Legislature(1997 - 1998)
03/05/1998 01:52 PM L&C
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
SENATE LABOR AND COMMERCE COMMITTEE March 5, 1998 1:52 P.M. MEMBERS PRESENT Senator Loren Leman, Chairman Senator Jerry Mackie, Vice Chairman Senator Tim Kelly MEMBERS ABSENT Senator Mike Miller Senator Lyman Hoffman COMMITTEE CALENDAR CS FOR HOUSE BILL NO. 135(RLS) "An Act extending the termination date of the Board of Dental Examiners to June 30, 2001; eliminating a requirement that a dental applicant's photograph be autographed; specifying the circumstances under which a person may be licensed as a dentist in this state without examination when the person is licensed as a dentist in another jurisdiction whose licensing requirements are not equivalent to this state's requirements; and providing for an effective date." - PASSED SCSCSHB 135(L&C) OUT OF COMMITTEE SENATE BILL NO. 160 "An Act relating to registration, inspection, and testing relating to radiological equipment in dentists' offices." - HEARD AND HELD SENATE BILL NO. 212 "An Act relating to automated teller machines." -HEARD AND HELD CS FOR HOUSE BILL NO. 199(JUD) "An Act relating to the property, transactions, and obligations of spouses; relating to the augmented estate; amending Rule 301, Alaska Rules of Evidence; and providing for an effective date." - PASSED CSHB199(JUD) OUT OF COMMITTEE PREVIOUS SENATE COMMITTEE ACTION HB 135 - No previous action to record. SB 160 - See Labor and Commerce minutes dated 3/5/98. SB 212 - See Labor and Commerce minutes dated 3/3/98 and 3/5/98. HB 199 - No previous action to consider. WITNESS REGISTER Ms. Annette Kreitzer, Staff Senator Leman State Capitol Bldg. Juneau, AK 99811-1182 POSITION STATEMENT: Commented on HB 135. Mr. Dan Pitts Soldotna, AK POSITION STATEMENT: Supported HB 135. Ms. Catherine Reardon, Director Division of Occupational Licensing Department of Commerce and Economic Development P.O. Box 110806 Juneau, AK 99811-0806 POSITION STATEMENT: Supported HB 135 and opposed SB 160. Dr. Tim Woller, President Alaska Dental Society Fairbanks, AK POSITION STATEMENT: Supported HB 135 and SB 160. Dr. Art Hansen Fairbanks, AK POSITION STATEMENT: Supported HB 135 and SB 160. Dr. Peter Nakamura, Director Division of Public Health Department of Health and Social Services P.O. Box 110610 Juneau, AK 99811-0610 POSITION STATEMENT: Opposed SB 160. Mr. Mike Helmbrecht, D.D. 421 3RD St. Fairbanks, AK 99701 Fairbanks, AK POSITION STATEMENT: Supported SB 160. Mr. Dan Anderson, Repair Technician Biomedical Equipment 510 Juneau Ave. Fairbanks, AK 99701 POSITION STATEMENT: Supported SB 160. Ms. Catherine Coleman Division of Public Health Department of Health and Social Services P.O. Box 110610 Juneau, AK 99811-0610 POSITION STATEMENT: Commented on SB 160. Mr. Sid Heidorsdorf Juneau, AK 99801 POSITION STATEMENT: Commented on SB 160. Mr. Jerry Weaver, Secretary Alaska Bankers Association 305 W. Northern Lights Blvd. Anchorage, AK 99503 POSITION STATEMENT: Opposed SB 212. Mr. James Beveridge Alaska Public Information Research Group (AKPIRG) 507 E St, Ste., 202 Anchorage, AK 99501 POSITION STATEMENT: Supported SB 212. Mr. Terry Lutz, Chief Financial Institution Examiner Department of Commerce and Economic Development P.O. Box 110807 Juneau, AK 99811-0907 POSITION STATEMENT: Commented on SB 212. Representative Joe Ryan State Capitol Bldg. Juneau, AK 99811-1182 POSITION STATEMENT: Sponsor of HB 199. Mr. Richard Thwaites Alaska Trust Co. 13741 Arne Erickson Circle Anchorage, AK 99515 POSITION STATEMENT: Supported HB 199. Mr. Richard Hompesch, Trust Attorney 119 Cushman, Ste 400 Fairbanks, AK 99701 POSITION STATEMENT: Supported HB 199. Ms. Annette Kreitzer, Staff Senate Labor and Commerce Committee State Capitol Bldg. Juneau, AK 99811-1182 POSITION STATEMENT: Commented on HB 199. ACTION NARRATIVE TAPE 98-11, SIDE A Number 001 HB 135 - DENTISTS: LICENSING & EXTEND EXAMINING BD CHAIRMAN LEMAN called the Senate Labor and Commerce Committee meeting to order at 1:52 p.m. and announced HB 135 to be up for consideration. MR. DAN PITTS, Soldotna Dentist, supported HB 135. SENATOR KELLY moved to adopt the CS to HB 135. There were no objections and it was so ordered. MS. CATHERINE REARDON, Director, Division of Occupational Licensing, said she works with the Dental Board and expressed strong support for HB 135. They provide the expertise needed to make strong licensing decisions. She gave them credit for adopting credentialling regulations which achieve a lot of what the audit pointed out the need for, specifically they say that an applicant who took an exam that has six out of eight of the same items on the Alaskan exam requires is equivalent enough to be licensed. That greatly lessened the problem they had where people were taking exams in California