02/24/2010 03:15 PM House LABOR & COMMERCE
| Audio | Topic |
|---|---|
| Start | |
| HB342 | |
| HB346 | |
| HCR19 | |
| Adjourn |
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB 342 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| *+ | HB 346 | TELECONFERENCED | |
| *+ | HCR 19 | TELECONFERENCED | |
ALASKA STATE LEGISLATURE
HOUSE LABOR AND COMMERCE STANDING COMMITTEE
February 24, 2010
3:32 p.m.
MEMBERS PRESENT
Representative Kurt Olson, Chair
Representative Mark Neuman, Vice Chair
Representative Mike Chenault
Representative Bob Lynn
Representative Tammie Wilson
Representative Robert L. "Bob" Buch
Representative Lindsey Holmes
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
HOUSE BILL NO. 342
"An Act extending the termination date of the Board of Certified
Real Estate Appraisers; and providing for an effective date."
- MOVED HB 342 OUT OF COMMITTEE
HOUSE BILL NO. 346
"An Act establishing the Workers' Compensation Advisory Board;
and providing for an effective date."
- MOVED CSHB 346(L&C) OUT OF COMMITTEE
HOUSE CONCURRENT RESOLUTION NO. 19
Urging the Alaska Industrial Development and Export Authority to
present a business case to the Alaska State Legislature that
includes a method for financing, a plan to solicit proposals for
a public and private venture, and an analysis of the economic
feasibility of a state-built and privately operated fuel storage
facility that would serve the public interest by providing
Alaskans with a reliable source of jet fuel, diesel, and
gasoline at competitive prices.
- HEARD & HELD
PREVIOUS COMMITTEE ACTION
BILL: HB 342
SHORT TITLE: EXTEND BOARD OF REAL ESTATE APPRAISERS
SPONSOR(s): REPRESENTATIVE(s) T.WILSON
02/12/10 (H) READ THE FIRST TIME - REFERRALS
02/12/10 (H) L&C, FIN
02/24/10 (H) L&C AT 3:15 PM BARNES 124
BILL: HB 346
SHORT TITLE: WORKERS' COMPENSATION ADVISORY BOARD
SPONSOR(s): REPRESENTATIVE(s) OLSON
02/15/10 (H) READ THE FIRST TIME - REFERRALS
02/15/10 (H) L&C, FIN
02/22/10 (H) L&C AT 3:15 PM BARNES 124
02/22/10 (H) -- Meeting Postponed to 02/24/10 --
02/24/10 (H) L&C AT 3:15 PM BARNES 124
BILL: HCR 19
SHORT TITLE: AIDEA REPORT ON IN-STATE FUEL STORAGE
SPONSOR(s): REPRESENTATIVE(s) RAMRAS
01/27/10 (H) READ THE FIRST TIME - REFERRALS
01/27/10 (H) L&C, FIN
02/22/10 (H) L&C AT 3:15 PM BARNES 124
02/22/10 (H) -- Meeting Postponed to 02/24/10 --
02/24/10 (H) L&C AT 3:15 PM BARNES 124
WITNESS REGISTER
MICHELLE SIKMA, Staff
Representative T. Wilson
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Presented HB 342 on behalf of the sponsor,
Representative T. Wilson.
CHRIS CURTIS, Division of Legislative Audit
Legislative Affairs Agency
Juneau, Alaska
POSITION STATEMENT: Testified and answered questions during the
discussion of HB 346.
JENNIFER STRICKLER, Chief, Professional Licensing
Division of Corporations, Business, and Professional Licensing
Juneau Office
Department of Commerce, Community, & Economic Development
(DCCED)
Juneau, Alaska
POSITION STATEMENT: Answered questions during the discussion of
questions on HB 342.
BUTCH OLMSTEAD, Vice-Chair
Board of Certified Real Estate Appraisers (BCREA)
Department of Commerce, Community, & Economic Development
(DCCED)
Ketchikan, Alaska
POSITION STATEMENT: Testified during the discussion of HB 342.
STEPHEN TURNER, Past President
Board of Certified Real Estate Appraisers (BCREA)
Department of Commerce, Community, & Economic Development
(DCCED)
Anchorage, Alaska
POSITION STATEMENT: Testified during the discussion of HB 342.
KONRAD JACKSON, Staff
Representative Kurt Olson
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Presented HB 346 on behalf of the prime
sponsor, Representative Kurt Olson
LINDA HALL, Director
Division of Insurance
Anchorage Alaska
POSITION STATEMENT: Answered questions during the discussion of
HB 346.
TRENA HEIKES, Director
Division of Workers Compensation
Department of Labor & Workforce Development (DLWD)
Juneau, Alaska
POSITION STATEMENT: Testified during the discussion of HB 346.
KENTON BRINE, Northwest Regional Manager;
Assistant Vice-President
Property Casualty Insurance Association of America (PCI)
Olympia, Washington
POSITION STATEMENT: Testified in support of HB 346.
VINCE BELTRAMI, President
American Federation of Labor and Congress of Industrial
Organizations (AFL/CIO)
Anchorage, Alaska
POSITION STATEMENT: Testified in support of HB 346.
PATRICIA WILSON
Workers Compensation Committee of Alaska
Anchorage, Alaska
POSITION STATEMENT: Testified during the discussion of HB 346.
JAMES HEMSATH, Deputy Director
Business Development
AIDEA
Anchorage, Alaska
POSITION STATEMENT: Presented a PowerPoint overview and
answered questions during the discussion of HCR 19.
REPRESENTATIVE JAY RAMRAS
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Presented HCR 19 as the prime sponsor of
the resolution.
ACTION NARRATIVE
3:32:07 PM
CHAIR KURT OLSON called the House Labor and Commerce Standing
Committee meeting to order at 3:32 p.m. Representatives Buch,
Lynn, Holmes, T. Wilson, and Olson were present at the call to
order. Representatives Chenault and Neuman arrived as the
meeting was in progress.
HB 342-EXTEND BOARD OF REAL ESTATE APPRAISERS
3:32:33 PM
CHAIR OLSON announced that the first order of business would be
HOUSE BILL NO. 342, "An Act extending the termination date of
the Board of Certified Real Estate Appraisers; and providing for
an effective date."
