Legislature(1999 - 2000)
05/06/1999 02:35 PM Senate HES
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
SENATE HEALTH, EDUCATION AND SOCIAL SERVICES COMMITTEE May 6, 1999 2:35 p.m. MEMBERS PRESENT Senator Mike Miller, Chairman Senator Pete Kelly, Vice-Chairman Senator Gary Wilken Senator Kim Elton MEMBERS ABSENT Senator Drue Pearce COMMITTEE CALENDAR SENATE BILL NO. 117 "An Act relating to property insurance required for school districts." -HEARD AND HELD SENATE BILL NO. 167 "An Act relating to scholarships to attend the University of Alaska; establishing the Alaska scholars program; and providing for an effective date." -MOVED SB 167 OUT OF COMMITTEE SENATE BILL NO. 61 "An Act relating to licensure and professional discipline of members of the teaching profession and providing for related penalties; relating to grounds for dismissal of a teacher; relating to the Professional Teaching Practices Commission; relating to limited immunity for procedures under the Educator Ethics Act; making conforming amendments; and providing for an effective date." -HEARD AND HELD PREVIOUS SENATE COMMITTEE ACTION SB 117 - See HESS minutes dated 4/19/99 and 5/3/99. SB 167 - No previous action. SB 61 - No previous action. WITNESS REGISTER Wendy Redmond University of Alaska PO Box 755000 Fairbanks, AK 99775 POSITION STATEMENT: Presented SB 167 Sanna Green, Executive Director Professional Teaching Practices Commission 344 W 3rd Ave., Ste. 127 Anchorage, AK 99501 POSITION STATEMENT: Supports SB 61 Teresa Williams Department of Law 1034 W 4th Ave., Suite 200 Anchorage, AK 99501-1994 POSITION STATEMENT: Provided a sectional analysis of SB 61 Sue Mossgrove Staff to Senator Taylor Alaska State Capitol Juneau, AK 99801-1182 POSITION STATEMENT: Presented SB 117 Mike Morgan, Facilities Manager Department of Education 801 W 10th St., Ste. 200 Juneau, AK 99801-1894 POSITION STATEMENT: Answered questions about SB 117 ACTION NARRATIVE TAPE 99-26, SIDE A Number 001 CHAIRMAN MILLER called the Senate Health, Education and Social Services (HESS) Committee to order at 2:35 p.m. and announced the presence of Senators Pete Kelly, Kim Elton, and himself. He informed participants the committee would take up legislation in the following order: SB 167, SB 61 and SB 117. SB 167-INFO ABOUT SCHOLARSHIP PROGRAMS WENDY REDMOND, University of Alaska Fairbanks (UAF), explained the idea for SB 167 came from the State of Georgia which provides free tuition to every student who maintains a "B" average. SB 167 provides free tuition at the University of Alaska (UA) for four years to the top ten percent of students in every Alaskan high school. Governor Knowles introduced similar legislation last year. The University thought it was such a good idea it proceeded with the program using money from its natural resources fund. President Hamilton reviewed nationwide statistics and discovered that Alaska ranks last in the nation in its retention of high school graduates who attend college. According to the national average, between 70 and 80 percent of the states' high school graduates go to colleges in state. Alaska averages 40 percent. Alaskan students are not attending better schools outside of the state; they are going to 400 colleges, many of which cannot hold a candle to programs offered at UA campuses. The State is currently spending millions of dollars to educate students here but it is not a good investment to spend so much money to make our students smart for export. MS. REDMOND said that although the scholars' program was initiated internally, UA needs statutory authority to make the program fully functional. Not all high schools are forthcoming with the information necessary to allow UA to offer their top ten percent of students free tuition; one problem being a federal law that requires privacy. That federal law can be overridden if the state has a law mandating that high schools provide the information. For awards to be granted in a timely manner, it is important that this legislation be passed this year. UA has been obtaining the names of the top ten percent of students in their junior year so that it has one year to recruit those students. Most students make their college decisions early in their senior year. SB 167 provides that the requested information be provided at the end of a student's junior year. MS. REDMOND pointed out that Ann Ringstad is administering the program, and that the program has been designed to fit with the Alaskan experience. Students can leave the State during their freshman year of college and still get free tuition to UA in their sophomore year. Students can also take one year off between high school and their freshman year. Students who are home schooled, not using the state's correspondence program, are not eligible at this time. Number 126 SENATOR WILKEN commended the bill and asked Ms. Redmond if the University will be able to obtain the names of juniors this year if the bill is delayed in the next few weeks due to fiscal problems. MS. REDMOND replied UA is moving forward with the program. She added that names are often obtained from parents who call the University for information. She