Legislature(2015 - 2016)BARNES 124
01/26/2015 03:15 PM House LABOR & COMMERCE
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| Overview: Department of Commerce & Economic Development by Fred Parady, Acting Commissioner | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
ALASKA STATE LEGISLATURE
HOUSE LABOR AND COMMERCE STANDING COMMITTEE
January 26, 2015
3:16 p.m.
MEMBERS PRESENT
Representative Kurt Olson, Chair
Representative Shelley Hughes, Vice Chair
Representative Jim Colver
Representative Gabrielle LeDoux
Representative Cathy Tilton
Representative Andy Josephson
Representative Sam Kito
MEMBERS ABSENT
Representative Mike Chenault (alternate)
COMMITTEE CALENDAR
OVERVIEW: DEPARTMENT OF COMMERCE & ECONOMIC DEVELOPMENT BY FRED
PARADY~ ACTING COMMISSIONER
- HEARD
PREVIOUS COMMITTEE ACTION
No previous action to record
WITNESS REGISTER
FRED PARADY, Acting Commissioner
Office of the Commissioner
Department of Commerce, Community & Economic Development (DCCED)
Juneau, Alaska
POSITION STATEMENT: Testified and answered questions during the
overview of the Department of Commerce, Community & Economic
Development.
LAWRENCE BLOOD, Acting Director
Division of Community and Regional Affairs (DCRA)
Department of Commerce, Community & Economic Development (DCCED)
Juneau, Alaska
POSITION STATEMENT: Answered questions during the overview of
the Department of Commerce, Community & Economic Development.
KEVIN ANSELM, Director
Division of Banking and Securities
Department of Commerce, Community & Economic Development (DCCED)
Anchorage, Alaska
POSITION STATEMENT: Testified and answered questions during the
overview of the Division of Banking and Securities.
SARA CHAMBERS, Acting Director
Professional Licensing
Division of Corporations, Business, and Professional Licensing
Juneau Office
Department of Commerce, Community & Economic Development (DCCED)
Juneau, Alaska
POSITION STATEMENT: Testified and answered questions during the
overview of the Division of Corporations, Professional &
Occupational Licensing.
LORI WING-HEIER, Director
Division of Insurance
Department of Commerce, Community & Economic Development
Anchorage, Alaska
POSITION STATEMENT: Testified and answered questions during the
overview of the Division of Insurance.
ACTION NARRATIVE
3:16:10 PM
CHAIR KURT OLSON called the House Labor and Commerce Standing
Committee meeting to order at 3:16 p.m. Present at the call to
order were Representative Hughes, Tilton, Josephson, Kito and
Olson. Representatives Colver and LeDoux arrived as the meeting
was in progress.
^OVERVIEW: DEPARTMENT OF COMMERCE & ECONOMIC DEVELOPMENT BY
FRED PARADY, ACTING COMMISSIONER
OVERVIEW: DEPARTMENT OF COMMERCE & ECONOMIC DEVELOPMENT BY FRED
PARADY, ACTING COMMISSIONER
3:16:51 PM
CHAIR OLSON announced that the only order of business would be
an overview by the Department of Commerce, Community & Economic
Development by Acting Commissioner Parady.
3:17:11 PM
FRED PARADY, Acting Commissioner, Office of the Commissioner,
Department of Commerce, Community & Economic Development
(DCCED), stated that Governor Walker has named the commissioner
designee; however, he will continue as acting commissioner for
the next month to allow for moving time. He will remain in the
DCCED as the deputy commissioner once Commissioner Designee
Chris Hladick arrives, he said.
3:18:39 PM
ACTING COMMISSIONER PARADY began his PowerPoint overview of the
department by directing attention to a snapshot of the
department organization [slide 2]. The department consists of
six organizations: Administrative Services, Banking &
Securities, Community & Regional Affairs, Corporations, Business
& Professional Licensing, Economic Development, and Insurance.
Seven corporate entities are housed in the organization: Alaska
Energy Authority, Alaska Gasline Development Corporation, Alaska
Industrial Development and Export Authority, Alaska Railroad
Corporation (ARRC), Alaska Seafood Marketing Institute (ASMI),
Alcoholic Beverage Control Board (ABC Board), and the Regulatory
Commission of Alaska (RCA). He relayed that DCCED's staff is
comprised of 576 fulltime, one part-time, and eight non-
permanent positions, excluding the ARRC, which is exempt from
the [State Procurement code and application of the Executive
Budget Act].
3:19:47 PM
REPRESENTATIVE COLVER asked for a geographic breakdown of the
576 staff.
ACTING COMMISSIONER PARADY offered to provide them to the
committee.
3:20:20 PM
ACTING COMMISSIONER PARADY answered that the funding
distribution is approximate 59 percent corporate and 41 percent
core funding [slide 3]. Of the $127 million in corporate
funding, roughly $40 million is the Power Cost Equalization
Fund, he said. Thus, roughly one-third of the corporate entity
funds are Power Cost Equalization funds.
