Legislature(1999 - 2000)
03/15/1999 01:32 PM House JUD
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE JUDICIARY STANDING COMMITTEE
March 15, 1999
1:32 p.m.
MEMBERS PRESENT
Representative Pete Kott, Chairman
Representative Joe Green
Representative Norman Rokeberg
Representative Jeannette James
Representative Lisa Murkowski
Representative Eric Croft
Representative Beth Kerttula
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
OVERVIEW: CARRS/SAFEWAY MERGER
- HEARD AND HELD; EXECUTIVE SESSION
* HOUSE BILL NO. 102
"An Act imposing certain requirements relating to cigarette sales
in this state by tobacco product manufacturers, including
requirements for escrow, payment, and reporting of money from
cigarette sales in this state; providing penalties for
noncompliance with those requirements; and providing for an
effective date."
- MOVED HB 102 OUT OF COMMITTEE
HOUSE BILL NO. 57
"An Act relating to immunity for certain claims against the state,
a municipality, or agents, officers, or employees of either,
arising out of or in connection with the year 2000 date change; and
providing for an effective date."
- HEARD AND HELD
(* First public hearing)
PREVIOUS ACTION
BILL: HB 102
SHORT TITLE: CIGARETTE SALES: AGREEMENT/ESCROW
SPONSOR(S): RULES BY REQUEST OF THE GOVERNOR
Jrn-Date Jrn-Page Action
2/19/99 258 (H) READ THE FIRST TIME - REFERRAL(S)
2/19/99 258 (H) JUDICIARY, FINANCE
2/19/99 258 (H) 2 ZERO FNS (REV, LAW)
2/19/99 259 (H) GOVERNOR'S TRANSMITTAL LETTER
3/15/99 (H) JUD AT 1:00 PM CAPITOL 120
BILL: HB 57
SHORT TITLE: STATE & MUNI IMMUNITY FOR Y2K
SPONSOR(S): RULES BY REQUEST OF THE GOVERNOR
Jrn-Date Jrn-Page Action
1/22/99 64 (H) READ THE FIRST TIME - REFERRAL(S)
1/22/99 64 (H) CRA, JUDICIARY
1/22/99 64 (H) ZERO FISCAL NOTE (ADM)
1/22/99 64 (H) GOVERNOR'S TRANSMITTAL LETTER
2/04/99 (H) CRA AT 8:00 AM CAPITOL 124
2/04/99 (H) MOVED OUT OF COMMITTEE
2/04/99 (H) MINUTE(CRA)
2/05/99 142 (H) CRA RPT 5DP 1NR
2/05/99 142 (H) DP: DYSON, MORGAN, HARRIS, MURKOWSKI,
2/05/99 142 (H) HALCRO; NR: KOOKESH
2/05/99 142 (H) ZERO FISCAL NOTE (ADM) 1/22/99
2/05/99 142 (H) REFERRED TO JUDICIARY
3/15/99 (H) JUD AT 1:00 PM CAPITOL 120
WITNESS REGISTER
BRUCE M. BOTELHO, Attorney General
Department of Law
P.O. Box 110300
Juneau, Alaska 99811-0300
Telephone: (907) 465-2133
POSITION STATEMENT: Testified on HB 102.
GAIL VOIGTLANDER, Assistant Attorney General
Special Litigation Section
Civil Division
Department of Law
1031 West 4th Avenue, Suite 200
Anchorage, Alaska 99501-1994
Telephone: (907) 269-5100
POSITION STATEMENT: Testified on HB 57.
BOB POE, Commissioner-designee
Department of Administration
P.O. Box 110200
Juneau, Alaska 99811-0200
Telephone: (907) 465-2200
POSITION STATEMENT: Testified on HB 57.
BRAD THOMPSON, Director
Division of Risk Management
Department of Administration
P.O. Box 110218
Juneau, Alaska 99811-0218
Telephone: (907) 465-5723
POSITION STATEMENT: Testified on HB 57.
ACTION NARRATIVE
TAPE 99-12, SIDE A
Number 0001
CHAIRMAN PETE KOTT called the House Judiciary Standing Committee
meeting to order at 1:32 p.m. All members were present at the call
to order.
Number 0068
CHAIRMAN KOTT called for a brief at-ease at 1:33 p.m. and called
the meeting back to order at 1:38 p.m.
OVERVIEW: CARRS/SAFEWAY MERGER
Number 0120
CHAIRMAN KOTT announced the first order of business is an overview
on the Carrs/Safeway merger.