3:32:36 PM
MICHELLE SIKMA, Staff, Representative T. Wilson, Alaska State
Legislature, presented HB 342 on behalf of the prime sponsor,
Representative T. Wilson, paraphrased from the sponsor's
statement, inserted, as follows [original punctuation provided]:
HB 342 extend the termination date of the Board of
Certified Real Estate Appraisers (BCREA).Per AS
08.03.010(c)(20), the board will sunset on June 30,
2010. HB 342 extends this date by four years, to June
30, 2014.
The BCREA is comprised of a five member board to
establish: (1) examination specifications for
certification as a real estate appraiser; (2) rules of
professional conduct to establish and maintain a high
standard of integrity in the real estate appraisal
profession; and (3) regulations necessary to carry out
the purposes of the statutes.
The conclusion of the Legislative Audit is a
recommendation to extend the BCREA's termination date
by four years. (Report Digest #08-20064-10).
3:34:35 PM
REPRESENTATIVE BUCH inquired about the fiscal note.
3:35:01 PM
CHRIS CURTIS, Division of Legislative Audit, Legislative Affairs
Agency, explained that the Division of Legislative Audit
conducted a sunset audit review and issued a report in January
2010. The objective of the audit was to determine whether the
termination date should be extended. She reviewed the
background information, including that the BCREA's authority
originated from an Act that passed the Congress in 1989, the
Financial Institutions Reform, Recover, and Enforcement Act
(FIRREA). This federal law was intended to ensure that
federally regulated real estate transactions appraisals were
performed by real estate appraisers who met the minimum
qualifications and were conducted in compliance with uniform
standards. Under the federal law each state could establish its
own agencies to license and certify real estate appraisers. In
1990, the legislature created the Board of Certified Real Estate
Appraisers (BCREA).
MS. CURTIS stated that the audit recommended that the BCREA be
granted an extension until June 30, 2014, which is half of the
eight years authorized in statute. The Division of Legislative
Audit recommended only a four-year extension of the BCREA,
instead of an eight-year extension. This recommendation is
based on the Department of Commerce, Community, & Economic
Development (DCCED) and the BCREA's failure to address
recommendations by the federal Appraisal Subcommittee (ASC).
Additionally, the Division of Legislative Audit recommended that
the DCCED should improve the administrative support to the
BCREA. She remarked that the lack of administrative support is
a systematic problem, and is one that the committee may see
surface in other audits. Further, the legislative auditors
recommended that the Office of the Governor improve its
appointments to the BCREA in a more timely fashion.
3:37:05 PM
REPRESENTATIVE LYNN asked for clarification of the items the
DCCED and the BCREA failed to address.
MS. CURTIS responded that the federal ASC review found that the
DCCED and the BCREA failed to ensure that two of the 42
certified applicants met the Appraiser Qualifications Board's
minimum time period requirements during which experience must be
earned. Thus, two of the certified real estate appraiser
licensees were not appropriately licensed. The federal ASC
recommended that the DCCED request additional documentation, but
only one applicant responded. Additionally, the federal ASC
asked the department to downgrade the licenses, but no action
was taken to do so. She understood the ASC conducted a
subsequent review, issued additional findings, and the DCCED and
the BCREA are currently working to address any remaining issues.
REPRESENTATIVE LYNN acknowledged that the audit reduced the
extension period. He asked whether the punishment is
commensurate with the findings.
MS. CURTIS related that rather than wait eight years to conduct
an additional review, an audit could be held in four years to
determine whether the DCCED and BCREA are meeting the
requirements. One result of the BCREA not meeting the federal
licensing criteria is that it could lead to federal lending
institutions not accepting appraisals, which is fairly
substantial, she stated.
REPRESENTATIVE LYNN asked whether any inspections or spot checks
would occur.
3:39:31 PM
MS. CURTIS related that she does not believe any oversight is
currently in place except for the federal review.
REPRESENTATIVE LYNN recalled his own military service and
offered his belief that surprise inspections are worthwhile, so
periodic inspections should happen.
3:40:34 PM
REPRESENTATIVE T. WILSON inquired as to whether the BCREA should
be extended for only two years instead of four years as
recommended by the auditors.
MS. CURTIS answered the decision is subjective, that the
division thought that it may take some time to address the
issues and wanted to allow the DCCED and BCREA time to remedy
the problems. She said she thought four years seemed prudent.
REPRESENTATIVE T. WILSON wondered whether it would take two
years to comply with the audit recommendations.
MR. CURTIS responded that it could. She also noted she was
unsure it would warrant the resources necessary to conduct a
full audit.
3:41:45 PM
REPRESENTATIVE BUCH referred to the fiscal note that indicates
the licensing program is required to cover its operating costs
with licensing fees. The revenue generated by BCREA licensing
fees is anticipated to cover the program's full operating costs.
Although this fiscal note indicates new funds are not required
to implement this bill, the fiscal note impact is approximately
$100,000.
MS. CURTIS stated that she cannot address the fiscal note, but
agreed that the BCREA must assess fees to cover the BCREA's
administrative costs.
3:42:43 PM
REPRESENTATIVE BUCH asked how often the BCREA meets.
MS. CURTIS related that the BCREA has met 11 times in the past 4
years.
3:43:00 PM
JENNIFER STRICKLER, Chief, Professional Licensing, Division of
Corporations, Business, and Professional Licensing, Juneau
Office, Department of Commerce, Community, & Economic
Development (DCCED), explained that the fiscal note reflects the
direct expenses, but does not include indirect expenses, which
includes the overhead of the agency. She explained that the
BCREA is not asking for a new appropriation, but is just sharing
the cost of operating the board.
3:44:33 PM
REPRESENTATIVE BUCH asked for the reason that the fiscal note
reflects $100,000 per year. He offered his belief that the
language is confusing.
REPRESENTATIVE CHENAULT explained the fiscal note. He referred
to the funding source as Receipt Support Services (RSS). He
explained that RSS represents funds collected from licensees and
does not represent general fund expenditures.
3:45:49 PM
REPRESENTATIVE CHENAULT asked for the number of certified real
estate appraisers.
MS. STRICKLER answered that there are approximately 243
licensees. In further response to Representative Chenault, she
related that the number of licensees has stayed about the same.
3:46:22 PM
BUTCH OLMSTEAD, Vice-Chair, Board of Certified Real Estate
Appraisers (BCREA), stated at last BCREA meeting held on
February 19th, 2010, the BCREA adopted several changes to its
regulations to respond to the audit. The BCREA gave direction
to its staff to send certified letters to applicants who had not
complied with the continuing education requirements.