ACTING COMMISSIONER PARADY directed attention to the budget by
the core services the department provides [slide 4]. Consumer
protection at 17 percent economic growth at 29 percent, strong
communities at 14 percent, and affordable energy at 40 percent.
Again, within the affordable energy component. Thus
approximately $41 million is for power cost equalization
distributions, he said.
3:21:11 PM
ACTING COMMISSIONER PARADY, turned to the Division of Economic
Development, Alaska Industrial Development and Export Authority,
and the Alaska Seafood Marketing Institute, which essentially
constitute the economic engine that supports economic growth
exclusive of gasline issues [slide 5]. The Division of Economic
Development has issued 261 loans in 10 loan programs totaling
$29 million, with 237 loans issued from the Commercial Fisheries
Revolving Loan Fund [slide 6]. He reported that a $15 million
annual contract for tourism marketing generated 800,000
information requests, 220,000 trips, and 700,000 visitors. The
legislature appropriated $400,000 in capital funding for
economic development, which has been recommended to be moved to
the operating budget to more accurately reflect the purpose of
the funds. This fiscal year, the DCCED will need to absorb
those costs within the department due to the budget constraints,
he said, noting these funds essentially support economic
development outside of tourism and fisheries.
3:22:43 PM
ACTING COMMISSIONER PARADY related that the Alaska Maritime
Industrial support sector analysis provides details on the
replacement of the commercial fishing fleet. This sector
considers ways to enhance Alaska based shipyards, determines the
age of the fleet, the schedule for capital replacement, and how
the state can support these activities. In response to
Representative Hughes, he clarified that $400,000 goes to
economic development outside of tourism and fisheries, which
will be transferred to the operating budget. He further
answered that the $400,000 provided funding for the report, in
collaboration with the University of Alaska, on drones and
development and research on drones in the state. It also
provides funding for the annual Minerals Commission report to
the legislature and for other economic activities outside the
core of tourism and fisheries.
3:24:09 PM
REPRESENTATIVE COLVER, referring to the third bullet on slide 6,
asked about source of funding for tourism marketing and the
allocation of those funds.
ACTING COMMISSIONER PARADY answered that the legislature created
the Alaska Tourism Marketing Board (ATMB) so the [ATIA] Alaska
Travel Industry Association is no longer the direct recipient to
those funds. The newly constituted ATMB held its first meeting
in January 2015 and is the conduit for roughly $15 million in
general fund [GF] appropriations to support the tourism
industry.
3:24:57 PM
ACTING COMMISSIONER PARADY reported that the Alaska Industrial
Development and Export Authority (AIDEA) is essentially the
"financing arm" of the state [slide 7]. AIDEA's FY 16 dividend
was declared at the last board meeting totaling $17.6 million
and AIDEA's assets total $1.4 billion. The AIDEA owns a variety
of entities, such as the road from Red Dog mine to the port.
Nearly $700 million in private sector investment has been
leveraged by the investment in AIDEA, he related, with
projections that these investments will create or retain 1,500
construction jobs and over 1,000 permanent jobs. The first
phase of the Mustang Oil Field development project has been
completed and the board recently approved the second phase. The
board has been actively working on Governor Walker's new
directions on the Interior Energy project.
3:26:09 PM
ACTING COMMISSIONER PARADY reported that the Alaska Seafood
Marketing Institute (ASMI) has worked diligently to increase the
export value of fisheries, which has increased by 85 percent to
$3.2 billion in ten years [slide 8]. He directed attention to
the second bullet, noting the Marine Stewardship Council (MSC),
a third-party procurement organization, has been working
tirelessly to create a Responsible Fisheries Management [RFM)
initiative and a State of Alaska "Certified as Responsible
Fisheries" program. When the MSC certified the Russian pollock
industry, it dramatically decreased the value of Alaska's
pollock catch. With the RFM initiative, the state hopes to
reassure major supply chain procurement entities, such as
Walmart, of the sustainability of Alaska's fisheries without
relying on a third party with an independent agenda. He
characterized this as providing an ongoing and substantial
strategic interest to our fisheries industry. He reported that
the fisheries industry is the number one employer in Alaska,
providing 63,100 jobs. This industry assesses itself with a
voluntary fish tax based on .5 percent of ex-vessel value, which
generates approximate $12 million of the operating funds for the
ASMI.
3:27:28 PM
REPRESENTATIVE LEDOUX asked for further clarification on the
voluntary fish tax.
ACTING COMMISSIONER PARADY answered that the industry has
created an assessment, currently set at .5, which can be up to
.6 of the ex-vessel value, which currently generates approximate
$12 million in revenues.
REPRESENTATIVE LEDOUX asked whether the industry voted on it.
ACTING COMMISSIONER PARADY was uncertain of the details of how
the fish tax was initially created, but offered to provide the
answer and statutory reference to the committee.
