the   bill  was  clear  that  the                                                                    
definition only applied to  the Alaska Workers' Compensation                                                                    
Representative  Pruitt wanted  to  know  why the  definition                                                                    
differed between the IRS and the Worker's Compensation Act.                                                                     
Ms. Marx  answered that the goal  of the act was  to protect                                                                    
injured workers  and employers  from huge  uninsured losses,                                                                    
which differed greatly  from the goals of the  IRS. She said                                                                    
that every state  in the nation worked this  way. She stated                                                                    
that there was simply not  a "one size fits all" definitions                                                                    
because of the narrow application of the term.                                                                                  
Representative  Pruitt   understood  that  there   could  be                                                                    
varying  definitions of  "independent  contractor" based  on                                                                    
who needed to pay taxes in  a certain way, and still another                                                                    
definition based  on how  they should  be covered  under the                                                                    
Workers' Compensation  Act. He  felt that  there could  be a                                                                    
uniform definition across state systems.                                                                                        
Ms. Marx  used the definition  of "resident" as  a parallel.                                                                    
There  were many  different definitions  of "resident"  that                                                                    
were used under different  circumstances. She submitted that                                                                    
the  definition  of  "independent contractor"  for  workers'                                                                    
compensation  purposes should  be  very narrow,  considering                                                                    
that the issue was  protecting injured workers and employers                                                                    
from  huge  uninsured losses  that  would  put them  out  of                                                                    
2:47:22 PM                                                                                                                    
Ms. Marx addressed Slide 8:                                                                                                     
     Strengthen Fraud Provisions CONT.:                                                                                       
          Secs. 7, 9, 11, 25-26, 28, 31-35, 37                                                                                
     Current Law                                                                                                            
        1. No penalty assessed for an employer who has                                                                          
          engaged in fraudulent misclassification                                                                               
        2. Maximum penalty of $1,000 for each uninsured                                                                         
          employee workday                                                                                                      
        3. Board suspends penalties in full or in part and                                                                      
          no guidelines for suspension                                                                                          
        4. No interest paid on payment plans                                                                                    
     HB 79                                                                                                                  
      1. Division may assess a penalty (Secs. 9, 32)                                                                            
        2. Maximum civil penalty of three times the premium                                                                     
          an employer should have paid (Sec. 9)                                                                                 
        3. Penalties may not be suspended in full or in part                                                                    
          (Sec. 11)                                                                                                             
        4. Interest on payment plans (Sec. 11)                                                                                  
2:50:11 PM                                                                                                                    
Co-Chair  Seaton asked  whether  the penalties  on Slide  8,                                                                    
pertained solely to civil penalties.                                                                                            
Ms. Marx  answered in the  affirmative. She  elaborated that                                                                    
she  was talking  about an  employee's  failure to  maintain                                                                    
workers'  compensation insurance  as  required  by law.  She                                                                    
furthered that those penalties went  into the injured worker                                                                    
fund.  The fund  needed the  ability to  file liens  because                                                                    
often by  the time  it came to  collect penalties  that were                                                                    
due the assets were depleted.                                                                                                   
Co-Chair Seaton understood that if  an employee did not have                                                                    
workers'  compensation insurance  then administrative  costs                                                                    
would need to be recovered.                                                                                                     
Ms. Marx answered in the  affirmative. Whenever there was an                                                                    
uninsured  injury  the  employer  was required  to  pay  the                                                                    
benefits whether  there was insurance  or not.  If employers                                                                    
did not pay,  those amounts were paid by  the injured worker                                                                    
fund, which in  turn sought reimbursement of  the costs from                                                                    
the employer.                                                                                                                   
Ms. Marx turned to Slide 9:                                                                                                     
     Reduce Administrative Costs:                                                                                             
          Secs. 2-6, 13, 15, 19, 21, 24, 27, 30-31, 38, 40                                                                    
     Current Law                                                                                                            
        1. An employer pays benefits by check                                                                                   
        2. Division may not require electronic filing                                                                           
        3. Division approval needed for corporate executive                                                                     
          officer workers' compensation coverage opt out                                                                        
     HB 79                                                                                                                  
        1. Does not prescribe a  specific method  of payment                                                                    
          (Sec. 38)                                                                                                             
        2. Division may prescribe filing  format (Secs. 3-6,                                                                    
          19, 21, 24)                                                                                                           
        3. Division approval not  required; not  an employee                                                                    
          if at least 10% ownership interest (Sec. 30)                                                                          
2:54:57 PM                                                                                                                    
Ms. Marx moved to Slide 10:                                                                                                     
     Reduce Administrative Costs CONT.:                                                                                       
          Secs. 2-6, 13, 15, 19, 21, 24, 27, 30-31, 38, 40                                                                    
     Current Law                                                                                                            
        1. Some medical publications not listed                                                                                 
        2. No deadline for  reporting  initial coverage;  10                                                                    
          day deadline for termination of coverage and no                                                                       
          penalty if late                                                                                                       
        3. Division   administers   contribution    to   and                                                                    
          reimbursement from Second Injury Fund                                                                                 
     HB 79                                                                                                                  
        1. Adds publications to list (Sec. 15)                                                                                  
        2. 30 day deadline  to report  initial coverage  and                                                                    
          termination of coverage, and penalty if late                                                                          
          (Sec. 13)                                                                                                             
        3. Phases out Second Injury Fund  (Secs. 2,  27, 31,                                                                    
          38, 40)                                                                                                               
Ms. Marx turned to Slide 11:                                                                                                    
     Ensure Adequate Funding:                                                                                                 