Additionally, the BCREA accepted a surrendered license from one
of three applicants. He related that the BCREA reviewed the
Division of Legislative Audit findings and offered his belief
that the board has accomplished the audit recommendations.
3:48:24 PM
STEPHEN TURNER, Past President, Board of Certified Real Estate
Appraisers (BCREA), explained that the federal Appraisal Sub-
committee visits the board each year to review procedures.
However, the 2007 audit was a more thorough audit than normally
conducted. He related that the number of certified real estate
appraisers is up considerably from the 2003 - 2004 period, by
about 50 additional members. With respect to the fiscal note,
since the licenses are biennial, they are renewed every other
year. Thus, the cash flow looks uneven with some years
reflecting a surplus and alternate years depicting negative
figures, but that it nets out at the end of the two-year cycle.
3:49:58 PM
CHAIR OLSON, after first determining no one else wished to
testify, closed public testimony on HB 342.
3:51:13 PM
REPRESENTATIVE LYNN disclosed that he currently holds an Alaska
Associate Broker's license.
3:51:22 PM
REPRESENTATIVE NEUMAN moved to report HB 342 out of committee
with individual recommendations and the accompanying fiscal
notes. There being no objection, HB 342 was reported from the
House Labor and Commerce Standing Committee.
The committee took an at-ease from 3:51 to 3:55 p.m.
3:55:39 PM
HB 346-WORKERS' COMPENSATION ADVISORY BOARD
3:55:50 PM
CHAIR OLSON announced that the next order of business would be
HOUSE BILL NO. 346, "An Act establishing the Workers'
Compensation Advisory Board; and providing for an effective
date."
3:56:19 PM
REPRESENTATIVE NEUMAN made a motion to adopt Amendment 1,
labeled 26-LS1447\R.1, Bailey, 2/15/10, as follows:
Page 1, line 1:
Delete "Board"
Insert "Council, and abolishing the Medical
Services Review Committee"
Page 1, line 5:
Delete "Board"
Insert "Council"
Page 1, line 6:
Delete "Board"
Insert "Council"
Delete "board"
Insert "council"
Page 2, line 10:
Delete "board"
Insert "council"
Page 2, line 13:
Delete "board"
Insert "council"
Page 2, line 16:
Delete "board" both places
Insert "council" both places
Page 2, line 17:
Delete "board"
Insert "council"
Page 2, line 19:
Delete "board"
Insert "council"
Page 2, line 20:
Delete "board"
Insert "council"
Page 2, following line 23:
Insert new bill sections to read:
"* Sec. 2. AS 23.30.095(j) is repealed.
* Sec. 3. AS 23.30.275, enacted by sec. 1 of this
Act, is repealed June 30, 2015.
* Sec. 4. Section 82, ch. 10, FSSLA 2005, is
repealed."
Renumber the following bill sections accordingly.
Page 3, line 8:
Delete all material.
Renumber the following bill section accordingly.
3:56:55 PM
REPRESENTATIVE HOLMES objected for purpose of discussion.
3:57:05 PM
KONRAD JACKSON, Staff, Representative Kurt Olson, Alaska State
Legislature, paraphrased from the sponsor's statement, inserted,
as follows [original punctuation provided]:
Since the mid-1980's an informal workers' compensation
advisory committee has operated in Alaska. This "Ad-
Hoc" committee was comprised of representatives from
organized labor and from the Workers' Compensation
Committee of Alaska - an industry group organized to
lobby for changes to Alaska's Workers' Compensation
Act. The Ad-Hoc Committee was instrumental in
effecting the huge changes made to the Act in 1988.
However, since then, the committee has been unable to
achieve any success in large part due to their lack of
any statutory legitimacy. In 2005, the legislature
amended AS 23.30.095 to create a Medical Services
Review Committee to advise the commissioner of the
Department of Labor and Workforce Development in the
area of medical costs and related services in workers'
compensation. In November 2009, the Committee issued
its final report and recommendations. One of the
recommendations was the establishment by statute of a
Workers' Compensation Advisory Council to advise the
commissioner and legislature in the area of workers'
compensation.
Similar councils have been created and operate quite
effectively in other states. These councils are
charged with recommending statutory changes to the
legislature as well as regulations to departments in
the area of workers' compensation. The purpose of the
council is to improve workers' compensation systems by
drawing together representatives from all workers'
compensation stakeholders who gather and analyze data
and information, discuss and debate options and make
recommendations regarding problems facing the
effectiveness of workers' compensation systems.
This bill creates a council similar to that found in
many other western and mid-western states. The Council
is comprised of 11 voting and 5 non-voting members:
four voting members drawn from organized labor, four
voting members drawn from various employer groups, and
three voting members from the various medical
societies. Non-voting members provide expertise and
are drawn from the insurance industry (2 members) and
the legislature (one from each legislative body).
MR. JACKSON remarked that in the haste to have the bill drafted
the council was inadvertently named a board. Amendment 1 would
correct that discrepancy. He referred to page 2, lines 18 - 20,
of Amendment 1, and noted one additional change in Sections 2 -
4, repeal the Medical Services Review Committee, since it is
replaced by this new council.
3:58:49 PM
REPRESENTATIVE NEUMAN asked for the purpose of the Medical
Services Review Committee.
MR. JACKSON explained that in 2005, the legislature amended AS
23.30.095 to create a Medical Services Review Committee (MSRC),
whose purpose was to advise the commissioner of the Department
of Labor and Workforce Development (DLWD) in the area of medical
costs and related services in workers' compensation.
REPRESENTATIVE NEUMAN restated that the committee reviewed
medical services. Thus, if a person was injured on the job, the
MSRC would determine whether treatment is necessary.
MR. JACKSON related that the MSRC does not review cases on a
case-by-case basis, but the committee would review items such as
the entire medical fee schedule.
4:01:21 PM
REPRESENTATIVE T. WILSON asked whether the composition of the
board is well rounded or if it should be changed.