noted the Fairbanks school district was the most problematic, however permission slips were eventually obtained from parents for the release of students' names. SENATOR WILKEN recommended that committee members read the scholar's sheet in committee packets. He noted 733 students are taking advantage of the program, and that quality begets quality. He stated this bill also signifies President Hamilton's desire to interface State and University programs. Number 164 SENATOR ELTON indicated he liked the Governor's proposal because it provided new money to the University. He asked Ms. Redmond to discuss what UA will lose by diverting resources to the scholars' program. MS. REDMOND replied that of course the University would like to have more money for the scholars' program. The natural resources fund is currently supporting natural resource research projects which will have to be put on hold. She stated the University feels comfortable considering young people as a natural resource. SENATOR ELTON asked how the scholars program works in a school district, such as Galena which has two high schools, and whether students might be encouraged to attend different schools where they have a better shot at being in the top ten percent. MS. REDMOND said the answer to the Galena situation is that 10 percent of students from both the charter school and the public school are offered scholarships. The second issue of "shopping for schools" has not been discussed but she does not think that will occur in huge numbers because people will actually have to move. CHAIRMAN MILLER commended the University and Senator Wilken for their work on the scholars' program. There being no further discussion, SENATOR WILKEN reported SB 167 out of committee with individual recommendations and its HES fiscal note. There being no objection, the motion carried. SB 61-TEACHERS'LICENSES, DISCIPLINE & ETHICS CHAIRMAN MILLER announced that several people were waiting to testify on SB 61 via teleconference. SANNA GREEN, Executive Director of the Professional Teaching Practices Commission, made the following comments from Anchorage. SB 61 is a housekeeping measure needed to update the statute that established the commission in 1968. The bill also codifies some of the commission's procedures, places some of the commission's regulations in statute (recommended by the Department of Law), and establishes new provisions common to the other licensing boards. She asked Teresa Williams of the Department of Law to discuss the specifics of SB 61. TERESA WILLIAMS, Department of Law, informed participants she provided an annotated version of the bill to the committee. She noted she would be referring to Version B, as that is the bill [HB 85] that was adopted on the House side. She gave the following sectional analysis. Section 1 changes the word "certificate" to "license." Section 2 addresses criminal history background checks. It will allow the normal types of criminal history background checks and it will specifically allow DOE to review records to determine if a person was found not guilty of a charge for reason of insanity. She pointed out that a conviction on a person's criminal record would not necessarily be cause for licensure denial, however it is reason to investigate further. Part C will allow background checks if a teacher resides out of state or has been unemployed during his/her previous licensure period. Section 3 lists the grounds for the denial of a license and contains a list of conditions that can be placed on a license. Section 4 codifies the appeals procedure for appeals denial and makes the Administrative Procedures Act (APA) applicable. The portion of this section that dealt with disciplinary action has been moved to another section specifically dealing with discipline. Section 5 is a cleanup provision. The bases for terminating a teacher are modeled on the bases for professional discipline and that language is cross referenced. Section 6 incorporates all provisions related to discipline and reinstatement procedures. It also changes the name of the Professional Teaching Practices Commission to the Educator Ethics Commission. Sections 7, 8, 9 and 10 make technical changes. Section 11 provides the exceptions to reinstatement and summary suspension. Section 12 makes a change to the APA. Under that Act, an agency must accept, in its entirety, the decision made by the hearing officer, or the agency can reduce the penalty. However, if the agency wants to increase the penalty, it has to call for the record, have it transcribed, and then review the record itself. Section 12 gives the agency the authority to adopt the proposed findings of fact in their entirety and increase or change the proposed disciplinary action. Number 495 SENATOR ELTON thought a refresher course on the findings of fact may be appropriate if the agency and hearing officer disagree on the outcome. MS. WILLIAMS replied the agency would have to review the findings of fact to decide whether the officer's recommendation was appropriate. Section 12 would change existing law only in that the agency would not have to have the entire proceeding transcribed and