3:28:34 PM
ACTING COMMISSIONER PARADY directed attention to affordable
energy and a discussion of the Alaska Energy Authority (AEA) and
Alaska Gasline Development Corporation (AGDC) [slide 9]. He
related AEA's mission: to reduce the cost of energy in Alaska,
with a goal of 50 percent electrical generation by 2025 from
renewable energy sources; and the AGDC's mission: to advance
the in-state natural gas pipeline. He reported that AEA has
disbursed nearly $40 million through power cost equalization
grant payments to 188 communities in FY 14 with completion of 53
of 114 rural power system upgrades and funding 22 projects
through the Emerging Energy Technology Fund (EETF). He noted
many of these projects offer a combination of diesel, wind
power, and hybrid power supply systems for rural Alaska. He
projected the 2016 annual fuel savings from the Renewable Energy
Fund at 20 million gallons of diesel equivalent.
3:29:40 PM
REPRESENTATIVE COLVER asked what funding is available for energy
upgrades to the Emerging Energy Technology Fund to complete
additional projects this year.
ACTING COMMISSIONER PARADY offered to provide a spreadsheet of
those figures to the committee.
3:30:16 PM
ACTING COMMISSIONER PARADY next directed attention to the Alaska
Gasline Development Corporation (AGDC). The AGDC has worked to
establish its alignment with administrative directives,
specifically to synchronize the timing of the AKLNG [Alaska
Liquefied Natural Gas] and ASAP [Alaska Stand Alone Pipeline]
project [slide 11]. The ASAP class 3 cost estimates were
prepared, with burner tip estimates for Fairbanks at $11.50-
$14.50 and in Anchorage at $11.50-$14.50, noting these figures
are estimates (+/-) plus or minus 20 percent. He offered that
the critical need for energy in the Interior remains a challenge
today.
3:30:56 PM
REPRESENTATIVE LEDOUX asked for clarification on the term burner
tip estimate.
ACTING COMMISSIONER PARADY replied that the burner tip estimate
is the full cost of delivering fuel to the burner tip, whether
it is in a utility or a home.
CHAIR OLSON, in further response to Representative LeDoux,
interjected that it is the point where the gas is ignited.
ACTING COMMISSIONER PARADY added it is the point where the pilot
light or gas ignition point is located.
3:32:05 PM
ACTING COMMISSIONER PARADY directed attention to the Division of
Community and Regional Affairs (DCRA) [slides 12-13]. He said
on his first day of work in the department his staff referred
him to Article 10 Section 14 of the Alaska Constitution, which
states the department shall advise and assist local governments.
He appreciated having the mission anchored in the Alaska
Constitution since it helps focus this division's work. This
division delivers services to local government, he said, having
placed substantial effort into capacity building and providing
technical assistance to over 200 communities this past year.
The Rural Utilities Business Advisor program assisted 147
communities and trained nearly 200 rural utility managers. This
represents the "nuts and bolts" of efforts to deliver power and
heat to rural Alaska. The Local Boundary Commission is also
located within DCRA, and approved the Edna Bay incorporation,
creating Alaska's first new city in 10 years. The DCRA
distributed over $85 million to 307 communities through revenue
sharing, payment in lieu of taxes (PILT), and other programs, he
said.
ACTING COMMISSIONER PARADY offered that staff has worked hard to
become cross-trained in order to deliver secondary information
and assistance to local governments. He emphasized that this is
an area of key personal interest to him, in particular, as the
state must consider how to reinvent government in the context of
the current fiscal crisis. He reported that the local
government specialists (LGSs) in Nome, Kotzebue, Bethel,
Dillingham, Fairbanks, Anchorage, and Juneau travel to many
rural communities and when these LGSs are in a community, they
represent the tip of the state's spear. Not only should the
DCRA's staff handle bulk fuel loans and rural utility business
assistance, but they should be able to assist the public when
problems arise with PERS [Public Employee Retirement & Benefits]
arrearages or other state programs. He could envision an LGS
sitting with a city manager placing a call to the appropriate
division to assist with any issue that confronts rural Alaskans.
Cross training can carry that assistance forward since the real
expenses and costs are incurred to travel to the communities.
Thus the more completely the department can arm the LGSs to
provide information on a range of activities across state
government, the better service the department can provide, he
said.
3:35:32 PM
REPRESENTATIVE COLVER asked whether there are any collaborative
efforts or costs savings that can be achieved by having the DCRA
and AEA combining their efforts to help rural Alaskans and
thereby avoiding duplication of services.
ACTING COMMISSIONER PARADY replied that the department is
currently reassessing the boundary between the agencies. At
this point AEA has handled bulk fuel tank projects and
replacement of tank farms and the DCCED has handled the bulk
fuel loan program. In fact, since the DCCED has a Bulk Fuel
Revolving Loan Program the agency contacted 92 communities last
fall to assess whether their winter fuel supply was adequate.
He characterized the boundary between the DCRA and the AEA as
falling between being the capital budget and the operating
budget, but opportunities exist to more closely synergize the
two.
3:37:06 PM
LAWRENCE BLOOD, Acting Director, Division of Community and
Regional Affairs (DCRA), Department of Commerce, Community &
Economic Development (DCCED), in response to Representative
Colver, added that the Rural Utility Advisor Program builds
management capacity in the communities and the concepts of
building management capacity directly translates to the running
and operating of the bulk fuel facilities. He agreed the DCRA
local government specialists (LGSs) work closely with AEA in the
management of the facilities.