MR. JACKSON explained that during the course of the MSRC
meetings, the Alaska State Medical Association and others
provided input as interested parties. He offered his view that
the recommendations seem fairly balanced, and although the final
composition may not be perfect, the larger a council or a board
becomes the more cumbersome it also becomes. The proposed
Workers' Compensation Advisory Council (WCAC) would be comprised
of 11 voting members, which seemed to be a reasonable size. A
number of ex-officio members can also provide input. The WCAC's
meetings are public so people will have an opportunity to make
comments at the regular WCAC meetings.
4:02:53 PM
CHAIR OLSON explained that it has taken four and a half years to
arrive at this point and a significant amount of work was
accomplished in the past six months.
4:03:03 PM
REPRESENTATIVE LYNN referred to page 2, line 4, of HB 346 to the
two members of the legislature that would be appointed to the
WCAC. He asked whether it would be useful to have a minority
and majority viewpoint on the WCAC, and select members that have
garnered the most votes and the least number of votes in the
election process.
MR. JACKSON answered that the MSRC recommended that the
leadership from each body of the legislature make appointments
for membership serving on the proposed WCAC.
REPRESENTATIVE LYNN suggested again that perhaps both political
parties should be represented.
4:04:37 PM
REPRESENTATIVE NEUMAN recalled that typically the leadership
from each body of the legislature makes appointments for
membership serving on councils, boards, or task forces.
REPRESENTATIVE LYNN maintained his concern.
MR. JACKSON agreed it is a policy call.
CHAIR OLSON recalled that the Ethics Committee is the only
committee he is aware of that makes that distinction.
REPRESENTATIVE LYNN expressed interest in hearing the viewpoint
from other committee members.
4:06:02 PM
REPRESENTATIVE BUCH related that if the sponsor was amenable,
that he would not oppose the change.
CHAIR OLSON remarked that he would need to consult with the
legislative legal drafters as to the appropriateness.
4:07:00 PM
LINDA HALL, Director, Division of Insurance, explained the
history of the advisory committees on workers' compensation.
She related that the committee members received some letters and
the sponsor statement also references an ad hoc committee. The
ad hoc committee produced numerous proposals for workers'
compensation reform in the late 1980s. The past few years the
ad hoc committee has had difficulty in reaching agreement to
address workers' compensation issues. When the MSRC met this
summer, it tried a different approach to find ways to improve
the workers' compensation system, particularly since it had
difficulty in reaching a good outcome. She recalled other
states have had similar success, such as in Oregon. While
Oregon's committee composition is a little different, some of
their members have advised the Alaska legislature on their
success in working on workers' compensation issues.
4:09:11 PM
MS. HALL said that it seemed to her a body with some statutory
authority might bring a different level of credibility to the
process. She offered her support for the composition of the
proposed WCAC and for establishing this type of an advisory
council.
4:09:42 PM
TRENA HEIKES, Director, Division of Workers Compensation,
Department of Labor & Workforce Development, stated that she is
also speaking as Chair of the Medical Services Review Committee
(MSRC). She stated the bill is much needed. She restated
background information, relating that HB 346 came out of the
recommendations made by the MSRC. In November 2009, the MSRC
submitted its final report to the Department of Labor &
Workforce Development (DLWD). The MSRC recommendations
contained cost containment measures, as well as recommending the
creation of the Workers' Compensation Advisory Council (WCAC).
Since the mid-1980's an informal Workers' Compensation Ad Hoc
Committee has operated in Alaska in an advisory capacity This
"Ad Hoc" Committee, without any statutory authority, was
comprised of representatives from organized labor and from the
Workers' Compensation Committee of Alaska - an industry group
organized to lobby for changes to Alaska's Workers' Compensation
System. Thus, out of "labor" and the WCCA came the ad-hoc
committee, which was instrumental in effecting the huge changes
made to the Workers' Compensation Act in 1988. Since then the
committee has been unable to achieve any success in large part
due to inadequate public input. She surmised that likely
happened due to the lack of any statutory legitimacy for the Ad
Hoc Committee. The meetings were not public, generally were
held behind closed doors, and consequently lack public input.
During her time as a workers' compensation attorney, she
assisted in making proposed changes to the workers' compensation
laws. Although little was accomplished, some of what surfaced
got passed into law since labor and industry both supported the
legislation.
4:13:33 PM
MS. HEIKES offered her belief that at least one administration
ignored the ad hoc committee since it was not formalized in
statute. Thus, the need arose to formalize the MSRC. In 2005,
the legislature amended AS 23.30.095 to create a Medical
Services Review Committee to advise the Department of Labor and
Workforce Development's Commissioner in the area of medical
costs and related services in workers' compensation.
MS. HEIKES stated that this past summer and fall larger issues
loomed and the MSRC began to examine councils in ten other
Western states to view how their councils functioned and to
review their respective statutes. She reiterated Ms. Hall's
comments, that these councils were comprised of labor and
management with the rest acting in an advisory capacity. They
work very effectively in "drilling down" into workers'
compensation issues and making recommendations to the
legislature. She thought they were successful because once the
issues passed through the council, both labor and industry put
their "stamp of approval" on the issues. Generally these
councils have been successful, she remarked. The proposed WCAC
is most closely based on the Wisconsin model. She referred to a
letter in members' packets from Frances Huntley-Cooper of the
International Association of Industrial Accident Boards and
Commissions (IAIABC), describing how the Wisconsin model
operates. The MSRC drew from that model as well as from Oregon,
Washington, and Montana, compiling recommendations that may work
well in Alaska. The intent of the MSRC was to gather workers'
compensation stakeholders together to analyze data and
information, discuss and debate options, and make
recommendations to transform Alaska's Workers' Compensation
System into a first-class system.
MS. HEIKES stated that the MSRC did not want to include people
with a specific agenda since committees comprised of single
agenda members do not work well. Instead, it is desirable to
have people serve who possess a single goal of working to
improving the workers compensation system, healing the injured
worker, and returning the worker to a productive life as soon as
possible, to minimize the impact on their lives.
MS. HEIKES stated that under HB 346, the proposed WCAC would be
comprised of 11 voting and 5 non-voting members: 4 voting
members drawn from organized labor, 4 voting members drawn from
various employer groups, and three voting members from the
various medical societies. Non-voting members would provide
expertise and were drawn from the insurance industry. In fact,
every council the MSRC reviewed had industry as a non-voting
participant. One member from the DLWD and one from each
legislative body would also serve on the proposed WCAC. The
primary purpose of legislative membership would be to apprise
the legislature on matters, such as on issues being reviewed by
the WCAC. She related the MSRB expressed concern about voting
members and committee members should have received letters to
that effect.