read. SENATOR ELTON asked Ms. Williams if the change is essentially a cost-saving measure. He questioned how much the commission has spent in the past to have transcripts prepared. MS. WILLIAMS said she did not know the cost, however the hearings can take several weeks and in fact, some of the boards and commissions will ask for a record because it saves time and money. Number 516 SENATOR ELTON asked Ms. Williams whether a transcript is public record. MS. WILLIAMS said it is public record, and the hearing itself is open to the public. SENATOR ELTON noted one could argue that a transcript may not be of benefit to the group, but it might be of benefit to the public. MS. WILLIAMS replied the public can obtain copies of the tapes. MS. WILLIAMS said in actuality, the Board realizes the cost of transcription is passed on to the profession so it usually does not request a transcript and instead leaves in place an inappropriate outcome that does not protect the public. MS. WILLIAMS continued with the sectional analysis. Section 13 addresses confidentiality and the investigative files of the commission, especially in regard to minors, and it establishes when those files would be available to the public and other parties. Number 543 SENATOR ELTON asked if initials are used to refer to a minor during a hearing rather than a name. MS. WILLIAMS said initials are used. MS. WILLIAMS explained Section 14 is technical. Section 15 is new and addresses the use of fraudulent certificates by teachers. The commission currently has no authority over that activity. The penalty section sets out civil and criminal penalties for a person who obtains a teacher position for which the person did not have the required certification. Section 16 contains definitions. There being no questions of Ms. Williams, Chairman Miller called John Cyr to testify. CHAIRMAN MILLER informed committee members that Ms. Williams' sectional analysis pertained to HB 85 which is now in the House Rules Committee. He noted HB 85 will probably be used as the vehicle for passage after the HESS committee finishes its review of the measure. JOHN CYR, President of NEA Alaska, expressed the following concerns about HB 85. Section 14.20.375 reads: (a) If the department files an accusation while a person is licensed under this chapter, the commissioner may revoke or suspend the person's license if the commissioner finds grounds for discipline under AS 14.20.372. NEA believes that language should be changed so that the commission, rather than the commissioner, must find grounds for license suspension or revocation. NEA would like to see a higher standard used for license revocation. Second, subsection (f) reads: notwithstanding other provisions of this section, the commission may not impose discipline on a member of the teaching profession's license to act as administrator unless the commissioner concurs in the commission's decision. MR. CYR said that provision smacks of a double standard. Again, the commission acts as a body, is made up of people from the education profession and should be making the decisions on licensure. TAPE 99-26, SIDE B NEA's final area of concern is Section 12 on page 13. To take someone's license to teach is a far different standard than to lose one's job. A teacher can lose a job because of philosophical differences with a school district yet be successful in a different school district. Section 12 should be changed so that the commission is required to consider all of the facts. NEA would argue that a de novo hearing would be appropriate before a person loses his/her license. MR. CYR informed committee members he would like to comment on a proposed amendment. CHAIRMAN MILLER invited Mr. Cyr to speak to the amendment, however said that the committee would not be dealing with amendments until HB 85 reaches the committee. Number 564 MR. CYR said he was referring to a proposed amendment by Senator Donley that would insert, in the bill title, "relating to teachers who have subject matter expertise." NEA has spent the last three years working in concert with teachers across the state on the subject of licensure. One suggested proposal establishes a tiered system of licensure which would make fundamental changes to the education system. All research indicates that the most important factor in quality education is a well qualified teacher. Senator Donley's amendment moves away from that and says that a person with a degree in math can teach mathematics, etc. NEA does not believe that is necessarily true, nor is it in the best interest of the children of the state. CHAIRMAN MILLER indicated that Senator Donley may offer that amendment in the Senate Judiciary Committee, of which he is a member. SENATOR WILKEN asked Mr. Cyr to elaborate on NEA's concerns about Section 12. MR. CYR read Section 12: (b) In addition to the options available under AS 44.62.500, the Commission may adopt a hearing officer's proposed findings of fact in their entirety and increase or change the proposed disciplinary action authorized under AS 14.20.375 against the person. MR. CYR said, in most cases, the hearing officer is the school board or an