without the endodontic section and were ineligible in Alaska. She also noted the fiscal note indicated that the Division spent $163,200 in FY 97 on the licensing and regulation of dentists and intends to continue with roughly that amount of expenditure. DR. TIM WOLLER, President, Alaska Dental Society, said that they are generally supportive of HB 135. DR. ART HANSEN, said he had been in Fairbanks for 30 years and had also been on the Board. He said that they do need a Board, but something has to be done to change the Administrative Procedures Act so the Board can act autonomously and not act under the jurisdiction of OCC licensing. Also, under the Attorney General's direction, he has seen investigators for OCC licensing bring in their opinions and state them as fact. When he was on the Board, they took those opinions and used them as the information they needed to take action. CHAIRMAN LEMAN responded that the title was too restrictive to deal with his concerns, too. MR. HANSEN said the Board is working under the guise of a figure- head and he didn't think that was the way it should work. SENATOR KELLY said that he is getting a little weary of these Boards that come into the legislature asking to be given a monopoly to practice a trade in the State and keep competitors out and complain when the legislature tries to protect the public's interest in this whole matter. SENATOR MACKIE moved SCSHB 135(L&C) from Committee with individual recommendations and a $0 fiscal note. There were no objections and it was so ordered. SB 160 - DENTAL RADIOLOGICAL EQUIPMENT CHAIRMAN LEMAN announced SB 160 to be up for consideration. SENATOR MACKIE moved to adopt CSSB 160(L&C), Lauterbach LS0825/L, dated 2/20/98. There were no objections and it was so ordered. SENATOR TAYLOR said he had correspondence saying that the State Dental Association had met in convention recently and strongly supported this legislation. He read a letter from a dentist to the Department of Health and Social Services saying the last time his office was inspected was seven years ago and that fees paid to the Department have increased to 250 percent of original fees. He said the State has been negligent in terms of radiological inspections. They don't need inspections, but were promised inspections and paid for them. He explained that this bill provides that the Board, working through the Department, would establish standards for those people who could and would inspect x-ray machines. When you pay a company to check out your machine, their technical person having the proper qualifications, could be certified by our Department of Health and Social Services as an inspector and would render a report back to the Department noting that those machines had been inspected by an appropriate person. SENATOR TAYLOR said that Section one provides that the Governor shall consider nominations made by the Alaska Dental Society which he is not now required to do. CHAIRMAN LEMAN asked what that section had to do with the rest of the bill and radiological equipment. SENATOR TAYLOR answered that's who's going to make up the Board. CHAIRMAN LEMAN asked if there was going to be a new Board. SENATOR TAYLOR answered no, but as appointments are made, they want to be heard from. SENATOR MACKIE said he was concerned that that subject wouldn't go into the title and he also thought the Governor always considered nominations from the Dental Society. SENATOR TAYLOR said he didn't know. SENATOR KELLY said that the wording was so vague he couldn't object to it, but he didn't see where it fit into the title. SENATOR TAYLOR said the drafters never mentioned it. Number 304 SENATOR MACKIE said it didn't really do anything, so why put it into statute. CHAIRMAN LEMAN asked if those were the only changes in the committee substitute. SENATOR TAYLOR said there were other major changes. The second one changes the responsibility for registration and inspection from the Department of Health and Social Services to the Board of Dentistry allowing the Board to establish those standards. He reviewed other changes for the Committee. DR. WOLLER strongly supported SB 160 because any time you can privatize an inspection like this, it ends up being a more efficient operation. They are also looking at very low emission units and not the high emission industrial units, so public safety is not being compromised. DR. PETER NAKAMURA, Director, Division of Public Health, explained what the registration and inspection process has been. When he first came to the Department in 1991 there was only one person who was responsible for doing not only the examinations of all the equipment and providing the consultation needed on radiation health issues like recent concerns with exposure to deposits at Point Hope and the use of I-131 in the