3:37:59 PM
REPRESENTATIVE COLVER asked if he had any suggestions for
streamlining or efficiencies that can be used to deliver
services and ways to better align and define services with the
end users.
MR. BLOOD answered that nothing immediately comes to mind, but
the department is currently reviewing ways to create
efficiencies. For example, the Bulk Fuel Loan program and Bulk
Fuel Bridge Loan programs were consolidated under DCRA to gain
efficiencies with one staff administering both programs. This
also made it more convenient for communities since they no
longer must apply for a bulk fuel loan through AEA and be denied
prior to applying to the DCRA for a bridge loan. Now one
umbrella program exists and if a community doesn't qualify under
one program the department automatically considers the
application for the other program.
3:39:44 PM
CHAIR OLSON asked whether any monies are still being expended by
LUST, the Leaking Underground Storage Tank replacement program.
MR. BLOOD answered not that he was aware of any.
CHAIR OLSON noted the LUST program may not currently be in use
but it provided a significant amount of funds 8-10 years ago to
replace worn out underground fuel tanks.
3:40:20 PM
ACTING COMMISSIONER PARADY directed attention to the Banking &
Securities Division's mission: to protect consumers of
financial services, promote safe and sound financial systems and
the Corporations, Business & Professional Licensing's mission:
to ensure competent professional and regulated commercial
services are available in Alaska [slide 14]. He highlighted
that the division issues 67,000 professional licenses in Alaska
in 20 programs with board oversight and for 20 programs managed
by the division. Last year the legislature also added
behavioral analysts, massage therapists, and contractors to the
programs regulated by the state. The division regulates those
professions under the statutes as laid out by the legislature.
In rough terms, Alaska falls in the middle of the pack for the
number of professions it regulates. The division also issues
50,000 business licenses. The department has made efforts to
enhance its information technology (IT) so as much as possible
can be done online.
ACTING COMMISSIONER PARADY reported the Division of Insurance's
mission: to regulate the insurance industry to protect Alaska's
consumers, and the Alcoholic Beverage Control Board's (ABC
Board) mission: to protect the public from alcohol abuse by
enforcing state laws. The Regulatory Commission of Alaska (RCA)
is charged with assuring viable utility and pipeline services
that provide just and reasonable rates to Alaskans.
3:42:27 PM
ACTING COMMISSIONER PARADY directed attention to the ABC Board.
In 2014, the division issued 1,847 active liquor licenses, 987
catering permits, and 335 special events permits. Since the ABC
Board function moved to DCCED in FY 13, the department has
worked hard to increase its collaboration with other agencies.
This move was important since the ABC Board straddles the divide
between a public safety perspective and a public health
perspective, he said. On the one hand the ABC Board oversees
the responsible regulation of the industry, but on the other
hand the state experiences unintended consequences or negative
social implications of the industry, too, which means the state
must balance the positive and negative implications of the
alcoholic beverage industry.
ACTING COMMISSIONER PARADY related that Cynthia Franklin, a
former municipal prosecutor, currently heads up the ABC Board.
She brings a prosecutorial background and a strong emphasis on
safety, but also has a keen awareness of social and health
implications. He anticipated a major rewrite of the alcohol
statutes will come before the legislature this session and a
working group of 60-70 people has worked to craft a reasonable
compromise spanning an 18-month time period. Further, issues
related to marijuana are ongoing in the discussion and will come
before the various legislative committees to address, he said.
3:44:06 PM
REPRESENTATIVE COLVER asked whether the Title 4 rewrite will
change the statutory authority and laws related to the ABC
Board.
ACTING COMMISSIONER PARADY answered yes.
REPRESENTATIVE COLVER asked whether the legislature could add
some provisions to the aforementioned omnibus act to implement
the marijuana initiative or if it could regulate the emerging
industry through another regulatory board or place it under the
purview of the ABC Board.
ACTING COMMISSIONER PARADY answered yes; that those decisions
certainly fall under the legislature's purview.
CHAIR OLSON remarked that former director, Shirley Cote, and the
new director share similar backgrounds.
3:45:17 PM
ACTING COMMISSIONER PARADY directed attention to the Regulatory
Commission of Alaska (RCA). The RCA has worked to improve
processes to minimize costs to ratepayers and companies; for
example, the RCA moved to online e-filing submittals for major
power utilities. Thus, only one electronic copy must be
submitted to the RCA instead of 10 paper copies. The RCA hopes
to extend e-filing options to smaller rural utilities and
telephone companies, he said. The RCA also collaborates with
the PCE [Power Cost Equalization] and the AEA [Alaska Energy
Authority] with the RCA performing calculations to ensure that
utilities meet the qualifications for the PCE, noting the first
500 kilowatt hours going into a residential household are
subsidized. The RCA continues to work to improve services to
its consumers, he concluded.