4:17:32 PM
MS. HEIKES related that of the 10 states examined, only
employees and employers were given a vote on the council.
Doctors were members but were non-voting members. This bill is
different, since the MSRB voted by a slim majority to give
doctors a vote. The MSRB took the view that doctors should have
a vote since workers' compensation comes down to a "three-legged
stool" consisting of employers, employees, and doctors, due to
the personal injury aspect. The MSRC expressed concern that if
doctors did not have a vote, they would just not show up, and
obtaining their perspective is important. She pointed out that
the insurance industry was not given a vote, although their
expert assistance will also be required, but no other state
council gave them a vote. She said that they really "don't have
a dog in the fight." She recalled one MSRB member stating that
the industry just passes the savings on to the system. She
remarked that the insurance industry also did not specifically
request a vote on the proposed WCAC. She concluded that this
bill creates a WCAC that has been needed in Alaska for some
time, and through the proposed WCAC, the state may be able to
garner more public input to a degree never experienced in
Alaska. She urged members to vote in support of HB 346.
4:19:43 PM
MS. HEIKES, in response to Chair Olson, said she leaves it up to
the legislature as to whether it wants a bi-partisan council.
She stated that these members really serve as messengers to the
legislature to inform them of emerging issues.
CHAIR OLSON remarked he is unaware of any party affiliation on
other boards.
MS. HEIKES agreed that the remaining seats are not examined by
party affiliation.
4:21:09 PM
KENTON BRINE, Northwest Regional Manager; Assistant Vice-
President, Property Casualty Insurance Association of America
(PCI), thanked the industry members and the MSRC for their
recommendations. He stated that Alaska has the highest workers'
compensation rate in the nation, which is driven in large part
by medical costs. In Alaska, medical costs represent about 72
percent of workers' compensation losses, in comparison to the
national average of 58 percent. He offered PCI's support for HB
346. He suggested the committee may wish to consider the make-
up of the proposed council. The Oregon system is a little
different, he stated. The Oregon Workers' Compensation System
was engaged in a major overhaul in 1990. One critical outcome
has been that employers have seen workers' compensation
insurance rates decline, in every year except one, since
enactment of the laws about 20 years ago. In comparison,
Washington State has a state run monopoly and the costs for
workers' compensation and the rates paid by employers have
increased almost every year. The state auditor predicts that
without higher rates or serious benefit cuts, the fund to pay
for injured workers will go broke in two to five years. One
feature unique to Oregon is that its advisory board, called a
Management Labor Advisory Committee (MLAC), is a 10-member
committee comprised of 5 representatives of organized labor, and
5 representatives from management or the employers. There is no
tie-breaking vote and no other entities are allowed into the
advisory committees. It is simply "the two sides battling it
out." He related that the tacit agreement by the legislature
and the governor's office is that unless a major piece of
legislation relating to Workers' Compensation benefits or
procedures has the MLAC seal of approval, the legislature will
not pass it and the governor will not sign it.
4:25:34 PM
MR. BRINE continued. He stated that this is an important tool
to be certain that fairness is had in terms of changing public
policy related to Workers' Compensation claims and benefits. He
suggested that members consider balancing out the current makeup
of the voting members of the proposed council. He said he does
not want to suggest, necessarily that insurers should have votes
on proposed council. However, he understood the rationale for
the voting and non-voting members. He reviewed the 11 members,
of which 4 are employers, noting the other 7 members may have a
different interest, which might be to expand benefit levels to
injured workers or the amount of money available for their care.
He offered his belief that this may not have the effect of
lowering the ever-increasing medical costs. He offered to
provide language if the committee is interested in doing so.
With those changes to HB 346, his organization could
wholeheartedly support the bill. Otherwise, he said, they would
have some concerns, but would still like to see HB 346 move
forward.
4:27:56 PM
VINCE BELTRAMI, President, American Federation of Labor and
Congress of Industrial Organizations (AFL/CIO), stated that he
has served as one of the members of the MSRC for the past six
months. He affirmed the MSRC's unanimous support to establish a
Workers' Compensation Advisory Council (WCAC), which is
relatively consistent with the proposal contained in HB 346. He
stated that creation of the proposed WCAC will place into
statute a function that the Ad Hoc Committee has had limited
success in performing. This proposed WCAC will resolve some
conflicts encountered in the Ad Hoc Committee process and will
consolidate the function of the Ad Hoc Committee and the MSRC.
It should streamline issues to have all the parties at the table
in a construct that should properly serve the two principal
interests, the injured workers and their employers. This should
eliminate some perceived profit motive from the process, he
stated. The MSRC reviewed the models from several other states
as Ms. Heikes mentioned, and uses one most similar to the
Wisconsin model, which have resulted in greater efficiencies for
Workers' Compensation Systems in other states by reducing costs,
improving protection for the injured worker, and setting
policies to return workers back to their jobs more quickly. He
agreed with the basic structure of the composition. He related
that the MSRC held considerable debate on who should have voting
rights. One member from the medical care providers was adamant
about doctors having voting rights. He stated that other states
had limited their voting rights, and although he expressed some
concern, he offered a willingness to hear the doctors make their
case, and acknowledged that doctors provide a key component to
the system.
4:31:21 PM
MR. BELTRAMI expressed concern with the language on page 1,
lines 9 - 11, of HB 346 on the make-up of the employer
representatives. It is conceivable that the oil industry could
occupy all four employer positions since some general
contractors perform oil field work. He suggested amending the
language to assure a more diverse pool of employers. He also
would not object to language that also diversified the organized
labor pool, as well, perhaps a certain number of building
trades. While he did not object to partisan representation, he
thought since the legislative representatives are ex officio,
and provide an advisory role to the legislative bodies. He
strongly urged adoption of HB 346, with some clarifying
amendments that insure Alaska's injured workers will be treated
fairly and in the most efficient manner.
4:33:05 PM
REPRESENTATIVE HOLMES related that all of the members except the
legislators are appointed by the DLWD commissioner. She asked
whether that was acceptable.
MR. BELTRAMI recalled some discussion by the MSRC. The MSRC
thought the appointment process might be less politicized than a
Governor's appointment. He recalled the MSRC agreed uniformly
that the appointment method was adequate.
