Legislature(2005 - 2006)CAPITOL 17
01/19/2005 03:15 PM House LABOR & COMMERCE
| Audio | Topic |
|---|---|
| Start | |
| Overview of the Department of Labor and Workforce Development | |
| Overview: Department of Commerce, Community and Economic Development | |
| Overview: Division of Insurance | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
HOUSE LABOR AND COMMERCE STANDING COMMITTEE
January 19, 2005
3:20 p.m.
MEMBERS PRESENT
Representative Tom Anderson
Representative Gabrielle LeDoux
Representative Bob Lynn
Representative David Guttenberg
Representative Pete Kott
Representative Norman Rokeberg
MEMBERS ABSENT
Representative Harry Crawford
COMMITTEE CALENDAR
OVERVIEWS: DEPARTMENT OF LABOR AND WORKFORCE DEVELOPMENT;
DEPARTMENT OF COMMERCE, COMMUNITY AND ECONOMIC DEVELOPMENT;
DIVISION OF INSURANCE;
DIVISION OF OCCUPATIONAL LICENSING
PREVIOUS COMMITTEE ACTION
No previous action to record
WITNESS REGISTER
GREG O'CLARAY, Commissioner
Department of Labor and Workforce Development (DLWD)
Juneau, Alaska
POSITION STATEMENT: Provided an overview of the Department of
Labor & Workforce Development.
EDGAR BLATCHFORD, Commissioner
Department of Commerce, Community, and Economic Development
Juneau, Alaska
POSITION STATEMENT: Provided an overview of the Department of
Commerce, Community, & Economic Development.
GREG WINEGAR, Director
Division of Investments
Department of Commerce, Community, and Economic Development
Juneau, Alaska
POSITION STATEMENT: Provided information regarding the Division
of Investments.
LINDA HALL, Director
Division of Insurance
Department of Commerce, Community, and Economic Development
Juneau, Alaska
POSITION STATEMENT: Provided an overview of the Division of
Insurance.
RICK URION, Director
Division of Occupational Licensing
Department of Commerce, Community and Economical Development
Juneau, Alaska
POSITION STATEMENT: Provided an overview of the Division of
Occupational Licensing.
ACTION NARRATIVE
CHAIR ANDERSON called the House Labor and Commerce Standing
Committee meeting to order at 3:20:00 PM. Representatives
Anderson, Ledoux, Lynn, Guttenberg, Kott, and Rokeberg were
present at the call to order.
^OVERVIEW OF THE DEPARTMENT OF LABOR AND WORKFORCE DEVELOPMENT
3:21:35 PM
GREG O'CLARAY, Commissioner, Department of Labor and Workforce
Development (DLWD), stated that DLWD has undergone two years of
major reshaping under the Murkowski Administration and launched
the Alaska Future Program in Anchorage on December 14th. The
goal of this program is have 90 percent of Alaskan residents in
the Alaskan workforce.
COMMISSIONER O'CLARAY reported that workers' compensation still
needs to be addressed, which is why he has initiated talks with
several key people on this matter. With respect to Alaska hire,
he opined that employers need to be invited to express why they
are not hiring Alaskans.
3:26:56 PM
COMMISSIONER O'CLARAY remarked that when paychecks fly south of
Ketchikan, they do nothing for Alaska's economy, but become a
drain. The locals here deserve better jobs and good family
wages, he opined.
3:29:06 PM
CHAIR ANDERSON noted that the committee packet should include a
document entitled "Alaska Department of Labor and Workforce
Development Overview" that details the key services and
accomplishments of 2004 and the goals of 2005.
3:29:40 PM
REPRESENTATIVE KOTT agreed that Alaska hire is very important,
and said that DLWD takes this serious. He recalled that the
department publishes a report that shows the break down of
employment statistics for Alaska and the percentage of Alaskans
who are employed by each employer. He inquired as to when the
next report will be available.
COMMISSIONER O'CLARAY said that the document will be available
in the first part of February.
