Legislature(2003 - 2004)
03/25/2003 01:32 PM Senate L&C
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* first hearing in first committee of referral
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+ teleconferenced
= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
SENATE LABOR AND COMMERCE STANDING COMMITTEE
March 25, 2003
1:32 p.m.
MEMBERS PRESENT
Senator Con Bunde, Chair
Senator Ralph Seekins, Vice Chair
Senator Gary Stevens
Senator Bettye Davis
Senator Hollis French
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
SENATE BILL NO. 86
"An Act relating to the rate of interest on delinquent taxes."
MOVED SB 86 OUT OF COMMITTEE
SENATE BILL NO. 111
"An Act relating to the submission of payroll information by
contractors and subcontractors performing work on a public
construction contract; and providing for an effective date."
HEARD AND HELD
SENATE BILL NO. 113
"An Act relating to the frequency of examinations of certain
persons licensed to engage in the business of making loans of
money, credit, goods, or things in action; repealing the
requirement for a state examination and evaluation of the Alaska
Commercial Fishing and Agriculture Bank; and providing for an
effective date."
HEARD AND HELD
SENATE BILL NO. 120
"An Act relating to the state's sovereign immunity for certain
actions regarding injury, illness, or death of state-employed
seamen and to workers' compensation coverage for those seamen;
and providing for an effective date."
HEARD AND HELD
PREVIOUS ACTION
SB 86 - See Labor and Commerce minutes dated 3/18/03.
SB 111 - No previous action to consider.
SB 113 - No previous action to consider.
SB 120 - No previous action to consider.
WITNESS REGISTER
Mr. Darwin Peterson
Staff to Senator Wilken
Alaska State Capitol
Juneau, AK 99801-1182
POSITION STATEMENT: Commented on SB 86.
Mr. Ed Fisher, Deputy Commissioner
Department of Labor & Workforce
Development
PO Box 21149
Juneau, AK 99802-1149
POSITION STATEMENT: Commented on SB 111.
Ms. Hali Denton, Acting Director
Division of Labor Standards and Safety
Department of Labor & Workforce
Development
PO Box 21149
Juneau, AK 99802-1149
POSITION STATEMENT: Commented on SB 111.
Mr. Don Etheridge
Alaska AFL-CIO
710 West 9th Street
Juneau, Alaska 99801
POSITION STATEMENT: Commented on SB 111.
Mr. Scott Johannes, Private Contractor
Association of Builders and Contractors
No address provided
POSITION STATEMENT: Opposed SB 111.
Mr. Charles Wiegers
Associated Builders and Contractors
32 Bonnir Ave.
Fairbanks AK
POSITION STATEMENT: Opposed SB 111.
Mr. Tim Rogers, Legislative Program Coordinator
Municipality of Anchorage
PO Box 196650
Anchorage AK
POSITION STATEMENT: Opposed SB 111.
Mr. Raymond Smith, Business Manager
International Union of Painters and Allied Trades (INPAT)
650 W. International Airport Rd.
Anchorage AK 99518
POSITION STATEMENT: Opposed SB 111.
Mr. Scott Bridges
Teamsters Local 959
520 E. 34th
Anchorage AK 99503
POSITION STATEMENT: Opposed SB 111.
Mr. Joe Smith
Gastineau Contractors
Juneau AK 99801
POSITION STATEMENT: Commented on SB 111.
Mr. Thomas Boedeker
City Manager
Soldotna AK
POSITION STATEMENT: Opposed SB 111.
Mr. Mark Davis, Director
Division of Banking, Securities and Corporations
Department of Community & Economic Development
PO Box 110800
Juneau, AK 99811-0800
POSITION STATEMENT: Supported SB 113.
Ms. Susan Cox, Assistant Attorney General
Department of Law
PO Box 110300
Juneau, AK 99811-0300
POSITION STATEMENT: Commented on SB 120.
Mr. Brad Thompson, Director
Division of Risk Management
Department of Administration
PO Box 110200
Juneau, AK 99811-0200
POSITION STATEMENT: Supported SB 120.
Mr. Joe Geldhof
Marine Engineers Beneficial Association (MEBA)
District 1 Pacific Coast Division
Juneau AK 99801
POSITION STATEMENT: Commented on SB 120.
ACTION NARRATIVE
TAPE 03-14, SIDE A
SB 86-INTEREST ON DELINQUENT TAXES
CHAIR CON BUNDE called the Senate Labor and Commerce Standing
Committee meeting to order at 1:32 p.m. Present were Senators
Davis, Seekins, French and Chair Bunde. He announced SB 86 to be
up for consideration. He said the Department of Revenue has
taken care of all of the big delinquent tax cases. SB 86 strikes
a balance between creating a system that is not oppressive to
the small taxpayer but does not leave any money on the table for
the big taxpayer.
MR. DARWIN PETERSON, staff to Senator Wilken, said that was a
fair statement.
SENATOR SEEKINS moved to pass SB 86 from committee with
individual recommendations and the attached fiscal note.