4:34:16 PM
PATRICIA WILSON, Workers Compensation Committee of Alaska,
stated that the committee submitted written comments. She
offered that the WCCA does not disagree with the council
approach. She related that she spent time at the MSRC meetings
this past year and was impressed with their report and
recommendations. In workers compensation, the "players" are the
employees, the injured workers, and their employers. While
other parties with financial interests, ranging from vocational
rehabilitation counselors, medical providers, and attorneys,
However, she offered her belief that the interested parties
should not be voting members. Instead, those with the ultimate
interest, the employees and employers, should be involved since
they are directly affected. She recalled that the MSRC worked
on cost containment issues with very difficult concepts that
required outside expertise and testimony. This type of format
allows for subject matter experts and the medical community
serves a valuable role. However, the voting members should be
restricted to the employers and the employees. She suggested
that the management appointments be recommended by a group that
can draw from a pool of people specifically experienced in
Workers' Compensation issues, which is a fairly arcane system
with many nuances.
4:38:42 PM
CHAIR OLSON, after first determining no one else wished to
testify, closed public testimony on HB 346.
REPRESENTATIVE HOLMES removed her objection.
There being no further objection, Amendment 1 passed.
4:39:07 PM
The committee took an at-ease from 4:39 p.m. to 4:43 p.m.
4:43:51 PM
CHAIR OLSON stated the amended bill is now before the committee.
REPRESENTATIVE T. WILSON moved to report HB 346, as amended, out
of committee with individual recommendations and the
accompanying fiscal notes. There being no objection, the CSHB
346(L&C) was reported from the House Labor and Commerce Standing
Committee.
The committee took an at-ease from 4:43 p.m. to 4:47 p.m.
4:47:10 PM
HCR 19-AIDEA REPORT ON IN-STATE FUEL STORAGE
CHAIR OLSON announced that the final order of business would be
HOUSE CONCURRENT RESOLUTION NO. 19, Urging the Alaska Industrial
Development and Export Authority to present a business case to
the Alaska State Legislature that includes a method for
financing, a plan to solicit proposals for a public and private
venture, and an analysis of the economic feasibility of a state-
built and privately operated fuel storage facility that would
serve the public interest by providing Alaskans with a reliable
source of jet fuel, diesel, and gasoline at competitive prices.
4:47:14 PM
REPRESENTATIVE JAY RAMRAS, Alaska State Legislature, explained
that HCR 19 is a resolution that pertains to in state fuel
storage. He recalled over a year ago the previous speaker
tasked him with working on a gasoline pricing report. He has
worked closely with Mr. Sniffen, Department of Law on these
issues. An expansion of the Port of Anchorage would provide
incentives for other refineries to operate in Alaska to create
competition for the production of gasoline in Alaska. At the
time, the Port of Anchorage was simply not large enough to
accommodate any additional fuel storage. Since that time,
former Governor Sheffield has physically enlarged the Port of
Anchorage by filling in portions of the port with acres of
gravel. The Port of Anchorage is now large enough to
accommodate fuel storage. He acknowledged that a great debate
has arisen over price gouging and price regulation in Alaska.
He offered his belief that his view on this issue is similar to
the Chair's view on this issue. This resolution supports the
concept of having AIDEA build a business case for the free
market to work, which would create competition to allow
gasoline, diesel, and jet aviation fuel to potentially come from
Cherry Point, the largest refinery in Washington State. This
refinery operates primarily using North Slope crude, refines
with natural gas, at $.08 kilowatts, which would make the cost
of fuels more affordable to Alaskan consumers. The "rack rate"
for the past 16 months has ranged from $.60 to $.90 cents per
gallon less than the two refineries in Alaska. The Tesoro
refinery in Nikiski produces 85 percent of Alaska's fuel and the
Flint Hills Resources Alaska Refinery (Flint Hills) in North
Pole produces the remaining 15 percent. Southeast Alaska is
served by Seattle and often enjoys lower prices than the
remaining parts of the state, he stated. He recapped that this
resolution would request AIDEA prepare a business case to
determine whether it would warrant a third-party operator to
assume the risk and liability of bringing in fuel from another
refinery to serve Alaskans.
REPRESENTATIVE T. WILSON asked whether this would affect Flint
Hills and if AIDEA would be a competitor.
REPRESENTATIVE RAMRAS answered yes. He expressed that is the
whole point, to provide a competitor in the market for the
benefit of consumers across the State of Alaska that does not
come from price gouging or price regulation legislation, which
would have a more adverse affect on Flint Hills than
competition.
4:51:01 PM
REPRESENTATIVE NEUMAN asked whether this resolution is an
outcome of the research on price gouging, and is meant to
provide additional information.
REPRESENTATIVE RAMRAS related that in January 2009, at the time
the report was produced, the Port of Anchorage was not large
enough to accommodate the consideration of extra fuel storage.
Former Governor Sheffield has indicated that the Port of
Anchorage is ready and the terminal would be ready for bulk fuel
storage before the construction could begin.
4:51:52 PM
REPRESENTATIVE RAMRAS related that the risk for anyone entering
into a transaction such as this is that if the competition
lowers the price for Alaskans by $.30 and Flint Hills Resources
(Flint Hills) and Tesoro Refinery (Tesoro) lowers their prices
by $.32 that the fuel would be stranded in the storage tanks,
which is the inherent risk embedded in the free market. He
pointed out that discussions with Flint Hills and Tesoro
indicated their preference for competition rather than price
gouging legislation since that approach to address high fuel
costs could "run Flint Hills out of the State of Alaska."
4:52:34 PM
JAMES HEMSATH, Deputy Director, Business Development, AIDEA,
presented a PowerPoint describing AIDEA's viewpoint of this
opportunity for a business project. He offered to review the
potential problem and opportunities, and address how AIDEA could
participate in a potential plan to address the problem [slide
2].
4:54:35 PM
MR. HEMSATH discussed the regular grade retail gasoline prices
[slide 3]. He explained that the graphs on this slide outline
data obtained from the Department of Law (DOL) and use
Representative Ramras's report, which is updated through 2009.
