Legislature(1995 - 1996)

03/22/1996 03:25 PM House L&C

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
          HOUSE LABOR AND COMMERCE STANDING COMMITTEE                          
                         March 22, 1996                                        
                           3:25 p.m.                                           
 MEMBERS PRESENT                                                               
 Representative Pete Kott, Chairman                                            
 Representative Norman Rokeberg, Vice Chairman                                 
 Representative Beverly Masek                                                  
 Representative Jerry Sanders                                                  
 Representative Brian Porter                                                   
 Representative Kim Elton                                                      
 Representative Gene Kubina                                                    
 MEMBERS ABSENT                                                                
 All members present                                                           
 COMMITTEE CALENDAR                                                            
 HOUSE BILL NO. 434                                                            
 "An Act relating to unclaimed property; and providing for an                  
 effective date."                                                              
      - PASSED CSHB 434(L&C) OUT OF COMMITTEE                                  
 HOUSE BILL NO. 533                                                            
 "An Act relating to the board of directors of the Alaska Aerospace            
 Development Corporation."                                                     
      - PASSED CSHB 533(L&C) OUT OF COMMITTEE                                  
 HOUSE BILL NO. 482                                                            
 "An Act relating to state procurement practices and procedures; and           
 providing for an effective date."                                             
      - PASSED CSHB 482(L&C) OUT OF COMMITTEE                                  
 CS FOR SENATE BILL NO. 197(L&C)                                               
 "An Act relating to insurance covering an insured who is a victim             
 of domestic violence and requiring certain disclosures by an                  
      - HEARD AND HELD                                                         
 *HOUSE BILL NO. 489                                                           
 "An Act regulating auctions and auctioneers; and providing for an             
 effective date."                                                              
      - BILL POSTPONED                                                         
 (* First public hearing)                                                      
 PREVIOUS ACTION                                                               
 BILL:  HB 434                                                               
 SHORT TITLE: UNCLAIMED PROPERTY                                               
 SPONSOR(S): RULES BY REQUEST OF THE GOVERNOR                                  
 JRN-DATE     JRN-PG                  ACTION                                   
 01/19/96      2486    (H)   READ THE FIRST TIME - REFERRAL(S)                 
 01/19/96      2486    (H)   STATE AFFAIRS, LABOR & COMMERCE, JUD              
 01/19/96      2486    (H)   ZERO FISCAL NOTE (REV)                            
 01/19/96      2486    (H)   GOVERNOR'S TRANSMITTAL LETTER                     
 02/27/96              (H)   STA AT  8:30 AM CAPITOL 102                       
 02/27/96              (H)   MINUTE(STA)                                       
 03/06/96      2990    (H)   STA RPT  CS(STA) 5DP                              
 03/06/96      2990    (H)   DP: JAMES, PORTER, GREEN, ROBINSON                
 03/06/96      2990    (H)   DP: WILLIS                                        
 03/06/96      2990    (H)   ZERO FISCAL NOTE (REV) 1/19/96                    
 03/22/96              (H)   L&C AT  3:00 PM CAPITOL 17                        
 BILL:  HB 533                                                               
 SPONSOR(S): COMMUNITY AND REGIONAL AFFAIRS                                    
 JRN-DATE     JRN-PG                  ACTION                                   
 02/28/96      2913    (H)   READ THE FIRST TIME - REFERRAL(S)                 
 02/28/96      2913    (H)   LABOR & COMMERCE                                  
 03/18/96              (H)   L&C AT  3:00 PM CAPITOL 17                        
 03/18/96              (H)   MINUTE(L&C)                                       
 03/20/96              (H)   L&C AT  3:00 PM CAPITOL 17                        
 03/20/96              (H)   MINUTE(L&C)                                       
 03/22/96              (H)   L&C AT  3:00 PM CAPITOL 17                        
 BILL:  HB 482                                                               
 SPONSOR(S): RULES BY REQUEST OF THE GOVERNOR                                  
 JRN-DATE     JRN-PG                  ACTION                                   
 02/09/96      2686    (H)   READ THE FIRST TIME - REFERRAL(S)                 
 02/09/96      2686    (H)   L&C, STATE AFFAIRS, FINANCE                       
 02/09/96      2687    (H)   2 FISCAL NOTES (ADM, DOT)                         
 02/09/96      2687    (H)   5 ZERO FNS (2-ADM, DCED, DCRA, CORR)              
 02/09/96      2687    (H)   5 ZERO FNS (DOE, DEC, F&G, GOV, DHSS)             
 02/09/96      2687    (H)   5 ZERO FNS (LABOR, LAW, DMVA, DNR, DPS)           
 02/09/96      2687    (H)   2 ZERO FNS (REV, UA)                              
 02/09/96      2687    (H)   GOVERNOR'S TRANSMITTAL LETTER                     
 03/18/96              (H)   L&C AT  3:00 PM CAPITOL 17                        
 03/18/96              (H)   MINUTE(L&C)                                       
 03/20/96              (H)   L&C AT  3:00 PM CAPITOL 17                        
 03/20/96              (H)   MINUTE(L&C)                                       
 03/22/96              (H)   L&C AT  3:00 PM CAPITOL 17                        
 BILL:  SB 197                                                               
 SPONSOR(S): SENATOR(S) DONLEY, Ellis, Salo, Duncan, Pearce,                   
 Zharoff, Lincoln; REPRESENTATIVE(S) Davies                                    
 JRN-DATE     JRN-PG                  ACTION                                   
 01/05/96      2058    (S)   PREFILE RELEASED - 1/5/96                         
 01/08/96      2058    (S)   READ THE FIRST TIME - REFERRAL(S)                 
 01/08/96      2058    (S)   LABOR & COMMERCE                                  
 01/16/96      2144    (S)   COSPONSOR(S):  DUNCAN                             
 02/15/96              (S)   L&C AT  1:30 PM BELTZ ROOM 211                    
 02/15/96              (S)   MINUTE(L&C)                                       
 02/20/96              (S)   MINUTE(L&C)                                       
 02/23/96      2512    (S)   L&C RPT  CS  5DP          NEW TITLE               
 02/23/96      2513    (S)   ZERO FISCAL NOTE TO SB & CS (DCED)                
 02/26/96              (S)   RLS AT 12:45 PM FAHRENKMAP RM 203                 
 02/26/96              (S)   MINUTE(RLS)                                       
 02/28/96      2568    (S)   RULES TO CALENDAR & 1NR      2/28/96              
 02/28/96      2571    (S)   READ THE SECOND TIME                              
 02/28/96      2572    (S)   L&C  CS ADOPTED UNAN CONSENT                      
 02/28/96      2572    (S)   COSPONSOR(S):  PEARCE, ZHAROFF, LINCOLN           
 02/28/96      2572    (S)   ADVANCED TO THIRD READING UNAN CONSENT            
 02/28/96      2572    (S)   READ THE THIRD TIME  CSSB 197(L&C)                
 02/28/96      2572    (S)   PASSED Y18 N- E2                                  
 02/28/96      2579    (S)   TRANSMITTED TO (H)                                
 02/29/96      2955    (H)   READ THE FIRST TIME - REFERRAL(S)                 
 02/29/96      2956    (H)   LABOR & COMMERCE, FINANCE                         
 03/18/96              (H)   L&C AT  3:00 PM CAPITOL 17                        
 03/18/96      3186    (H)   CROSS SPONSOR(S): DAVIES                          
 03/20/96              (H)   L&C AT  3:00 PM CAPITOL 17                        
 03/20/96              (H)   MINUTE(L&C)                                       
 03/22/96              (H)   L&C AT  3:00 PM CAPITOL 17                        
 WITNESS REGISTER                                                              
 RACHEL MARSHALL, Administrator                                                
 Unclaimed Property Section                                                    
 Income and Excise Audit Division                                              
 Department of Revenue                                                         
 P.O. Box 110420                                                               
 Juneau, Alaska 99811-0420                                                     
 Telephone:  (907) 465-5885                                                    
 POSITION STATEMENT:  Explained HB 434.                                        
 BOB BARTHOLOMEW, Deputy Director                                              
 Income and Excise Audit Division                                              
 Department of Revenue                                                         
 P.O. Box 110420                                                               
 Juneau, Alaska 99811-0420                                                     
 Telephone:  (907) 465-2320                                                    
 POSITION STATEMENT:  Answered questions on HB 434.                            
 AMY DAUGHERTY, Legislative Assistant                                          
   to Representative Alan Austerman                                            
 Alaska State Legislature                                                      
 Capitol Building, Room 434                                                    
 Juneau, Alaska 99801                                                          
 Telephone:  (907) 465-4956                                                    
 POSITION STATEMENT:  Answered questions on HB 533.                            
