Legislature(1997 - 1998)

04/18/1997 03:21 PM L&C

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
txt
            HOUSE LABOR AND COMMERCE STANDING COMMITTEE                        
                          April 18, 1997                                       
                             3:21 p.m.                                         
                                                                               
                                                                               
 MEMBERS PRESENT                                                               
                                                                               
 Representative Norman Rokeberg, Chairman                                      
 Representative John Cowdery, Vice Chairman                                    
 Representative Bill Hudson                                                    
 Representative Joe Ryan                                                       
 Representative Tom Brice                                                      
 Representative Gene Kubina                                                    
                                                                               
 MEMBERS ABSENT                                                                
                                                                               
 Representative Jerry Sanders                                                  
                                                                               
 COMMITTEE CALENDAR                                                            
                                                                               
 SPONSOR SUBSTITUTE FOR HOUSE BILL NO. 189                                     
 "An Act relating to sale of tobacco and tobacco products; and                 
 providing for an effective date."                                             
                                                                               
      - MOVED CSSSHB 189(L&C) OUT OF COMMITTEE                                 
                                                                               
 HOUSE BILL NO. 134                                                            
 "An Act relating to regulation of barbers and hairdressers;                   
 extending the termination date of the Board of Barbers and                    
 Hairdressers; and providing for an effective date."                           
                                                                               
      - MOVED CSHB 134(L&C) OUT OF COMMITTEE                                   
                                                                               
 HOUSE BILL NO. 218                                                            
 "An Act relating to regulation and examination of insurers and                
 insurance agents; relating to kinds of insurance; relating to                 
 payment of insurance taxes and to required insurance reserves;                
 relating to insurance policies; relating to regulation of capital,            
 surplus, and investments by insurers; relating to hospital and                
 medical service corporations; and providing for an effective date."           
                                                                               
     - HEARD AND HELD                                                          
                                                                               
 * HOUSE BILL NO. 199                                                          
 "An Act relating to the property, transactions, and obligations of            
 spouses; relating to the augmented estate; amending Rule 301,                 
 Alaska Rules of Evidence; and providing for an effective date."               
                                                                               
      - MOVED HB 199 OUT OF COMMITTEE                                          
                                                                               
 HOUSE BILL NO. 116                                                            
 "An Act relating to workers' compensation self-insurance."                    
                                                                               
      - HEARD AND HELD                                                         
                                                                               
 (* First public hearing)                                                      
                                                                               
 PREVIOUS ACTION                                                               
                                                                               
 BILL:  SSHB 189                                                               
 SHORT TITLE: RESTRICT TOBACCO SALES/POSSESSION                                
 SPONSOR(S): REPRESENTATIVE(S) COWDERY                                         
                                                                               
 JRN-DATE      JRN-PG               ACTION                                     
 03/12/97       640    (H)   READ THE FIRST TIME - REFERRAL(S)                 
 03/12/97       640    (H)   LABOR & COMMERCE, JUDICIARY                       
 04/03/97       922    (H)   SPONSOR SUBSTITUTE INTRODUCED-                    
                             REFERRALS                                         
 04/03/97       922    (H)   READ THE FIRST TIME - REFERRAL(S)                 
 04/03/97       922    (H)   L&C, JUDICIARY                                    
 04/09/97              (H)   L&C AT  3:15 PM CAPITOL 17                        
 04/09/97              (H)   MINUTE(L&C)                                       
 04/10/97              (H)   L&C AT  3:15 PM CAPITOL 17                        
 04/10/97              (H)   MINUTE(L&C)                                       
 04/18/97              (H)   L&C AT  3:15 PM CAPITOL 17                        
                                                                               
 BILL:  HB 134                                                                 
 SHORT TITLE: BARBERS AND HAIRDRESSERS                                         
 SPONSOR(S): RULES BY REQUEST OF BUDGET AND AUDIT COMMITTEE                    
                                                                               
 JRN-DATE      JRN-PG               ACTION                                     
 02/13/97       333    (H)   READ THE FIRST TIME - REFERRAL(S)                 
 02/13/97       333    (H)   LABOR & COMMERCE                                  
 03/21/97              (H)   L&C AT  3:15 PM CAPITOL 17                        
 03/21/97              (H)   MINUTE(L&C)                                       
 04/18/97              (H)   L&C AT  3:15 PM CAPITOL 17                        
                                                                               
 BILL:  HB 218                                                                 
 SHORT TITLE: OMNIBUS INSURANCE REFORM                                         
 SPONSOR(S): LABOR & COMMERCE BY REQUEST                                       
                                                                               
 JRN-DATE      JRN-PG               ACTION                                     
 03/27/97       872    (H)   READ THE FIRST TIME - REFERRAL(S)                 
 03/27/97       872    (H)   LABOR & COMMERCE                                  
 04/04/97              (H)   L&C AT  3:15 PM CAPITOL 17                        
 04/04/97              (H)   MINUTE(L&C)                                       
 04/18/97              (H)   L&C AT  3:15 PM CAPITOL 17                        
                                                                               
 BILL:  HB 199                                                                 
 SHORT TITLE: COMMUNITY PROPERTY                                               
 SPONSOR(S): REPRESENTATIVE(S) RYAN, Therriault                                
                                                                               
 JRN-DATE      JRN-PG               ACTION                                     
 03/18/97       736    (H)   READ THE FIRST TIME - REFERRAL(S)                 
 03/18/97       737    (H)   L&C, JUDICIARY                                    
 04/18/97              (H)   L&C AT  3:15 PM CAPITOL 17                        
                                                                               
 BILL:  HB 116                                                                 
 SHORT TITLE: WORKERS COMPENSATION SELF-INSURANCE GROUP                        
 SPONSOR(S): REPRESENTATIVE(S) KOTT, Hudson, Foster, Berkowitz,                
 Hodgins, Kelly, Dyson, Davis, Phillips, Kohring, Ogan, Green, Elton           
                                                                               
 JRN-DATE      JRN-PG               ACTION                                     
 02/05/97       243    (H)   READ THE FIRST TIME - REFERRAL(S)                 
 02/05/97       243    (H)   LABOR & COMMERCE                                  
 02/07/97       277    (H)   COSPONSOR(S): KOHRING                             
 02/13/97       349    (H)   COSPONSOR(S): OGAN                                
 02/17/97       376    (H)   COSPONSOR(S): GREEN                               
 02/21/97       430    (H)   COSPONSOR(S): ELTON                               
 02/26/97              (H)   L&C AT  3:15 PM CAPITOL 17                        
 02/26/97              (H)   MINUTE(L&C)                                       
 04/18/97              (H)   L&C AT  3:15 PM CAPITOL 17                        
                                                                               
 WITNESS REGISTER                                                              
                                                                               
 CASEY SULLIVAN, Legislative Administrative                                    
   Assistant to Representative John Cowdery                                    
 Alaska State Legislature                                                      
 Capital Building, Room 416                                                    
 Juneau, Alaska 99801                                                          
 Telephone:  (907) 465-3879                                                    
 POSITION STATEMENT:  Explained CSSSHB 189.                                    
                                                                               
 JONATHAN BLATTMACHR, Partner (Attorney at Law)                                
 Milbank, Tweed, Hadley and McCloy                                             
 One Chase Manhattan Plaza                                                     
 New York City, New York  10005                                                
 Telephone:  (212) 530-5066                                                    
 POSITION STATEMENT:  Testified in support of HB 199.                          
                                                                               
 BOB MANLEY, Attorney at Law                                                   
 Hughes, Thorsness, Powell, Huddleston and Bowman                              
 324 East Cook                                                                 
 Anchorage, Alaska 99501                                                       
 Telephone:  (907) 263-8251                                                    
 POSITION STATEMENT:  Testified in support of HB 199.                          
                                                                               
 DOUGLAS BLATTMACHR, President                                                 
   and Chief Executive Officer                                                 
 Alaska Trust Company                                                          
 840 "K" Street                                                                
 Anchorage, Alaska 99501                                                       
 Telephone:  (907) 278-6775                                                    
 POSITION STATEMENT:  Testified in support of HB 199.                          
                                                                               
 RICH HOMPESCH, Attorney at Law                                                
 119 North Cushman                                                             
 Fairbanks, Alaska 99701                                                       
 Telephone:  (907) 452-1700                                                    
 POSITION STATEMENT:  Testified in support of HB 199.                          
                                                                               
 LINDA HULBERT, Insurance Agent                                                
 New York Life Insurance Company                                               
 110 Cushman Street                                                            
 Fairbanks, Alaska 99701                                                       
 Telephone:  (907) 452-4400                                                    
 POSITION STATEMENT:  Testified in support of HB 199.                          
                                                                               
 REPRESENTATIVE PETE KOTT                                                      
 Alaska State Legislature                                                      
 Capitol Building, Room 204                                                    
 Juneau, Alaska 99801                                                          
 Telephone:  (907) 465-3777                                                    
 POSITION STATEMENT:  Sponsor of HB 116.                                       
                                                                               
 STEVE WISDOM, President                                                       
 Alaska State Homebuilders Association                                         
 P.O. Box 4184                                                                 
 Homer, Alaska 99603                                                           
 Telephone:  (907) 235-6045                                                    
 POSITION STATEMENT:  Testified in support of CSHB 116(L&C).                   
                                                                               
 BARBARA HUFF-TUCKNESS, Director                                               
 Legislative and Governmental Affairs                                          
 Teamsters Local 959                                                           
 4300 Boniface Parkway                                                         
 Anchorage, Alaska 99504                                                       
 Telephone:  (907) 269-4236                                                    
 POSITION STATEMENT:  Testified in support of CSHB 116(L&C).                   
                                                                               
 BILL TAYLOR                                                                   
 Alaska State Homebuilders Association                                         
 2340 Loren Circle                                                             
 Anchorage, Alaska 99516                                                       
 Telephone:  (907) 345-0371                                                    
 POSITION STATEMENT:  Testified in support of CSHB 116(L&C).                   
                                                                               
 RENEE MURRAY                                                                  
 605 West 42nd Street                                                          
 Anchorage, Alaska 99503                                                       
 Telephone:  (907) 561-8796                                                    
 POSITION STATEMENT:  Testified in support of CSHB 116(L&C).                   
                                                                               
 LINDA HALL, Representative                                                    
 Alaska Independent Insurance                                                  
   Agents and Brokers                                                          
 3111 "C" Street                                                               
 Anchorage, Alaska 99516                                                       
 Telephone:  (907) 561-1250                                                    
 POSITION STATEMENT:  Testified against CSHB 116(L&C).                         
                                                                               