REPRESENTATIVE ROKEBERG pointed out that the number of Alaska
hires could actually increase if the definition of Native
Alaskans was changed to be current with the case law on that. He
then noted that DLWD has a new study that addresses the issue of
proper classification and new employees. He inquired as to what
gave rise to that study and finally, he asked if it was due to
the new federal employee classification or was it a review of
Alaska's rather antiquated statutes.
COMMISSIONER O'CLARAY answered that it was not new. The case
law and statutes from the Division of Unemployment Security have
empowered the department. From these statutes the definition is
used to distinguish the difference between an employee and a
contractor.
COMMISSIONER O'CLARAY explained that there is concern because an
employee classified as an independent contractor does not pay
into the unemployment insurance fund. This fund needs to be
safeguarded and solvent, and those employers following the rules
are protected from rate increases that occur when someone is not
paying his/her share.
REPRESENTATIVE LEDOUX asked if there are any initiatives
targeting increasing the number of rural people in the
workforce.
COMMISSIONER O'CLARAY said that's an area on which this
administration has been concentrating. The relationship with
Alaska Works Program (AWP) apprenticeship program has been
strengthened. This program is the primary avenue for training
for the construction and marine industry. Industry people have
committed to accept AWP trainees for their ships, which he
characterized as a major accomplishment. There are about 1,000-
1,200 mariners in the fishing industry and there about 100
vacancies at all times.
3:35:05 PM
COMMISSIONER O'CLARAY opined that DLWD has done a marvelous job
recruiting in Bush Alaska. In November DLWD sponsored a pipeline
training program from which 74 graduated, and of that 74 over 50
percent were Bush Alaskans. Many of these young people already
have jobs in the North Slope. For a long time, there has been a
cultural misunderstanding that these young people do not want to
leave their villages. However that's not true anymore. Although
they have a strong sense of family, they realize that it is
imperative that they leave for school and work.
CHAIR ANDERSON turned his attention to workers' compensation and
asked if Commissioner O'Claray intends to work on legislation
with the ad hoc committee or if it was the governor's intent to
have his own legislation.
COMMISSIONER O'CLARAY expressed hope that there would be one
bill and noted that the department has been working very close
with the ad hoc committee. Although there were some difficulties
last year, the administration has discussed some suggestions
with the ad hoc committee.
3:39:18 PM
COMMISSIONER O'CLARAY pointed out that employers are having to
choose between health benefits and workers' compensation because
the latter is statutorily required and the other is not. He
expressed his desire to have a good bill this year with an eye
on getting a final bill that addresses the more controversial
issues that will require more time.
^OVERVIEW: DEPARTMENT OF COMMERCE, COMMUNITY AND ECONOMIC
DEVELOPMENT
EDGAR BLATCHFORD, Commissioner, Department of Commerce,
Community, and Economic Development (DCCED), informed the
committee that DCCED's mission is to promote a healthy and
strong economy, as well as healthy and strong communities. The
department regulates the existing industry and assists
communities with governance and sustainability. He noted that
DCCED has been keen on economical development and promoting
local hiring.
3:43:02 PM
COMMISSIONER BLATCHFORD informed the committee that DCCED's
total budget is around $125 million, of which $7.8 million
originates from the general fund (GF). He highlighted DCCED's
work including the passage of SB 272, which was followed by the
passage of Administrative Order 219 that transferred the
corporations program to the Division of Banking. This transfer
will better serve the public by creating a single organization
within state government, he opined.
3:44:35 PM
COMMISSIONER BLATCHFORD next turned to the Division of
Investments, which he characterized as a very successful
division, and said that it was the best way to implement public
policy loans. Last year the Division of Investments processed
133 loans for a total of $15.2 million, of which 114 loans
totaling $6.5 million went to commercial fishermen. He then went
on to report that there were 10 loans for commercial fisheries,
8 rural development loans totaling almost $800,000 resulting in
the creation or retention of 29 jobs, and finally there was 1
small business loan that retained 2 jobs. He then reported on
specifics of the tax and loan programs, as well as the fisheries
revitalization. He concluded with a discussion on the marine
industry's Community Development Quota Program (CDQs). Rapid
growth, he said, resulted in revenues in over $100 million in
training benefits since its inception in 1992.