arbitrator. During a hearing, the officer listens to the facts and makes a disposition. HB 85 allows the commission to review the disposition and then decide whether the hearing officer went far enough regarding the punishment. He maintained the standard for losing a job and the standard for losing a license should be markedly different. If the commission decides the hearing officer did not go far enough, the case deserves a total review. SENATOR WILKEN asked if Mr. Cyr is saying the commission takes or leaves the hearing officer's proposal, and when it does not accept the proposal, it should remand the case to another hearing officer. MR. CYR said "exactly." A hearing officer does not have the ability to pull a license; the license is owned by the state and only the commission can revoke it. If the commission is considering license revocation, the teacher deserves to have a hearing in front of the commission. CHAIRMAN MILLER asked if NEA believes the first phase should be a take it or leave it procedure, but in cases in which the decision is not accepted, the commission should remand it back to another hearing officer or hear the case itself. MR. CYR said he thinks the commission should hear the case. SENATOR WILKEN asked Mr. Cyr to prepare an amendment addressing NEA's concerns. SENATOR WILKEN questioned whether the term "mentally incapable" on page 3, line 29, of HB 85, and pointed out the Fairbanks school district has had trouble proving a person as such. He asked Ms. Williams whether that term is defined anywhere. Number 487 MS. WILLIAMS replied the definition would come from the Americans with Disabilities Act. Such a person would not be able to perform an essential function necessary to the job of teaching. The conditional license would ease that process by designing conditions that will enhance a person's ability to be in the profession if they can safely carry out the essential duties of their profession. SENATOR WILKEN felt the "mentally incapable" issue is a double- edged sword. He stated he does not want an educator to hide behind it, nor does he want a school board to be prevented from removing an educator because of it. MS. WILLIAMS clarified the decision to grant the initial license would rest with the Department of Education rather than the school boards. MS. WILLIAMS addressed NEA's concern about the proceedings that take place before a hearing officer. The hearing officer acts on behalf of the commission; he/she is appointed by the Governor to conduct the hearing before the commission and make the proposed decision to the commission. This procedure is independent of any action by a school board. The section on procedures of school boards or districts begins on page 8, line 18. That section sets out the deference given a school district decision and how the commission needs to state a good cause for rejecting a finding of fact on a final decision before the school district. In that situation, the commission would have the record before the school district. Number 438 SANNA GREEN clarified that a hearing officer for a school board is completely separate from the hearing officer used by the commission who is appointed by the Governor under the APA. SENATOR WILKEN repeated that he is not comfortable with the way the term "mentally incapable" is addressed in the bill. He asked Ms. Williams if the committee should try to further define the term. MS. WILLIAMS replied she does not think the committee needs to go further because if a person is mentally incapable then licensure is denied. If they can perform some functions, the license could be limited. SENATOR WILKEN asked how the term can be defined in legislation so that it is not interpreted for different purposes at different times. MS. WILLIAMS explained the bottom line for teacher licensure is whether one is able to carry out the duties of being a teacher. The only purpose of this section is to allow conditional licenses if a person can perform some, but not all, of the functions. SENATOR WILKEN questioned who will define the mental capacity of that teacher. MS. WILLIAMS replied the Department of Education. SENATOR WILKEN asked under what guidelines. MS. WILLIAMS said from information from previous employers, for example. Senator Wilken and Ms. Williams discussed the problems associated with determining that a person is mentally incompetent, and concluded there is no easy statutory way to solve the problem because there is no test that can be administered; each situation is fact-specific. SENATOR WILKEN commended Ms. Williams for the format of the comparison of bill versions she provided to members. Number 365 SENATOR ELTON agreed with Mr. Cyr that the bill sets up a double standard by making it easier to take action to revoke a teacher's license than an administrator's license. MS. WILLIAMS explained there has always been parallel authority to act between DOE and the commission; SB 61 does not change that. In reality DOE has never used its parallel authority. It has always charged the commission to initiate and conduct proceedings. SENATOR ELTON maintained that the parallel exists for administrators but not for