 REPRESENTATIVE ALAN AUSTERMAN                                                 
 Alaska State Legislature                                                      
 Capitol Building, Room 434                                                    
 Juneau, Alaska 99801                                                          
 Telephone:  (907) 465-4956                                                    
 POSITION STATEMENT:  Sponsor of HB 533.                                       
 DUGAN PETTY, Director                                                         
 Division of General Services                                                  
 Department of Administration                                                  
 P.O. Box 110210                                                               
 Juneau, Alaska 99811-0210                                                     
 POSITION STATEMENT:  Spoke on HB 482.                                         
 JAYNE ANDREEN, Executive Director                                             
 Council on Domestic and Sexual Assault                                        
 Box 111200                                                                    
 Juneau, Alaska 99801                                                          
 Telephone:  (907) 465-4356                                                    
 POSITION STATEMENT:  Testified in support of SB 197.                          
 SENATOR DAVE DONLEY                                                           
 Alaska State Legislature                                                      
 Capitol Building, Room 11                                                     
 Juneau, Alaska 99801                                                          
 Telephone:  (907) 465-3892                                                    
 POSITION STATEMENT:  Sponsor of SB 197.                                       
 KEN SYKES, Analyst III                                                        
 Market and Conduct                                                            
 Division of Insurance                                                         
 Department of Commerce                                                        
   and Economic Development                                                    
 P.O. Box 110805                                                               
 Juneau, Alaska 99811-0805                                                     
 Telephone:  (907) 465-2564                                                    
 POSITION STATEMENT:  Answered questions in SB 197.                            
 MARGARET DOWLING, Attorney                                                    
 State Farm                                                                    
 Lessmeier and Winters                                                         
 One Sealaska Plaza, Suite 303                                                 
 Juneau, Alaska 99801-1249                                                     
 Telephone:  (907) 586-5912                                                    
 POSITION STATEMENT:  Testified against SB 197.                                
 ACTION NARRATIVE                                                              
 TAPE 96-27, SIDE A                                                            
 Number 001                                                                    
 The House Labor and Commerce Standing Committee was called to order           
 by Chairman Pete Kott at 3:25 p.m.  Members present at the call to            
 order were Representatives Sanders, Masek, Kubina, Elton, Rokeberg            
 and Kott.  Representative Porter arrived late.                                
 HB 434 - UNCLAIMED PROPERTY                                                 
 Number 011                                                                    
 CHAIRMAN PETE KOTT announced the first order of business would be             
 HB 434, "An Act relating to unclaimed property; and providing for             
 an effective date," introduced by Rules by request of the Governor.           
 RACHEL MARSHALL, Administrator, Unclaimed Property Section, Income            
 and Excise Audit Division, Department of Revenue, explained HB 434            
 has to do with some cleanup areas.  Many of recommendations in the            
 bill were from an audit done by the Office of Management and Budget           
 (OMB).  The bill is also in line with the uniform law                         
 commissioner's 1995 revision to the Uniform Unclaimed Property Act.           
 MS. MARSHALL said Section 1 cleans up language for property that is           
 dividend reinvestment plan oriented.  It specifically addresses               
 mutual funds because they are not actively monitored by an owner.             
 Mutual funds become unclaimed property usually because a mailing              
 has not been received by the owner.  By the time a second mailing             
 hasn't been received by the owner, it is flagged as unclaimed                 
 property.  Ms. Marshall noted this is in line with the Uniform Law            
 Commission's changes for 1995.                                                
 Number 284                                                                    
 MS. MARSHALL explained Section 2 was a recommendation by OMB which            
 streamlines reporting amounts.  Currently, there are amounts that             
 are $25 for certain types of property and $50 for other types of              
 property.  This would lump sum all types of property into a $100              
 aggregate.  She said it is up to the holder, which is a company, an           
 association, a bank or financial institution, etc., reporting the             
 property to either itemize those amounts or they could list them,             
 for example, as 16 unclaimed checks in the amount $14, instead of             
 listing them as 2 cents, 4 cents, etc.                                        
 MS. MARSHALL said Section 3 provides for the filing dates to be the           
 same, November 1.  Currently, life insurance companies report by              
 May 1, and remit the property November 1.  All other companies                
 report the property November 1, and remit the property May 1.  She            
 said this is very confusing for holders.  Why not clean up all your           
 records all at once - once a year and call it good.                           
 MS. MARSHALL referred to Section 4 and said it has to do with                 
 increasing property values which holders are required a due                   
 diligence requirement to contact the owner one last time prior to             
 recording it as unclaimed property and to make this dollar amount             
 consistent with the reporting amount, the aggregate amount and the            
 publication amount - all to be $100.                                          
 Number 417                                                                    
 CHAIRMAN KOTT referred to Section 4 and asked Ms. Marshall to                 
 explain how it would work.                                                    
 MS. MARSHALL explained that section is for the holders to send                
 their due diligence requirement.  Depending on the property, the              
 dormancy period which is five years on the average, for five years            
 a bank statement has been going to you once a month - mail has been           
 sent to your address and it is being returned.  This section asks             
 that property that is at a level of $100 or more, one more time you           
 must send them a notice before it is reported as unclaimed                    
 property.  For most of the other items under $100, you already have           
 significant flagging in your system that the owners have moved, but           
 because the value is $100, they would be asked to try to contact              
 the person one more time before the property is reported.                     
 Currently, if it is under $50, you don't have to send out the due             
 diligence notice.  By increasing the amount to $100 would be                  
 consistent with the increase to the reporting amount and                      
 publication amount.  She noted 120 days before the unclaimed                  
 property is reported by a holder, they would send the owner one               
 more written notice.                                                          
 CHAIRMAN KOTT asked how many previous notices Ms. Marshall would              
 have sent.                                                                    
 MS. MARSHALL said she wouldn't have sent any.  This is the                    
 responsibility of the company holding the money.  She noted it                
 varies depending on what type of property it is.  If it is wages,             
 the company may have only sent that last paycheck one time.  If it            
 is a bank, they automatically send a statement every month and have           
 for the last seven years.                                                     
 Number 599                                                                    
 MS. MARSHALL referred to Section 5 and said the way the current law           
 reads, not later than March 1 of each year, the department is                 
 required to publish the names of owners who have property in excess           
 of $50 or more.  She stated the Uniform Law Commission has made a             
 change to the uniform law and the department is trying to follow              
 suit with that.  More and more property is being reported every               
 year and her section is not given any more time to key the                    
 information into the computer system and to work with the holders             
 in returning the property prior to publication.  By having an extra           
 four months, the department would have enough time to administer it           
 and publish it when the resources are there to handle the incoming            
 phone calls.  Although it says not later than March 1, with a staff           
 of three they have to start at the beginning of February in order             
 to hit Anchorage first and Fairbanks, because you can't publish               
 names around the whole state at the same time or the phone lines              
 would be clogged.  Ms. Marshall said by moving the time to June 30,           
 it would leave the administrator or the department manageable time            
 to publish names when the office and resources can handle it.  She            
 noted the Uniform Law Commission's change was no later than                   
 November 1, so the department would still have a shorter deadline             
 than the commission's deadline.                                               
 Number 790                                                                    
 MS. MARSHALL referred to Section 6 and said it has to do with                 
 requirements to publish a owner's last known addresses.  She said             
 currently, the statute requires the owner's address be put in the             
 publication.  She explained in order to clean up areas, the owners            
 are listed under the last known city.  The reason this is important           
 is because the owners look for their name in each town they lived             
 in instead of using addresses.  She said she lists the names by               
 city because it is much easier for people to be found.                        
 CHAIRMAN KOTT asked if the publication is a handbook.                         
 MS. MARSHALL explained the names are inserted in newspapers                   
 statewide.  They are inserted in the Bush Mailer which goes to 214            
 communities, the Anchorage Daily News, the Fairbanks News Miner and           
 the Juneau Empire.  Ms. Marshall said each year they call the                 
 newspapers and ask what their highest circulation date is and the             
 publication is inserted in that date.                                         
 CHAIRMAN KOTT asked if the names are published as a community                 
 service item or if there is a cost.                                           
 MS. MARSHALL said she would be reviewing that area because the                
 names are supposed to be published for two consecutive weeks and              
 the department wants to make it one time.                                     
 CHAIRMAN KOTT asked what is done for the rural areas that are not             
 serviced by a newspaper.                                                      
 MS. MARSHALL said she takes things to library.  She also noted the            
 publications are given to the legislators and there has been a good           
 Number 995                                                                    
 REPRESENTATIVE NORMAN ROKEBERG said he identified a constituent of            
 his in the publication he received.  He stated it does work.                  