CHAIRMAN KOTT invoked Rule 22, "Open and Executive Sessions", of
the Uniform Rules due to the sensitivity of the nature of the
merger arrangement. He noted it requires a majority vote and
called for a motion.
Number 0143
REPRESENTATIVE CROFT made a motion to invoke the rule of executive
session.
Number 0160
REPRESENTATIVE ROKEBERG objected and asked Chairman Kott whether
this has been discussed with the attorney general.
CHAIRMAN KOTT replied yes. The attorney general has indicated a
cautious approach due to the nature of some of the questions that
might come up.
REPRESENTATIVE ROKEBERG withdrew his objection. The House
Judiciary Standing Committee went into executive session at 1:40
p.m. and came out of executive session at 2:42 p.m.
HB 102 - CIGARETTE SALES: AGREEMENT/ESCROW
CHAIRMAN KOTT announced the next order of business is HB 102, "An
Act imposing certain requirements relating to cigarette sales in
this state by tobacco product manufacturers, including requirements
for escrow, payment, and reporting of money from cigarette sales in
this state; providing penalties for noncompliance with those
requirements; and providing for an effective date."
CHAIRMAN KOTT called on Bruce M. Botelho from the Department of Law
to discuss the bill.
Number 0230
BRUCE M. BOTELHO, Attorney General, Department of Law, stated the
purpose of the bill is simply to accomplish one aspect of the
settlement reached last November between the attorneys general and
the tobacco industry. It calls for the enactment of a model
statute whose purpose is to deal with the non-participating
manufacturers. The purpose is to make sure that those companies do
not take advantage of the ability to undersell their products and
gain market share in any state in the union. The state is not
required, under the terms of the Master Settlement Agreement, to
pass this type of legislation nor is it a condition precept for the
state to receive monies from the settlement. However, there is a
major penalty in the sense that if there is an increase in a market
share that increase is shared disproportionately with those states
that have not enacted the model legislation. The material that has
been provided shows a hypothetical example of this kind of adverse
fiscal impact on the state. At this stage, more than 99 percent of
the total are participating. The legislation provides the option
of signing on or establishing an escrow account reflecting a
manufacturer's percentage of its share of the market and cost that
it would otherwise bear under the terms of the agreement.
Number 0448
CHAIRMAN KOTT asked Attorney General Botelho whether the bill
applies only to cigarettes or is there a broader application to
cover cigars or smokeless tobacco products.
ATTORNEY GENERAL BOTELHO replied it is targeted at all cigarettes.
There is a separate settlement regarding chewing or smokeless
tobacco.
Number 0490
REPRESENTATIVE GREEN asked Attorney General Botelho whether there
are any sales of tobacco products that are not made in the U.S.
ATTORNEY GENERAL BOTELHO replied he doesn't know.
Number 0520
REPRESENTATIVE GREEN asked Attorney General Botelho whether the
bill would have any affect on alien tobacco manufacturers.
ATTORNEY GENERAL BOTELHO replied it would require any company or
person attempting to sell in the state of Alaska to sign on to the
agreement or pay money into an escrow account. The incidence is
really the sale of tobacco in the state.
Number 0549
REPRESENTATIVE MURKOWSKI asked Attorney General Botelho whether
there have been any legal challenges to the model legislation.
ATTORNEY GENERAL BOTELHO replied, to his knowledge, there hasn't
been any challenge to the model legislation. There have been
challenges in several states to the underlying settlement itself.
Most notably are California, New York, New Jersey and Pennsylvania.
In each instance, except for New York, they have challenged the
overall efficacy of the settlement. New York's battle has been
over the allocation of monies between the local government and the
state. In addition, a separate class action has been filed in
Oklahoma for the overall settlement to be declared
unconstitutional.
Number 0632
REPRESENTATIVE MURKOWSKI asked Attorney General Botelho whether
this legislation would be thrown out, if everything is thrown out.
ATTORNEY GENERAL BOTELHO replied correct.
Number 0650
REPRESENTATIVE GREEN referred to Section 45.53.020 of the bill and
stated the schedule of increase is an unusual mill. He wondered
whether it is an estimate of a cost of living increase, for
example.
ATTORNEY GENERAL BOTELHO replied the numbers were negotiated at
great length between the industry and the leading states in the
settlement. He cannot answer why they are at the 1/10,000 point.
Number 0711
CHAIRMAN KOTT stated this doesn't prevent any new revenue to the
state. It prevents cherry picking.