teachers. MS. WILLIAMS explained the commission is comprised of 9 members, 5 of which must be teachers, one an administrator, one a principal, one from DOE, and one from the University of Alaska. Administrators noted they were vastly outnumbered on the commission and requested that the make-up of the commission be changed. The compromise reached in 1968 was to add a requirement that the commissioner of DOE had to concur with any discipline against an administrator. A second concern was that a commission made up primarily of teachers would be less likely to initiate action against other teachers. For that reason, administrators wanted to create a stop gap by giving DOE the power to initiate actions. DOE has never actually initiated any actions and the commission has been zealous in its responsibility to enforce teaching ethics. Alaska has the highest rate of revocation in the country. SENATOR ELTON asked if the commissioner of DOE is required to have an administrator's certificate. MS. WILLIAMS was unsure but did not believe so. She added that the Alaska Association of School Administrators has made it clear that it will revisit the issue of the make-up of the commission if this provision is removed. The Administration would prefer that this bill pass because it is a necessary clean up and it gives the commission the authority to do what it needs to do. It prefers that any discussion regarding the make-up of the commission be addressed separately so as not to slow down the bill. Number 300 MR. CYR expressed concern that Ms. Williams insinuated that Alaska has a high rate of teachers whose licenses are pulled for sexual abuse activities and he finds that offensive. Of the 10,000 certificated teachers in Alaska, three hearings were held last year; two of those cases were of a sexual nature. The other reason teacher's licenses are revoked is for breaching a contract. He noted teachers in rural Alaska do leave at times because they are harassed by the local people. He still believes of the 10,000 teachers in Alaska, the vast majority are doing a very good job and to characterize the situation any other way is unacceptable. SENATOR KELLY agreed with Mr. Cyr but noted it is interesting that the lobbyist for the NEA finds it distasteful when sweeping characterizations are made about people. He asked Mr. Cyr to be aware of that when NEA puts out its next pamphlet. Number 272 CRAIG BAKER, a teacher from Kodiak and president of the local union, stated he fully supports the fingerprint and criminal background check requirement, however he pointed out that requirement has created problems in Kodiak. Last year a teacher from Idaho was hired in Kodiak and had her fingerprints taken at a police station. The FBI rejected the fingerprints because they were unclear, but by that time school was about to begin and she did not yet have her certificate. He noted the time issue could prevent people from not being hired at the last minute. He indicated that a provision on page 2 of SB 61 allows temporary certificates to be issued however he does not believe that is the solution. SENATOR WILKEN asked Mr. Baker if he is against issuing a temporary teaching certificate. MR. BAKER said that is correct, however he repeated the background checks need to be done in a more timely manner. BETH LAPE, Special Assistant at the Department of Education, informed committee members she would like to testify on Senator Donley's amendment when and if it comes before the committee. CHAIRMAN MILLER stated that with no further testimony, the committee will hold SB 61 and wait until HB 85 arrives in the committee. TAPE 99-26, SIDE B Number 218 SB 117-INSURANCE FOR SCHOOL DISTRICTS CHAIRMAN MILLER brought up SB 117 and a proposed committee substitute (CS) for consideration, and invited Ms. Mossgrove to testify. MS. SUE MOSSGROVE, staff to Senator Taylor and to the Administrative Regulation Review Committee, explained the bill is the result of a problem identified in regulation. The CS clarifies that if a school district is not in a flood plain or a flood prone area, it does not have to purchase flood insurance. In addition, language has been added to exempt schools from carrying earthquake insurance unless they are in an active seismic zone. The requirement to have earthquake insurance is left to the discretion of the DOE commissioner. Clear seismic zones ranging from 0-4 have been mapped out in Alaska. The CS also clarifies that this amendment to Title 14 applies only to REAAs, not to schools that are eligible for self-insurance. The CS adds definitions from CFR 44 of flood plain and flood prone areas; the same definitions in the regulation as well. SENATOR ELTON asked about earthquake zones and whether a zero classification is inactive and 1 is active. MS. MOSSGROVE replied a map exists with the zones laid out, zero being the lowest potential for earthquake activity. The "ring of fire" is zone 4, the highest. The zones 0-4 guidelines are set by the building code. SENATOR ELTON asked if an REAA school in a 1-4 zone will be required to carry earthquake insurance while REAA schools in zone 0 will not. MS. MOSSGROVE replied