3:47:46 PM
COMMISSIONER BLATCHFORD highlighted the Rural Bulk Fuel
assistance program, which he characterized as a success of the
special session last summer. Working close with the communities,
DCCED was able to reduce the amount of assistance to under
$800,000 dollars in loans to deliver bulk fuel primarily for the
preservation of life and infrastructure. He next reported that
administering community advocacy was at the heart and soul of
the division. He announced that the department assisted several
communities with issues such as flooding, erosion, fuel
shortages, the creation of online web sites and community
profile maps. He then moved on to the discussion of Local
Boundaries Commission (LBC) proceedings. Communities around the
state are reviewing the possibility of annexing, detaching, or
creating new boroughs. All of the aforementioned is of great
interest for people in this state, he said.
COMMISSIONER BLATCHFORD moved on to the Alaskan Aerospace
Development Corporation (AADC), which spent $11.6 million in
federal funds in 2004. This expenditure translates into 45 full-
time jobs in Kodiak and 16 in Anchorage. He then pointed out
that the Alaska Industrial Development and Export Authority
(AIDEA) also generated revenue. Alaska Energy Authority (AEA),
he commented, is of great interest to communities around the
state. He noted that upgrades and new emergency response
services, as well as bulk fuel facility upgrades were completed.
With regard to the Alaska Seafood Marketing Institute (ASMI), he
related that Alaska seafood is the second most popular food
brand on menus of the top 500 restaurants in the U.S. The
Regulatory Commission of Alaska (RCA), he announced, has also
been active according to his report. In fact, pending dockets
have been reduced while awards and grants have increased.
3:52:14 PM
COMMISSIONER BLATCHFORD reviewed the future goals of DCCED,
which include working closely with CDQs and fine-tuning the
Magnuson-Stevens Act (MSA). The MSA is of huge importance to
coastal communities. He reminded the committee that the
initiative passed last year called the Community Quota Entity
(CQE), which enables the communities to buy Individual Fishery
Quotas (IFQs) shares and then lease to communities who want to
fish the quotas.
3:54:11 PM
COMMISSIONER BLATCHFORD stated that tourism is of great
importance. This year, at least a million visitors are expected
to arrive by cruise ship. He then went on to say that the
department works very closely with the Office of Economic
Development (OED), and the tourism industry as well as the
Alaskan Travel Association.
3:55:07 PM
COMMISSIONER BLATCHFORD turned to mining and stated that the
department works closely with communities such as Delta
Junction. With regard to the Development of Alaskan Rural
Tourism (DART), it has been partly funded by a $300,000 grant.
This $600,000 project was an 18-month long project into which
several communities have been accepted. He moved on to announce
the new initiative called the Manufacturer's Extension Program
(MEP). The goal of this initiative is to create 12 electronic
commerce centers in rural Alaska. It doesn't require the
construction of $100 million infrastructure because it can be
done quickly using local people and local resources.
3:56:47 PM
COMMISSIONER BLATCHFORD reminded the committee that the Alaska
Regional Development Organization (ARDORs) program is up for
authorization. There are 11 ARDORs, most of which are located in
rural areas. He informed the committee that although some are
more successful than others, this is a good program.
REPRESENTATIVE GUTTENBERG recalled mention of the City of Delta
Junction considering expansion; and noted that there is some
controversy regarding whether or not the residents want a
borough. He then mentioned that Fairbanks is reviewing
annexation of some of the local mining areas, and asked if
Fairbanks is becoming more active with the LBC.