The top graph shows the absolute prices between Seattle and
Anchorage. The bottom graph provides the average price spread
between Anchorage and Seattle. Historically the spread has been
in the $.10 per gallon range, but in the last 18 months rose as
high as a $1 per gallon differential. Currently the difference
is running at $.75 per gallon. Qualitatively, it is reasonable
to assume a price differential should range between $.10 to $.20
per gallon, which accommodates transportation costs and
efficiencies of refineries. He concluded that $.75 to $1.00
price difference between Seattle and Anchorage may be seen as
less than reasonable.
4:56:00 PM
MR. HEMSATH provided an overview of transportation links between
Alaska and Seattle [slide 4]. He related this small graphic
provides the transportation paths between Cherry Point in
Washington State, Anchorage, the North Pole Refinery, and other
parts of Alaska to transport a variety of fuels.
4:56:23 PM
MR. HEMSATH explained the reasons for HCR 19 [slide 5]. He
stated that this past winter a question arose whether sufficient
jet fuel was available at the international airports, raising
the question of whether planes could operate. He explained that
a spike arose in the cargo load, combined with a lowering of the
production rate at Flint Hills. He recalled that UPS provided
the remedy and fuel for Cathay Pacific to operate. He
characterized the issue as a "little bit of a squeeze" and
suggested that security issues also need to be addressed. He
related that from AIDEA's perspective an infrastructure need
exists, that something is missing in the infrastructure itself.
Something is needed to alleviate the problems and provide an
opportunity for economic development, at least from the
perspective of maintaining and saving jobs in Alaska. Further,
AIDEA, in its Development Finance Program can own and operate an
asset of this nature to serve this need. However, he
acknowledged that a business case must exist in order to do so.
4:57:51 PM
MR. HEMSATH outlined what AIDEA must review to develop the
business case [slide 6]. He explained that by law, AIDEA is
required to have projects pay for themselves. He related that
the proposed project would be open access, AIDEA owned, and
contractor operated. The proposed project would need to
generate sufficient revenue to pay for itself. Additionally,
AIDEA would review the market and market risk, as well as
address competition issues. He pointed out that AIDEA does not
want to be viewed as being in the middle of competition as a
state authority, although what AIDEA "brings to the table" is
not necessarily a grant or non-business aspect. However, AIDEA
needs to ensure that it is not putting one business out of
business in order to sustain another business. Specifically,
one of eight jobs in Anchorage relates to the airport, so
reliability of fuel is important. Thus, AIDEA would build for a
specific reason and a specific project.
4:59:36 PM
REPRESENTATIVE NEUMAN asked whether AIDEA is currently involved
in projects that use a business plan that is similar to the
proposed arrangement in HCR 19.
MR. HEMSATH responded that as projects are considered by AIDEA,
such as a small iron ore project currently under consideration,
that each project has own mode. The overriding factors AIDEA
considers are the business case, the revenue aspects, the market
for the product, and the risks in that market. It is not
specifically defined in a stop-gap format, but that is the
approach that AIDEA takes when considering projects, which is
similar to the process being used for this project.
5:00:42 PM
REPRESENTATIVE T. WILSON asked whether AIDEA is currently
involved in any plan that would compete against the private
sector. She offered her belief that the proposed project would
specifically compete with the private sector, such as the Flint
Hills Refinery in North Pole.
MR. HEMSATH responded that it depends on how competition is
defined. Competition is not necessarily a definitive condition.
For example, AIDEA owns the road and the port that makes it
possible for the Red Dog Mine Facility to operate. He asked
whether that constitutes competition with the private sector.
He answered that while it does compete with mines in other parts
of the country, AIDEA's involvement does not necessarily compete
with the private sector in Alaska. He offered his belief that
AIDEA competes with other areas of the country or the world in
order to provide jobs in Alaska. He said that he did not
believe that AIDEA has a specific project in Alaska that is
potentially as overt a competitor as the proposed Port of
Anchorage expansion project, which is the reason the market
dynamic needs to be fully addressed and understood, he stated.
5:02:03 PM
REPRESENTATIVE T. WILSON asked for the closest business plan
similar to this proposed project.
MR. HEMSATH answered that the closest business plan would be the
ownership at the Ketchikan Shipyard. While other shipyards,
such as the ones in Kodiak and Seward provide similar work, some
aspects and variations between the shipyards make them not
completely competitive with the Ketchikan Shipyard project.
5:02:40 PM
MR. HEMSATH discussed product storage of jet fuel, gasoline, and
distillate [slide 7]. He stated the various grades of gasoline,
and noted the importance of recognizing the processing capacity
in the state. Additionally, product storage includes
distillate, the ultra low-sulfur, and number two fuel oil. It
is also important to discuss how storage relates to the Railbelt
and what type of storage is required for Western Alaska, he
stated. The graphic depicted was taken from a 2007 report of
the Energy Information Authority, which provides an indication
of the amounts of sales of petroleum products in Alaska. He
related that two-thirds of the fuel is jet fuel, and the
distillate and motor fuel make up the other third.
5:04:06 PM
MR. HEMSATH compared typical crude oil yields [slide 8]. He
stated that the graphic on the right is a light crude oil,
typical of a West Texas intermediate, with about 50 - 60 percent
in atmospheric distillates, 20 - 25 percent in vacuum
distillates, and 20 percent in vacuum residue or heavy ends.
Alaska currently is some place under that, but not quite at the
heavy oil level. He said, "This is where we think we are going,
with the crude slate, when we start looking at producing some of
the heavier or more viscous crudes on the North Slope, where the
atmospheric distillates count for only 20 percent of the barrel,
and the bottoms account for as must as 60 percent of the
barrel." This is important in terms of how the refinery
processes the oil. Flint Hills Resources Alaska (Flint Hills)
and the two Petro Star, Inc. (Petro Star) refineries are light
end distillation only, so these refineries would produce their
products from only 20 percent of the barrel of heavy oil crude.
He related that their products consist of light straight-run
gasoline, kerosene, jet fuel, and some heating oil [slide 9].
Tesoro has a hydrotreater, but Flint Hills and the Petro Star
plants do not so they cannot produce any of the low-sulphur
diesel fuels. Tesoro has some vacuum-unit capacity and some
ability to make other gasoline products, but they are also
limited, in that a full quarter of their production consist of
the heavy ends or bottoms that some refineries would destroy as
a Coker, or sell as a potential feed stock for other refineries
on the West Coast, or as bunker fuel for ships. The ability of
the refineries to produce predominately jet fuel changes, which
is an aspect for consideration in terms of fuel security and how
the system might work.