Fairbanks area. They have the inability to do the kinds of inspections that are needed or wanted to be done and hired a second individual in May 1997. Since that date, he and Ms. Catherine Coleman have inspected 70 of the 241 dental devices that are in the State. At this time, there are approximately 500 medical facilities that have radiation devices; 241 are related to dental services. When his staff is involved in registration or an inspection process, it is more than just looking at a piece of equipment. They look at the procedures, check to see if the staff are trained, they see if procedures for appropriate use of the equipment are posted anywhere, so there's some level of comfort that whoever is using it is at least following a given protocol. They go beyond checking the equipment and seeing if there is release of radiation in the room beyond the head of the x- ray unit. DR. NAKAMURA said that Dr. Woller is right in that dental devices are extremely safe, especially if used with the proper techniques by properly trained people and taking into consideration any unnecessary exposure to the provider or the patient. For instance, inspectors look at the x-ray film to see if it's been well taken or over-exposed. What commonly happens is when the film looks inappropriate, the easiest way to correct it is to crank up the kilovoltage and increase the amount of exposure resulting in a brighter film. Often the problem is not the machine, but the technique used to develop the film or the procedures. This is what inspectors look at. He had no problems with Section one having the Dental Association recommend people it thinks would be most competent on the Board. However, language in Section two saying "inspections of the control panel" is very specific and doesn't involve looking at the device itself in terms of the radiation heads. Their inspections have found when a tube starts to go bad and gets a little "gassy," it can emit at different levels, sometimes twice as much, each time the test is repeated. It has nothing to do with the panel, but with the tube. Narrowing language down to just the control panel would significantly reduce the fees which were established in 1993, because they are based on the number of tubes registered. Dental units are charged $50 annually per tube and medical units are charged $80 annually per tube. The reason for the annual fee is their annual budget for this program is $120,000 per year; of that, $30,000 comes from the feds, about $26,000 comes from general funds, and the rest of the $64,000 comes from fees that are generated through the registration process. To maintain a staff to do this, they need to collect fees. Finding staff qualified to do this work is not easy. They do recruit in-state, but haven't found anyone with the qualifications or the interest to assume this kind of responsibility. Although the greatest hazard in the State from radiation is medical devices, checking them is not the only thing they do. This is why another person was hired. He wouldn't mind moving all responsibilities from the Department of Health, although that is the arm of government that is mandated by the Constitution to protect public health, as long as the work is done properly. Number 450 DR. HANSEN said he did not know where information came from about a dentist having continually overexposed his patients. He had visited the office during an inspection of the equipment nothing was nothing found other than a slight light leak under the door of the dark room. He thought that statement should have never been made. He had asked about the inspection done in 1978 and whether the calibrations were done wrong and was told the equipment was old and their calibrations could have been off. Number 495 MS. CATHERINE REARDON, Director, Division of Occupational Licensing, said that she is here because her Division serves as staff to the Dental Board to whom this duty is being transferred in the bill. She is not knowledgeable about radiologic health risks or x-ray equipment, so she deferred to Dr. Nakamura's comments on that aspect. She would comment on the administrative aspects of the transfer. She said the fiscal note was based on the original draft and would need revising. Her understanding of the work draft is that private sector technicians would take over inspection of the equipment. She checked with the Governor's Office and found that they have been considering names that are given to them by the Dental Society and didn't realize there was a problem. CHAIRMAN LEMAN asked if every licensed dentist in Alaska was a member of the Dental Society. MS. REARDON answered that she didn't think they were. CHAIRMAN LEMAN asked if there was a way to get input from those who are not members. He assumed they would be eligible to be