 RICHARD BLOCK                                                                 
 Alaska National Insurance Company                                             
 360 West Benson, Suite 300                                                    
 Anchorage, Alaska                                                             
 Telephone:  (907) 563-5121                                                    
 POSITION STATEMENT:  Testified against CSHB 116(L&C).                         
                                                                               
 MARIANNE BURKE, Director                                                      
 Division of Insurance                                                         
 Department of Commerce and                                                    
   Economic Development                                                        
 P.O. Box 110805                                                               
 Juneau, Alaska 99811-0805                                                     
 Telephone:  (907) 465-2515                                                    
 POSITION STATEMENT:  Testified against CSHB 116(L&C).                         
                                                                               
 JOHN GEORGE, Lobbyist                                                         
 National Association of                                                       
   Independent Insurers                                                        
 3328 Fritz Cove Road                                                          
 Juneau, Alaska 99801                                                          
 Telephone:  (907) 789-0172                                                    
 POSITION STATEMENT:  Testified on CSHB 116(L&C).                              
                                                                               
 PAUL GROSSI, Director                                                         
 Division of Workers' Compensation                                             
 Department of Labor                                                           
 P.O. Box 25512                                                                
 Juneau, Alaska 99802-5512                                                     
 POSITION STATEMENT:  Testified on CSHB 116(L&C).                              
                                                                               
 ROBIN WARD                                                                    
 Alaska State Homebuilders Association                                         
 Box 91443                                                                     
 Anchorage, Alaska 99509                                                       
 Telephone:  (907) 562-3770                                                    
 POSITION STATEMENT:  Testified in support of CSHB 116(L&C).                   
                                                                               
 ACTION NARRATIVE                                                              
                                                                               
 TAPE 97-44, SIDE A                                                            
 Number 001                                                                    
                                                                               
 VICE CHAIRMAN JOHN COWDERY called the House Labor and Commerce                
 Standing Committee to order at 3:21 p.m.  Members present at the              
 call to order were Representatives Hudson, Ryan, Brice and Cowdery.           
 Representative Kubina and Chairman Rokeberg arrived at 4:00 p.m.              
                                                                               
 SSHB 189 - RESTRICT TOBACCO SALES/POSSESSION                                  
                                                                               
 Number 067                                                                    
                                                                               
 VICE CHAIRMAN COWDERY announced the first order of business would             
 be SSHB 189, "An Act relating to sale of tobacco and tobacco                  
 products; and providing for an effective date."                               
                                                                               
 Number 099                                                                    
                                                                               
 CASEY SULLIVAN, Legislative Administrative Assistant to                       
 Representative John Cowdery, Alaska State Legislature, came before            
 the committee to explain the bill.  He informed the committee                 
 members there is a proposed committee substitute (CS).  The                   
 legislation will limit public access to tobacco products.  He said            
 the CS creates an affidavit for employees and increases the                   
 penalties for selling tobacco to minors.  It also includes a                  
 section that will allow only the sales clerk to have access to any            
 tobacco products prior to sale.  Self service tobacco displays will           
 be banned.  Mr. Sullivan said page 2, line 7, states, "the sale               
 occurs in a manner that allows only the sales clerk to have access            
 to the cigarettes, cigars, tobacco, or products containing tobacco            
 prior to sale;".  He said this will not limit how retail premises             
 or tobacco shop stores present tobacco products.  If anyone wishes            
 to buy tobacco products, they must go through an employee.                    
                                                                               
 MR. SULLIVAN said also included in the CS is a section that will              
 further require employees to card people who employees believe to             
 be under 27 years of age.  Secondly, the retail businesses shall              
 require the sales clerk to sign a form stating that they understand           
 it is illegal to sell tobacco to persons under the age of 19.  He             
 said they believe this will put more responsibility on retail                 
 employees who sell tobacco products.                                          
                                                                               
 MR. SULLIVAN explained there is also change regarding the                     
 penalties.  In the previous version of the bill, selling, giving or           
 exchanging tobacco to minors had a fine of up to $300.  In the CS,            
 the fines are the same as contributing alcohol to a minor.  The               
 first violation is a class A misdemeanor, a $5,000 fine.  If a                
 second infraction occurs within five years, the person will be                
 guilty of a class E felony, a $50,000 fine.                                   
                                                                               
 Number 264                                                                    
                                                                               
 REPRESENTATIVE TOM BRICE asked if the age should be increased from            
 19 to 21.                                                                     
                                                                               
 VICE CHAIRMAN COWDERY said he hasn't requested that with his bill.            
                                                                               
 Number 289                                                                    
                                                                               
 REPRESENTATIVE BILL HUDSON made a motion to adopt CSSSHB 189(L&C),            
 0-LS0711, Version B, for the purpose of discussion.                           
                                                                               
 VICE CHAIRMAN COWDERY asked if there was an objection.  Hearing               
 none, CSSSHB 189(L&C) was adopted.                                            
                                                                               
 VICE CHAIRMAN COWDERY referred to Section 3, regarding the                    
 effective date of July 1, 1997, and said he would like to propose             
 a conceptual amendment to change it to 90 days.                               
                                                                               
 Number 339                                                                    
                                                                               
 REPRESENTATIVE BRICE pointed out the committee would need to strike           
 Section 3.  He then made a motion to delete on page 3, line 6,                
 Section 3.                                                                    
                                                                               
 VICE CHAIRMAN COWDERY asked if there was an objection.  Hearing               
 none, it was so ordered.                                                      
                                                                               
 Number 399                                                                    
                                                                               
 MR. SULLIVAN said Chairman Rokeberg had a question about signage on           
 a retail premises that sells tobacco.  He said AS 43.70.075 (f)               
 discusses that a person who holds a license endorsement under this            
 section shall post on the licensed premise a warning sign as                  
 described in the subsection.  He said the sign should measure 6               
 inches by 18 inches and must have lettering at least 1.5 inches               
 high which should read, "The sale of tobacco products to a person             
 under age of 19 is illegal."                                                  
                                                                               
 VICE CHAIRMAN COWDERY pointed out that there is also a mandatory              
 fine of a minimum of $300.                                                    
                                                                               
 REPRESENTATIVE HUDSON asked if there is a cap on the amount that              
 can be fined.                                                                 
                                                                               
 VICE CHAIRMAN COWDERY pointed out the language is the same language           
 regarding selling alcohol to a minor.                                         
                                                                               
 Number 588                                                                    
                                                                               
 REPRESENTATIVE JOE RYAN asked Vice Chairman Cowdery if he wanted to           
 raise the age from 19 to 21.                                                  
                                                                               
 VICE CHAIRMAN COWDERY responded that it is his intent to leave the            
 age at 19.  He also indicated there were no witnesses signed up to            
 testify.                                                                      
                                                                               
 Number 624                                                                    
                                                                               
 REPRESENTATIVE RYAN made a motion to moved CSSSHB 189(L&C), as                
 amended, out of committee with individual recommendations and a               
 zero accompanying fiscal note.  Hearing no objection, CSSSHB
 189(L&C), as amended, was moved out of the House Labor and Commerce           
 Standing Committee.                                                           
                                                                               
 HB 134 - BARBERS AND HAIRDRESSERS                                             
                                                                               
 Number 683                                                                    
                                                                               
 VICE CHAIRMAN COWDERY announced the committee would hear HB 134,              
 "An Act relating to regulation of barbers and hairdressers;                   
 extending the termination date of the Board of Barbers and                    
 Hairdressers; and providing for an effective date."  He indicated             
 there is a House Labor and Commerce committee substitute.  He also            
 noted the bill had been heard twice before and that there were no             
 witnesses signed up to testify.                                               
                                                                               
 Number 825                                                                    
                                                                               
 REPRESENTATIVE HUDSON moved and asked unanimous consent to adopt              
 CSHB 134(L&C), 0-LS0546, Version E.  Hearing no objection, it was             
 so ordered.                                                                   
                                                                               
 Number 748                                                                    
                                                                               
 REPRESENTATIVE HUDSON made a motion to move CSHB 134(L&C), dated              
 4/14/97, Version E, out of committee with individual                          
 recommendations and a zero fiscal note.  Hearing no objection, CSHB
 134 (L&C) was moved out of the House Labor and Commerce Standing              
 Committee.                                                                    
                                                                               
 VICE CHAIRMAN COWDERY called for an at-ease at 3:35 p.m.  He called           
 the meeting back to order at 3:39 p.m.                                        
                                                                               
 HB 218 - OMNIBUS INSURANCE REFORM                                             
                                                                               
 VICE CHAIRMAN COWDERY announced the next bill to come before the              
 committee would be HB 218 "An Act relating to regulation and                  
 examination of insurers and insurance agents; relating to kinds of            
 insurance; relating to payment of insurance taxes and to required             
 insurance reserves; relating to insurance policies; relating to               
 regulation of capital, surplus, and investments by insurers;                  
 relating to hospital and medical service corporations; and                    
 providing for an effective date."  He said the bill was held over             
 from April 4.  He explained the committee would adopt a proposed              
 committee substitute.  The bill then would be held so everybody               
 could have a chance to review it before it is heard again on April            
 23.                                                                           
                                                                               
 REPRESENTATIVE RYAN made a motion to adopt CSHB 218(L&C), Version             
 0-LS0850/B, dated 4/17/97.  Hearing no objection, it was so                   
 ordered.                                                                      
                                                                               
 VICE CHAIRMAN COWDERY announced CSHB 218(L&C), dated 4/17/97, would           
 be held until the following Wednesday.                                        
                                                                               
 HB 199 - COMMUNITY PROPERTY                                                   
                                                                               
 Number 865                                                                    
                                                                               
 VICE CHAIRMAN COWDERY announced the committee would hear HB 199,              
 "An Act relating to the property, transactions, and obligations of            
 spouses; relating to the augmented estate; amending Rule 301,                 
 Alaska Rules of Evidence; and providing for an effective date,"               
 sponsored by Representative Ryan.                                             
                                                                               