COMMISSIONER BLATCHFORD emphasized that the City of Delta
Junction is a progressive community. Mayor Gilbertson and the
city administrator are reviewing expanding the opportunities for
the local people, and there are so many opportunities in the
greater Delta area. He noted that other entities in the area
would like to seize the opportunities available to the people in
the Delta Junction area.
4:00:14 PM
REPRESENTATIVE ROKEBERG informed the committee that he was privy
to a letter written to the governor which suggested that the
commercial fishing revolving loan fund be merged with (indisc).
He then asked if the commissioner is familiar with the letter or
any of the issues involved with it.
COMMISSIONER BLATCHFORD replied that he was familiar with it.
REPRESENTATIVE ROKEBERG asked the commissioner if there is any
merit to consolidating some of the loan programs "specific to
mission of the particular program".
COMMISSIONER BLATCHFORD reiterated his belief that the Division
of Investments does an excellent job. This department implements
public policy quickly because it doesn't have to go through some
of the regulatory processes required of lending institutions.
COMMISSIONER BLATCHFORD continued by stating that the Division
of Investments has a loan portfolio totaling close to $2.5
million and it's very committed to providing local
opportunities. He iterated that his department uses local people
who work very closely with organizations in the state, and the
goal is to keep local opportunities for local people. This is
the beauty of the CDQ program. However, the "limited
entrepreneurs" permits have been migrating outside of the state.
He then announced that it is the governor's policy, as well as
the department's, to keep local permits [in the state].
4:02:44 PM
COMMISSIONER BLATCHFORD opined that the best way to preserve
jobs is to work with the loan programs within the Division of
Investments.
REPRESENTATIVE ROKEBERG remarked that the area of consolidation
had more to do with loans that are more conducive to commercial
loans for fishing boats, gear, and things of that nature, not
permits or CDQs.
GREG WINEGAR, Director, Division of Investments, Department of
Commerce, Community, and Economic Development, clarified that
the Division of Investments does not subsidize anyone in rural
Alaska. He explained that the division works closely with those
who borrow money from the state investors.
Mr. WINEGAR stated that the program has been very successful and
has returned about $40 million to the state. The Division of
Investment is a very successful program and one created through
the wisdom of the legislature. The Division of Investments,
unlike traditional lending institutions, has faith and
confidence in local people.
MR. WINEGAR pointed out that the challenge here is that the vast
majority of the division's portfolio would not qualify for any
loans obtained through any other financial institution. He then
went on to say that in regards to the subsidy issue there should
be a handout; this is illustrated on page 6, where, he said, the
division provides statistics that relate to the program. The
program has repaid all the funds that went into it and continues
to earn more money than necessary to operate the program and
provide for loans.
4:06:41 PM
REPRESENTATIVE ROKEBERG pointed out that the indication on page
6 of the handout refers to a stated interest rate that is a
fixed rate of prime plus 2 percent. He asked if this was
correct.
4:07:28 PM
MR. WINEGAR answered that it is a typo; the rate is actually
prime plus 2 percentage points for the portfolio.
REPRESENTATIVE ROKEBERG mentioned that there seems to be a
controversy growing about the competition between the Division
of Investments and commercial lenders, and possible duplication
of services.
Mr. WINEGAR informed the committee that legislation on that
issue has been considered. One of the major concerns is that the
vast majority of loans the division doles out are to individuals
and groups that do not qualify for any other financing. If this
program is not available, there will be no availability of funds
for those individuals.
REPRESENTATIVE ROKEBERG stated that this should be reviewed.
REPRESENTATIVE ROBERTA GARDNER, Alaska State Legislature,
inquired as to how the success of an ARDOR is defined.
COMMISSIONER BLATCHFORD explained that the department deems an
ARDOR successful when it is able to identify opportunities for
local people and provide a voice for local economical
development. A good concrete example of a successful ARDOR is
the MEP program.
^OVERVIEW: DIVISION OF INSURANCE
4:10:59 PM
CHAIR ANDERSON announced that the next order of business would
be the Division of Insurance.