appointed to the Board and asked if there was any organized group that might submit their name. MS. REARDON said she didn't know of any other organized group, but anyone who has comments is free to send a letter off to the Office of Boards and Commissions in the Governor's Office. She said that sometimes people will lease equipment and, therefore, it would be better to say "owners and lessors" throughout the bill. Secondly, she has a concern with language saying the Board cannot adopt standards that duplicate federal law or regulations, because they might want to adopt a federal regulation so there would be a corresponding State regulation that could be enforced. On page 2 there is also a prohibition against the Board adopting regulations that are lower than the manufacturers standard and she questioned what would happen if the manufacturers standard is lower than the federal standard. She also thought they might want to say a dentist or anyone under the dentist's supervision can use the equipment, because many times it's the dental hygienist or the dental assistant who actually uses the dental equipment. She said that certification should be for entire calendar years, so everyone would be due at the same time. If they want to send out a list of equipment that hasn't been certified to dentists, they can do that at one time. Machines could say certifications are good up until a certain year, not just a specific month in a year. In the enforcement section, she questioned why it wouldn't be considered unprofessional or incompetent practice to have a machine without a sticker on it, if it results in a $5,000 fine. They could also do it repeatedly. In the area of public health service or other federal facilities, she didn't think we had the authority to require the federal government to get a certification from the Dental Board. TAPE 98-11, SIDE B MS. REARDON said the basic task of the Dental Board would be to develop standards for the private sector inspectors. She hoped there would be people in the State who could meet the qualifications and would want to serve. She said that inspectors in Maryland must have degrees in physics, biological sciences, engineering or math, and a certain amount of experience in the field. She didn't know if that is typical for State inspectors and didn't know how well that meshed with manufacturers reps. SENATOR KELLY said regarding Section seven that this title does not authorize the Department to register, inspect, test, or otherwise regulate dental radiological equipment or records relating to dental radiological equipment regulated by the Board of Dental Examiners under law. He asked if she would even be in the game, if this bill passes. He asked who would regulate the technicians. Someone answered that the Board would. MS. REARDON responded the reason she would be involved at all is because the Board does not have any staff outside of her Division, so in terms of who would be receiving the certifications, mailing out the stickers, etc., under the current system, it is her staff. She said that the Dental Board discussed this bill a couple of meetings ago and opposed it in its original version. As individuals they may not all oppose the bill. MR. MIKE HELMBRECHT, Fairbanks Dentist, said he talked with Mr. Ken Crooks who was neutral on the bill. He said he favored the bill very much and that the current system of dental x-ray inspection is broken and no longer effective. It's also not in the public's best interest. There is no need for government inspection. There are two problems with the State doing the inspections. The first is that the Department by its own admission hasn't had the personnel to do consistent inspections in over six years and since dental x-rays comprise over 50 percent of the units that the Department inspects and meet only .3 percent of the radiation that Alaskans receive, they can transfer authority to regulate these units to the Dental Board of Examiners which would free the Department to inspect only those x-ray machines that are capable of harmful doses of radiation. MR. DAN ANDERSON, Repair Technician, said he repairs and calibrates dental and medical x-ray equipment. He said the private sector technicians are ready and willing to calibrate and repair the dental x-ray units. He said there are a number of companies in Anchorage that would do it there. He agreed with Dr. Nakamura's concern that using "control panel" is not a good choice of words. He cannot inspect a control panel without also inspecting the x-ray tube. Also, if it is deemed by the Dental Board that more than the x-ray machine be done, they could also do a dark room survey where they would check the x-ray film processor. SENATOR KELLY asked if he had to go to school to become a technician. MR. ANDERSON