 Number 889                                                                    
                                                                               
 REPRESENTATIVE RYAN informed the committee that HB 199 will allow             
 an option in Alaska of people by signing a good faith agreement to            
 take some or all of their assets and place them in community                  
 property status.  The basic law of Alaska will remain individual              
 property and this is strictly an option.  He informed the committee           
 that there are advantages to taking this option.  Representative              
 Ryan said, "If you have some assets with unrealized gains and you             
 know that if you sell these assets you're going to pay the maximum            
 capital gain tax of 28 percent and you decide rather than do that,            
 you have a good relationship, you plan on living together until you           
 die - you're wife and husband.  When one of the partners dies, the            
 basis is what for the value of the asset is that in which it was              
 purchased and any appreciation of that, on behalf of the estate of            
 the person who died, has no tax liability.  So that asset can be              
 sold, the gains realized without paying the federal government any            
 taxes.  Also, for the surviving spouse, their half of the estate,             
 their half of the wealth of that assets gets the same step up in              
 basis with no tax liability.  So this is a provision in the law               
 that goes back to I think 1932, with the Simons case that was                 
 argued before the supreme court that community property states now            
 enjoy.  Unfortunately, most community property states, there are              
 nine of them, make community property mandatory.  There are a lot             
 of people, especially in this day and age, who don't for some                 
 reason or another don't spend their lives together and when they              
 get divorced, there is a lot of acrimony because of the value of              
 the assets and what the distribution splits will be and so forth.             
 Community property provides -- to have community property provides            
 that each partner in the marriage owns half of whatever is there.             
 So that if there were a disillusion of a marriage, the judge would            
 award 50 percent here, 50 percent here, it's a done deal.  There is           
 no reason for anybody to sit and argue about what the value is or             
 that one partner should get more than the other or less than the              
 other or however these things go in family law.  This is a thing of           
 community property - says, `Boom, you get half and half' and there            
 is no other way you can do anything about it.  We've talked to                
 Judge Karen Ott and she says that she already does a lot of                   
 litigation on this because people come from other states that are             
 community property states and they have acquired an asset in that             
 state so that when a divorce comes along, the court already deals             
 with community property because the property having been acquired             
 under community property or if there is a dissolution of marriage,            
 it still has to be divided as community property.  So the courts              
 are well familiar with this.  It's not going to cause a problem to            
 anyone.                                                                       
                                                                               
 "We can allow, thorough the passage of this legislation, people who           
 live in the other 41 states that don't have a community option to             
 create a trust in Alaska under the generous trust laws that we just           
 passed and signed by the Governor April 1, to take assets and to              
 put them in a trust in Alaska and denominate the `miscommunity'               
 property so that they will, in fact, have the advantage of a step             
 up in basis and we will have the advantage of managing those assets           
 and/or at least administrating them which I believe will be a good            
 opportunity to bring capital to Alaska for investment and, if                 
 nothing else, the management and the administration fees will be              
 quite substantial.  So what we're doing is we're bringing in                  
 environmentally clean business.  We have no downsides.  We're going           
 to put a lot of people to work.  If you don't particularly like the           
 state planning attorney and/or accountants, then you may have a               
 problem with this bill, but other than that you ought to remember             
 these people make substantial amounts of money and they're going to           
 spend it in the communities where they live and that is going to go           
 to provide jobs in many other related businesses.  So we have                 
 everything to gain on this piece of legislation and really nothing            
 to lose because we're not requiring anybody to do anything.  We're            
 offering people a choice.  With that, I conclude my testimony.                
 There are some people that are much more knowledgeable about this             
 than I, I think on teleconference, and perhaps they can explain it            
 a little better."                                                             
                                                                               
 Number 1170                                                                   
                                                                               
 JONATHAN BLATTMACHR, Partner (Attorney at Law), Milbank, Tweed,               
 Hadley and McCloy, testified via teleconference from Anchorage.  He           
 informed the committee he is a member of the Alaska, California and           
 New York Bars and practices in all three jurisdictions.  He said              
 the thinks Representative Ryan did an excellent job of explaining             
 the bill.  It is purely a voluntary system.  If the husband and               
 wife care to they can enter into the agreement and they can                   
 designate all of their assets or specify which ones they want                 
 treated as community property.  That means they will own 50/50 and            
 in the event of death or divorce, it will pass 50/50 to each of               
 them.  When they die, the surviving spouse will receive an                    
 exceptionally good tax break.  He said it is a great thing to                 
 enact.                                                                        
                                                                               
 Number 1231                                                                   
                                                                               
 BOB MANLEY, Attorney at Law, testified via teleconference from                
 Anchorage.  He noted he is member of an Anchorage law firm, Hughes,           
 Thorsness, Powell, Huddleston and Bowman and has been working in              
 the estate planning and probate area for approximately 20 years.              
 He said he thinks HB 199 is a great bill because freedom and                  
 flexibility of property ownership will be provided.  People can opt           
 in to the community property regime and take advantage of the                 
 income tax benefits.  He said by passing the bill, the legislature            
 would be providing freedom and flexibility of arrangements to                 
 people because they could say in a community property agreement               
 that property will be divided in some other fashion or in divorce             
 court if that ever happened (indisc.).  People are being given more           
 options.  Mr. Manley said it will be good for commerce in Alaska              
 because he thinks it will bring in more trust activity.  He                   
 referred to the Trust Act and said there is a requirement that any            
 community property trusts for non-Alaskan residents have an Alaska            
 trustee with some portion of the administration in Alaska.  Alaska            
 should see more activity in the trust area and the formation of new           
 trust companies.  He urged the committee to support the                       
 legislation.                                                                  
                                                                               
 Number 1330                                                                   
                                                                               
 DOUGLAS BLATTMACHR, President and Chief Executive Officer, Alaska             
 Trust Company, testified via teleconference from Anchorage.  He               
 said his organization totally supports HB 199.  Mr. Blattmacher               
 said he and his wife just moved back to Alaska and would like to              
 have the option of their property being considered as community               
 property to take advantage of the taxing.                                     
                                                                               
 Number 1355                                                                   
                                                                               
 REPRESENTATIVE HUDSON said he believes this has a selective option            
 capability as well.  He asked if he is correct in saying that a               
 couple could select any portion of their assets to be owned by this           
 community allowance.                                                          
                                                                               
 MR. BLATTMACHR said that is correct.  They could opt for any                  
 amount, any particular piece of property or all of their property.            
                                                                               
 REPRESENTATIVE HUDSON asked if this occurs in any other state.                
                                                                               
 MR. BLATTMACHR explained in other states where they have it, the              
 spouses can elect out.  They can elect for certain assets to be               
 elected out, but HB 199 provides for an election which provides               
 much less turbulence with respect to property rights and provides             
 a lot more flexibility.  In the states where community property               
 currently exists, a husband and wife may agree to a separate the              
 property regime rather than have community property for all their             
 assets or for specifically identified ones.                                   
                                                                               
 Number 1425                                                                   
                                                                               
 VICE CHAIRMAN COWDERY asked whether the property could include                
 escrows or stocks.                                                            
                                                                               
 MR. BLATTMACHR explained it can include any assets such as stocks,            
 bonds, a home, commercial real estate, et cetera.  He noted one of            
 the great advantages is that often people who have real estate have           
 taken depreciation deductions which are provided for under the                
 income tax law.  By the time the first spouse dies, the basis is              
 extremely low and yet the survivor will still have a very large               
 potential income tax liability.  He said, "If the husband died, and           
 the husband and wife have owned the asset and half is included in             
 the husband's estate, the wife is stuck with her extremely low                
 basis.  In fact it can, in a tax sense, actually be less than zero.           
 But by electing for it to be community property, when the first               
 spouse dies, 100 percent of the inheritance profit is forgiven, so            
 the surviving spouse can turn around and sell it without any                  
 capital gains tax at all."                                                    
                                                                               
 Number 1507                                                                   
                                                                               
 RICH HOMPESCH, Attorney at Law, testified via teleconference from             
 Fairbanks.  He noted he has been an attorney in Alaska for almost             
 13 years and practices in the area of probate, estate planning and            
 taxation.  Mr. Hompesch said when he was in law school and first              
 learned about the difference in income tax treatment between                  
 community property and non-community property, he never did                   
 understand the reason why there is such a difference and nobody has           
 been able to explain it to him.  Mr. Hompesch said he thinks there            
 is an injustice in the tax code.  Surviving spouses in Alaska will            
 pay more income taxes than surviving spouses in California,                   
 Washington and the other community property states.  He said HB 199           
 corrects this injustice and allows Alaskans to elect certain                  
 (indisc.) community property.  Mr. Hompesch said in his estate                
 practice, about 85 percent of time he represents women who are                
 surviving spouses.  This legislation will help those women save in            
 income taxes.  He noted the clients that he has discussed this bill           
 with like it.  Mr. Hompesch urged the committee to pass HB 199.               
                                                                               
 Number 1600                                                                   
                                                                               
 LINDA HULBERT, Insurance Agent, New York Life Insurance Company,              
 testified via teleconference from Fairbanks.  She noted she was an            
 educator in Alaska for 20 years and has been a life insurance agent           
 for the last 8 years.  Ms. Hulbert told the committee that she                
 spends a lot of her time helping people plan for retirement, in               
 that she writes wills to help them plan to protect themselves                 
 against risk.  Many times there aren't a lot of assets and there is           
 the concern about what is going to happen to the second spouse.               
 With life expectancies extending, what is going to be there to help           
 a second spouse upon the death of a spouse.  She said the bill                
 presents a tremendous opportunity to help both people with                    
 significant assets and those people who do not have many assets.              
 Ms. Hulbert said she would like to urge the committee to pass the             
 legislation because she feels it is very important for all                    
 Alaskans, no matter what their income level is.                               
                                                                               
 VICE CHAIRMAN COWDERY asked whether anybody else wished to testify.           
                                                                               
                                                                               
 There being no further witnesses to testify, he called for a brief            
 at-ease at 3:55 p.m.  The meeting was called back to order at 4:00            
 p.m.                                                                          
                                                                               
 Number 1673                                                                   
                                                                               
 REPRESENTATIVE BRICE made a motion to move HB 199 out of committee            
 with the zero fiscal notes and individual recommendations.  Hearing           
 no objection, HB 199 was moved out of the House Labor and Commerce            
 Standing Committee.                                                           
                                                                               
 HB 116 - WORKERS COMPENSATION SELF-INSURANCE GROUP                            
                                                                               
 Number 1698                                                                   
                                                                               
 VICE CHAIRMAN COWDERY announced the committee would hear HB 116,              
 "An Act relating to workers' compensation self-insurance."                    
                                                                               
 REPRESENTATIVE HUDSON made a motion to adopt CSHB 116, dated                  
 4/16/97, Version H, for the purpose of discussion.  Hearing no                
 objection, it was so ordered.                                                 
                                                                               
 CHAIRMAN NORMAN ROKEBERG called for an at-ease at 4:01 p.m.  He               
 called the meeting back to order at 4:05 p.m.  He said the                    
 committee has adopted the committee substitute for HB 116.                    
                                                                               
 Number 1775                                                                   
                                                                               
 REPRESENTATIVE PETE KOTT, sponsor of the measure, came before the             
 committee.  He said he would explain the changes in the CS.  The              
 changes were made after numerous hours of discussion with the                 
 various entities.  The first change is on page 2, line 1, where               
 language was deleted that established a filing fee of $500.  The              
 approval has now been given to the director to establish that                 
 filing fee.  On page 2, line 31, language was deleted that allowed            
 the director to prescribe the amount of the security and included             
 an amount of $450,000.  He noted this used to be prescribed by the            
 director.                                                                     
                                                                               