 MS. MARSHALL noted the information is all public information.  When           
 a legislator does call a constituent to inform them they have                 
 unclaimed property, they are going to want to know what kind of a             
 dollar amount it is.                                                          
 REPRESENTATIVE ROKEBERG asked if he could find out by calling the             
 Unclaimed Property Office.                                                    
 MS. MARSHALL indicated he could as it is public information.                  
 Number 1035                                                                   
 MS. MARSHALL said Section 7 is in line with making all the dollar             
 amounts consistent.  Currently, the department publishes a name for           
 property of $50.  That amount would be increased to $100.  Not only           
 the cost for publishing has become expensive, but there are some              
 easier and less costly methods for putting peoples' names out in              
 order for them to be located.  One is the Internet which doesn't              
 cost anything.  She said they could provide the items of $99 by the           
 Internet and $100 or above would still be published.                          
 CHAIRMAN KOTT questioned how many people have unclaimed property              
 below $99.                                                                    
 MS. MARSHALL said she isn't sure.  She said the number would be a             
 lot less than then amounts above $100.  Ms. Marshall said it may              
 reduce the publication by one page or maybe two.  She noted it is             
 an eight page circular.  It would probably be kept at eight pages             
 because she would also list the Internet address for the items                
 under $100 and give other ways to look for property of less than              
 Number 1173                                                                   
 MS. MARSHALL referred to Section 8 and said the people who are                
 reporting unclaimed property, the holders, sends the department               
 their report on November 1.  She said she advertises it and then by           
 May 1, if those people haven't come forward then the holder sends             
 the department another report with the changes of the people who              
 have come forward.  Ms. Marshall noted some of those people have              
 come forward and have not completed their paperwork so they are               
 still included on the list.  Some are deleted off the list.  They             
 have to add interest and deduct service charges on a second report.           
 The Uniform Law Commission and OMB have recommended that they do a            
 report/remit.  The holder would send both the names and money                 
 November 1.  When people call after seeing their name in the paper,           
 the department would have their money and owners wouldn't have to             
 go to the holders.  The way things currently are is by the time the           
 owners call the holders, the money has been sent to the department.           
 MS. MARSHALL referred to Section 9 and said this section has to do            
 with people who help locate owners.  They are called heir finders,            
 fee finders and other names.  Ms. Marshall said the department gets           
 an awful lot of complaints.  Some finders charge people 35 to 50              
 percent of their unclaimed property.  This section asks for two               
 items.  She said property that is on its way to the department                
 cannot have a charge put on it until it has been in the                       
 department's possession for 24 months, which is a nice window                 
 period for the department to be able to return the property to the            
 owner.  This time period would give the property time to work                 
 through the system.  It would have worked through due diligence               
 through the holder and through the publication period.  After that            
 24 month period if the department still hasn't been able to locate            
 the owner, someone else could assist.  Ms. Marshall explained many            
 states are going to a percentage the fee finders can collect.  She            
 said 15 states have a 10 percent limit, 5 states have a 15 percent            
 limit, 5 states have a 20 percent limit and 2 have a 5 percent                
 limit.  Ms. Marshall said the department wanted to be in line with            
 33 other states to have some kind of a cap on this fee.  The fee              
 finders aren't doing all the work, the holders and the state are              
 and for the cost of a stamp and a phone call, they're charging a              
 lot of money.                                                                 
 Number 1359                                                                   
 REPRESENTATIVE JERRY SANDERS asked Ms. Marshall if she has an idea            
 as to what percentage of the returns are instigated by a finder.              
 MS. MARSHALL said she doesn't have that information.  She noted               
 that sometimes the owner will send her copies of the agreement with           
 the fee finder, but that doesn't necessarily mean that the owner              
 actually pays them or all the property that they located was                  
 included in that fee finder agreement.  Ms. Marshall said if she              
 had to guess, she would say it may be between 5 and 10 percent.               
 She noted the larger the value of the property, the more someone is           
 REPRESENTATIVE SANDERS said, "The reason I asked, and I may be                
 completely backwards if -- and you know, I'm not going to argue               
 this point.  I just want to bring it up (indisc.).  These people              
 are performing a service because they're looking these people up -            
 people who obviously haven't seen it in the paper and you obviously           
 haven't gone to find out where they moved to.  So if these guys are           
 doing that and they do it for a high amount, I could understand               
 that.  On the low amount, you know for $200 at 10 percent I                   
 wouldn't write their name down for $20, you know and they wouldn't            
 either, and people might want their $200 back.  So I'm wondering if           
 you might want to put in a variation there.  Maybe 50 percent on              
 anything under $500 or something and 10 percent over that.  It is             
 just something I wanted to bring out.  I'm not going to push it, I            
 don't care, but everybody knows about it.  Thank you."                        
 CHAIRMAN KOTT noted he also had a concern in that area.                       
 Number 1483                                                                   
 REPRESENTATIVE KIM ELTON said anymore, this isn't a tough business.           
 You can buy CD Roms that gives every name listed in every phone               
 book in the United States.  All you have to do is a name search.              
 Number 1515                                                                   
 BOB BARTHOLOMEW, Deputy Director, Income and Excise Audit Division            
 Department of Revenue, explained that for the department, there are           
 three components to that change which is having to require that the           
 fee finder has to tell the owner the value of the property that               
 they found.  The fee finder can't contact the owner for 24 months             
 so that the state can have a chance to try and refund the property            
 for free.  The third part is the percentage cap which is the least            
 important of the three to the department.  Mr. Bartholomew noted              
 the idea of the bill is to reduce some of the paperwork and get               
 back to the function of finding owners.                                       
 CHAIRMAN KOTT said there is a lot of technology that would make it            
 fairly simple to locate people, but even with that it obviously               
 isn't working otherwise there wouldn't be eight pages of unclaimed            
 property.  There may be something more to it than just looking at             
 CD Roms.                                                                      
 Number 1593                                                                   
 MS. MARSHALL said the owners are being hit up for money before the            
 property comes to Unclaimed Property.  Sometimes she hasn't even              
 had a chance to try and find them.  Ms. Marshall said on a $5,000             
 claim, $1,400 is a lot.                                                       
 REPRESENTATIVE SANDERS said he didn't have a problem with the 24              
 month time period.  He asked Ms. Marshall if she what she thought             
 about changing the percentage rate to 25 or 50.                               
 MS. MARSHALL indicated she would love to hear any recommendations             
 the committee has.                                                            
 Number 1644                                                                   
 REPRESENTATIVE PORTER referred to money being held by the state for           
 two years and asked what the disposition of the interest is on the            
 MS. MARSHALL said property is only paid interest if it is interest            
 bearing when it comes to the state.                                           
 Number 1671                                                                   
 MR. BARTHOLOMEW explained the department is required to deposit the           
 money into the general fund, but if it was an uncashed warrant that           
 was sitting in someone's desk drawer where interest wouldn't be               
 earned, the department would then not pay interest on the money               
 when it is returned to the owner.  If a savings account was                   
 received that was an interest bearing account, then interest would            
 be paid on that account as if it were left in the bank.  Interest             
 is paid on property if it was earning interest when it was                    
 submitted to the state.  He noted the general fund would benefit              
 from the interest earned during that interim.                                 
 Number 1696                                                                   
 MS. MARSHALL explained Section 10 defines business associations to            
 include mutual funds.                                                         
 MS. MARSHALL informed the committee Section 11 includes warrants              
 under intangible property.                                                    
 MS. MARSHALL referred to Section 12 and said, "The state is                   
 required to - once - a 120 days before November 1, the holder sends           
 out a written notice and once we get it we're supposed to send out            
 a written notice.  It is a duplicate mailing notice.  In the next             
 few months after we receive the property, we're gonna advertise it            
 anyway or have it out on the Internet.  We're asking that that                
 written notice be deleted from the department's responsibilities.             
 OMB also had that in their recommendations for their audit this               
 year too."                                                                    
 MS. MARSHALL said Section 13 asks that this take effect in July.              
 Number 1750                                                                   
 CHAIRMAN KOTT questioned what section asks that the names be                  
 published one time.                                                           
 MS. MARSHALL informed him it is Section 5.                                    
 Number 1791                                                                   
 MR. BARTHOLOMEW informed the committee the department spends                  
 $22,000 to $25,000 to do one statewide publication.  Of the total             
 cost of the program, which is about $188,000, that is a lot of                
 money and to do it twice....  There would have to be an increase in           
 their budget to do it twice.  He said they haven't actually been              
 doing it twice.                                                               
 CHAIRMAN KOTT asked how successful the program is and how many                
 claims are actually returned to the rightful owner.                           