          Sec. 1                                                                                                              
     Current Law                                                                                                            
        1. Workers' compensation insurers pay a fee  of 2.7%                                                                    
          of net workers' compensation premium written                                                                          
        2. 1.82% to WSCAA and  .88% to  Alaska Comprehensive                                                                    
          Health Insurance Fund (ACHI)                                                                                          
     HB 79                                                                                                                  
        1. NO CHANGE                                                                                                            
        2. 2.5% to WSCAA and .2% to ACHI                                                                                        
2:57:12 PM                                                                                                                    
Co-Chair Foster hoped that  electronic filing issues related                                                                    
to limited internet in rural Alaska had been considered.                                                                        
Ms.  Marx answered  that  reports of  injury  were filed  by                                                                    
either  insurance companies,  r third  party administrators,                                                                    
or self-insured  employers. She shared that  injured workers                                                                    
never filed  directly with the division.  She furthered that                                                                    
if  an injured  worker was  not  given a  response form  the                                                                    
employer, a  paper form was  available from the  division in                                                                    
order  to file  directly. She  related that  the bill  would                                                                    
allow the  division to clarify  for insurance  companies and                                                                    
self-employed insurers to standardize the business process.                                                                     
Representative Wilson  pointed to Section  1, page 9  of the                                                                    
bill.  She  asked  whether there  were  instances  there  an                                                                    
attorney for an employee could be paid for by the state.                                                                        
Ms. Marx  answered that there  was a statutory  provision in                                                                    
the Workers'  Compensation Act that  allowed for  a guardian                                                                    
to be  appointed for the  purpose of resolving  the workers'                                                                    
compensation claim.                                                                                                             
Representative Wilson thought that  it could be important to                                                                    
allow for non-attorneys to represent  an injured worker. She                                                                    
thought that people  who could not afford  an attorney could                                                                    
be at a disadvantage.                                                                                                           
3:00:24 PM                                                                                                                    
Ms.  Marx  replied that  the  balance  was between  allowing                                                                    
those who  had filed  claims to work  their way  through the                                                                    
system and working to keep  system operations efficient. She                                                                    
added that most tribunals  had process guidelines related to                                                                    
who  could efficiently  represent parties  before them.  She                                                                    
suggested  that there  could be  an amendment  to provide  a                                                                    
list  of  allowable representation  included  non-attorneys.                                                                    
She  said  that in  her  experience  non-attorneys made  the                                                                    
process less efficient.                                                                                                         
Representative  Wilson  thought   that  the  injured  worker                                                                    
should be prioritized over efficiency.                                                                                          
Ms.  Marx responded  that  there were  systems  in place  to                                                                    
assist  injured  workers. She  said  that  the division  had                                                                    
staff whose  job was to provide  assistance to unrepresented                                                                    
parties. She related that the  division had a duty under the                                                                    
law  to   inform  injured  workers  about   their  right  to                                                                    
benefits,  and how  to pursue  their  right to  compensation                                                                    
under the law.  She reiterated her suggesting  of crafting a                                                                    
list of allowable representatives.                                                                                              
3:04:16 PM                                                                                                                    
Co-Chair Foster noted Paloma  Harbour, Director, Division of                                                                    
Administrative Services,  Department of Labor  and Workforce                                                                    
Development was available for questions as well.                                                                                
Representative Kawasaki  referenced Slide 11. He  noted that                                                                    
the handouts were different than  the presentation. Ms. Marx                                                                    
agreed and noted she had made a correction on the record.                                                                       
Representative   Guttenberg  asked   whether  it   had  been                                                                    
disruptive  for  claimants  to  be  represented  by  a  non-                                                                    
Ms. Marx asked for clarification.                                                                                               
Representative  Guttenberg   wondered  whether  non-attorney                                                                    
representation had been productive for claimants.                                                                               
3:06:55 PM                                                                                                                    
Ms.  Marx  replied  that, in  her  experience,  non-attorney                                                                    
representatives did not  understand procedures and available                                                                    
benefits,  which  made  it  difficult   to  bring  cases  to                                                                    
resolution  in a  timely fashion,  if at  all. She  asserted                                                                    
that the bill would provide for a more efficient process.                                                                       
3:08:37 PM                                                                                                                    
Representative  Pruitt   referenced  letters   from  several                                                                    
parties who  initially had concern but  were now supportive.                                                                    
He wondered if the letters were still valid.                                                                                    
Ms. Marx  understood that the stakeholder  groups that wrote                                                                    
the letters maintained their support of the legislation.                                                                        
3:10:00 PM                                                                                                                    
Co-Chair Foster OPENED public testimony.                                                                                        
CHARLES MCKEE, SELF,  ANCHORAGE (via teleconference), shared                                                                    
that he was currently navigating  the system. He relayed his                                                                    
case number. He offered a series of personal comments on                                                                        
the issue of workers' compensation.                                                                                             
Co-Chair Foster CLOSED public testimony. He asked members                                                                       
to submit any amendments to his office by Monday, January                                                                       
12, 2018.                                                                                                                       
HB 79 was HEARD and HELD in committee for further                                                                               
3:16:15 PM                                                                                                                    
AT EASE                                                                                                                         
3:17:05 PM                                                                                                                    
Co-Chair Foster relayed that amendments on HB 79 were due                                                                       
on Tuesday, February 6 at 5pm and the bill would be heard                                                                       
again on Thursday.                                                                                                              
3:17:55 PM                                                                                                                    
The meeting was adjourned at 3:17 p.m.                                                                                          

Document Name Date/Time Subjects
HB 91 Amendment #1.pdf HFIN 2/5/2018 1:30:00 PM
HB 91
HB 79 DOL 02.05.18.pdf HFIN 2/5/2018 1:30:00 PM
HB 79
HB 79 Legal Opinion.pdf HFIN 2/5/2018 1:30:00 PM
HB 79