 REPRESENTATIVE KOTT said, "Page 3, line 27, used to have an                   
 estimated standard annual premium of $250,000 and $500,000 for                
 subsequent years.  We've doubled that from $250,000 to $500,000 for           
 the first year and added conditional $250,000 for subsequent years            
 and that deals with the premiums.  Then over to page 4, lines 5 and           
 7, we're requiring now the administrators and the service companies           
 to carry errors and omission insurance - not in the original bill.            
 And page 4, line 31, this is an inclusion that basically suggests             
 that the group will be subject to the premium tax imposed on other            
 domestic carriers.  The next change is on page 7, line 9.  In the             
 original bill there was language that groups had to give notice               
 when a member terminated or cancelled and to continue to carry that           
 member for 30 days unless the member obtained substitute insurance.           
 The new CS removes that language.  On page 8, line 5, there is                
 language included to allow the group to request a 60 day extension            
 on the deadline because often times they are fairly comprehensive             
 and they just allow some flexibility.  Then over on page 9, line              
 27, we've added a requirement that the director must approve the              
 refunds before those monies are refunded to the members.  Then on             
 page 10, starting on line 6, this language was added making it                
 clear that the 25 percent imposed in this section is in addition to           
 the 25 percent required under 20.47.030 (A)(10).  The amendment               
 that you have addresses this particular area."                                
                                                                               
 CHAIRMAN ROKEBERG asked whether that is the amendment the committee           
 members have.                                                                 
                                                                               
 REPRESENTATIVE KOTT said, "Yeah, there seemed to be some confusion,           
 if I just might divert, that you could in fact use that 25 percent            
 to allow it to go toward the premiums and this makes it clear that            
 this is not used toward premiums."                                            
                                                                               
 Number 2029                                                                   
                                                                               
 REPRESENTATIVE HUDSON asked whether the amendment is included in              
 the CS.                                                                       
                                                                               
 REPRESENTATIVE KOTT said it is not in the CS.  He said that the               
 intent wasn't clearly captured.  The amendment makes it certain.              
 Representative Kott said, "On page 10, line 18, (indisc.) with the            
 workers compensation so -- insurance guarantee fund.  This is a new           
 section that requires the groups to establish a workers' comp self-           
 insurance guarantee fund.  Each member is to make a one time                  
 deposit of 5 percent into the fund.  The member can receive that 5            
 percent back once they leave the group."                                      
                                                                               
 Number 2062                                                                   
                                                                               
 REPRESENTATIVE RYAN asked whether the purpose of the guarantee fund           
 is if somebody can't meet their obligations.                                  
                                                                               
 REPRESENTATIVE KOTT responded, "It could be used to meet the                  
 group's obligations or the -- yeah, the group's obligation.  It's             
 a group fund."                                                                
                                                                               
 Number 2103                                                                   
                                                                               
 REPRESENTATIVE KOTT referred to page 11, lines 5 and 6, "This                 
 specifies that 25 percent of the funds paid under subsection 160              
 and the guarantee funds may be used to make up inefficiencies and             
 that gets back to that earlier section - 5 percent.  And page 11,             
 lines 26 and 27 reduces the penalties from the previous amount and            
 they were $1,000 and $10,000 and it's been reduced to $500 and                
 $5,000."                                                                      
                                                                               
 REPRESENTATIVE HUDSON asked what it was before.                               
                                                                               
 REPRESENTATIVE KOTT responded, "It was $1,000 - civil penalty may             
 not exceed $1,000 for each act or violation and may not exceed                
 $10,000 in the aggregate."                                                    
                                                                               
 Number 2156                                                                   
                                                                               
 REPRESENTATIVE RYAN asked whether that will be the penalties for              
 all insurers or just for this group.                                          
                                                                               
 REPRESENTATIVE KOTT responded that he believes it is just for this            
 group.  He then referred to page 12, lines 2 and 3 and said,                  
 "Again, the penalties were again reduced and it used to be on line            
 2, it was $10,000 now it's reduced to $5,000, and on line 3 it was            
 $100,000 and it was reduced to $25,000."                                      
                                                                               
 Number 2190                                                                   
                                                                               
 REPRESENTATIVE GENE KUBINA asked why the penalties are being                  
 reduced.                                                                      
                                                                               
 REPRESENTATIVE KOTT said with the higher amount the intent of                 
 penalties are to ensure that the group complies.  Once that is                
 satisfied, then there is no need to adjust it any higher.  He said            
 he didn't want to put so much of a burden on the group that it                
 perhaps would cause insolvency or bankruptcy.  It is very similar             
 to other states.  He noted in the original version of the bill he             
 arbitrarily came up with a number.                                            
                                                                               
 Number 2225                                                                   
                                                                               
 REPRESENTATIVE BRICE asked Representative Kott if he knows what the           
 penalties are for the same type of violations under the regular               
 workers' compensation (indisc.).                                              
                                                                               
 REPRESENTATIVE KOTT responded that he isn't sure what they are.               
                                                                               
 Number 2246                                                                   
                                                                               
 REPRESENTATIVE KOTT referred to page 12, line 6, and said, "We've             
 defined `knowingly' as basically the same -- the definitions are              
 basically the same definition as used in the criminal code.  I                
 might add on line 1, page 12, the word `knowingly' was added.  It             
 was felt that in order to impose a civil penalty of this nature, at           
 least the group should be aware that they did in fact commit a                
 violation of the cease and desist order.  That's back on page 12,             
 line 1.  I overlooked this one, but the word `knowingly' was                  
 inserted.  And page 13, line 21, we removed the word                          
 `unincorporated' from the definition of workers' comp self-                   
 insurance group.  The reason for that is that some of these groups            
 could in fact be incorporated.  Page 13, line 23, we changed the              
 minimum number of employers from five and upped it to ten.  Mr.               
 Chairman, I believe that concludes the changes.  I might add that             
 the drafter - we just confirmed before coming down here Section 2             
 of the new CS is not required now - page 13.                                  
                                                                               
 REPRESENTATIVE HUDSON referred to page 13, line 23, and said that             
 has been increased from five to ten.  That places a little higher             
 standard on acquisition to this treatment.                                    
                                                                               
 REPRESENTATIVE KOTT said that is correct.  He said, "I'll just kind           
 of recap now what the bill contains based on my original objective            
 and that is to make whole any one employee that has a workers' comp           
 claim to make sure that they are paid and made whole as best as we            
 can.  And now what we have in this whole mix to ensure that happens           
 is that you can use the surplus from prior fiscal years.  You have            
 an administrative fund that can be used.  We have the fund that was           
 created in 24.47.160 (a), which is -- in the earlier fund we talked           
 about the 25 percent, we have the guarantee fund, we have                     
 assessments, we have a $450,000 security and you have the joint               
 several liability of the members.  Then if all else fails which               
 after all these layers, I can't that it would, we have the $1                 
 million in aggregate assets."                                                 
                                                                               
 Number 2467                                                                   
                                                                               
 REPRESENTATIVE RYAN said at the last hearing on the bill he                   
 remembers asking about the amount of money that was going to be               
 used as a fall back position.  He referred to the $1 million and              
 said he asked about liquidity versus assets.  Assets can't                    
 necessarily be liquidated at their value and it would take a period           
 of time to get them converted to liquid assets.  Representative               
 Ryan said he had thought he heard that they would come back to the            
 committee with liquid assets.  He also said he believes that the              
 director of the Division of Insurance and a number of other people            
 had said that $1 million wasn't really sufficient and that they               
 were going to see if they could pool more assets and come up with             
 a higher basis.                                                               
                                                                               
 REPRESENTATIVE KOTT indicated that the discussion did take place.             
 He pointed out that what has been added to the bill is a 5 percent            
 fund, a 25 percent fund and also $450,000 surety, cash or bond.  He           
 said he doesn't know what they would amount to if they were added             
 up, but it would be close to $1 million in cash or liquid assets.             
 He stated that as the legislature has addressed some of the issues            
 with workers' comp over the years, you also have to recognize that            
 some of the serious worker's comp claims are not resolved on a                
 monthly basis.  Sometimes it takes several years to resolve a                 
 claim, and when it is resolved, often times you find that you're              
 not paid in one lump sum.  It is disbursed over several years.  He            
 said he believes the amount is an appropriate amount.                         
                                                                               
 TAPE 97-44, SIDE B                                                            
 Number 001                                                                    
                                                                               
 REPRESENTATIVE KOTT continued, "I'm not sure if they establish the            
 interest penalty, if you will, on workers' comp, but on a regular             
 insurance claim, you know it takes several years to make the                  
 adjustment.  And while you're in these serious workers' comp                  
 claims, if there are any, you're still collecting from your members           
 the annual premiums.  That's been increased.  Don't mean that there           
 is a number of safeguards now that this bill did not possess when             
 it first hit this committee from a monetary perspective."                     
                                                                               
 Number 027                                                                    
                                                                               
 REPRESENTATIVE COWDERY questioned how payment will be issued to the           
 hospital if there is a claim.                                                 
                                                                               
 REPRESENTATIVE KOTT responded that he would defer the question to             
 some of the people in the audience.  He said it is his                        
 understanding that the administrator would be setting up this fund.           
                                                                               
 Number 087                                                                    
                                                                               
 REPRESENTATIVE COWDERY said he would like to make sure the question           
 is answered as to when an injury occurs, how will the treating                
 physician be assured of payment.                                              
                                                                               
 REPRESENTATIVE KOTT said he assumes it would be no different than             
 what currently happens.  He noted he might be wrong.                          
                                                                               
 Number 121                                                                    
                                                                               
 STEVE WISDOM, President, Alaska State Homebuilders Association                
 (ASHA), came before the committee to testify.  He noted he lives in           
 Homer.  Mr. Wisdom informed the committee members that currently 32           
 other states have legislation that allows self-insurance pools and            
 14 other states have models that his organization is looking at.              
 He referred to the question of why the ASHA wants to do this.  The            
 first reason is most homebuilders have ten or fewer employees on              
 their payroll.  Larger insurance companies don't pay attention to             
 the small employer as they don't have the loss control specialist             
 in the field to work with the small employer.  If a loss comes up,            
 they pay the loss and, in many cases, the small employer has to               
 find a new carrier the next year.  Self-insurance pools require all           
 participants to be completely involved in the workers' compensation           
 issue such as on-site safety programs.                                        
                                                                               