 MS. MARSHALL said there is about a 30 percent return to the owner             
 and that is high.                                                             
 MS. MARSHALL informed the committee there is a gentleman in                   
 Anchorage where the department has had about $250,000 for him.  The           
 department has a good address for him.  Ms. Marshall said she asked           
 him to sign a form that says he wants his unclaimed property and              
 she'd be happy to send it to him.  He has so much money he doesn't            
 know what to do with it and hasn't requested his money from                   
 Unclaimed Property.  She noted he is an attorney.                             
 Number 1911                                                                   
 REPRESENTATIVE GENE KUBINA asked what happens to the $250,000.                
 MS. MARSHALL said it is in the general fund.  She said when he dies           
 and his children want to come forward for it, they can have it.               
 REPRESENTATIVE KUBINA asked how long it has to be kept in the                 
 general fund.                                                                 
 MR. BARTHOLOMEW said forever.                                                 
 REPRESENTATIVE SANDERS said he thought it was for seven years.                
 MS. MARSHALL said that was the escheat law that went out in 1986.             
 This law came in September, 1986.                                             
 MR. BARTHOLOMEW explained there is a unclaimed property trust                 
 account and a balance is kept in there almost equal to what the               
 department returns annually.  The rest of it actually gets                    
 deposited into the unrestricted general fund.  If there was ever a            
 claim in excess of what is collected in a year, which is $2.5                 
 million to $3 million, the department would have to get                       
 authorization for all past deposits.  Even if the example of the              
 $250,000 came in a year, the department would have plenty of                  
 authority to return it out of those annual receipts.  There may be            
 a smaller deposit into the general fund, but it wouldn't require an           
 appropriation.  Close to $2 million a year would flow into the                
 general fund and a large run on the fund would shrink that deposit.           
 He noted he doubts there would ever be a year that would exceed the           
 Number 2001                                                                   
 CHAIRMAN KOTT closed public testimony as there were no further                
 witnesses to testify on the measure.                                          
 Number 2021                                                                   
 REPRESENTATIVE SANDERS made a motion that on page 5, line 3, after            
 the word "property" add "provided the property is over $500;".  It            
 would then read:  "(1) the fee or compensation if not more than 10            
 percent of the value of the property provided the property is over            
 REPRESENTATIVE ROKEBERG made a motion to amend the amendment to               
 say, "20 percent of the value..."                                             
 REPRESENTATIVE ELTON said he would like to make a friendly                    
 suggestion that it read, "the fee or compensation is not more than            
 20 percent provided that any property with a value over $500 the              
 fee is not more than 10 percent."                                             
 REPRESENTATIVE ROKEBERG said he would rather have the 10 percent              
 first because people will read the statute that way.  He said, "Not           
 more than 10 percent of the value of the property in the amount of            
 $500 or under 20 percent of the value of the property under $500."            
 CHAIRMAN KOTT said conceptually, we want to establish a fee of no             
 more than 10 percent of property valued at $500 or more, and less             
 than $500, the percentage will be no more than 20 percent.                    
 CHAIRMAN KOTT asked if there was an objection to the friendly                 
 amendment to the amendment to the amendment.                                  
 REPRESENTATIVE SANDERS said he would like to point out that at                
 $490, they get 20 percent which is almost $100.  At $500, they get            
 10 percent which is $50.                                                      
 Number 2185                                                                   
 CHAIRMAN KOTT said without objection, conceptual Amendment 1 is               
 Number 2189                                                                   
 REPRESENTATIVE ROKEBERG made a motion to move CSHB 434, as amended,           
 out of committee with individual recommendations and the attached             
 zero fiscal note.                                                             
 CHAIRMAN KOTT asked if there was an objection.  Hearing none, CSHB
 434(L&C), was moved out of the House Labor and Commerce Committee.            
 HB 533 - ALASKA AEROSPACE DEVELOPMENT CORP. BOARD                           
 CHAIRMAN KOTT announced the next order of business would be HB 533            
 "An Act relating to the board of directors of the Alaska Aerospace            
 Development Corporation."                                                     
 REPRESENTATIVE ROKEBERG made a motion to adopt CSHB 533(L&C), 9-              
 LS1731/F, Lauterbach, 3/20/96.                                                
 CHAIRMAN KOTT asked if there was an objection to the adoption of              
 the committee substitute.  Hearing none, it was so ordered.                   
 CHAIRMAN KOTT informed the committee about the amendments adopted             
 at the previous hearing on the measure.  Amendment 1 on page 2,               
 deleted "the executive director of the Alaska Science and                     
 Technology Foundation;".  Amendment 2 was on page 1, line 8, where            
 two state residents was added.  Amendment 3 was on page 2, line 28            
 and 29, where the board of directors of the corporation shall                 
 select the chair and vice-chair.  The last amendment was on page 2,           
 line 7, where "aerospace" was added.  He explained those amendments           
 have been incorporated into the committee substitute.                         
 Number 2356                                                                   
 REPRESENTATIVE ELTON said, "I think you held this bill because I              
 had a proposed amendment.  My proposed amendment was going to be on           
 page 2, line 13, eliminate "nonvoting."  So it would be one member            
 who has recognized...  And then on page 2, line 6, three members.             
 So you're substituting the international expert for one of the four           
 who also have aerospace or commercial space industry (indisc.).               
 Talking to the sponsor and representatives of the sponsor, their              
 preference was simply delete paragraph 6, beginning on line 13.               
 The reason I'm offering the amendment is instead of paying for nine           
 people to travel or ten people to travel back and forth to the                
 board meeting, this is nine - (indisc.) pay for nine.  The sponsor            
 indicated he had no -- he would prefer just eliminating paragraph             
 6 beginning on line 13 of page 2, rather than (indisc.)."                     
 CHAIRMAN KOTT clarified the amendment which was to delete                     
 subsection (6) on line 13, page 2, which also affects line 6, page            
 1, where ten would then become 9.                                             
 Number 2413                                                                   
 AMY DAUGHERTY, Legislative Assistant to Representative Alan                   
 Austerman, said it was her understanding that they just wanted to             
 delete lines 13 and 14 on page 2, so that there would be just nine            
 CHAIRMAN KOTT asked if the committee understood the amendment.  He            
 then asked if there was objection.                                            
 Number 2428                                                                   
 REPRESENTATIVE KUBINA asked if the word "and" needed to be deleted            
 The response was in the affirmative.                                          
 Number 2432                                                                   
 REPRESENTATIVE SANDERS objected for clarification.  He questioned             
 the purpose of the amendment.                                                 
 REPRESENTATIVE ELTON responded lower costs.  Instead of                       
 transporting ten people, you're transporting nine people to the               
 board meetings.                                                               
 CHAIRMAN KOTT noted it would be the nonvoting member.                         
 REPRESENTATIVE ROKEBERG asked if the famous person is supposed to             
 be a voting member.                                                           
 REPRESENTATIVE ELTON said, "We're going to assume if there is a               
 famous person, they're going to be one of the other nine members."            
 REPRESENTATIVE SANDERS explained his only concern is that if this             
 is going to be a viable industry in the state, we're going to have            
 to deal internationally and we're going to need all the help we can           
 get.  He said he wanted to make sure there will be some high                  
 powered people on the board.  He said he thought maybe the                    
 committee was eliminating this person and he doesn't want to do               
 REPRESENTATIVE ELTON said the effect of the amendment would be that           
 the international slot would be eliminated.  The assumption would             
 be that in subsection (5), those four people with aerospace or                
 commercial space industry expertise would already have that                   
 CHAIRMAN KOTT noted the sponsor concurs with the amendment.                   
 TAPE 96-27, SIDE B                                                            
 Number 001                                                                    
 REPRESENTATIVE ALAN AUSTERMAN said if he understands the amendment            
 right on line 6, page 2, the four members have been changed to                
 three members.                                                                
 CHAIRMAN KOTT indicated that was incorrect.  He explained the                 
 effect of the amendment is to remove the one nonvoting member who             
 has recognized prominence and influence within the international              
 space industry.  That would come out of the bill.  Subsequently,              
 that would effect, on page 1, the make up.  It would be reduced               
 from ten to nine.                                                             
 REPRESENTATIVE AUSTERMAN said he endorses the amendment.                      