ATTORNEY GENERAL BOTELHO said correct. The bill is not a revenue
source. It is simply an escrow account by which the public may
draw on monies in the event that the non-participating manufacturer
chooses to sell.
Number 0736
REPRESENTATIVE ROKEBERG asked Attorney General Botelho to comment
on the steps it would take to sell cigarettes in the state.
ATTORNEY GENERAL BOTELHO replied any company that wishes to sell in
the state is required through its wholesaler to register and pay a
tax right now. The bill would require a non-signatory manufacturer
of the settlement to establish a separate escrow account.
Number 0784
REPRESENTATIVE ROKEBERG asked Attorney General Botelho how much
would it deposit.
ATTORNEY GENERAL BOTELHO replied it would be based on estimated
sales according to a schedule.
REPRESENTATIVE ROKEBERG asked Attorney General Botelho whether
there is a stipulated schedule in the settlement.
ATTORNEY GENERAL BOTELHO replied there is a schedule in terms of a
per pack. Each manufacturer has given a different estimate of the
cost of the settlement to that manufacturer. He reiterated this
would be primarily based on a representation of estimated sales; it
would be trued for actual sales.
Number 0835
REPRESENTATIVE ROKEBERG asked Attorney General Botelho whether the
bill gives any guidance to a manufacturer.
ATTORNEY GENERAL BOTELHO replied it is triggered in Section
45.53.020(a)(2) of the bill. The bill also provides additional
authority to adopt regulations to implement the terms of the
agreement.
Number 0878
REPRESENTATIVE ROKEBERG asked Attorney General Botelho whether the
"units sold" is an individual cigarette.
ATTORNEY GENERAL BOTELHO replied yes.
REPRESENTATIVE ROKEBERG asked Attorney General Botelho whether the
formula is suppose to be close to the 45 cent tax surcharge put in
place in December of 1998.
ATTORNEY GENERAL BOTELHO replied yes, in general. The 45 cents is
an estimate that varies from company to company. Some companies
have chosen to overstate their overall fiscal impact per pack.
REPRESENTATIVE ROKEBERG called the 45 cents an imprecise variable.
ATTORNEY GENERAL BOTELHO stated correct.
Number 0925
REPRESENTATIVE CROFT asked Attorney General Botelho what other
states have adopted something like this.
ATTORNEY GENERAL BOTELHO replied he doesn't have the current list,
but will provide one as quickly as possible. All states this year
are considering it during their legislative session. He is not
aware of any state that has already enacted it.
CHAIRMAN KOTT indicated Alaska could be the first.
Number 0958
REPRESENTATIVE CROFT asked Attorney General Botelho whether there
are other bills to cover cigars and chewing tobacco.
ATTORNEY GENERAL BOTELHO replied cigars are not covered in this
bill. He reiterated there is a separate agreement with smokeless
tobacco, but there isn't separate legislation.
Number 1014
REPRESENTATIVE CROFT asked Attorney General Botelho whether the
attorneys general negotiated with the companies covered by the
settlement, not the companies that opted out.
ATTORNEY GENERAL BOTELHO replied the states negotiated with the
five largest manufacturers in the United States. The terms of the
settlement itself provides an opportunity for other companies to
opt in, and for the most part they have. He reiterated, at this
stage, those who are not included constitute less than .5 percent
of the overall market. There really are only 5 major players in
the country, 20 minor players, and a slew of mom and pops that
Alaska will probably never see.
Number 1084
REPRESENTATIVE CROFT stated his question was directed at drafting
HB 102 and negotiating the numbers to the one-ten thousandth of a
cent.
ATTORNEY GENERAL BOTELHO stated the numbers in the bill were the
result of negotiations specifically with the big five companies.
Number 1106
REPRESENTATIVE MURKOWSKI asked Attorney General Botelho, for
clarification, whether the bill would not apply to cigars.
ATTORNEY GENERAL BOTELHO replied that is his understanding.
REPRESENTATIVE MURKOWSKI referred to the "Definitions" section of
the bill and asked what a cigar is rolled in.
REPRESENTATIVE CROFT read, "(i) any roll of tobacco wrapped in
paper or in any substance not containing tobacco;", and stated
tobacco wrapped in tobacco wouldn't be covered.
REPRESENTATIVE GREEN noted a cigar is wrapped in a leaf.
Number 1158
REPRESENTATIVE ROKEBERG complimented Attorney General Botelho for
placing the financial burden of cigarette smoking on the
manufacturers and not the state of Alaska.
CHAIRMAN KOTT closed the meeting to public testimony and called for
a motion to move the bill out of committee.