replied that he is a certified biomedical technician and has a B.S. degree. To get the certification, one must have a two- or four-year degree and a certain number of years experience. Most technicians who repair dental equipment do not come from the medical equipment side like he does. Some have gotten their training from the military, some from factories, some from an apprenticeship, etc.. He said training for medical x-ray units is much more complicated than training for dental x-ray units. Number 463 SENATOR MACKIE asked what people in the rural areas were supposed to do. MR. ANDERSON responded that any town that has enough people to have a dental clinic will also have a medical clinic and so the technician that goes to do the medical equipment could do the dental, except for native clinics that are run by federal employees. MR. SID HEIDORSDORF, a neurological physicist, said he first became involved with the State program in 1962 when he was first assigned here. He said when proposals like this come up, there is a reason behind it, and he thought they should look for the reason. He's heard of two issues, one is an inspection fee problems, but if it's a complaint about actions taken by the Department of Health and Social Services, that should be looked at. It's either a legitimate claim or it isn't. He thought it would be a terrible mistake to transfer this responsibility out of the Division of Health and Social Services to the Department of Commerce, because the State already has radiation responsibilities split three ways. The Department of Labor has responsibility for occupational exposure to radiation, the Department of Environmental Conservation has responsibility for contamination of the air, soil, water, and subsurface soils by radioactive materials, and the Department of Health and Social Services which is responsible for all public health aspects of radiation protection. Maintenance personnel are the mechanics and calibrate and repair x- ray equipment, but that has nothing to do with use of the equipment which is critical. Dental x-rays are reliable, but five years isn't an acceptable limit to go back and try to recheck what exposures were. When he left the State there were about 160 dental offices with an average of 3 x-ray units per office. About 35 percent exceeded the "acceptable" exposure range and these are the offices he placed a higher priority on. He would not defend the statement, "An amount of radiation so minute that there's no chance of harm." The philosophy of radiation protection is to minimize exposure and there is always a certain minimum amount you need to get a good x-ray. He did not think maintenance personnel were equipped to do these kinds of inspections on dental equipment. MR. HEIDORSDORF also said he would like to hear a definition of an outdated x-ray unit. Twenty-five-year-old equipment is perfectly acceptable. He opposed the inspection fee when it was instituted, but the legislature required the Department to start charging for services in 1987 or 88. He emphasized that this is a registration fee, not an inspection fee and a lot of people thought it was a fee for inspection. The cost of getting to remote areas to inspect equipment would be prohibitive, especially compared to a $50 per tube registration fee today. He explained that dental units and medical units both operate within the same range of 65 - 90 kilovolts. Megavolts are therapy units and are not diagnostic x-rays. The effect per exposure for a medical x-ray unit is identical to the effect of dental x-ray unit, if all other conditions are equal. Number 325 SENATOR MACKIE asked if the $50 per tube fee was the only fee a dentist has to pay. He asked how many tubes there are in a unit. MR. HEIDORSDORF answered that is the only fee and they can have as few as three or as many as six. SENATOR MACKIE asked if there are any inspection fees if he does an inspection. MR. HEIDORSDORF answered no. The extra costs are covered by the State. SENATOR MACKIE asked if he ever had an instance where someone wasn't ready to comply with his recommendations. MR. HEIDORSDORF said he had a number of instances with medical units, but not with dental. Generally the weak link is processing. SENATOR MACKIE asked about inspecting the control panel only. MR. HEIDORSDORF answered that he couldn't relate to that at all. You can't inspect an x-ray unit unless you check the tube. SENATOR KELLY said his first concern is the health of the public and that's why this law was passed originally. It would appear the dental x-ray units are not dangerous as some of the higher medical equipment. He asked if there was a public health reason they couldn't split the dental radiological equipment off from the medical equipment. MR. HEIDORSDORF said there was a good reason