 CHAIRMAN KOTT said without objection, that conceptual amendment               
 will be adopted.                                                              
 Number 066                                                                    
 REPRESENTATIVE ROKEBERG made a motion to move CSHB 533(L&C), as               
 amended, Version F, with individual recommendations and a zero                
 fiscal note.                                                                  
 CHAIRMAN KOTT asked if there was an objection.  Hearing none, CSHB
 533(L&C), as amended was moved out of the House Labor and Commerce            
 HB 482 - STATE PROCUREMENT PRACTICES & PROCEDURES                           
 Number 102                                                                    
 CHAIRMAN KOTT announced the committee would hear HB 482, "An Act              
 relating to state procurement practices and procedures; and                   
 providing for an effective date," introduced by the Governor.  He             
 informed the committee there has been two other hearings on the               
 DUGAN PETTY, Director, Division of General Services, Department of            
 Administration, came forward to address the bill.  At the last                
 meeting on the bill there were five concerns that Representative              
 Rokeberg had with various sections.  He said he got together with             
 Representative Rokeberg and in the committee member's packets there           
 are four proposed amendments.                                                 
 Number 129                                                                    
 REPRESENTATIVE ROKEBERG moved that Amendment 2 be adopted.                    
 REPRESENTATIVE ELTON objected for the purpose of an explanation.              
 REPRESENTATIVE ROKEBERG said it relates to Section 4.  This                   
 particular section in the bill had a threshold of 5,000 square feet           
 to allow leases to go into the marketplace and to qualify for the             
 small procurement procedures.  He said the change would be to go              
 from 5,000 square feet to 3,000 square feet.  There is also the               
 addition of providing public notice to be prospective (indisc.) in            
 the market area.  It is his understanding that under the small                
 procurement procedure basis they would only have to have three                
 potential offers.  His concern was that they need to at least                 
 publish that to invite anybody who would have space available an              
 opportunity to make an offer.  They could do it under the                     
 procedures of the small procurement code.  Representative Rokeberg            
 said he thinks this is a good accommodation and recommends                    
 Number 182                                                                    
 REPRESENTATIVE ELTON said the offering would not be threatened if             
 an offer was skipped.  He said he is assuming the department would            
 be able to work off of the list that they maintain in their office.           
 If they happen to miss somebody that says, "Hey, I've got 3,000               
 feet," it is not going to threaten.                                           
 REPRESENTATIVE ROKEBERG indicated that is correct.                            
 Number 203                                                                    
 MR. PETTY explained the department would either put a notice in the           
 paper or they would go off of their list of bidders on their                  
 bidders list.  If somebody had not been placed on the department's            
 bidder list because they had not applied or they missed the add in            
 the paper, they would be under no obligation to give them further             
 REPRESENTATIVE ELTON withdrew his objection to the adoption of                
 Amendment 2.                                                                  
 CHAIRMAN KOTT asked if there were further objections to the                   
 adoption of Amendment 2.  Hearing none, Amendment 2 was adopted.              
 Number 227                                                                    
 REPRESENTATIVE ROKEBERG moved that Amendment 3 be adopted.                    
 CHAIRMAN KOTT said there is a motion to adopt Amendment 3 which               
 deals with Section 5.                                                         
 REPRESENTATIVE ELTON objected.                                                
 REPRESENTATIVE ROKEBERG explained the amendment does two things.              
 The way the bill is currently drafted, it allows the department to            
 renegotiate a lease right up to the last day of the natural                   
 expiration of the lease.  The insertion would be on line 12.  At              
 the end of the first paragraph in the amendment it reads, "and has            
 at least 6 months remaining under the lease term,".  He explained             
 the reason he wanted this inserted is that in a larger urban area             
 where there is a dynamic lease market, he thinks it is essential              
 that the other lessors have an opportunity to bid on a major lease            
 hold acquisition if they are about ready to expire.  As a practical           
 matter in the marketplace, landlords are aware of lease expirations           
 and track them and even plan for them to give themselves to                   
 opportunity to bid on them.  Without some type of a cutoff point,             
 this would disruptive to the natural flow of the marketplace.                 
 Representative Rokeberg said although he would like to see a                  
 slightly longer time period, he did agree on a six month provision.           
 REPRESENTATIVE ROKEBERG referred to the subsections and said a 15             
 percent savings was added and a 10 percent savings if there is ADA            
 requirement modifications.  He explained the reason those figures             
 were inserted was to create a higher threshold.  When we're talking           
 about rents that could be expressed in square footage of about                
 $1.50 a square foot, per month, a 10 percent decrease would only be           
 15 cents a square foot.  He noted that may be substantial in some             
 instances, it depends on the market conditions.  Representative               
 Rokeberg said he thinks a higher threshold will benefit the                   
 department because they might be able to use the statute as a tool            
 to generate higher achievable savings.                                        
 Number 359                                                                    
 REPRESENTATIVE ELTON referred to the numerous effective dates of              
 the bill, and asked Representative Rokeberg if he means to change             
 the first report is due August 31, 1996, when the original bill               
 says the report is due in 1997.                                               
 REPRESENTATIVE ROKEBERG explained Mr. Petty assisted him in the               
 drafting of the amendments.                                                   
 MR. PETTY said it probably was intended to be 1997, and then it               
 must cover the fiscal year for 1997.                                          
 Number 392                                                                    
 REPRESENTATIVE ELTON said he would offer that as a friendly                   
 amendment.  The report would be due August 31, 1997.                          
 REPRESENTATIVE ROKEBERG explained it was a typographical error.               
 Number 400                                                                    
 REPRESENTATIVE ELTON withdrew his objection to Amendment 3.                   
 CHAIRMAN KOTT asked if there were further objections.  Hearing                
 none, Amendment 3 was adopted.                                                
 Number 409                                                                    
 REPRESENTATIVE ROKEBERG moved that Amendment 4 be adopted.  He                
 explained the amendment make it symmetrical with the terms                    
 expressed in Amendment 2.  He indicated it is a conforming                    
 CHAIRMAN KOTT asked if there was an objection to Amendment 4.                 
 Hearing none, Amendment 4 was adopted.                                        
 Number 438                                                                    
 REPRESENTATIVE ROKEBERG moved that Amendment 5 be adopted.                    
 REPRESENTATIVE ELTON objected to the adoption of Amendment 5.                 
 REPRESENTATIVE ROKEBERG explained Amendment 5 does two things.  It            
 (indisc.-coughing) the time allowable for a claim up to 90 days.              
 The last sentence of the amendment exempts lease rate adjustments             
 that are stipulated in the lease.  It would exempt those types of             
 things from the time period.  Representative Rokeberg explained in            
 many leases for office space or space, there are escalation clauses           
 for utilities and things of this nature.  Because of the delays in            
 receiving bills and accounting for them, etc., the back charges               
 many times are delayed and it is really difficult to meet an                  
 artificial deadline.  The state does have these types of escalation           
 in their leases based on percentages of consumer price indexes                
 (CPIs) and various other factors.  Representative Rokeberg said he            
 thinks this is consistent with common business practices and the              
 department doesn't have an objection to it.                                   
 REPRESENTATIVE ELTON said that is three months that the state may             
 be at risk for office space.  He said that seems like a long time             
 for him.                                                                      
 MR. PETTY informed the committee members that currently the statue            
 has no time limit on when a claim against the state and the                   
 contract controversy may be brought for any type of contractual               
 circumstance for which there is a claim and a controversy.  He said           
 they started out with 30 days.  The question here is really trying            
 to have a reasonable period of time in which the contractor must              
 bring their claims so that they can't simply wait a year or two and           
 bring it in later.  He indicated the department is comfortable with           
 90 days.  Mr. Petty said with respect to the lease adjustment                 
 circumstance, the department's bid document for lease includes a              
 specific clause that says, "So much of your cost are uncontrollable           
 for utilities or operational costs that are affected by inflation,            
 you can come in and request an increase if the consumer price index           
 has gone up high enough to warrant that."  He said the fact that              
 somebody would overlook that or be late on it, the department                 
 doesn't believe it should keep them from coming back and the                  
 department honoring the bargain that was initially stuck.                     
 Number 564                                                                    
 REPRESENTATIVE ELTON withdrew his objection.                                  
 REPRESENTATIVE ROKEBERG said there are two different things that              
 are being discussed with regards to the amendment.  He said lease             
 hold interests are excluded from this 90 day (indisc.), it is the             
 other contracts in the whole global universe of other claims that             
 are covered by the 90 day....                                                 
 CHAIRMAN KOTT said Amendment 5 has been adopted.                              
 Number 599                                                                    
 REPRESENTATIVE ROKEBERG explained he had one more amendment and               
 then directed the committee to page 14, Section 40.  He then moved            
 conceptual Amendment 6 which deletes page 14, line 31 and page 15             
 line 1.  On page 15, line 2, delete the subsection 35 and add 34.             
 This deletes Section 34 as it is presented in the bill which                  
 affects the Governor's office.  Number 35 becomes 34.                         
 REPRESENTATIVE ELTON objected.  He said he wouldn't have a problem            
 with it if the same thing is done to the legislature that does                
 these same kinds of procurement and is exempted.  It seems unfair             
 to say that the legislature can go out and hire a law firm in                 
 Washington, D.C., to lobby Congress and not have to comply with the           
 procurement code, but the Governor's office does have to comply.              