SENATORS SEEKINS, FRENCH, DAVIS AND BUNDE voted yea, and the
motion carried.
SB 111-PUBLIC CONSTRUCTION PROJECT REQUIREMENTS
CHAIR BUNDE announced SB 111 to be up for consideration.
SENATOR STEVENS arrived at 1:38 p.m.
MR. ED FISHER, Deputy Commissioner, Department of Labor and
Workforce Development (DOLWD), said SB 111 is designed to
eliminate the requirement that contractors on public works
projects submit weekly certified payrolls to the Department of
Labor and Workforce Development. He continued:
In place of the certified payroll, all the contractors
and subcontractors will be required to file a notice
of intent to perform public work along with a fee of
$100. The notice would be on a form provided by the
department and include identifying information about
the project and the contractor and a statement that
the contractor fully understands his or her
responsibilities to workers under Title 36 and will
comply with those requirements. The notice of intent
would inform the department that each contractor is
aware of the proper prevailing rates of pay. At the
end of its project, each contractor or subcontractor
would file with the Department of Labor an affidavit
of compliance on a form provided by the department
along with another $100 fee. That affidavit would
state that the contractor has completed the work of
the project and complied with the requirements of
Title 36 with the regard to the payment of proper
prevailing wages and resident's preference. The
affidavit of compliance would provide an instrument
for closure on projects and a sworn attestation of
compliance with the act.
The advantage to contractors would be that they would
no longer have to file the certified weekly payrolls
with the department. However, in most cases, when
federal money is involved, certified weekly payrolls
are already being filed with the contracting agency.
This would eliminate the duplication of the filing of
those certified payrolls. The payrolls would still be
accessible for audit purposes in the event of a
complaint or an investigation. The contracting agency
would not be required to audit the payrolls, although
the Department of Transportation/Public Facilities
already performs certain tasks to satisfy federal
grants on most of its projects. Presently, many
contracting agencies do not make final payment on a
project until they have clearance from the Department
of Labor. Under this plan, that is the plan in SB 111,
the department would check its files for the final
affidavits and that would make the process of issuing
a clearance much more responsive. Final payment could
be released to the contractor sooner. This bill would
enable the department to put its resources in the
field rather than in the office filing paperwork.
The expectation is that the fees will generate - and
the savings from eliminating a clerical position would
generate annual revenue of $115 million.
CHAIR BUNDE said he was confused about the filing requirements
and flexibility as any Little Davis Bacon project requires a
weekly payroll filing.
MR. FISHER replied that is true at present because Title 36
requires that the payroll information be filed with the
Department of Labor.
CHAIR BUNDE asked if SB 111 removes that requirement.
MR. FISHER replied contractors would no longer be required to
file a certified payroll with the department, but they would be
required to file a certified payroll with their contracting
agency.
CHAIR BUNDE asked if the department has just been getting a copy
of the paperwork contractors were filing with the federal
agency.
MR. FISHER replied that is correct and said the certified
payrolls fill about 27 file drawers every year and amount to
about 20,000 pieces of paper in a month.
CHAIR BUNDE asked if a subcontractor who finishes a project in a
day or two would still have to file and pay the two $200 fees,
and whether the subcontractor would get paid before the main
contractor filed his paperwork.
MR. FISHER replied the intention of the bill is that the
subcontractor would file payroll information. The department,
upon receiving the affidavit of completion, would check its
files and provide the proper release so that the subcontractor
could be paid.
CHAIR BUNDE asked if that would apply if a subcontractor worked
one day or less.
MR. FISHER replied that is correct as presently written.
CHAIR BUNDE asked how the $100 fees equate to the cost of the
work that would be done.
MR. FISHER replied that the fee was not designed in terms of the
cost. He stated, "It's a revenue generator."
SENATOR SEEKINS pointed out the fiscal note contains a breakdown
of 2300 projects with an average of five contractors per
project. He asked Mr. Fisher if he could tell how large those
projects were.
MR. FISHER said he couldn't, but based on Southeast Alaska only,
about 15 percent of the projects have a value of about $5,000;
another 25 percent have a value of about $10,000 or less.
SENATOR SEEKINS asked how long it would take the department to
do the certification so people could get their final payment.
MS. HALI DENTON, Acting Director, Division of Labor Standards
and Safety, said they don't have a solid number for that because
it's not something the department has had to keep track of
before. She noted, "It's intended to streamline the process...."
She said the division would be releasing the subcontractors as
they filed their affidavits so they would not have to wait until
the entire project is completed.
SENATOR SEEKINS asked what percentage of a contract is normally
held out for final payment.
MS. DENTON said she would get back to him with an answer.
SENATOR SEEKINS said he was concerned that on a small contract,
for example a $5,000 contract, the whole amount would be
withheld and none of the contractors or subcontractors could get
paid until the department got to that point. He asked if the
division has envisioned the final process and whether it would
be based on the affidavit or whether the division would look at
other documents to make sure that people had complied with the
many Davis Bacon requirements.