and it's because they are both ionizing radiations of the same type and both involve some type of radiation exposure to patients. Therefore, it should be under the jurisdiction of people who are trained in radiation safety. SENATOR TAYLOR asked if it wasn't a matter of drawing up regulations and having the right person do it. Number 260 MR. HEIDORSDORF said that could be done. There are a number of states allowing private consultants to do these inspections right now. He is not aware of a single state that accepts anything other than "a radiological health person" (backgrounds in physics and chemistry). SENATOR TAYLOR asked who replaced him at the Division of Public Health and if he had the same qualifications. MR. HEIDORSDORF said after he left the position was vacant for a couple of years and the person who replaced him was qualified, but has left. MS. CATHERINE COLEMAN, Division of Public Health, said there was a three and a half year gap. MR. HEIDORSDORF repeated that radiation safety is not the concern of a repair technician, they make sure the equipment works properly. That doesn't Ensure that it is used properly and there is a big difference. The feeling is that when you have an x-ray exam, the benefit from that exam will far exceed any risk. There is some risk, but it's impossible to count up x-rays and then tell a person they can't have any more. There is a clear benefit to having them. He explained there are about 100 milligrams of background radiation per year for the whole body. It's very difficult to compare medical or dental exams, because they are not whole body radiation. SENATOR MACKIE added that he has a strong concern for what happens in the outlying areas and if they have to fly someone in from Fairbanks or Anchorage, that could be done by the State. SENATOR TAYLOR responded that in Ketchikan they would send inspectors to the outlying areas during their scheduled stops for the City. According to testimony he has heard, dental equipment is the least dangerous and most reliable of all. He thought what has been happening for the last several years is that all the dentists have been paying their $50 per tube to basically keep the inspectors away. That's why there is a three and a half year gap with no one to do it and why some machines have gone six to 10 years without an inspection. He said that he was gearing up to have inspections every five years. CHAIRMAN LEMAN said SB 160 would be held over for further work by the Committee. SB 212 - FEES FOR USE OF AUTOMATED TELLER MACHINES CHAIRMAN LEMAN announced SB 212 to be up for consideration. SENATOR ELLIS, sponsor, explained this bill relates to automated teller machines in Alaska, "a multi-billion dollar industry." This bill emphasizes safety and notice to the customer and the issue of double-charging. There is a trend nationwide to charge ATM holders a second fee. Up until a year ago the private sector itself had a ban on double-charging of customers for these services. He does not have a problem with charging a customer for the cost of the convenience, but the double-charge offends him. For someone with a lot of money that is not a big concern, but for lower income and working people, the charges get out of hand. He thought notice to the consumer was getting to be more important, because the machines are soon going to dispense coupons, tickets, and other things that will divert the attention of the consumer. Initiative for work on this issue came from Senator D'Amato who is working on this on a national level. Other aspects of the bill are patterned after the state of Washington and are based on some investigative news reports on ATMs being crime magnets across the country. There are provisions for safety evaluations, lighting requirements, etc. that will make them less likely to be points of crime commission. CHAIRMAN LEMAN asked regarding the first charge which is shared by banks, if there is a mechanism for the charge to be split. SENATOR ELLIS said the only mechanism he knows of is the agreements between the banks and, frankly, how they charge the fees is a mystery to him. He said there are banks that don't charge fees. It is also a mystery about how profitable these ATMs are. They are talking not just about the bank affiliated ATMs, but also the independent ATMs for which there's a much greater projected growth in that area. TAPE 98-12, SIDE A Number 001 SENATOR MACKIE asked how many actual ATM transactions there are in this State. SENATOR ELLIS said he didn't know, but could probably get that information. SENATOR MACKIE asked if the fee was a percentage or a set amount. SENATOR ELLIS answered that it is a set amount. SENATOR KELLY asked if he was specifically exempting credit unions that have automatic teller machines in this legislation. He noted that