 REPRESENTATIVE ROKEBERG stated if his colleague persists in this              
 line, he is going to suggest adding a further amendment to delete             
 subsection 33 from the bill which relates to Alaska Seafood                   
 Marketing Institute (ASMI).                                                   
 REPRESENTATIVE ELTON said we can make whatever amendment offers we            
 want.  This amendment doesn't work and he can think of many                   
 examples in which the Governors office have gone out for                      
 procurement which are in the interest of the state.  He said this             
 would essentially mean that after the Exxon Valdez oil spill, the             
 Governor's office would have to wait on some procurement for a.....           
 He then asked Mr. Petty how long the normal period of time is when            
 you go through the state procurement code                                     
 MR. PETTY said depending on the complexity, it could be 120 days to           
 300 days.  He said one of the issues is it is simply not possible             
 to use the competitive bid or the RFP process to acquire                      
 effectively some of these items.  He said Section 40 doesn't                  
 identify if it would be lobbying, public relations or advertising             
 for line agencies of government which is very particular to the               
 Governor's office.  Mr. Petty said he thinks that it is a                     
 recognition that at some level within the Executive Branch, there             
 are times when they must act, they must buy direct media or                   
 advertising in a particular market to influence a vote in Congress            
 or to have lobbying that is effective within the political                    
 influence that the Governor is obligated to exercise.  It is simply           
 not possible to use a RFP process to buy that kind of direct media            
 or advertising or to get the kind of lobbyists to that is necessary           
 to effectively conduct the Governor's business in Washington, D.C.            
 Number 780                                                                    
 REPRESENTATIVE PORTER questioned what the current law is.                     
 MR. PETTY explained the law requires that these type of contracts             
 go through the invitation to bid process or the RFP process or an             
 exception process such as a sole emergency or limited competition             
 REPRESENTATIVE PORTER said the Governor's office has been dealing             
 with this impossibility for the last 40 years.                                
 MR. PETTY said very ineffectively.                                            
 Number 798                                                                    
 REPRESENTATIVE ELTON said he doesn't think it is a partisan issue.            
 It seem to him that it ties the hands of the Governor, whoever it             
 is.  In services like lobbying and public relations, you don't                
 necessarily want the cheapest.  You want to go with the people who            
 can do the work and can do it quickly and in a timely manner.  A              
 120 day wait is not a timely manner and the state procurement code            
 is designed to get you the least expensive.  You can do all kinds             
 of waivers and other things, but the purpose here is to get the               
 best as fast you can.                                                         
 REPRESENTATIVE ROKEBERG indicated confusion.  This includes both              
 lobbying, public relations and advertising.  He said he sees no               
 reason why advertising cannot be conducted under the standard                 
 procurement procedures.  If we need to change the procurement code            
 lets change the code and not start exempting.  This would be the              
 35th exemption to the ASMI.  He said if there is a circumstance               
 that is important, for example like the Exxon Valdez, he would                
 think the Governor has some discretionary funds he would draw on              
 Number 900                                                                    
 MR. PETTY said the funding may be available within the budget, but            
 the expenditure of the fund would be governed by the procurement              
 code.  If it were over 25,000, under current statute, it would have           
 to go out as an RFP or an invitation to bid, unless it went out               
 under the sole source limited competition or emergency process.               
 REPRESENTATIVE PORTER said there is the procurement code with 37              
 exceptions to it, all for different reasons and concerns.  The                
 problem obviously isn't in the exceptions, the problem is the                 
 procurement code.  If we exempted the Governor's office, all                  
 motivation for really changing it is gone.                                    
 Number 986                                                                    
 REPRESENTATIVE KUBINA said you wouldn't be exempting the Governor's           
 office.  You're only exempting them on lobbying, public relations             
 and advertising.  He said think what you guys have done, as the               
 majority in the legislature, this year hiring people that are                 
 experts.  He indicated they didn't go out and do a public bid and             
 allow RFPs go out on the fish and game experts that were hired.               
 REPRESENTATIVE PORTER pointed out there is a separation of powers             
 issue that comes into the procurement code.  What we do is probably           
 what the Democratic majority did six years ago.  That is the way it           
 has been for different majorities.  Representative Porter said what           
 he is talking about is the effect of the procurement code on all              
 the other agencies.                                                           
 REPRESENTATIVE KUBINA said the procurement code is obviously a very           
 complicated thing.  He said look what happens with the federal                
 government procurement code.  We're not talking about going out               
 buying nuts, bolts, tools and clean supplies.  We ought to have               
 rules and we do have rules.  He questioned how you can go on a                
 competitive bid for a lobbyist or public relations.                           
 REPRESENTATIVE PORTER said he totally agrees with Representative              
 Kubina.  If that is a realistic problem, why shouldn't it be a                
 problem for the Department of Public Safety, the Department of                
 Natural Resource, the Department of Corrections and not for the               
 REPRESENTATIVE KUBINA said he isn't sure they're out buying                   
 lobbyists or public relation firms.                                           
 REPRESENTATIVE SANDERS said the Department of Transportation does.            
 Number 1155                                                                   
 MR. PETTY explained that this is not intended to be an out for                
 (indisc.) agencies of government because he believes they are able            
 to anticipate their need for public relations.  The Department of             
 Commerce does an effective job of acquiring their public relations            
 and advertising through an RFP process, but they have an ongoing              
 program where they can project that.  Oftentimes that doesn't                 
 happen at the Governor's office level.  There simply isn't time to            
 do that kind of RFP process to make it work and that is why this              
 special exemption was only intended to cover the Governor's office.           
 There are circumstances that the Governor's office can anticipate             
 far enough down the line that they might be able to use an RFP                
 process.  Mr. Petty explained the Governor's office deals in                  
 political issues that are fundamentally different.                            
 REPRESENTATIVE ROKEBERG suggested putting some of these people on             
 a retainer so you wouldn't have to go through the process.  He said           
 he thought we already had a representative in Washington, D.C., Mr.           
 REPRESENTATIVE ELTON said he is in an odd position where he doesn't           
 disagree with some of what he has heard.  He said he would like to            
 note that if we go for the argument that the Governor's office                
 ought to share the same pain felt by the agencies, the logical                
 extension of that is so should the legislature because that will              
 might force the legislature to take a good look at the procurement            
 code and figure out how we can make it work for everybody.  He said           
 if we do this, where tying the hands of one of the elected                    
 officials in the state that probably has a very legitimate interest           
 in what is happening in Congress, just as the legislature does.  He           
 said he would find this easier to accept if the rules were applied            
 equally to everybody and we're not doing that with the proposed               
 CHAIRMAN KOTT asked if there were further questions for Mr. Petty             
 on the amendment.  There were no further questions.  Chairman Kott            
 asked if there still was an objection.                                        
 REPRESENTATIVE ELTON maintained his objection.                                
 Number 1431                                                                   
 A roll call vote was taken.  Representatives Masek, Porter,                   
 Rokeberg, Sanders and Kott were in support of the amendment.                  
 Amendment 6 was adopted.                                                      
 Number 1488                                                                   
 REPRESENTATIVE ROKEBERG made a motion to pass HB 482, Version A, as           
 amended, out of committee with individual recommendations and the             
 accompanying fiscal note.                                                     
 CHAIRMAN KOTT asked if there was an objection.  Hearing none, CSHB
 482(L&C) was moved out of the House Labor and Commerce Committee.             
 SB 197 - INS:DOMESTIC VIOL. VICTIMS & DISCLOSURES                           
 Number 1555                                                                   
 CHAIRMAN KOTT announced the next order of business would be CSSB
 197(L&C), "An Act relating to insurance covering an insured who is            
 a victim of domestic violence and requiring certain disclosures by            
 an insurer."                                                                  
 JAYNE ANDREEN, Executive Director, Council on Domestic and Sexual             
 Assault, testified in support of SB 197.  She said as the committee           
 already heard in previous testimony, insurance discrimination in              
 terms of domestic violence is not a problem that has been                     
 identified in Alaska.  However, they do have documentation that it            
 has been a significant problem in California, Delaware, Iowa,                 
 Minnesota, Oregon, Pennsylvania and Washington.  In 1994, the U.S.            
 Judiciary Subcommittee on crime and criminal justice found that 8             
 of the 16 major insurance companies were using the history of                 
 domestic violence victimization as a factor on whether or not to              
 insure and how much to charge for insurance premiums.  In March,              
 1995, the Pennsylvania Insurance Commission found that 28 percent             
 of insurers responding to a survey utilized domestic violence as a            
 underwriting criteria.  Ms. Andreen said something she heard at the           
 previous meeting was that this is a problem that pertains only to             
 health insurance.  She said they have found that is not the case.             