3:46:36 PM
KEVIN ANSELM, Director, Division of Banking and Securities,
Department of Commerce, Community & Economic Development
(DCCED), stated that every Alaskan is touched in some way by the
programs the division administers. She said consumers may use
securities, investment advisors and brokers, obtain a mortgage,
or use a money service to wire funds or exchange currency. In
addition, the division also regulates depository and non-
depository institutions, including banks, credit unions, payday
lenders, premium finance companies, and one business industrial
development corporation. The Division of Banking and Securities
is the sole repository for ANCSA proxy filings, she said. She
provided statistics for the licensure, registration, charter and
examinations the division conducts, such that the division
performed over 70 examinations during FY 14 and oversees over
1,200 broker-dealers for 54 branch offices - noting one broker-
dealer is now domiciled in Alaska. She reported that 756
investment advisors are registered in Alaska in 31 offices in
Alaska, with over 85,000 salespersons registered to the various
securities firms; however, only 890 firms are physically located
in Alaska. In terms of securities registrations and filings,
over 5,500 mutual funds and 550 securities filings are available
in Alaska. She also reported that $13 million is generated
annually by securities registration and filing fees, which is a
substantial amount of money - generated primarily from the Lower
48. The division accepted over 300 ANCSA proxy-related filings
and makes those publically available in the division's offices,
she said.
3:49:24 PM
MS. ANSELM reported as of the end of 2014, approximate 30 of 197
mortgage brokers licensed in Alaska, with 37 of 185 branches
domiciled in Alaska, and 61 of 1,389 mortgage loan originators
licensed in Alaska are located in Alaska. The division also
oversees 360 delegates operating 66 money service businesses,
with three businesses domiciled in Alaska. Many of these money
service businesses are seasonal and work in cruise ship ports,
primarily wiring funds, she said.
MS. ANSELM related that the division examines three state banks,
three state holding companies, and a mutual savings bank
depository once every 18 months, in conjunction with federal
regulatory counterparts. In addition, the division also
oversees three trust companies, 27 insurance premium finance
companies, and 25 payday loan entities, of which 20 are located
in Alaska.
3:51:10 PM
REPRESENTATIVE LEDOUX, referring to the marijuana initiative
Alaska voters passed in November, highlighted problems other
states, such as Colorado and Washington, have experienced with
legalized marijuana. "The banks won't take the money and it's
pretty hard to run a business out of paper bags," she said.
Bank issues stem from marijuana use still being illegal under
federal law, with banks operating under federal banking laws.
She assumed the same issues will apply to federal banks in
Alaska, but wondered whether state banks in Alaska will have
similar problems.
MS. ANSELM answered yes; that the same problems exist for state
banks in Alaska because they are regulated by the same federal
regulations; however, the banking marketplace that serves firms
related to the emerging marijuana industry has been moving
quickly. Some states and credit unions in Oregon and Washington
have recently expressed a willingness to provide banking
services to the industry. In fact, last week one bank in Oregon
was quoted in an Oregon newspaper as actively courting firms in
Colorado involved in the marijuana business. The division has
been in close contact with federal agencies, including the
Federal Deposit Insurance Corporation (FDIC) and the Federal
Reserve Bank (FRB), to discuss options for Alaska's banks as
well as for federal banks located in Alaska. She offered to
keep the committee posted on changes and to review the financial
reporting regulations in more detail at another time.
3:53:31 PM
MS. ANSELM directed attention to slide 18, reporting that the
division collects over $13 million in fees and assessments
annually. She highlighted changes within the division, such
that the division has been embracing electronic filing for
certain securities and filings, which provides investors with
real time information and reduces paper and postage costs for
the industry. In addition, the division has gone to electronic
filings for all of its mortgage lending, applications, and other
required filings and will continue to expand these efforts.
MS. ANSELM reviewed outreach and enforcement efforts, noting
examiners participate in public meetings and forums with other
government and non-profit partners [slide 18]. Further, the
division provides many resources for the public on its new
website, making the website a destination for obtaining
financial information. In the past year, the division has
worked closely with the Municipality of Anchorage (MOA) in
presenting information to emerging entrepreneurs who have taken
advantage of the 49th State Angel Fund. In terms of
enforcement, most actions are taken against those in the Lower
48 who have exploited Alaskans or have not followed Alaska law.
In FY 14, the division issued 24 administrative actions,
including 20 consent orders and 4 final cease and desist orders,
she reported. This can be challenging since the bulk of
licensees operating unlawfully in the state are often physically
located outside Alaska. The division also partners with federal
regulatory agencies and law enforcement to expand tight
resources and it shares examinations, investigations, and
enforcement actions, including globally-negotiated settlements
or administrative actions to save time and money for all
involved.
3:56:27 PM
REPRESENTATIVE JOSEPHSON asked when the license and registration
fees were last increased.
MS. ANSELM answered that the Division Banking and Security's
fees are covered in various parts of the statutes. She offered
to provide information to the committee.