 MR. WISDOM said another reason is to reduce costs.  Studies looking           
 at self-insurance pools, specifically within the homebuilders                 
 associations in the 14 other states, the cost to the builder has              
 been reduced between 30 percent and 40 percent which is from                  
 actively working the loss control.  There are also savings involved           
 in that if there is someone injured, they have immediate follow-up.           
 He said a side benefit to passing the bill is a safer workplace for           
 the worker because the employer becomes heavily involved in putting           
 safety programs in place.  He noted there is also the peer pressure           
 involved.                                                                     
                                                                               
 MR. WISDOM referred to the last hearing on the bill and said the              
 Division of Insurance raised four major questions.  One was the               
 guarantee fund which is now addressed in the CS.  Another was the             
 premium tax which has also been addressed in the CS.  The third is            
 the number of employers that would be involved to bring the base up           
 and that has been addressed.  The division was also concerned with            
 the assets and the liquidity of the assets, the $1 million, which             
 has also been addressed.  He pointed out their major concern is a             
 safe workplace and their employees.  He noted employees are a major           
 asset to small firms.                                                         
                                                                               
 Number 318                                                                    
                                                                               
 BARBARA HUFF-TUCKNESS, Director, Legislative and Governmental                 
 Affairs, Teamsters Local 959, testified via teleconference from               
 Anchorage in support of HB 116.  She said, "In reviewing this bill,           
 we believe that by allowing groups of employers to pool their                 
 resources together for the purpose of providing workers'                      
 compensation coverage for their employees, this bill will                     
 accomplish several things."                                                   
                                                                               
 MS. HUFF-TUCKNESS said, "First, we believe this bill will help                
 reduce the cost of workers' compensation by reducing the cost and             
 we've got a mitigating reason out there as always.  Money saved               
 could be utilized to improve wages and benefits for employees.                
 These savings can also be used to provide more job opportunities in           
 the state which would create a more stable work environment for               
 many Alaskan workers, for example, the Alaska Truckers Association.           
 And in talking with several individuals within that group, there              
 seems the way the set up in the current system - those larger                 
 companies out there within the Trucking Association would (indisc.)           
 better break than some of the smaller companies and we believe that           
 there is a theory here in pooling those companies together would              
 more realistically spread some of those costs.  Secondly, as a                
 self-insured group, we believe there would be a great incentive, on           
 behalf of the group participants, to focus on safety as was mention           
 (indisc.) speaker.  This incentive itself will reduce the cost of             
 workers' compensation coverage.  We believe the group would tend to           
 look closer at safety and the importance of the safety programs."             
                                                                               
 MS. HUFF-TUCKNESS continued, "It has been proven that workers who             
 are properly trained in safety work smarter on the whole and for              
 that reason have much fewer, if any, accidents which results in a             
 reduced number of claims, thereby reducing the cost of workers'               
 compensation.  The concept applied here, and I'm not going to use             
 the phenology that they are the same because definitely there are             
 some differences.  But I think the concept is somewhat similar to             
 the health and welfare plans whereby groups of employers and/or               
 many groups of unions have pooled their resources (indisc.) buying            
 power for purposes of providing health care coverage.  This has               
 worked well and has provided a substantial savings to the plan,               
 plus allowing expansion of benefits based on more available dollars           
 out there."                                                                   
                                                                               
 MS. HUFF-TUCKNESS continued, "Additionally, and I don't want to say           
 that we walked into this I guess with blinders on because there               
 were a lot of discussion - a lot of issues that had been raised to            
 share with the committee.  There were concerns that the group would           
 not be able to cover the cost of compensation claims if there was             
 a catastrophic accident, especially during the first year of this             
 start-up of this group, whether it's with the homebuilders, the               
 trucking association or any other viable non-profit organization              
 out there.  In fact I might add, and I don't know with an after-              
 thought here driving over here this afternoon, even looking at the            
 anticipation of the gap I find coming on board with the various               
 contractors that would be involved in that whether it would be                
 through and AGC or a TAGS organization out there which they do                
 currently already have set up.  This will all be another                      
 opportunity for them, down the road, to look at reducing costs as             
 well."                                                                        
                                                                               
 MS. HUFF-TUCKNESS continued, "But our concerns definitely were with           
 the amount of monies covering the premiums in this area because               
 although we represent unionized workers out there, in general, the            
 concern being that the be enough money to cover whatever claims,              
 whether union or nonunion.  With the proposed premium amount                  
 established in the CS, the inclusion of the what I term an                    
 `umbrella insurance policy,' those pros in the area are probably              
 more knowledgeable referring to the excess insurance - I believe              
 that's the way it's referred to in the bill."                                 
                                                                               
 MS. HUFF-TUCKNESS referred to the requirement that an additional 25           
 percent of each member's premium be paid in addition to the                   
 required premium amount and said there seems to be sufficient                 
 guarantees to protect the injured worker and ensure ongoing                   
 coverage with those existing or ongoing claims.  She urged the                
 committee to move the bill.                                                   
                                                                               
 Number 551                                                                    
                                                                               
 BILL TAYLOR, representing Alaska State Homebuilders Association,              
 came before the committee to testify.  He noted he is a homebuilder           
 in Anchorage and the name of his company is Callin (ph.) Builders.            
 He gave committee members an annual report from New Mexico, which             
 is a state that has model legislation.  Mr. Taylor said the report            
 is actually a financial statement of the group after they have been           
 in business for a number of years.  He pointed out the financial              
 stability of the group.                                                       
                                                                               
 MR. TAYLOR said they have tried to address the concerns by raising            
 the initial premium requirement from $250,000 to $500,000 in                  
 response to numerous concerns about protecting the potential                  
 claimant and protecting the group from insolvency.  He said they              
 have also tried to increase the amount of oversight from the                  
 director.  There has been a lot of discussion about start-up risk.            
 Mr. Taylor said he thinks that if the start-up risk hasn't been               
 eliminated, it has been neutralized to the point where it shouldn't           
 be a significant concern.  He said there are four layers of                   
 protection.  The first is 70 percent of the premium income goes to            
 loss reserve.  He noted that in the New Mexico report, their loss             
 reserves is upwards of $11 million.  This fund can generate a                 
 tremendous amount of money in a relatively short period of time.              
 Mr. Taylor referred to the assessment to the members and said the             
 liquidity of the initial requirements has been improved                       
 considerably.  He said if there is a catastrophic claim, the                  
 payment will come in a delayed manner which gives more time to                
 accumulate reserves.                                                          
                                                                               
 Number 686                                                                    
                                                                               
 MR. TAYLOR explained the next layer is the $450,000 surety bond.              
 That is straight cash, dollars in the bank that the director of the           
 Division of Insurance has access to.  The final layer is the                  
 guarantee fund.  He said they have required 5 percent of the                  
 initial premium deposit and $500,000.  That guarantee fund has been           
 funded with a $25,000 bullet.                                                 
                                                                               
 MR. TAYLOR informed the committee he would like to propose one                
 amendment on 6, line 16, in Section 21.47.060., add a new section             
 (C), "The board of trustees shall follow the prudent man rule of              
 investing when investing money held in reserves for losses."  He              
 said they just want to assure that the board of trustees, who are             
 responsible for placing the reserve money, certificates of deposit            
 and treasury bond and bills, follow the prudent man rule of                   
 investing.  That assures that when the board of trustees allocates            
 these funds for various investments follows the prudent man rule.             
                                                                               
 CHAIRMAN ROKEBERG asked  Mr. Taylor to put his proposed amendment             
 in writing.                                                                   
                                                                               
 Number 814                                                                    
                                                                               
 MR. TAYLOR said another point he would like to make is that the               
 director has virtual control over the self-insured groups through             
 the amount, the form and which insurance company is to be used for            
 aggregate, surplus or excess insurance.  He said that concludes his           
 testimony.                                                                    
                                                                               
 REPRESENTATIVE RYAN pointed out that we live in a politically                 
 correct world and the term now is "prudent person."                           
                                                                               
 Number 860                                                                    
                                                                               
 REPRESENTATIVE COWDERY asked if the reserves are paid back to the             
 members as dividends.                                                         
                                                                               
 MR. TAYLOR said his understanding is those funds have to be held.             
 There is an actuarial equivalent of an amount of money that must              
 remain in place for a given group of potential insurers.  Once that           
 minimum has been met then the surplus can be given back to the                
 members in the form of dividends.  So there is the net income and             
 the required minimums.  That sort of goes into another pool that              
 can be returned to the group.                                                 
                                                                               
 REPRESENTATIVE COWDERY asked how the assurance will be made that              
 when a person goes to a doctor, how that doctor will be paid.                 
                                                                               
 MR. TAYLOR said they would follow the same rules that other                   
 compensation carriers play by.  He said if someone has a claim, all           
 of his employees know that their carrier is the self-insured group            
 and would report that to the medical facility on their application            
 for treatment.  He said they would be a bona fide carrier and would           
 be licensed by the state of Alaska.  Mr. Taylor noted that the                
 employer is required, by statute, to post their workers'                      
 compensation information in an obvious place.  So the worker, in              
 theory, should have that information instantly available to them.             
                                                                               
 Number 1042                                                                   
                                                                               
 REPRESENTATIVE COWDERY questioned how payment will be made to the             
 individual who has a temporary disability.  He also questioned how            
 it would be made if there is a permanent disability.                          
                                                                               
 MR. TAYLOR explained there is what is called a third party                    
 administrator (TPA) that the group contracts with to make all the             
 claims paying mechanisms work.  He noted the TPA is a professional            
 group that would be hired by the self-insured group.                          
                                                                               
 CHAIRMAN ROKEBERG asked Mr. Taylor how many members are in the New            
 Mexico organization.                                                          
                                                                               
 MR. TAYLOR said he believes they started out with approximately 343           
 participants and they are now over 1,000.                                     
                                                                               
 CHAIRMAN ROKEBERG questioned how many homebuilders are in Alaska.             
                                                                               
 MR. TAYLOR responded that there are 893 firms.                                
                                                                               
 CHAIRMAN ROKEBERG asked if TPA would determine the amount of                  
 premium assessments to each member based on their employees and               
 their loss record history.                                                    
                                                                               
 MR. TAYLOR indicated the TPA has the expertise, the actuarial                 
 sciences and the required assessments that would be needed.                   
                                                                               
 Number 1151                                                                   
                                                                               
 REPRESENTATIVE COWDERY said he would assume the 893 firms would               
 support the legislation.  He asked if there are any subcontractors,           
 trucking associations, etc., who would also support the bill.                 
                                                                               
 MR. TAYLOR said the legislation enables those groups to form their            
 own pools.  The truckers, miners truckers, electrical workers,                
 etc., could form their own groups.                                            
                                                                               
 REPRESENTATIVE RYAN asked if all the groups could form under an               
 umbrella.                                                                     
                                                                               