4:12:12 PM
LINDA HALL, Director, Division of Insurance, Department of
Commerce, Community, and Economic Development, provided an
overview of the division's mission. She announced that the
division is a resource which provides the technical ability that
helps the legislature deal with the insurance world. She then
went on to say that the division is a regulatory agency that
provides consumer protection, enforces insurance regulations,
and provides licensing for insurance companies. In fact, she
said, the core of the division's services is the provision of
licensing for insurance companies; there are approximately 1,000
companies for which the division is responsible. Ms. Hall
indicated that the state has licensed 19,000 agents and brokers
who sell insurance, of which 4,000 are residents. Obviously,
there are a huge number of nonresidents who do business in the
state.
MS. HALL next turned to compliance, another core service of the
division. One of the division's primary roles is the financial
examinations of the state's domestic insurers. Statute requires
a financial examination every three years, which entails both
in-house certified public accountants and outside contractors.
The division thoroughly reviews the financial standing of
insurance companies for whom it is the primary regulator. She
then went on to say that the division collects a premium tax.
The division generated approximately $44 million at the end of
fiscal year 2004 in premium tax into the state general fund.
However, the division is not a general fund agency. She informed
the committee that the division generates $5.4 million in fees.
The division charges fines, penalties, and interest all of which
is placed into the general fund.
MS. HALL pointed out that compliance also deals with market
conduct, which means the division reviews what the insurance
companies are doing. Such review of market conduct might entail
review of how the insurance companies underwrite and what their
claim practices are like. The division tends to do this when it
has an inordinate amount of complaints. The division tries to
resolve complaints by calling the companies. Insurance companies
pay for this market conduct, she highlighted.
4:17:34 PM
MS. HALL mentioned that the investigations are also performed
for agencies and surplus line brokers. The investigations are
done by individuals with law enforcement backgrounds. These
investigations, she explained, usually lead to administrative
action or criminal prosecution. She informed the committee that
three fraud cases are now being heard.
MS. HALL moved on to a discussion of consumer services, which
was offered to provide the public better access to the division.
This component of the division helps people find answers to
problems. In the last year, the consumer services component has
mitigated losses in the range of $300,000 for consumers. She
pointed out that the division also does filing approvals for
property/casualty and some life and health rates and forms. In
the last year there have been 6,600 filings, she reported.
MS. HALL identified the fourth core function of the division as
public information and speaking engagements. Most of the staff,
she said, deals with the public in some fashion. Public
information regarding insurance is disseminated via the radio,
public service announcements, and the Internet.
4:22:03 PM
MS. HALL described the division's work on a day-to-day basis.
For example, the division has dealt with a bankrupt insurance
company for which claim settlement was difficult. Ultimately,
legislation was created that made it possible to mitigate the
problem. Workers' compensation, she noted, is an important issue
that the division addresses. In a study done by an organization
in Oregon, it was determined that Alaska consistently ranks high
in premium costs as compared to the other states. In 2002,
Alaska was ranked number 15 on the list, and in 2004, Alaska was
ranked number 2, only behind California. Workers' compensation
is very expensive and costly, she commented. Furthermore,
markets are expensive in Alaska, adjustments are difficult in
the Bush, and certain types of industries have difficulty
finding insurance providers.
4:26:34 PM
MS. HALL pointed out that committee packets should include a
letter regarding bid rigging and inappropriate steerage of
business, which has become a national problem. This issue has
generated a huge amount of concern with regulators.
4:28:20 PM
MS. HALL noted that solvency is also very important, as the
division has to make sure that insurance companies doing
business in Alaska can pay any claims against them. She informed
the committee that modernization and streamlining insurance is
also on the division's agenda. She expressed hope there will be
a new bill that makes it easier for insurance companies to enter
the state. She made it very clear that moving an insurance
business into this state is going to be streamlined. Electronic
licensing and back grounding are to be the standard for agents.