 There is documentation that battered women's shelters have been               
 denied professional and property liability.  Not because they posed           
 an increased risk, but because many of their workers were former              
 victims of domestic violence.  She said there is documentation of             
 this impacting life, mortgage and homeowners insurance.  There is             
 also documentation of coverage being denied for injuries sustained            
 in domestic violence in spite of there being an existing policy in            
 place.  Based on a study conduced in 1986, over 13,000 women living           
 in Alaska have obtained medical treatment because of injuries they            
 sustained in domestic violence.  Ms. Andreen said they are                    
 concerned that because there has been so much publicity on the                
 national level, victims here in Alaska have stopped and will stop             
 seeking necessary medical treatment.  They will stop seeking                  
 necessary counseling and will refrain, when they do seek services,            
 from identifying the cause of those injuries.  Ms. Andreen said Ms.           
 Hugonin from the Network on Domestic Violence and Sexual Assault              
 talked about Maternal, Child and Family Health receiving a federal            
 grant to train medical providers on how to identify domestic                  
 violence injuries.  She said she is concerned that if they know               
 their records would be used to deny a victim future insurance that            
 they will stop identifying and documenting those injuries.                    
 MS. ANDREEN referred to the previous meeting where there was a                
 question, "Doesn't this bill allow victims to stay in an unsafe               
 situation?"  She said that is not the case.  Victims do not choose            
 to live in a violent lifestyle.  The first time there is violence,            
 the victim assumes that it is a one time event.  The perpetrator is           
 usually apologetic and promises it'll never happen again.                     
 Eventually, over a period of time a pattern is established and it             
 becomes harder and harder for a victim to leave.  Ms. Andreen                 
 pointed out that there is a number of economic, social, family                
 value, and safety issues that a victim has to factor in when                  
 deciding to leave a relationship.  Without this type of protection,           
 it is possible that loss of health insurance and other types of               
 insurance for a victim and her children could be a deciding factor            
 for a victim to stay in an abusive relationship where she already             
 has the insurance.                                                            
 MS. ANDREEN stated she doesn't agree with the position established            
 by Mr. Lessmeier.  She said she does acknowledge that State Farm              
 has voluntarily agreed, in other parts of the country, to stop its            
 discrimination policy, but when they talk about using medical                 
 conditions as a criteria for determining whether or not someone is            
 eligible for insurance coverage, she is concerned this will                   
 indirectly open the door to discriminate against victims of                   
 domestic violence.  She said it has been found with other insurance           
 companies that it is sometimes used to target the types of injuries           
 that result in domestic violence as the criteria for not insuring             
 (indisc.--coughing) increasing their premiums.                                
 MS. ANDREEN said they support the need for the required disclosure            
 as a standard policy for all insurance, since a person applying for           
 an insurance policy must be notified that they're not receiving               
 that insurance.  She said she doesn't believe it would be that much           
 more difficult to give the reason why.  Ms. Andreen said she thinks           
 it would be very difficult for the general public to know that they           
 have the right to ask why they're being rejected.  She explained              
 they also support the need for a strong confidentiality clause that           
 insurance companies need to keep any information they have about              
 domestic violence as confidential information because of the risk             
 it can place to the victim if that information is disclosed                   
 Number 1969                                                                   
 REPRESENTATIVE PORTER said as he reviewed the bill and Mr.                    
 Lessmeier's concerns, the first question that came to his mind was,           
 "How does a insurance company determine that an injury was a result           
 of domestic violence?"                                                        
 MS. ANDREEN said it is her understanding that it could happen in a            
 number of different ways.  If it is an existing policy, then                  
 insurance companies have access to the medical records.  If the               
 person sought medical treatment or counseling services, where the             
 insurance company is being used to pay for that, the insurance                
 company has access to those records.                                          
 REPRESENTATIVE PORTER explained he has been involved in a couple of           
 cases, as an employer, and never had access to counseling records.            
 REPRESENTATIVE KUBINA asked Ms. Andreen if she meant records of the           
 counseling sessions or the billing for counseling.                            
 REPRESENTATIVE PORTER clarified the subject of the counseling.  He            
 said he is trying to figure out how it is that insurance companies            
 know that they are discriminating against domestic violence victims           
 as opposed to victims with repeated injury (indisc.).                         
 Number 2029                                                                   
 SENATOR DAVE DONLEY, sponsor of SB 197, said if they don't know, it           
 is not a problem.  We don't assume that they have the knowledge of            
 whether or not somebody is a victim and that the injury to them is            
 based on that.  It is only prohibited if they know that somebody is           
 a victim and they discriminate because of that.  So, if they don't            
 know, then that's clearly not the only reason that they're making             
 that assessment and it's not prohibited by the bill.                          
 REPRESENTATIVE PORTER said, "You're saying that they may not keep             
 records -- they may not attempt to determine if it's domestic                 
 violence, but yet they can't discriminate if it is domestic                   
 violence.  So, what I'm thinking is that there is probably -- and             
 I don't know much about insurance, but there is probably some                 
 degree of increase in rates or whatever that's gonna happen if                
 somebody comes in with repeated costs against policy.  It is like             
 your car insurance goes up if you had the second accident.  That              
 being the case, if they can't ask if these injuries are as a result           
 of domestic violence, then how are they going to know whether                 
 they're discriminating or not against victims of domestic                     
 Number 2186                                                                   
 SENATOR DONLEY explained they could have gotten the information               
 from another source, from an independent investigation, from police           
 records, or other things that may be available to them.  He said it           
 is not a problem unless they know about it and it is the only                 
 reason they discriminate against that individual.                             
 MS. ANDREEN said it is her understanding, and she may be wrong,               
 that when you file a claim for health insurance coverage, you sign            
 a disclaimer saying that your medical records are available to the            
 insurance company for reviewing their claim.  She said it is her              
 understanding that is the most common way that the information gets           
 passed through.                                                               
 Number 2278                                                                   
 REPRESENTATIVE SANDERS said he has a concern that some women, in              
 some circumstances, when they have two or three kids, would stay in           
 abusive relationships partly for the insurance.                               
 MS. ANDREEN explained that is one of the things that they are                 
 concerned about.  If they have, for example, an existing policy               
 through their husband's employer, and one of the things they're               
 concerned about in leaving the relationship is their economic                 
 ability to support themselves and their children.  (Indisc.) being            
 denied health insurance or other forms of insurance and/or looking            
 at higher premiums because they have this history.  It will be a              
 factor that will help keep them in an abusive relationship.                   
 REPRESENTATIVE SANDERS said he guesses he is looking at it in                 
 another way.  He said he is thinking that if her insurance was                
 yanked, it would get her to leave the situation.  He said maybe he            
 is wrong, but he sees it that way.                                            
 Number 2436                                                                   
 REPRESENTATIVE ELTON said one way that information may get into an            
 insurance file record is that the insurance company doesn't really            
 have control on the information that may come in from a doctor.  If           
 the doctor's report says, "A blunt force trauma imposed by spouse,"           
 then that would be part of the record.  Then the provision would be           
 that they couldn't knowingly release that except under several                
 circumstance which are outlined.                                              
 TAPE 96-28, SIDE A                                                            
 Number 001                                                                    
 REPRESENTATIVE ROKEBERG said if an insurer doesn't know what the              
 cause of repeated injuries are and they came up and said, "Well               
 this person is accident prone so we want to risk assess them by               
 increasing their premium because they have had -- three times                 
 they've falling down the stairs and broken their leg.  We don't               
 know how it happened but..."  Representative Rokeberg said they               
 couldn't do that under this.  He said it is being prohibited                  
 whether they knew the approximate cause of the injury or not.  If             
 somebody is accident prone, maybe they should have a higher                   
 SENATOR DONLEY said this discussion came up in the Senate.  That is           
 why the bill was drafted in concurrence with the Division of                  
 Insurance to say on line 9 the word "only."  That word is crucial             
 to addressing the concern Representative Rokeberg raised.  If they            
 don't know, then it's not the only reason.  It is only if they know           
 that it is caused by domestic violence or if the insured or                   
 potential insured is a victim of domestic violence that they can              
 violate this prohibition.  If they don't know, they're not in                 
 violation because it is not the only reason that they're                      
 discriminating.  They don't have a duty to know, either.                      