 MR. TAYLOR indicated they could if they elected to do that.  He               
 pointed out that he thinks what has been successful in other states           
 is that groups of "like kind" sort of form their own separate pool.           
 Mr. Taylor said his understanding is that this would allow, for               
 example, the miners and the builders to form a group if they                  
 elected to.                                                                   
                                                                               
 Number 1364                                                                   
                                                                               
 RENEE MURRAY was next to testify via teleconference from Anchorage.           
 She informed the committee she is a retired vice president of                 
 Wetzel Services.  She noted she is not representing anyone.  Ms.              
 Murray stated she has worked in the insurance industry for 40                 
 years, 20 of which was spent working for insurance companies and              
 the last 20 she spent working in the self-insurance and third party           
 claims administration business.  Ms. Murray pointed out she has               
 nothing to gain by the passage of the bill other than the benefits            
 that she believes would adhere to the general public through cost             
 savings experienced by the entities that could band together as               
 self-insurers grow.                                                           
                                                                               
 MS. MURRAY said that generally, group self-insurance would greatly            
 reduce the individual insurance costs over time and these savings             
 would eventually reduce consumer costs and should benefit everyone.           
 She said she thinks the bill is an excellent bill with substantial            
 safeguards and guarantees.  She said she can't imagine why there              
 would be any legitimate opposition other than perhaps that of                 
 insurance companies who stand to lose their substantial premium               
 dollars.  She noted in her career she has almost never seen a self-           
 insured entity opt to return to a standard insurance market because           
 the cost savings were so great, and those few instances when that             
 did occur they generated a return to the self-insurance market at             
 a later date.                                                                 
                                                                               
 Number 1356                                                                   
                                                                               
 MS. MURRAY said she has one suggestion for a change in the bill and           
 that is, in her opinion, the net worth of the group should be                 
 increased to between $3 million and $5 million as an additional               
 guarantee.  With that exception, she stated she is very much in               
 favor of the passage of the bill.                                             
                                                                               
 CHAIRMAN ROKEBERG asked if that would be the individual net worth             
 or the cumulative net worth of the group.                                     
                                                                               
 MS. MURRAY responded the net worth of the group.                              
                                                                               
 Number 1399                                                                   
                                                                               
 LINDA HALL, Representative, Alaska Independent Insurance Agents and           
 Brokers, testified via teleconference from Anchorage.  Ms. Hall               
 stated she just received the CS and isn't prepared to discuss the             
 changes that have occurred.  She said as Representative Kott went             
 through the changes there were some questions she had.  Ms. Hall              
 said she would limit her testimony to questions.  She said, "One is           
 the requirement for an E and O coverage.  I -- this is not                    
 necessarily an appropriate coverage for these types of groups.  I'm           
 not sure what the intent of requiring E and O (error and omission)            
 coverage is.  There may be a requirement for fiduciary liability,             
 but I'm not sure that the E and O requirement is particularly                 
 appropriate."                                                                 
                                                                               
 MS. HALL indicated she has concerns about the guarantee fund.  One            
 of the earlier major objections to the bill was the lack of                   
 participation in a guarantee fund.  This particular language in the           
 CS does not address what type of guarantee fund this would be.  She           
 questioned whether all groups that fall under this chapter would              
 participate in a single guarantee fund or if each group would have            
 a separate fund and whether there would be the ability to assess              
 from one self-insurance group to another.  She said there are a               
 number of questions that need to be addressed on that issue.                  
                                                                               
 Number 1487                                                                   
                                                                               
 MS. HALL stated she takes serious objection to the reduction in the           
 penalties in the bill.  As a member of the insurance industry, they           
 are subject to substantial penalties.  She said she would like to             
 see how the penalties in the bill compare to the penalties of the             
 insurance industry.  Not only are insurance practitioners subject             
 to civil penalties, they are also subject to criminal penalties.              
 She said she would think the same requirements should be placed on            
 any type of self-insurance group.  She again noted she hasn't had             
 a chance to review the CS, but her philosophical objection to the             
 removal of large premium dollars from the insurance marketplace is            
 still a major concern.  Alaska is a very small marketplace and the            
 bill would detract from the ability of all businesses who might not           
 qualify for a special interest group to purchase coverage at a                
 reasonable price.                                                             
                                                                               
 Number 1543                                                                   
                                                                               
 CHAIRMAN ROKEBERG asked if Ms. Hall if she believes the passage of            
 the legislation would have a negative impact on the availability of           
 workers' compensation insurance to other people who couldn't join             
 groups like this in the state of Alaska.                                      
                                                                               
 MS. HALL said she absolutely feels that way.  As she testified in             
 February, we have a very small marketplace, we've had a good track            
 record and we are continuing to attract good strong insurance                 
 companies to the market which increases competition for all Alaskan           
 businesses.  If the available premium volume is eroded through                
 self-insurance groups, insurance companies will no longer find                
 Alaska an attractive place to do business and, therefore, that                
 competitive edge that we're now feeling will be lost.                         
                                                                               
 Number 1593                                                                   
                                                                               
 REPRESENTATIVE HUDSON said, "One of the lines of question here was            
 what if a member who is on workers compensation is traveling to               
 another state.  Under the current workers' compensation that is               
 handled by traditional carriers such as yourself, what kind of bona           
 fides are provided to the insured so that he or she can get                   
 attention out of the state of Alaska?"                                        
                                                                               
 MS. HALL indicated she hasn't adjusted workers' compensation, but             
 suggest Ms. Murray would probably be able to answer.                          
                                                                               
 Number 1642                                                                   
                                                                               
 MS. MURRAY stated, "This law is subject to all of the regulations             
 and controls of the Alaska Workers' Compensation Act, and that act            
 covers - for multiple states.  You have a right to choose which               
 state.  If you're an Alaska worker working say in the state of                
 Washington and are injured there, you can elect which state that              
 you wish to chose your coverage from.  This would be exactly the              
 same because the coverage for this is no different than coverage              
 for any other."                                                               
                                                                               
 Number 1701                                                                   
                                                                               
 RICHARD BLOCK, Alaska National Insurance Company, came before the             
 committee to address the bill.  He said there are three principle             
 areas from his reading of the CS that suggest the bill still has              
 very serious problems.  He said his company still opposes the bill.           
 One problem is there isn't a change in the underlying problem in              
 the requirement that there be cash liquidity capital funds to be              
 able to operate for the first several years required in this bill.            
 He said there is talk about the $1 million, but that is not $1                
 million that goes to this group.  It's the $1 million of net worth            
 in the participants of this group.                                            
                                                                               
 MR. BLOCK said that we have heard that there are several layers of            
 resources available in the event of failure of the organization to            
 be able to pay claims.  He said he isn't sure that it is                      
 appropriate to be designing a program around alternatives to                  
 failure.  Those programs are the assessment of the members which he           
 would propose is not an easy thing to reach if there were members             
 whose financial conditions change or who had the net worth but not            
 the case.  Secondly, they are talking about a $450,000 bond, but              
 that bond as he reads the language is not readily cash and                    
 accessible as perhaps a capital cash account would be.  He referred           
 to the guarantee fund and said he would have to plead a little bit            
 of inability to respond completely on that fund because apparently            
 now there is a separate guarantee fund proposed with $25,000 in it            
 or 5 percent of premium for group self-insurance only.                        
                                                                               
 Number 1856                                                                   
                                                                               
 MR. BLOCK referred to the New Mexico annual report and said he                
 would suggest that if Alaska adopts this bill and this was started            
 in Alaska, you wouldn't see a report like this.  He said this is              
 because there are no provisions for auditing with a certified audit           
 for this group in the same manner the New Mexico report is done.              
 There is the requirement of a certified audit, but it is limited to           
 three or four specific items such as claim reserves, bad debts and            
 honoring premium reserves and one other item.  It is not a complete           
 financial audit.  He said in the New Mexico report there is an                
 equity, there is retained earnings, there is also a surplus                   
 provided.  No such provision is required in the bill before the               
 committee.  In other words, if there is a profit it is proposed               
 that the profit from each year be returned to the members so that             
 you never really get to the point where you build up a surplus as             
 is demonstrated in a New Mexico approach.  There is no requirement            
 in the bill that there be an initial surplus.                                 
                                                                               
 MR. BLOCK stated, "It is these kinds of failures to establish a               
 financially responsible enterprise that gives us great pause.  And            
 while I appreciate Renee Murray's support for the loss control and            
 for the expense saving and for the economies that can be gained by            
 having an industry sponsored group, with which largely I agree, I             
 also respect Renee Murray's observation that you need a much                  
 stronger capital base underpinning this thing for it to be assured            
 of success."                                                                  
                                                                               
 MR. BLOCK explained the second major point is that there is still             
 failures to reach equity with the other insurance type of                     
 mechanisms.  For example, they did put in the premium tax which is            
 a progressive step given this new guarantee association, but they             
 took portions of it back by saying they get a credit for 50 percent           
 of their assessment to the guarantee association.                             
                                                                               
 An unidentified speaker indicated that was taken out.                         
                                                                               
 MR. BLOCK apologized for not seeing the latest version.  He said              
 there are also numerous technical problems and it is a non-workable           
 type of plan.  Mr. Block stated the points by the Labor Union and             
 Mr. Wisdom in that there is desirability in having a mechanism                
 where people of common interest or common industry can come                   
 together and provide loss control and an economic incentive to work           
 together is an allottable one and it has worked successfully in               
 Alaska with several groups.                                                   
                                                                               
 Number 2088                                                                   
                                                                               
 REPRESENTATIVE RYAN said, "I understand that presently (indisc.)              
 companies do this kind of work have a pool, neither wet or day, for           
 someone who can't perform (indisc.) bankruptcy.  And they will then           
 cover all the claims and assess themselves later to cover the cost            
 of the expenses and to bring this pool back up to where it's                  
 supposed to be.  Is there any provision here for participation for            
 that kind of pooling?"                                                        
                                                                               
 MR. BLOCK said Representative Ryan is referring to the Property and           
 Casualty Guarantee Association.  He said the way that operates is             
 if a property or casualty insurance carrier should become insolvent           
 and unable to pay its claims then the Guarantee Association is                
 activated.  It is activated by assessing all other property and               
 casualty insurers to pay the net loss in claims that is left by the           
 defaulting insurance company.  Mr. Block referred to the question             
 of is there a mechanism in the bill and said apparently what has              
 been done is a guarantee association has been created made up of              
 self insurance groups such as what the homebuilders would                     
 establish.  He said it would be hard for him to understand what               
 happens if it is the homebuilders that go insolvent and there are             
 no other groups formed.  There would be no place to go for                    
 assessment.  Mr. Block noted the Guarantee Association covers all             
 property and casualty insurers including workers' compensation                
 insurers.                                                                     
                                                                               