3:57:22 PM
SARA CHAMBERS, Acting Director, Professional Licensing, Division
of Corporations, Business, and Professional Licensing (DCBPL),
Juneau Office, Department of Commerce, Community, & Economic
Development (DCCED), reviewed the division's five sections,
beginning with the business licensing section, which currently
serves 68,503 active licensees and has issued 1,426 tobacco
endorsements. The Corporations unit manages 59,000 corporate
entities, and oversees business name reservations and
trademarks. The professional licensing section oversees 67,000
professional licensees through the process of initial
application and license renewal for 44 programs: 21 with boards
or commissions and 23 programs solely managed by the division.
The investigation section responds to public complaints, gathers
evidence, and works with the boards and the Department of Law on
enforcement of professional and business licensing statutes and
regulations. Lastly, the division employs administrative
support unit to provide customer service and clerical support to
the division.
3:59:02 PM
MS. CHAMBERS reviewed efficiency and accountability improvements
the division has made [slide 20]. In May 2012, 40 percent of
Alaska's corporate entities were not in good standing, but by
implementing a new data management system and reaching out
proactively, the division has increased the rate of those in
good standing from 60 percent in 2012 to 93 percent in 2014.
3:59:39 PM
REPRESENTATIVE COLVER asked the reason that corporations were
not in good standing.
MS. CHAMBERS answered that corporations must file biennial
reports and keep information up to date, such as bylaws changes
and articles of incorporation. These corporations are not in
good standing if they fail to file timely, she said.
4:00:20 PM
MS. CHAMBERS stated that business licenses and several
professional licenses can be renewed online. She anticipated
that with upgrades to the division's database this spring, the
Division of Corporations, Business, and Professional Licensing
hopes to greatly expand its online offerings in time for the
heaviest renewal period. The division also posts a variety of
quarterly and statistical reports online, and has barcoded
professional licensing renewal documents to reduce receipting
timelines from three weeks to three days. In 2014, the
investigative section implemented efficiencies that have reduced
the investigation timeframes by 53 percent.
4:01:19 PM
REPRESENTATIVE HUGHES, with respect to professional licensing
renewal, commended the division's willingness to assist a
physician in her district renew a license, noting the division
resolved the professional license issue within several hours.
In her previous personal experience, as a health care
professional, she understood that significant delays can occur
with licensing. Thus, she was very impressed with the service
the department provided, she said.
CHAIR OLSON commented that Ms. Chambers has spent significant
time working with the legislative committees on licensing
issues, in particular, he acknowledged the time she has spent
during the legislative interim working with the Legislative
Budget & Audit (LB&A) committee.
MS. CHAMBERS reported that the division has reduced its indirect
expenses to the boards it serves by 20 percent or $1 million.
In addition, the division has reduced the Department of Law
(DOL) expenses by 34 percent in the past three years. In these
ways the division has managed to create efficiencies and
accomplish goals while serving a growing base of licensees, she
said.
4:03:22 PM
MS. CHAMBERS highlighted some of the division's challenges. The
division must balance its public protection mandate with the
statutory fee-setting guidelines without significantly hindering
Alaska's private businesses, she said. This summer, the
Legislative Budget & Audit Committee met seven times to discuss
issues related to the professional licensing methodology, board
travel, the investigative process, and other areas of interest
to legislators and stakeholders in Alaska. The LB&A committee
reviewed steps taken to address historical program deficits,
including an appropriation of $3.4 million to offset
professional licensees' overpayment of indirect fees over a
period of many years. The legislature sought to "right an
accounting wrong" and that task had been accomplished in the
division, she said. Although the actions did not reduce
indirect costs to zero, the process to assess indirect costs
assures that the appropriate costs are being assessed to the
boards.
4:05:00 PM
MS. CHAMBERS identified another challenge, noting board members
have been quite vocal about the necessity of staying current
with national trends and issues facing their professions by
traveling to professional conferences. The legislature has
responded and assisted boards in reaching this goal. She
outlined one statutory paradox that exists in terms of
enforcement. The division must respond to complaints of
licensing violations, which is essential to the division's
public protection mandate, but in doing so this creates an
inherent conflict with the fee-setting requirements of statute
since licensees must cover 100 percent of their costs, including
costs for investigations of those licensed and individuals not
licensed, she said.
4:06:37 PM
REPRESENTATIVE LEDOUX asked whether a violator or "bad apple" is
fined to offset the overall fees and costs of the division.
MS. CHAMBERS replied that levied fines are collected and
deposited to the general fund and do not go to the division.
The division and the LB&A have been reviewing that process;
however the division and the boards want to avoid the appearance
of enriching the boards through the enforcement and fine-setting
process. She characterized this issue as creating a balance
between providing adequate enforcement and licensees not being
able to cover investigative costs. It is a work in progress,
she said.
MS. CHAMBERS elaborated on the division's process in setting
license fees. Investigation costs incurred create fluctuations
that can spike fees, in particular, for small licensing boards
and programs. For example, the midwifery program consists of 40
licensees and the costs of one investigation assessed on such a
small group of licensees can adversely affect fees. She pointed
out that the midwifery profession currently pays $1,700 for
their biennial license fees.
REPRESENTATIVE LEDOUX remarked that a problem exists.