 Number 136                                                                    
 REPRESENTATIVE ROKEBERG asked if the premium could be increased if            
 there was more than that knowledge.  If there was a clear pre-                
 existing health condition that was unrelated to any traumatic                 
 injuries as a result of domestic violence, wouldn't the insurance             
 company have a chance to increase their premiums?  Representative             
 Rokeberg questioned that if they start smoking, couldn't they                 
 increase the premiums?                                                        
 SENATOR DONLEY said the answer is yes, they can increase the                  
 premium.  In that case, it is not the only reason they're                     
 increasing the premium.  The only reason is that they're a victim             
 of domestic violence.  The reason is because they have a pre-                 
 existing condition or that they're smoking.  He said that is not a            
 prohibited discrimination under the bill.                                     
 REPRESENTATIVE ROKEBERG asked if an insurance company underwrites             
 for people who have a pattern of injuries over a period of time               
 that were caused by domestic violence but the insurer didn't know             
 SENATOR DONLEY said unless the insured knows they're a victim of              
 domestic violence, there is no violation.                                     
 REPRESENTATIVE ROKEBERG said then it is a matter of evidence and              
 proof if there is any kind of cause of action filed or claimed.               
 SENATOR DONLEY said at that point, under this legislation, if they            
 cancelled somebody or raised their rates, they would notify them              
 just as they do in their existing law as to why.  If they were                
 denying original coverage, this bill says they would have to say              
 why they denied them coverage.  They would have to articulate a               
 reason other than that they were a victim of domestic violence for            
 their discrimination.  If they could do that, they wouldn't be in             
 violation of the law.                                                         
 Number 312                                                                    
 REPRESENTATIVE PORTER referred to the required disclosure on page             
 2, and said it doesn't seem to apply to this case.  It seems to say           
 the standard or requirement for the insurance company in general              
 for any termination of a policy.  He asked Senator Donley if there            
 is any way to get at what he wants without having to create a whole           
 new operation for the insurance industry.                                     
 SENATOR DONLEY said his understanding, under the existing insurance           
 code, any time an insurance company cancels or raises an injured              
 person's rates, they're required to provide notice of why they did            
 so.  The only additional element in the bill is if they deny                  
 insurance to a new applicant, they would have to advise that person           
 as to why.  Since the bill covers the full range of insurance                 
 available, property, (indisc.--coughing) feasibility, it seems                
 important that they provide that disclosure.  The only modification           
 would be for people whom they deny original coverage to.                      
 REPRESENTATIVE PORTER inquired about the reason people are                    
 discriminating against domestic violence victims, and whether it is           
 the fear of having costs from the injuries.                                   
 SENATOR DONLEY said it is profit.  If you know that they have a               
 former spouse who is inclined to commit acts of violence or                   
 property damage, it is only a good profit motive to cancel the                
 insurance so you don't have to pay a claim on something that                  
 Number 577                                                                    
 MS. ANDREEN said it is her understanding that there are no actual             
 studies that shows domestic violence costs insurance companies more           
 money.  It is more of a perception.                                           
 REPRESENTATIVE ELTON referred to the disclosure where we're adding            
 a new disclosure for original applicants.  He said that is what               
 essentially happens if you apply for credit and are denied.  You              
 have a right to know why you've been denied credit.                           
 CHAIRMAN KOTT referred to applying for a credit card and you are              
 rejected.  They would have to provide a reason for that rejection             
 without you prompting them.                                                   
 REPRESENTATIVE ELTON said he thinks the difference is that they are           
 not necessarily required to tell you when they reject, but if you             
 ask they have to tell you.  You have a right to ask and they must             
 tell you why you were denied.                                                 
 Number 691                                                                    
 REPRESENTATIVE ROKEBERG referred to the definitions on page 2 and             
 asked if everything had to be defined for the new section.                    
 KEN SYKES, Analyst III, Market and Conduct, Division of Insurance             
 Department of Commerce and Economic Development, explained the                
 division currently supports CSSB 197(L&C).  He said it encompasses            
 all insurers, property, casualty and life and health, writing                 
 business in the state of Alaska.  He said that would be an answer             
 as to why we need all the definitions on page 2.  He said there are           
 a myriad of definitions that apply to different entities in their             
 statute.  This incorporates all of them.  Mr. Sykes said the bill             
 makes the insurer write for a condition and not for a cause.  In              
 other words, the condition of a bad heart, bruised ribs or a broken           
 arm, not that it was caused by an industrial accident or domestic             
 violence or just plain clumsiness.  Insurers can deny for a myriad            
 of reasons.  Mostly, you will find that they will not accept an               
 application based on frequency.  If somebody has ten accidents                
 within a two month period, that is definitely a high risk.  The               
 insurer is allowed to rate for that risk because of the ten                   
 accidents as a frequency, but not because the individual cases of             
 those accidents because there may not be a relation between those             
 two.  What you're looking at is the relationship of the condition.            
 Number 842                                                                    
 REPRESENTATIVE PORTER said what the bill asks is to not                       
 discriminate because of domestic violence, but to allow an                    
 insurance company to discriminate based on any other rational                 
 reason that they now do.  So if the two happen to coincide, it                
 doesn't mean that they're stuck with a risk because it's domestic             
 violence as opposed to clumsiness.                                            
 MR. SYKES said that is correct.  It goes hand in hand with another            
 statute concerning unfair discrimination, AS 21.36.090(d).                    
 MR. SYKES explained to the committee members that currently in                
 statute, if a insurance company wants to raise or cancel your                 
 premium they must send you a notice within a specified time period            
 and they must also state the reason why they are either increasing            
 your premium, non-renewing your coverage or cancelling your                   
 coverage.  This hits at the first step.  In other words, if I do              
 not accept your application for coverage, then I will tell you why.           
 Number 984                                                                    
 MARGARET DOWLING, Attorney, Lessmeier and Winters, was next to                
 address the committee on behalf of State Farm.  She said State Farm           
 strongly supports legislation that would prohibit discrimination              
 against a victim of domestic violence, but the way the bill is                
 currently drafted it creates some practical problems.  She said a             
 bill could be drafted in a more precise way that would address the            
 same public policy that seems to be driving the bill.  For example,           
 State Farm's position is that the bill is drafted too broadly.  She           
 said there is no problem in Alaska that they have knowledge of                
 where there is discrimination against victims of domestic violence.           
 Nationwide, the problem seems to limited to health life insurance             
 and disability insurance.  Since that is the case, State Farm                 
 believes it should be limited to those insurers in Alaska.                    
 Otherwise there will be an incredible burden on a huge range of               
 insurance carriers.                                                           
 MS. DOWLING explained the bill will create a special class of                 
 people who would enjoy exemption from adjustments to premiums or              
 coverage based on their status as a victim of domestic violence.              
 She said even though this discrimination can't occur if the carrier           
 is aware of or has knowledge that this person is a victim of                  
 domestic violence, the burden is shifted to the carrier to prove              
 that they didn't know that the person was a victim of domestic                
 violence.  So there is a situation where the coverage is adjusted,            
 the person claims that they're a victim of domestic violence, the             
 burden shifts to the carrier to prove they don't know.  Ms. Dowling           
 said in many cases, victims of domestic violence are reluctant to             
 reveal that they're a victim.                                                 
 MS. DOWLING referred to confidentiality of records and said State             
 Farm sees that as raising some problems.  Sometimes the carrier is            
 not going to know.  There may be a record that reveals an injury              
 but doesn't link the injury to any particular case, this would                
 place the burden on the carrier to try and find out.  She said this           
 shifts the burden to the carrier and puts them in an awkward                  
 situation where they may actually be breaking the law by revealing            
 information that they did not know was records of a person who was            
 a victim of  domestic violence.  Ms. Dowling pointed out that is              
 not a provision that is necessary.  At present, there is a common             
 law privilege, it is the patient/physician privilege that protect             
 confidentiality.  This extends not to just victims of domestic                
 violence, but also people with other medical conditions.  Ms.                 
 Dowling said the bill is drafted too broad.  The problem is you're            
 trying to fix a problem where there is no problem.  She continued             
 to give testimony against the legislation.                                    
 Number 1378                                                                   
 REPRESENTATIVE ROKEBERG recommended the bill be held over or put in           
 a subcommittee.  He said he has some concerns with the bill.  He              
 said there are a lot more insurance companies that operate in the             
 state that the committee hasn't heard from.                                   
 REPRESENTATIVE PORTER referred to the disclosure section and                  
 recommended the reason be given upon request as opposed to every              
 single one having to state a finding.                                         
 REPRESENTATIVE ELTON pointed out the committee passed out a major             
 procurement bill without hearing from any contractors.  He said               
 some of the people who have testified know a lot of people in the             
 industry and he would have expected that the committee would have             
 heard from them.                                                              
 CHAIRMAN KOTT indicated the bill would be held.                               
 CHAIRMAN KOTT adjourned the House Labor and Commerce Committee                
 meeting at 5:10 p.m.                                                          

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