 Number 2229                                                                   
                                                                               
 REPRESENTATIVE KUBINA asked Mr. Block whether he is correct in that           
 he represents Alaska National Insurance Company.                              
                                                                               
 MR. BLOCK indicated that is correct.                                          
                                                                               
 REPRESENTATIVE KUBINA said one thing that has been portrayed to him           
 is that Alaska National Insurance Company is quite a monopoly in              
 Alaska as far as workers' compensation.  He said, "We either have             
 to get insurance through you or you rewrite the insurance."                   
                                                                               
 MR. BLOCK responded that he has heard that statement was made.  He            
 said he would set the record straight.  "Alaska National Insurance            
 Company is an important market in this state.  Since its formation            
 in 1980, has provided a stable and growing underwriting presence              
 for workers' compensation as well as other lines.  Right now, other           
 than the special interest insurance companies such as the timber              
 exchange and ERIKA (ph.), and I think those are the only two, are             
 in the Municipal League's Group.  We are the only Alaskan based               
 insurance company writing workers' compensation, we are not the               
 only carrier, but the only carrier that is dependent upon a book of           
 Alaska business for our success.  So we've always been here and               
 always provided a market."                                                    
                                                                               
 MR. BLOCK continued, "On the other hand, we are subject to                    
 competing for business with all the other carriers that do come up            
 to this state and there are numerous other companies that come here           
 including the industrial indemnity, which has been a market for us            
 for years.  Nationwide is moving up as a group.  INA or Cigna has             
 always been an important group.  Eagle is a newer company and is a            
 vigorous competitor for certain segments of business and I could go           
 on.  And the fact of the latter is that say within the last five              
 years, Alaska National has written somewhere between 25 and 30                
 percent of the market which means that between 70 and 75 percent of           
 the market is written by other insurance companies.  I don't have             
 the 1996 figures because the cumulative industry-wide data won't be           
 available probably for another couple of months.  But in 1995,                
 which is the last data that I have as to all the other carrier                
 writings, our market share has been reduced and my sense of it is             
 that it's being reduced because of the vigorous competition from              
 other carriers.  Now what about the other 70 or 75 percent?  Does             
 Alaska National in any way participate in that?  With one                     
 exception, which I have to explain for a technical reason, the                
 answer is absolutely no, and the reason for that is that we do not            
 do reinsurance.  Alaska National does not reinsure other insurance            
 carriers.  It's not the business that we do.  So that business                
 written by INA, Industrial Indemnity, Nationwide, Eagle, et cetera,           
 et cetera, is written by those companies for their own account...."           
                                                                               
 TAPE 97-45, SIDE A                                                            
 Number 001                                                                    
                                                                               
 MR. BLOCK continued, "... based on its size determines for itself             
 what that level of catastrophic exposure might be.  And for                   
 example, in our company we may say that we're prepared to accept              
 what $200,000 or $300,000 of a loss, whereas the INA may be more              
 than willing to accept a million dollars of a loss.  It's ludicrous           
 to think that INA or Industrial Indemnity is gonna turn around and            
 reinsure with us when we're prepared to accept much lower loss                
 levels than they are.  So I don't know where the idea came from,              
 but it is totally and utterly ludicrous.  Now there is one                    
 technical area, which I will explain very quickly Mr. Chairman, and           
 that is every insurance company writing workers' comp in the state            
 of Alaska does reinsure, pro rata to its writings, the assigned               
 risk pool.  So that if someone gets an assigned risk policy, that             
 is shared pro ratably by all of the writers based on their                    
 voluntary writings and to that extent, we share in that in the same           
 way all other carriers do and I hope that explains it in such that            
 rests."                                                                       
                                                                               
 Number 102                                                                    
                                                                               
 CHAIRMAN ROKEBERG asked Mr. Block whether his firm buys                       
 reinsurance.                                                                  
                                                                               
 MR. BLOCK indicated it does buy reinsurance.                                  
                                                                               
 CHAIRMAN ROKEBERG asked Mr. Block whether the bill, as he reads it,           
 provides for reinsurance.                                                     
                                                                               
 MR. BLOCK said there are some terminology problems.  If they are              
 self-insuring, they would not be buying reinsurance.  They would be           
 buying excess insurance and the bill does provide for excess and              
 aggregate.                                                                    
                                                                               
 CHAIRMAN ROKEBERG asked whether that is equivalent to reinsurance.            
                                                                               
 MR. BLOCK indicated it would be similar.                                      
                                                                               
 CHAIRMAN ROKEBERG asked whether it is readily available in the                
 national underwriting market.                                                 
                                                                               
 MR. BLOCK responded that he isn't prepared to say that it is                  
 readily available.  He said it is sometimes difficult to find that            
 and it is even more difficult it on a long-term continuing basis.             
 He said, "It is also difficult to find it, the lower retentions you           
 have."  The risk of losing that aggregate excess reinsurance                  
 exposes the group to the necessity of maybe terminating the group             
 or accepting a whole lot of high risk.                                        
                                                                               
 Number 430                                                                    
                                                                               
 MARIANNE BURKE, Director, Division of Insurance, Department of                
 Commerce and Economic Development, came before the committee to               
 give her testimony.  Ms. Burke said, "I think those who have                  
 testified before me have alluded to cash ability to pay the claims,           
 and although there have been some changes to this proposed                    
 legislation, the cash is still not there.  There has been                     
 discussion about the layers of protection, I would point out to the           
 committee that we will still have that inception when this group              
 starts business -- $87,500 to pay claims.  This is by the formula             
 in the bill itself which requires a minimum of $500,000 in premium            
 of which 25 percent must be available up front."                              
                                                                               
 REPRESENTATIVE BRICE questioned what the number was.                          
                                                                               
 MS. BURKE responded, "The first year's premium must be $500,000 of            
 which 25 percent must be available up front, that's 125,000.  The             
 proposed legislation stipulates that 70 percent will be available             
 for claims.  The math of that is $87,500.  The remaining monies,              
 $37,500, is for administrative costs including the purchase of the            
 reinsurance, which has been discussed at length and I won't cover             
 that again, the cost of the TPA, the organization to administer               
 this group, pay the claims, the audit costs, any costs for rating             
 agencies, advisory organizations, audit, actuarial opinions or any            
 of the other costs associated with administering a group such as              
 this.  Again, it's cash.  We have had testimony to the fact that              
 there is a $450,000 bond or surety.  I would point the attention to           
 page 3, line 19 and 20, which specifically say this is payable only           
 -- payable upon the failure of the group to pay workers'                      
 compensation benefits that it is legally obligated to pay.  In                
 other words, they're insolvent.  So they go insolvent before this             
 $450,000 layer of protection is there.  The reinsurance is provided           
 for, but keep in mind we've only got a total of $37,500 to cover              
 all of those costs."                                                          
                                                                               
 MS. BURKE said there is a guarantee fund established in the new               
 version.  She said she would emphasize that by definition a                   
 guarantee fund is a group you can go to and say, "Everybody, pony             
 up your share to cover this shortfall."  A group of one, if it is             
 already insolvent wouldn't be able to meet this.  She noted there             
 would be $25,000.  Ms. Burke said there is a lack of cash to pay              
 the claims.                                                                   
                                                                               
 Number 724                                                                    
                                                                               
 CHAIRMAN ROKEBERG asked Ms. Burke if she has had any communications           
 with the Homebuilders Association since the last meeting on this              
 bill.                                                                         
                                                                               
 MS. BURKE responded that Mr. Grossi was kind enough to fax her a              
 copy of the proposed CS.  She said when she saw it she asked for a            
 conference call.  The Alaska State Homebuilders' Association                  
 offered to meet with her and Mr. Grossi to discuss the CS.  She               
 said she was committed to talk to another insurance company that is           
 going to move the state of Alaska, which had been committment for             
 over two months.  She said the conference call was arranged for a             
 day earlier and everybody was on the conference call and the CS was           
 discussed.  Ms. Burke stated she has not met with or discussed the            
 issues with them since that conference call Thursday, a week ago.             
 She informed the committee she has provided the Alaska State                  
 Homebuilders' Association with a memorandum summarizing things that           
 Mr. Grossi from the Division of Workers' Compensation and the                 
 Division of Insurance feel are essential for this type of concept             
 to work.  She stated she firmly supports the concept of the bill,             
 but it simply is not adequately funded.                                       
                                                                               
 CHAIRMAN ROKEBERG asked Ms. Burke to provide the committee with the           
 memorandum.                                                                   
                                                                               
 Number 827                                                                    
                                                                               
 REPRESENTATIVE KOTT said he has heard over and over that there are            
 not enough liquid dollars available to pay claims.  Everybody seems           
 to be coming in on that angle.  The bill has been adjusted                    
 tremendously.  He said, "You've mentioned some of the areas that              
 are taken care of in the bill, but I also must point out that you             
 talk about the claims fund account, the 70 percent for the losses,            
 that is a minimum at least.  The annual payment of premiums is at             
 least -- there is a 25 percent account that was established as well           
 which was not mentioned in the $450,000, if you ever get to that              
 point, would be available.  (Indisc.--coughing) cash.  Beyond all             
 the rhetoric and the smoke, what is the bottom line dollar amount             
 that you would consider satisfactory?"                                        
                                                                               
 MS. BURKE said this issue was discussed on the conference call and            
 she told them that the similar groups in the state of Alaska                  
 requires, by an act of this legislation, $1,500,000.  She informed            
 Representative Kott that in the memorandum she proposed an                    
 alternative funding mechanism that they might be able to consider.            
 If they do not want to be a reciprocal, perhaps they could look at            
 a different funding mechanism.  She said she gave them some                   
 suggestions.  Ms. Burke informed the committee she hasn't had a               
 chance to talk to them since then.  She noted the Homebuilders                
 Association received the memorandum that Thursday morning because             
 she had promised a fast turnaround.                                           
                                                                               
 Number 930                                                                    
                                                                               
 CHAIRMAN ROKEBERG referred to $1,500,000 and asked if that would be           
 in the form of net worth or on deposit.                                       
                                                                               
 MS. BURKE explained the group itself would have a net worth of                
 $1,500,000 which would be in the form of a $300,000 deposit with a            
 bank in the state of Alaska.  It's usually in the form of a tri-              
 party agreement between the director of the Division of Insurance,            
 the self-insured group and the bank.  The money wouldn't be used              
 unless all three parties agree to what it should be used for.  The            
 remainder is in a net worth, usually in the form of approved                  
 investments that are very specifically addressed in the insurance             
 codes - the type of acceptable investments and the percentage of              
 those investments that you can hold at any one time.                          
                                                                               