that is correct but the final decision is left to the commissioner's discretion. Schools in zones zero and one do not need to carry insurance because no earthquakes have ever been recorded in those zones. SENATOR ELTON expressed hesitancy about whether to give different commissioners the latitude to re-define seismic zones. Zone zero is easy, but zone one and two are not as clear. He said he is uncomfortable that the bill does not contain more specifics to guide the commissioner's decisions. SENATOR WILKEN agreed with Senator Elton's concern and noted that Anchorage has 4 or 5 seismic zones within it and that a school could straddle seismic zones. He suggested the committee re-think who defines seismic zones, and whether the designation applies to a school area or a district. He indicated the University of Alaska has plenty of maps available. Number 145 MS. MOSSGROVE said she got her information from the University's website, DNR and the U.S. Geological Survey. The map she used lays out the seismic zones quite clearly. She was unaware that Anchorage has different seismic zones within it because it is shown only as Zone 4 on her map. SENATOR WILKEN said the Geophysical Institute is currently working on defining the seismic zones in Anchorage for major structures so they don't all pay at the Zone 4 level. SENATOR ELTON asked Ms. Mossgrove to describe the net effect on the REAAs. MS. MOSSGROVE said Senator Taylor's intention is to clarify in statute who has to have insurance, and to allow DOE to apply some common sense, especially in times of revenue shortages. It is her understanding that the state currently requires earthquake and flood insurance for all REAAs. The insurance industry has combined the two coverages and created a blanket policy to provide a cheaper rate. Number 101 SENATOR ELTON asked if that means the pooled insurance will be higher for non-REAAs if some REAAs no longer have to purchase the earthquake coverage. MS. MOSSGROVE deferred to DOE to answer that question. MR. MICHAEL MORGAN, Facilities Manager for DOE, explained that current regulation requires flood insurance for all structures in a flood plain or flood prone area. It also requires earthquake insurance only for REAAs that are housed in state-owned buildings. The change will lift the requirement that all REAAs in state-owned buildings carry blanket earthquake and flood insurance. MR. MORGAN said the practical effect should net zero, because almost all REAAs are covered through the Alaska School Insurance Company's (ASIC) program as part of its broad coverage policy offering earthquake and flood coverage. When DOE did the regulation two years ago, it talked to ASIC and AML. ASIC said because of the marketplace, no cost savings would result if one or two districts wanted out of earthquake and flood coverage. It should not really increase the cost of the premium to districts. Number 056 SENATOR ELTON asked whether, because of the insurance market the pool is now working in, no net savings to any district wanting to cancel earthquake coverage may occur. He questioned what will happen if ASIC begins using another insurance market, and whether, if this bill passes, the Juneau school district's insurance could increase because another district dropped out of the pool. MR. MORGAN replied that if any district pulls out of the pool the insurance rates of the remaining members would be affected. He could not say how that would balance out over the long term. Mr. Morgan said DOE is uncomfortable being put in the position of determining seismic zones, and he agrees with the comments made by both Senators Elton and Wilken. SENATOR ELTON asked if the risk that other districts' insurance rates will increase if this bill is enacted is insignificant. MR. MORGAN said he believes "this will have really no effect on other districts." SENATOR WILKEN asked if any REAAs are not in state-owned facilities. MR. MORGAN said some REAAs have asked for title to the land and buildings under AS 14.08.151 which requires DOE to convey the title if requested. Some REAAs have already taken title to land and buildings. SENATOR WILKEN asked if the REAAs assume the maintenance and operating costs when they take title. MR. MORGAN said REAAs do that whether or not they have title. SENATOR ELTON noted the issue raises an especially interesting question because if a school building originally served 13 students and now serves eight, the school building is no longer classified as a school under the formula. MR. MORGAN agreed that a student population must consist of more than 10 students in order for a school to exist. Regarding the question of what happens to the ownership issue when titles are transferred, MR. MORGAN stated titles are transferred with their underlying restrictions on deeds. Deeds acquired by the state from the BIA usually contain a restriction requiring the land to be used for school purposes. The REAA could probably rent or lease the school building and keep the land. CARL ROSE, Executive Director of the Association of Alaska School Boards (AASB) and President of the Alaska Public Entity Insurance Company (APEIC), formerly