Health insurance is also an issue, she affirmed. Of all the
people covered in Alaska, 40 percent are affected by the agency.
By extension then, it can shown that legislation concerned with
health insurance would impact only this small percentage.
MS. HALL concluded with a discussion on title insurance, which
is also being worked on by the division. The division has also
worked with auto dealers regarding how they insure their
vehicles, chiefly with guaranteed auto protection.
REPRESENTATIVE ROKEBERG asked if the assessment fees for the
companies were authorized.
MS. HALL replied yes, and added that the fee was kept at 4
percent.
4:35:34 PM
REPRESENTATIVE ROKEBERG asked what dollar amount is derived from
the 2 percent.
MS. HALL answered that it generates about $4.5 million a year.
CHAIR ANDERSON next turned attention to the Alaska Comprehensive
Health Insurance Association (ACHIA).
MS. HALL explained that the ACHIA program is an insurance
program for people who are high risk and unable to obtain
insurance any other way. This is the market of last resort. The
ACHIA program provides private insurance for high risk
individuals and the cost of the program is assessed back to
insurers.
REPRESENTATIVE ROKEBERG asked if Ms. Hall meant that ACHIA is
funded out of the premiums of the 40 percent of individual small
group policies.
MS. HALL affirmed that the companies that write the individual
and small group policies are responsible for the cost.
REPRESENTATIVE GUTTENBERG asked whether the cash flow problem is
short term or long term.
MS. HALL clarified that it's not a cash flow problem. She opined
that this program is a burden on the companies that are paying
more in increasing percentages.
REPRESENTATIVE LEDOUX recalled that a couple of years ago
several coastal communities were impacted when one of the
maritime insurance companies went "belly-up." She asked whether
the division regulates maritime insurance.
MS. HALL answered that the division does cover some types of
maritime insurance. She explained that the type that is not
regulated is referred to as a non-admitted company, which is not
covered by the guaranty funds. Although the division required
that there be disclosure, what Representative LeDoux recalled
could still happen.
REPRESENTATIVE LEDOUX asked whether people can buy self-
procurement insurance.
MS. HALL estimated that this is generally not the case.
REPRESENTATIVE LEDOUX then asked whether or not someone could
buy a workers' compensation policy, which is required by statute
under self-procurement.
MS. HALL answered that workers' compensation has to be placed
with an admitted insurer.
4:41:30 PM
^OVERVIEW: DIVISION OF OCCUPATIONAL LICENSING
RICK URION, Director, Division of Occupational Licensing,
Department of Commerce, Community and Economical Development,
informed the committee that his division is responsible for the
licensing of 19,700 new businesses. The cost of the license has
increased since 2003, but this has not affected the rate at
which they have been issued. He pointed out that the state has
over 70,000 business licenses, 45,000 professional licenses, and
35,000 corporations.
MR. URION turned to the cost of a business license, which has
increased from the $50 fee that has been in place since 1949 to
$200. He then informed everyone that 22 percent of the licensed
public took advantage of the new one-year renewal. He reported
next that the business license and the renewal of professional
licenses is also online. However, the initial professional
licensing cannot be online for obvious reasons, since there has
to be a review of qualifications.
MR. URION announced that HB 70 and SB 52 will replace language
referring to the department with more generic language. He said
that he will continue to ask for the passage of the "Fee and
Fine bill," which allows both the fees and the fines collected
to go to the cost of regulating the professions.
4:48:02 PM
CHAIR ANDERSON informed Mr. Urion that Josh Applebee, Staff for
Representative Anderson, has discussed the notion of one bill
dealing with all entities that sunset.
MR. URION noted that the Division of Legislative Audit has
performed an audit on the sunset process and offered
recommendations.
REPRESENTATIVE ROKEBERG asked if there any home inspector bills.
MR. URION replied no.
ADJOURNMENT
There being no further business before the committee, the House
Labor and Commerce Standing Committee meeting was adjourned at
4:50 p.m.
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