there is one credit union that is larger than all but one or two of the banks. SENATOR ELLIS said he thought the definition clause was big enough to cover everyone; it's not his intent to exclude credit unions or give them any advantage over banks. MR. JERRY WEAVER, Secretary, Alaska Bankers Association, said he is also an employee of the National Bank of Alaska. He said that anyone who wants to can set up a cash machine, if they have the money, but he didn't think the definition was expansive enough to fully include those people. The bulk of NBA's business is by customers of the bank and they aren't charged for use of ATM's. The machines cost roughly $25,000 and about $1,500 per month to service. The second fee is basically part of the service charge that comes from Cirrus and is 50 - 75 cents. Plus and Cirrus both have regulations that require two types of notice to be given to customers which has to be placed physically on the outside of the machine and before the transaction can be completed, the fees have to come up on the screen. All 120 machines the NBA has are lit and have video cameras with them, since video cameras require lighting to operate effectively. MR. WEAVER said they view this as a free enterprise issue; business competing against business. Consumers are very smart and quickly figure out what the fees are. They look for convenience the same as with the hundreds of other electronic products that are available to consumers. Alaska is unique because in some areas these machines almost act as banks, especially in bush locations. If they regulate fees and pass a bill such as this, they would see a fairly fast reduction of those machines in the availability and convenience to the consumers. There is competition out there and those people who have put out the heavy capital investment to get the machines out there should be allowed to make an adequate recovery. MR. JAMES BEVERIDGE, AKPIRG, explained that a surcharge like this to a person who was not a customer of the bank would mean they would be charged a fee by their own bank and the new surcharge would be billed to them at the time of the transaction. He said that bigger banks have a much broader network of ATM's and by placing this fee on customers who aren't members of their own bank, they are disadvantaging small banks and credit unions. The effect of these surcharges are not felt evenly by all people and disadvantage people of lower incomes who need to use them more frequently for smaller withdrawals. They are often compelled to receive their welfare or benefit checks electronically. MR. TERRY LUTZ, Chief Examiner, Division of Banking, said he had relatively few complaints, but he had a problem with the bill, because it seems to target banks. If they get rid of the first section identifying banks as the culprit, he thought the bill would be good. He thought we needed something statewide if the federal government doesn't. SENATOR KELLY asked if he thought the definition should be expanded to anyone who operates an ATM. MR.LUTZ answered yes. Number 242 CHAIRMAN LEMAN said they would hold the bill and work on language to take care of the concerns and bring it up next Tuesday. HB 199 - COMMUNITY PROPERTY CHAIRMAN LEMAN announced HB 199 to be up for consideration. REPRESENTATIVE JOE RYAN, sponsor, said HB 199 allows Alaskans to take advantage of a loophole in the federal tax law that says if you have property that is designated community property when one of two married people dies, the property gets adjusted up from its original value to its present value and there is a capital gains liability of 20 percent. This bill exempts the property from tax liability, because it is community property. This bill allows people by election to take some or all of their assets and name them community property. Both people have to sign an agreement and can have the advantages. Family law people felt that somehow a woman would be taken advantage of and wanted more than a 50/50 split, and so cautionary language was put in to consult an attorney before signing an agreement. The other aspect of this is that it ties in with a series of investment bills he is introducing, with the Alaska Trust Act being one. He is trying to make Alaska a favorable place to bring money to invest. SENATOR KELLY asked if enactment of this legislation makes Alaska a community property state. MR. RICHARD THWAITES, Alaska Trust Co., answered no. He explained in 1981 a change was made with regard to estate taxes and community property states had an advantage we didn't have as a separate property state. In community property states, if one person died, the surviving spouse got a stepped up income tax basis in both halves of the property. He has proposed here an optional community property provision which