the Alaska School Insurance Company (ASIC) until two years ago. ASIC was domiciled in Vermont because it was created as a pool before the Alaska insurance pooling laws were enacted; two years ago ASIC decided to domicile in Alaska. MR. ROSE discussed the background of this issue. In 1985, most of the REAAs were unable to obtain insurance. The AASB created, under its charter, a pool of property values within the REAAs and small school districts, to take to market. At that time, AASB was looking at premium prices in the area of $1.25 per $100 of coverage. By the year 1991, AASB was able to drive that price down to 21 cents per $100. As an insurance company, APEIC has suffered over $36 million in losses as a result of total loss fire damage and a few floods. After paying $36 million in damages, APEIC's premium rates only increased to 41 cents per $100, and they continue to decrease. At present, insurance companies are making money on investments and the focus is not on underwriting but on getting the premiums to invest. When the investment climate begins to tail off, insurance companies will be forced to focus on underwriting and the industry is cyclical. Regarding how APEIC came up with the idea of providing earthquake and flood insurance, REAAs were required, under their use permits, to provide that coverage it they did not take possession of the buildings. That scheme acted as the footprint for the APEIC so that the REAAs could get coverage. As a result, APEIC was able to get the coverage at a fairly low rate because it spread the cost to those outside of an earthquake zone, similar to the Universal Service Fund in relation to telephone rates. SB 117 will not have a net impact on the REAAs that exist right now. The insurance industry looks at Alaska as an active seismic area, although some areas of Alaska are not active. APEIC differentiates between the two. With respect to REAAs, MR. ROSE did not think SB 117 would have an effect. He said he understood at one point in time, a group of people who did not need earthquake coverage wanted to be exempted from the requirement. Because of the state of the market, the insurance industry has adopted a quality-added atmosphere: the industry is trying to offer broad coverage for the lowest possible premium to attract consumers. The net result is that if the Legislature segments the market and no longer requires certain schools to have coverage, the premium rates on those who do need the coverage would be driven up. MR. ROSE repeated that regarding REAAs, he does not believe SB 117 will change anything in existence right now but he questioned whether newly acquired buildings would be required to have the insurance. Two insurance pools are available in the state: AML and APEIC. Both are trying to provide broad areas of coverage. He believes SB 117 does clarify what people will be required to do and the industry is positioned to provide the coverage. SENATOR ELTON asked if Yakutat no longer purchases flood insurance because it is not in a flood plain, whether its insurance rates will remain the same so that no other pool member's rates will be affected. MR. ROSE replied that is an accurate assessment. Yakutat is not an REAA so it is not required to provide this coverage right now. APEIC's broad policies include earthquake and flood coverage. He noted Yakutat did not want that coverage, but it was part of the broad package. He repeated that the quality-added approach taken by the insurance industry is to provide as much coverage as possible for the premium dollar. He noted the savings would be minuscule if a specific coverage was broken out because purchasing large quantities of insurance as a pool provides more buying power. MR. MORGAN said his reading of the committee substitute is that the current requirement in regulation that cities, boroughs and municipalities in a flood plain or flood prone area carry coverage would not change. CHAIRMAN MILLER asked if Mr. Morgan's reading of the original bill was that Yakutat would not have to purchase coverage. MR. MORGAN said that is correct; if a school is not located in a flood plain or flood prone area, it will not be required to be covered for such. SENATOR WILKEN moved to adopt CSSB 117(HES), Version H. There being no objection, CSSB 117(HES) was adopted in lieu of the original bill. SENATOR ELTON stated he believes a definition of "seismic zone" should be included in the bill. SENATOR WILKEN agreed. MS. MOSSGROVE noted the drafter specifically included the word "active" when referring to a seismic zone because Alaska as a whole is considered to be a seismic zone. CHAIRMAN MILLER thought the committee would be more comfortable clarifying the different zones and their ratings to determine which zones should and should not be covered. SENATOR WILKEN suggested asking the drafter to define "active seismic area" within the bill so that a reference exists. CHAIRMAN MILLER suggested Senator Wilken, Senator Taylor, Mr. Morgan and Mr. Rose get together and come up with a solution. CHAIRMAN MILLER stated there being no other business to come before the committee, the Senate HESS Committee was adjourned.