 CHAIRMAN ROKEBERG said, "Is this making it into a reciprocal group            
 then.  I mean kind of defacto or are you setting the same liquidity           
 and asset standards as you would for a reciprocal?"                           
                                                                               
 MS. BURKE said, "We also, Mr. Chairman, proposed a different                  
 mechanism for them that would help meet our concerns."                        
                                                                               
 Number 1031                                                                   
                                                                               
 REPRESENTATIVE RYAN asked whether the investment would be in                  
 capital assets or would it be investing liquid assets.  He said               
 there would be $300,000 in a bank account and then $1.2 would be              
 invested.  He also asked, "How would these things be if the need              
 arose to convert them to liquid assets?"                                      
                                                                               
 MS. BURKE explained it is very specifically spelled out in the                
 insurance code that certain assets are considered nonadmitted such            
 as a building or something that is not readily liquid, but                    
 investments, cash, certificates of deposit, bonds, treasuries,                
 things like that are considered admitted assets.  She said they               
 might have $10 million worth of assets in land and buildings, but             
 that wouldn't count towards the $1 million.                                   
                                                                               
 REPRESENTATIVE RYAN said, "We talked about reinsurance and I think            
 it was mentioned risk pooling, I'm not sure what the term was that            
 was used, you mentioned $37,000 left over from the interest premium           
 to cover this multitude of expenses.  If they want to go out and              
 get the reinsurance premium, what the premium be for the                      
 reinsurance they would have to buy to cover - make their operation            
 reasonable."                                                                  
                                                                               
 MS. BURKE indicated she can't answer that question because she                
 doesn't know how much reinsurance they would propose.  She said she           
 would have to review what their experience factors were.  That is             
 in many ways a negotiated cost.  You go out and shop for                      
 reinsurance.                                                                  
                                                                               
 Number 1187                                                                   
                                                                               
 REPRESENTATIVE RYAN asked Ms. Burke that under this law, she would            
 set the premium tax.  He questioned how much it would be.                     
                                                                               
 MS. BURKE indicated the legislation  makes the premium tax the same           
 as any other insurer in Alaska which is 2.7 percent.                          
                                                                               
 Number 1210                                                                   
                                                                               
 REPRESENTATIVE KUBINA said a lot of what he has heard today is a              
 reiteration of a previous meeting.  He suggested putting the bill             
 into a subcommittee.  Representative Kubina said he is surprised              
 that the Homebuilders Association hasn't been in Ms. Burke's office           
 to discuss the differences.                                                   
                                                                               
 CHAIRMAN ROKEBERG said because of the circumstances revolving how             
 the House currently works, he is reluctant to put it into a                   
 subcommittee, but he thinks the message should be clear from the              
 committee what the committee would like done with the bill.                   
                                                                               
 Number 1267                                                                   
                                                                               
 REPRESENTATIVE RYAN indicated he is neither in favor or against the           
 bill.  He said his only concern is that if this operation comes               
 into effect, it can operate as solvently as other people who are              
 doing insurance in this state.  Representative Ryan said he doesn't           
 want to see something that is designed to fail.  He would like to             
 see them have the opportunity, but he also has a responsibility               
 that before legislation is passed it has a good chance of                     
 succeeding.                                                                   
                                                                               
 Number 1485                                                                   
                                                                               
 JOHN GEORGE, Lobbyist, National Association of Independent                    
 Insurers, said he hasn't testified on the bill before because his             
 clients don't write a whole lot of workers' compensation insurance,           
 but they do write a lot of auto, homeowner and fire insurance.  He            
 noted he is a former director of the Division of Insurance, but               
 prior to that he was the first risk manager for the state of                  
 Alaska.  He said he brought the state into self-insurance for                 
 workers' compensation, property and liability.  Before that, he               
 worked in risk management in the oil industry and formed captive              
 insurance companies and did self-insurance.                                   
                                                                               
 MR. GEORGE said when he left state employment, the first thing he             
 did was cut a contract with the Municipal League to help them form            
 the JIA, a pooling for municipalities.  Mr. George stated he is a             
 proponent of self-insurance, pooling, etc.  He believes a lot of              
 the things the Homebuilders' Association are saying are true in               
 that by them paying careful attention to safety and loss control              
 programs they can control their costs.  They ought to be doing                
 that.  Contractors particularly, but small businessmen in general             
 tend to do things creatively to get by and resist OSHA regulations.           
 He said he thinks there is a high likelihood that there will be               
 assessments of members of the Alaska State Homebuilders'                      
 Association, to the extent that they can pay those.  It would                 
 probably work.                                                                
                                                                               
 MR. GEORGE said, "I remind you in 1985 and 1986 when the building             
 industry went in the tube, there were contractors leaving town.               
 Now had that program been in effect, those people would still be              
 subject to assessment, but where are they?  Well they went                    
 bankrupt.  Are they still subject to assessment after they go                 
 bankrupt?  No, they left town.  You can't find them.  Who is going            
 to pay?  The ones that are left.  The 10 percent that survived                
 would end up paying the claims for the 90 percent who left town,              
 went bankrupt, aren't here anymore.  So I think there are some real           
 concerns about this joint several liability and assessment in a bad           
 economy.  As long as things are growing, we got lots of                       
 contractors, it might work.  But I can see some real problems with            
 a small group.  I mean if you had every contractor in the state,              
 you've only got 800, that's smaller than New Mexico and in bad                
 times you're going to have a whole lot less than 800 and they won't           
 have the money to pay the assessments."                                       
                                                                               
 Number 1485                                                                   
                                                                               
 PAUL GROSSI, Director, Division of Workers' Compensation,                     
 Department of Labor, was next to come before the committee.                   
                                                                               
 CHAIRMAN ROKEBERG asked, "The PERA lacks audit provisions - does              
 that trouble you?"                                                            
                                                                               
 MR. GROSSI indicated that troubles him.  He noted that not only the           
 audit of the group troubles him, but the individual members of the            
 group should be audited.  There should be a financial statement for           
 each individual member so that the director of the Division of                
 Insurance can properly judge how viable this group is.  Mr. Grossi            
 said he isn't against the bill in concept.  They think it's a good            
 idea because of the stress on safety and claims loss.  He stated              
 the big problem is that it is under capitalized.  There is not                
 enough money to pay claims.  There is $87,000 and one injury could            
 make them become insolvent.  He noted concern that the $1 million             
 may not be liquid assets.  There is $450,000 which may or may not             
 be enough and the only other source of money is the $25,000 in the            
 guarantee fund.  They are going in the right direction, but they              
 just are quite there as far as funding the payment of claims.                 
                                                                               
 Number 1598                                                                   
                                                                               
 ROBIN WARD, Alaska State Homebuilders Association, came before the            
 committee to give her testimony.  She said her association feels              
 that the concept that Ms. Burke has set out will probably create a            
 barrier as to ever being able to make a group like that work with             
 that kind of cash requirement.  Ms. Ward said she really does feel            
 that there is enough cash for a couple of reasons.  One is that not           
 only do you have the 25 percent, there is the additional deposit,             
 so there is $87,500 times two.  That is only for three months.  She           
 said they have to make quarterly payments.  So there will be                  
 another $87,500 at the beginning of the fourth month.  By the                 
 beginning of the ninth month there will be another $87,500 on top             
 of that.  By the end of the first year, there will be a fair amount           
 of cash.  Ms. Ward said they have reinsurance and they can                    
 negotiate it so that they only pay $5,000 of a claim.  She said               
 they understand it is expensive.  They may have to put some money             
 into their reinsurance, but in the bill the director has the right            
 to prescribe the form, the amount and the insurance company that              
 they would use for reinsurance or excess insurance.  Ms. Ward said            
 they understand that for the first year they will have to have                
 expensive reinsurance because they have to cover what they don't              
 have in claims cash available.  She said they do feel there will be           
 enough cash with the reinsurance.                                             
                                                                               
 Number 1677                                                                   
                                                                               
 MS. WARD explained the amendment requires the director to work with           
 the association to determine how much is refunded.  Those reserves            
 won't be returned until the director gives them permission to do              
 that.  The guarantee fund is set up so that the 5 percent is                  
 initial.  Ms Ward noted there are other assessments required by the           
 director and she would assume the director would create regulations           
 so that there will be further assessments.  She noted they do                 
 expect that have more than just one in the group.                             
                                                                               
 CHAIRMAN ROKEBERG asked Ms. Ward why they don't allow a dividend to           
 the membership and just provide an actuarial approved lowering of             
 the premium.                                                                  
                                                                               
 MS. WARD stated that is what they are hoping will happen, but Mr.             
 Block mentioned that in New Mexico there was surplus.                         
                                                                               
 CHAIRMAN ROKEBERG said you have to have a certain amount of                   
 retainer.                                                                     
                                                                               
 MS. WARD said that is correct and it is prescribed by the director.           
                                                                               
 Number 1739                                                                   
                                                                               
 REPRESENTATIVE RYAN said he would like to see a spread sheet of how           
 it would work and one for how things are currently working.  He               
 said he isn't currently convinced that this thing is going to work,           
 but he wants to see it work.                                                  
                                                                               
 MS. WARD noted her organization has been approached by several                
 reinsurance agencies who are ready to work with them.                         
                                                                               
 Number 1781                                                                   
                                                                               
 CHAIRMAN ROKEBERG said, "I am also concerned about even though you            
 raised from five to ten the number of people to join the group, I             
 think that's something that works against you, if you will.  You              
 might want to consider even increasing that.  It would give you a             
 higher level of assets to work with and the higher amount of                  
 premium base, particularly initially -- because I want to put on              
 the record the fact that even though the Homebuilders as an                   
 organization are spearheading this, there is interest on the part             
 of a large number of other business organizations in the state.  So           
 the applicability of this bill is not just to a group of people and           
 businesses that may have relatively high net worths comparatively.            
 It could be to other business that would have marginally lower net            
 worths as a rule and, therefore, we need to look at that and that             
 into consideration.  So the committee's charge here is to make sure           
 this works for everybody in the state if we're going to go forward            
 with this, so you need to keep that in mind.  And I would ask that            
 because this bill has only one -- is there any further questions of           
 Ms. Ward?  Thank you very much, Ms. Ward."                                    
                                                                               
 CHAIRMAN ROKEBERG said rather than sending the bill to                        
 subcommittee, he would like the bill sponsor to work with everybody           
 involved.  He said he believes in the concept of the bill, but is             
 concerned about the substance of it as it is presently structured.            
                                                                               
 ADJOURNMENT                                                                   
                                                                               
 Number 1892                                                                   
                                                                               
 CHAIRMAN ROKEBERG adjourned the House Labor and Commerce Standing             
 Committee meeting at 5:43 p.m.                                                
                                                                               

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