is much like the one passed in Oklahoma in 1938 (which was approved by the federal statutes), with an opt out clause which has passed IRS muster. Alaska can have the best of both worlds by staying a separate property state and by offering an optional community property designation for spouses to elect asset by asset. There would be three classifications of states: community property, separate property, and Alaska which would be a separate property state with a community property option available on a designated basis and you could go into it or out of it as long as both people consented. SENATOR MACKIE asked why other states hadn't come up with this option. MR. THWAITES answered that they hadn't thought about it, yet. Number 364 He said after Alaska adopted its Trust Act a couple of years ago, Delaware tried to copy it, but it changed three things in its statute which rendered it unworkable. The banks, family lawyers, and personal injury lawyers wanted and were granted special exceptions. Now Delaware is trying to fix it. SENATOR KELLY asked if another state besides Delaware did a trust statute after us. MR. THWAITES answered that South Dakota introduced a bill and the legislature tabled it. SENATOR KELLY asked where is the advantage to the State? MR. THWAITES answered that over the last two years we have gotten a lot of publicity around the country. SENATOR KELLY asked if our law is known as the Alaska Trust. MR. THWAITES answered yes, but the trusts are being called Tundra Trusts. SENATOR KELLY asked how many trusts had been established in Alaska as a result of the Trust Law. MR. THWAITES answered they have over 50 in the Alaska Trust Company, some as high as $26 million from Florida. Key Bank is doing a major marketing campaign across the country as a result of it. SENATOR KELLY asked if he knew how much total money had come to Alaska as a result of that legislation. MR. THWAITES answered he just knew of the 50 with his company, but meetings he has been to have had the largest attendance in the Alaska section. He said that the Delaware law works from a creditor's standpoint, but it wouldn't work with the IRS. If you want the estate planning rationale, you need to go with the IRS. Number 448 There has been an attack on the Alaska Trust as being a sham by the off-shore trust people. But most of the people he talked to at an institute said it's obvious if Alaska does work, all the people with legal purposes are going to go to Alaska and all the drug people and O.J. Simpson are going to be the only ones left off- shore - and there's $1 trillion off-shore right now. He has seen three trusts come to Alaska from California that were off-shore before by people who didn't like the off-shore stuff. He thought HB 199 would further enhance that trend and get it down to where more practitioners would want to do it. From the tax standpoint, this is a pretty straightforward option. SENATOR KELLY asked how the State of Alaska benefits from passage of this bill. MR. THWAITES answered that the citizens of Alaska are going to benefit in that they will not pay as much (federal) income tax as they would have paid before. This is somewhat decreased by the after 55 one-time $125,000 exemption which has been changed by Congress to the $250,000 exemption for as many times as you want to with no age limit. Very often at a liquidation stage, most of the cash that comes in on a sale like that goes to commissions and taxes. This will take the tax part of that away to the extent the assets were elected. SENATOR KELLY asked if there were any fees the State of Alaska receives from any of these trusts that are being established up here. MR. THWAITES answered yes, that they are $25 for the registration and whatever fees or taxes other trusts pay. SENATOR MACKIE asked if there was any correlation between estate taxes and assets received by heirs. MR. THWAITES said there was in the Trust Act, but this is purely an income tax bill. MR. RICHARD HOMPESCH, Fairbanks Trust Attorney, supported HB 199. CHAIRMAN LEMAN asked if there were any downside to this at all. MR. THWAITES answered that the only loser is the IRS. MR. HOMPESCH agreed, he added that it this is purely optional. SENATOR KELLY asked what the administration thought of it. REPRESENTATIVE RYAN said he had discussed this with Willis Kirkpatrick, Director, Division of Banking, who endorsed the bill. He noted the $0 fiscal note. (Mr. Kirkpatrick had to leave the hearing for another appointment.) Number 482 MS. ANNETTE KREITZER, Staff to Senate Labor and Commerce, said she also had talked to Mr. Kirkpatrick who had no problems with the bill. SENATOR MACKIE moved to pass HB 199 with individual recommendations. There were no objections and it was so ordered. CHAIRMAN LEMAN adjourned the meeting at 4:05 p.m.