Number 1199
REPRESENTATIVE JAMES made a motion to move HB 102 from the
committee with individual recommendations and the attached zero
fiscal note(s). There being no objection, HB 102 was so moved from
the House Judiciary Standing Committee.
HB 57 - STATE & MUNI IMMUNITY FOR Y2K
Number 1260
CHAIRMAN KOTT announced the next order of business is HB 57, "An
Act relating to immunity for certain claims against the state, a
municipality, or agents, officers, or employees of either, arising
out of or in connection with the year 2000 date change; and
providing for an effective date."
CHAIRMAN KOTT opened the meeting up to the teleconference network.
Number 1285
GAIL VOIGTLANDER, Assistant Attorney General, Special Litigation
Section, Civil Division, Department of Law, testified via
teleconference from Anchorage. She stated the department is
proposing an amendment to clarify the definition of "state" in the
bill. There is some concern because the organizations that fall
within the state are not automatically thought of as the "state".
The amendment flushes that out and ensures that public authorities
such as the Alaska Industrial Development and Export Authority
(AIDEA) are clearly within the ambit of the bill. The amendment
reads as follows:
Page 3, following line 19:
Insert a new paragraph to read:
"(3) "state" includes a department, institution, board,
commission, division authority, public corporation,
council, committee, or other instrumentality of the state
including the University of Alaska;"
Page 3, line 20:
Delete "(3)"
Insert "(4)"
Number 1385
REPRESENTATIVE GREEN made a motion to adopt Amendment 1. There
being no objection, it was so adopted.
Number 1478
BOB POE, Commissioner-designee, Department of Administration,
stated HB 57 intends to address a big problem of potential
litigation related to the year 2000 (Y2K). There are three
alarming statistics involved: the national cost to clean up Y2K is
expected to be about $300 billion to $400 billion, the cost of
litigation is expected to be about $1 trillion, and 300 national
law firms have already opened up Y2K practices. In addition, the
state doesn't have a cap on what it can be sued for. He further
stated that the bill intends to try to mitigate the liability
issues. There are lawsuits now in the courts where somebody has
tried to do the right thing, but were sued because they were a deep
pocket. The state is a likely candidate for those types of suits.
He deferred to Brad Thompson from the department.
Number 1585
BRAD THOMPSON, Director, Division of Risk Management, Department of
Administration, stated the division offers the state's property
casualty insurance protection. The division anticipates a
significant cost to be realized should the state not be provided
the protection afforded in HB 57 as proposed. Twenty states, at
the moment, are actively considering similar legislation to protect
both the state and local municipal governments. Five state have
already enacted a law. Thirty-two states have already limited the
type or value of claim that can be brought against them and/or the
local municipalities. The state of Alaska has no such protection.
He reiterated the bill provides for limited protection just for the
Y2K exposure. It does nothing to remove or vacate the state's
responsibility for people to provide a benefit or perform a duty to
the public.
Number 1668
REPRESENTATIVE CROFT asked whether the bill requires due diligence
from the state in protecting people from the effects of the Y2K
change.
MR. THOMPSON replied the state is performing exhaustive efforts
with the available funding, personnel and time. He doesn't believe
that there is a condition preceding the protection provided by
this.
Number 1714
MS. VOIGTLANDER stated the bill does not have due diligence as a
requirement for immunity. The state has been undertaking quite an
effort on Y2K remediations. Each agency has had to access mission
critical programs and come up with remediation and contingency
plans. The bill really accompanies the efforts that
Commissioner-designee Poe has been leading.
Number 1759
REPRESENTATIVE CROFT asked Ms. Voigtlander whether there is
anything in the bill that requires an effort to get this immunity.
In other words, if one state agency does absolutely nothing and
another state agency makes substantial efforts, are both immune?
MS. VOIGTLANDER replied yes. The bill in its present form does not
have a standard of performance attached for immunity. It does
address the efforts being made for remediation.
Number 1821
REPRESENTATIVE ROKEBERG stated that he is concerned about the
definition of "year 2000 date change" in the bill. Does it mean
January 1, 2000 or does it mean January 1, 2001? It is debatable.
He announced he has an amendment to specify the years.
Number 1860
COMMISSIONER-DESIGNEE POE stated the definition in the bill is a
similar definition that has been used in lots of other things that
describe Y2K. He understands Representative Rokeberg's point, that
being when does the actual millennium occur - 2000 or 2001. In
testing systems, there is a range of dates that fall under the Y2K
moniker, such as a date projected four months in advance.