CHAIR OLSON agreed; reiterating that the Legislative Budget &
Audit Committee (LB&A) held seven meetings this summer to
address the complexity of these issues.
4:09:00 PM
REPRESENTATIVE LEDOUX said it seems unfair that a small group
has to pay for an investigation with exorbitant license fees.
CHAIR OLSON agreed, noting that some investigations can cost
over $100,000. He acknowledged that there isn't any easy
remedy.
4:10:32 PM
MS. CHAMBERS pointed out that since the license renewals are on
a biennial cycle, the majority of revenue is collected in one
year, so a "false" deficit appears in the non-renewal year. The
division has heeded the recommendations by the Department of Law
and the Legislative Audit Division to amortize these deficits.
The division remains committed to work with the legislature to
resolve this issue, she said.
4:11:30 PM
LORI WING-HEIER, Director, Division of Insurance, Department of
Commerce, Community & Economic Development (DCCED), stated the
Division of Insurance's (DOI) mission is to regulate the
insurance industry and protect Alaska's consumers. The division
accomplishes this in two ways: through market regulation and
market conduct. In order for an insurer to operate in Alaska,
the company must apply to the state to obtain a certificate of
authority. The division essentially reviews their track record,
including their corporate structure, financials, last
examination in another state, state of domicile, business plan,
and the services the business plans to offer consumers.
Currently, 1,128 admitted insurers operate in Alaska. This
year, the Division of Insurance also admitted 14 new insurers of
which seven are domestic insurers listing their home state as
Alaska.
4:12:56 PM
MS. WING-HEIER listed them as Alaska National Insurance, Umialik
Insurance Company, ARECA Insurance Management, Inc. - the rural
electric cooperative insurer, Alaska Timber Insurance Exchange,
Alaska Vision Services, and the Tongass Timber Trust. In
addition, the Division of Insurance monitors other insurers who
provide services in the state. The division continually reviews
the financial solvency and the best practices to protect
consumers, she said.
4:13:41 PM
REPRESENTATIVE LEDOUX asked for an explanation of efforts the
division takes on monitoring and whether statewide or national
sites also review all insurance companies.
MS. WING-HEIER replied that the division does all of the above.
The Division of Insurance is a member of the National
Association of Insurance Commissioners (NAIC) and conducts
multi-state exams with other commissioners as well as conducting
individual examinations, she said.
4:14:32 PM
REPRESENTATIVE LEDOUX asked whether the Division of Insurance
audits all insurance companies that might provide services in
Alaska.
MS. WING-HEIER answered yes; elaborating that the Division of
Insurance conducts physical audits on domestic firms and
participates in multi-state "colleges" or exams in conjunction
with other states. In response to Representative LeDoux, she
said the state audits in-state insurance companies, but also
partners with out-of-state organization on other examinations;
however, in some cases the division will audit a parent company
of a business offering services in Alaska or in instances when
the division has reason to believe an audit needs to be
performed.
4:15:44 PM
MS. WING-HEIER advised members that Alaska is a prior approval
state for health, life, property, casualty, or title insurance,
which means companies must file with the state for the rate -
the price charged - or the form - the terms and conditions of
the policy. In 2014, approximately 3,700 filings were made,
with the division disapproving 147 applicants on the basis of
unfair practices to consumers. She briefly explained the
process, such that insurance filings are received
electronically, ensuring the companies meet the statutes and
regulations, which provides an important consumer protection.
4:16:26 PM
MS. WING-HEIER turned to market conduct, noting that
approximately 47,000 licensed insurance professionals are
licensed in Alaska, including resident and non-resident
adjusters, producers, bail bonds, and title insurers. In FY 14,
245 complaints were received and $216,000 in fees were returned
to consumers as a result of division's actions. She reported
that the four investigators opened 79 investigations and closed
115 prior year investigations. The division held its first
joint investigation with the Division of Banking and Securities,
which resulted in revocation of the financial advisor and
insurance producer licenses. She characterized 2014 as a year
of change, with the division implementing new processes,
improvements, and efficiencies [slide 22]. Without any
additional cost to the state, the division was able to make
property and casualty filings available to the public on the
division's website so that the public does not need to file a
formal request for information.
4:19:10 PM
MS. WING-HEIER reported the Division of Insurance has increased
its training efforts, noting six administrative staff are
currently enrolled in the NAIC property and casualty mini-
course. This free online course provides a basic knowledge of
insurance, including learning basic terms such as deductible and
coinsurance, which should help provide opportunities for staff
mobility. The division has issued regulatory orders that will
also assist businesses in doing business with the division.
Previously, companies who needed to file insurance forms by
providing the same endorsement for 15 different policies had to
submit the forms 15 times. Under changes to its regulations,
forms will only need to be filed once, which helps reduce staff
time for businesses and the division staff, as well. In
addition, the regulation project comment period ends this week
on regulations that will allow businesses to conduct business
electronically. "This is a first for the division; however, we
have made the order such that if someone decides they do not
wish to receive their insurance policy electronically, the
insurance company or their agent or broker must still mail it to
them," she said. The division has found the majority of the
people now wish to receive their billings and claims data
electronically.