5:06:26 PM
MR. HEMSATH described the Anchorage Port Expansion Phasing Plan
[slide 10]. He referred to the color slide and related that the
fuel storage tanks would be located in the red and yellow area
on the far right of the facility. The yellow area has been
filled, while the red area is open water and is scheduled to be
filled this summer. While there is space at the Port of
Anchorage, and staging space exists, some space is not yet
completed, he stated. The Port of Anchorage would relocate its
existing fuel off-loading facility to that area, he said.
5:07:31 PM
MR. HEMSATH outlined AIDEA's action plan [slide 11]. He related
that the Market Analysis is currently being done by Econ One
Research Inc. (Econ One) and is a continuation of last year's
efforts on the pricing mechanism, which is supported by the
Department of Law. From the market analysis, AIDEA will review
the military capacity, long-term air cargo, and fuel supply
reliability. The AIDEA is also in the midst of bringing on
board an engineering contract to perform a layout and cost
estimate. He suggested that it is important to assess the
storage constraints. The market analysis may provide a
tolerance for one million barrels of storage capacity, but if
there is only room for 500,000 barrels, that could change the
business case. He related that the project is not just tanks,
but also includes vapor recovery, and space for additives to
change the jet fuel for military specifications. Further, the
schedule of the proposed port expansion is also important. He
said he would like to say that the AIDEA would do a quick market
analysis and examine the estimates, but many other aspects will
need to be considered to develop the business case. The
business case model will examine how the project impacts
competition, the ability to produce fuel, the market risks and
economic impact, including any new jobs that may be created.
5:09:38 PM
MR. HEMSATH described the AIDEA's mission and its relevance to
HCR 19 [slide 12]. He asked why this resolution is being
written for AIDEA. Part of AIDEA's mission in terms of economic
development and growth is the ability to own assets, and treat
them as a business entity with a different feel. AIDEA has a
bylaw that allows it to manage and operate projects as the
authority considers necessary and appropriate to serve a public
purpose, which puts this type of project "directly in our lap."
5:10:26 PM
MR. HEMSATH discussed AIDEA's purpose [slide 13]. The AIDEA is
also allowed, by statute, to equip, operate, and maintain
facilities that will enhance the competitiveness of the
International Airport System, specifically the Ted Stevens
International Airport [slide 20]. Issues on that fuel supply
and fuel reliability are probably the number one risk to our air
cargo business in the state. Thus, these types of excerpts from
our enabling statute drive AIDEA to be part of this project
since it fits one of AIDEA's project modes. He reiterated that
AIDEA is looking for projects that it can demonstrate are
economically advantageous to the state, are financially
responsible, and produce revenue [slide 21 - 22]. He pointed
out that AIDEA has a business case it must meet. He related
that if the terminal project does not meet these requirements,
that AIDEA cannot participate in the project. He related
similar types of projects, such as the road and port at the Red
Dog mine, the FedEx hangar in Anchorage, the Ketchikan Shipyard,
and the Skagway Ore Terminal. He stated that AIDEA envisions
the Port of Anchorage fuel terminal as fitting into that mode.
The project size would entail 500,000 to 1,000,000 barrels of
fuel storage capacity [slide 29]. The project would consist of
an open access project, and the product would be transferred by
pipeline, barge, and railcar. This project should enhance the
statewide fuel system, which encompasses storage, distribution,
as well as manufacturing. He related that AIDEA would contract
with an operator, and would use an open season concept for
storage commitments. Thus, AIDEA must be able to guarantee that
it has the business for a sufficient period of time to pay off
the debt.
5:12:18 PM
MR. HEMSATH related that depending on the size of the terminal,
the total cost is estimated from $75 to $100 million [slide 29].
He concluded by stating that AIDEA believes this type of project
fits its mission and its strategic vision to be an active
partner with Alaskans and a dynamic resource in statewide
economic development.
5:12:38 PM
REPRESENTATIVE T. WILSON referred to page 16 of his PowerPoint
presentation and read, "AIDEA does not compete with the private
sector."
MR. HEMSATH responded that she is correct.
REPRESENTATIVE T. WILSON related her understanding that under
this resolution that AIDEA would compete with the private
sector.
MR. HEMSATH agreed that it might be considered competing with
the private sector. He explained that the aspects to consider
are whether the reasons for the distorted fuel costs are due to
strictly non-competition reasons or whether a problem exists in
the infrastructure itself. He related that fuel prices would be
more competitive if someone were able to build storage capacity,
but any single individual might not have enough capacity to make
the project economic. The consolidator would be looking at
projects to bring in other storage. Whether these prices are
due strictly to competition is not yet known. However, another
reason for AIDEA's involvement is whether this could be an issue
of security. He said, "The question is there may be a business
case in this in jet fuel only, and has nothing to do with
whether we're competing to lower price, but on the business case
alone."
[HCR 19 was held over].
5:14:02 PM
ADJOURNMENT
There being no further business before the committee, the House
Labor and Commerce Standing Committee meeting was adjourned at
5:14 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB342 ver A.pdf |
HL&C 2/24/2010 3:15:00 PM |
HB 342 |
| HB342 Sponsor Statement ver A.pdf |
HL&C 2/24/2010 3:15:00 PM |
HB 342 |
| HB342 Legislative Audit Summary.pdf |
HL&C 2/24/2010 3:15:00 PM |
HB 342 |
| HB342-Legislative Audit Report.pdf |
HL&C 2/24/2010 3:15:00 PM |
HB 342 |
| HCR19 AIDEA ppt Testimony.pdf |
HL&C 2/24/2010 3:15:00 PM |
HCR 19 |
| HB346 Lettter ASMA 2-22-10.pdf |
HL&C 2/24/2010 3:15:00 PM |
HB 346 |
| HB346 Lettter ASMA 2-24-10.pdf |
HL&C 2/24/2010 3:15:00 PM |
HB 346 |
| HB346 Letter IAIABC 2-23-10.pdf |
HL&C 2/24/2010 3:15:00 PM |
HB 346 |
| HB342 Fiscal Note-CED-CBPL-2-18-10.pdf |
HL&C 2/24/2010 3:15:00 PM |
HB 342 |
| HB346 Letter NFIB 2-17-10.PDF |
HL&C 2/24/2010 3:15:00 PM |
HB 346 |