Number 1895
REPRESENTATIVE ROKEBERG announced he has an amendment that provides
for an 18-month window at which time the millennium bug will have
come out of its cocoon.
Number 1922
REPRESENTATIVE GREEN asked whether there would be any other
immunity drawn into this alleviating the obligation of the state.
MS. VOIGTLANDER stated the bill intends to cover only acts or
omissions for damages caused directly or indirectly by the failure
of an electronic computing device. She said, "If I understand the
question which I presume is in the nature of what if there's just
some very tangential link to a year 2K issue, would this--is this
intended to immunize for that? I don't see the bill as doing that
because what it--the act or omission is immunized through this bill
for damages that are caused by a failure of an electronic computing
device. So I think that if--it would have to circle back to that
for it to fall within the gambit of (indisc.--coughing)."
Number 2038
REPRESENTATIVE MURKOWSKI referred to the definition of "physical
apparatus that is not primarily used as a computer". She noted it
includes medical equipment and asked whether the state would still
have immunity if that equipment failed to work and killed somebody,
especially if there hadn't been an upgrade and it was not Y2K
compliant.
COMMISSIONER-DESIGNEE POE stated medical devices are in mission
critical areas. They have been checked out. In addition, they
have to be covered with a contingency plan. It is covered under
the state's due diligence effort.
MR. THOMPSON stated he is not so sure that the state or its
agencies are directly involved with that type of medical care.
There may be some, but as Ms. Voigtlander said it would have to be
directly or indirectly caused by the Y2K date change. He said,
"But, I don't think there's a disincentive that members may be
concerned about of the state's efforts to be prepared and to do
what it can to prevent any fallout for Y2K. We are doing the best
we can. I don't think this bill would have any effect to that
effort."
Number 2165
REPRESENTATIVE MURKOWSKI asked whether the Administration looked at
a carve-out in the event of death caused by a medical malfunction.
COMMISSIONER-DESIGNEE POE stated he didn't look at it specifically.
MS. VOIGTLANDER stated she doesn't recall it as being an issue
probably because that is not the type of medical care the state
renders. She said, "Usually, if you're going to be rendering
medical care with that type of equipment, then people have been
moved out of the state system, so to speak, and are receiving
medical care through private medical sources. Either they've been
transferred to an emergency room or another hospital, or there are
physicians that are not state employees who are brought in to see
people and to use the particular equipment. But, I don't recall
seeing something specifically other than some--I have a somewhat
vague recollection that one of the Eastern states maybe had a bill
that had to do with medical devices. Unfortunately, I can't put my
hands right on that right away."
Number 2252
REPRESENTATIVE MURKOWSKI explained she was referring to legislation
from the state of Montana which says, "...the state's immunity does
not apply to a health care facility if death or bodily injury
results from failure or malfunction..."
Number 2277
REPRESENTATIVE KERTTULA asked whether a situation like Juneau where
the municipality owns the hospital is the concern.
COMMISSIONER-DESIGNEE POE stated that sounds right. There is also
the Alaska Psychiatric Institute (API) and the pioneers' homes. So
far, it hasn't been found that biomedical devices are causing a
problem. On the same token, Providence Alaska Medical Center in
Anchorage and Fairbanks Memorial Hospital are finding devices that
have Y2K problems. He referred to Senator Bob Bennet's Year 2000
report addressing health care issues and stated that a lot of the
issues focus on doctor's offices. But, they aren't paying that
much attention to this because they don't have that much in their
offices that really affect life and death situations on a Y2K
basis, whereas hospitals do.
Number 2344
REPRESENTATIVE CROFT asked Commissioner-designee Poe how the state
has been paying for the Y2K efforts.
COMMISSIONER-DESIGNEE POE replied the state has been paying for it
out of the Risk Management Fund. The state has used about $2.1
million to $2.2 million to date.
REPRESENTATIVE CROFT asked Commissioner-designee Poe whether using
money from the Risk Management Fund was appropriate because of the
potential liability risk.
COMMISSIONER-DESIGNEE POE replied right. The state would be
exposed to more suits without taking a due diligent effort. The
Risk Management Fund is used to settle suits and it also made sense
to use it to avoid suits.
CHAIRMAN KOTT stated it was a good business decision.
CHAIRMAN KOTT indicated that the bill would be held over for
further consideration.
ADJOURNMENT
Number 2400
CHAIRMAN KOTT adjourned the House Judiciary Standing Committee
meeting at 3:25 p.m.
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