MS. WING-HEIER highlighted a number of consumer outreach efforts
conducted by the Division of Insurance. She reported that the
division's website contains a number of "buttons" that contain
useful information on programs. For example, the division
produced a "white paper" to highlight the difference between a
percentage deductible versus a flat deductible for insurance.
The website also reminds people to consider adding earthquake
insurance to their policy in Alaska. The division has been
proactive to expand its relationship with industry, with the
emphasis on consumer protection.
4:22:00 PM
REPRESENTATIVE LEDOUX asked whether the consumer outreach is
located on the division's website or if the information is
mailed.
MS. WING-HEIER answered that the information is on the
division's website; however, as pamphlets are published they are
sent to independent insurance agents who can deliver them to
their members. Thus, the public can walk into their agent's
office and their agent can print the PDF version of the policy
for them.
4:22:40 PM
REPRESENTATIVE LEDOUX asked for an example of what an insurance
tip would consist of if a person was getting married.
MS. WING-HEIER answered that it might be a reminder to review
his/her insurance policy.
4:23:01 PM
REPRESENTATIVE HUGHES asked for clarification on the division's
role in terms of the implementation of the [Patient Protection
and] Affordable Care Act [also known as the "Affordable Care
Act"].
MS. WING-HEIER answered that the division has been very involved
in the Affordable Care Act process during September-November.
Although the division does not have any regulatory authority at
this time on the Affordable Care Act, the division has been in
contact with the United Way and with primary care.
CHAIR OLSON answered that this authority is forthcoming.
4:23:54 PM
MS. WING-HEIER explained that the Division of Insurance has
received numerous calls with concerns on rates. The department
has continued to monitor the federal lawsuit for the Affordable
Care Act, and in the event that the exchange is not allowed to
assess any impact this will have on Alaska. In addition, the
division is working with other departments, such as the
Department of Health and Social Services on options. For
example, she anticipated that the innovation waiver is
forthcoming, so the administration has been holding discussions
and, in particular, has been very cognizant of costs to
individuals.
4:25:09 PM
REPRESENTATIVE HUGHES offered to meet with the director on this
to better understand the process since the division approves
rate increases.
MS. WING-HEIER agreed to do so.
4:25:59 PM
REPRESENTATIVE JOSEPHSON commented that there is some evidence,
that other states, although not Alaska, have seen a decrease in
escalation of premiums since the Affordable Care Act.
MS. WING-HEIER agreed some states have enjoyed lower rates.
4:26:25 PM
REPRESENTATIVE JOSEPHSON, setting aside the Medicaid expansion,
recalled that Governor Walker expressed an interest in doing
everything he could to increase the number of people insured.
MS. WING-HEIER answered that she believed that is correct.
REPRESENTATIVE JOSEPHSON asked if she had any specific
information on what the governor meant by that comment.
MS. WING-HEIER answered no; but she understood the governor's
overall goal is to make insurance available and affordable to
Alaskans.
CHAIR OLSON interjected that a portion of it was the plan to
expand Medicaid in Alaska.
4:27:09 PM
REPRESENTATIVE KITO related his understanding that the biggest
issue related to insurance costs in Alaska is the small pool of
those insured in Alaska. He asked for further clarification on
the information that is being placed online to avoid Freedom of
Information Requests, in terms of whether staff is determining
what information can be released to ensure confidentiality of
information.
MS. WING-HEIER answered that the Division of Insurance uses the
same process it would to provide information under a Freedom of
Information Act request. She stated that protected information
is stored in the division's database, but is typically limited
to the company's trademark or rating model and that information
will still be kept confidential. However, most other data is
not confidential and will be available for released after the
effective date. For example, the rates for the Affordable Care
Act were effective January 1, 2015 so that is the release date
for that information, she said.
4:28:57 PM
CHAIR OLSON asked how much the Division of Insurance generated
in the last fiscal year.
MS. WING-HEIER answered approximately $64 million.
CHAIR OLSON related his understanding that the Division of
Insurance is the third or fourth largest source of revenue for
the general fund.
MS. WING-HEIER answered yes; noting the Division of Insurance's
budget is approximately $7 million.
CHAIR OLSON characterized the Division of Insurance as a "cash
cow."
MS. WING-HEIER agreed.
4:29:40 PM
ACTING COMMISSIONER PARADY, in response to a question by
Representative Colver on the Alaska Tourism Marketing Board
(ATMB), stated that the ATMB is an advisory board. The funds
expended are administered through the Division of Economic
Development (DED) through the procurement process, primarily in
marketing contracts for tourism. He reiterated that the ATMB is
advisory, but the actual administration of the funds occurs
through the DED.
CHAIR OLSON offered his belief that a good portion of the funds
are for advertising.
ACTING COMMISSIONER PARADY agreed.
4:30:40 PM
ADJOURNMENT
There being no further business before the committee, the House
Labor and Commerce Standing Committee meeting was adjourned at
4:30 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| DCCED Overview HLC 1-26-15.pdf |
HL&C 1/26/2015 3:15:00 PM |
DCCED Overview |