MS. DENTON replied that the affidavit is intended to be a sworn
document. The division would look at that if problems surfaced
and it would be auditing the payrolls. Absent any complaints, it
would just reference the affidavit.
MR. DON ETHERIDGE, Alaska AFL-CIO, said the AFL-CIO has concerns
with the bill as drafted and wants to see the certified payroll
requirement remain with the department. The fees should also be
earmarked for the department so they can do this project right.
The problem now is that the department doesn't have enough staff
to follow up on complaints about certified payrolls. The AFL-CIO
also wants to see a graduated fee instead of charging the same
amount for a $5,000 contract or larger one.
He explained that if you're trying to track down certified
payrolls right now on the federal level, you don't know where
you're going to find them. It could take forever. His members
know when they are being paid the wrong amount; now they can go
to the department.
SENATOR FRENCH asked if the certified payrolls were going to
stay with the contracting agency, which might be the Village of
Hoonah or some other small agency.
MR. ETHERIDGE replied that is correct. It could be any
department of the state, municipalities, etcetera, and that is
why it would be so hard sometimes to try and track them down. He
also noted that many times contractors look at the certified
payrolls to make sure their competitors are staying above board.
SENATOR FRENCH asked if certified payrolls basically tell you if
the appropriate wage is being paid to the appropriate individual
under the Little Davis Bacon Act.
MR. ETHERIDGE replied yes.
CHAIR BUNDE asked a where the federal certified payroll goes and
whether there is a central repository where people could access
that information.
MR. SCOTT JOHANNES, Association of Builders and Contractors,
said he saw a lot of problems with the bill. One is the Village
of Hoonah. Now the state knows how to review the payrolls and
once this bill goes into effect, hundreds of agencies across the
state, the village of Hoonah being one, will be responsible for
doing that review. They don't have anyone on staff to do that.
This new system will be less efficient and the person doing it
will be less qualified.
MR. JOHANNES second concern was the fee. Basically, the state is
charging the contractor the fee on projects the contractors are
doing for the state, so the state is charging itself and they're
asking the contractor to pass it through. He surmised, "So
they're going to increase the cost to themselves."
SENATOR STEVENS asked if it would be of concern to him to have
contractors investigated.
MR. JOHANNES replied that until the department has
certifications for everyone on the project, it is not going to
be able to release the certification verifying that a
subcontractor is in compliance so the subcontractor can get a
final payment.
SENATOR STEVENS asked if that would be any different than it is
now.
MR. JOHANNES replied yes. Currently, department staff is
responsible for reviewing those and have the means to do it.
CHAIR BUNDE asked if, under the current system, subcontractors
are required to provide the certified payroll under the Davis
Bacon Act and, if they don't, the major contractor would be held
up from payment as well.
MR. JOHANNES replied that is correct.
MR. CHARLES WIEGERS, Associated Builders and Contractors, was
opposed to SB 111 for many of the reasons already expressed. He
said the department is shifting this effort to the contracting
agencies and some are capable but some are already overwhelmed
with the administration of contracts. In addition, the
department is asking to derive revenues from this bill. He was
skeptical that the $115 million the department intends to
receive from the fees would be added on to the cost of
construction [which the state would have to pay for].
Another concern he expressed with is the clearance of the final
contract. He said if a subcontractor doesn't file, the general
contractor's payment could be held up and the subcontractor
might do it maliciously.
MR. WIEGERS said another concern is that it removes enforcement
from the process because the department will no longer enforce
Title 36 wages. It is going to rely on a piece of paper. He
added, "If someone is dishonest enough and disingenuous enough
to pay less than prevailing wages on a project, I wouldn't put
it past them to sign a certification saying that they did."
He said he is aware of the large amount of paperwork because as
a contractor he dealt with it. He suggested moving to an
electronic submission to eliminate the huge volumes of paper.
MR. TIM ROGERS, Legislative Program Coordinator, Municipality of
Anchorage, said he has some concerns with the bill. First,
municipalities will become the record keepers for the Department
of Labor and they don't have the expertise to do that. He was
also concerned about the fees, especially for smaller projects
around $5,000. Two hundred dollars is a significant percentage
increase on a smaller project. He also noted there is no
provision for emergency work and his city is faced with a few
million dollars worth of emergency work caused by a wind storm.
There is no provision allowing the municipality to get a
contractor to do the repair work immediately and the
municipality would have to wait for the department to say it's
okay to put a contractor on the job. This could cause
significant problems for the municipalities in some cases.
Municipalities also have to get the department to sign off
before they can issue final payment. He explained they do have
significant retainage, especially on the larger projects, and
are required by state law to pay interest if there is any delay
on the payment. He concluded by saying they wouldn't object if
municipalities were exempted from this bill.
SENATOR SEEKINS asked if municipalities are currently required
to make sure their contractors are sending in the certified
payroll affidavits.
MR. ROGERS replied that he couldn't answer that, but would get
the answer for him.
MR. RAYMOND SMITH, Business Manager, INPAT, opposed SB 111 for
the same reasons already given. He said, "The Department of
Labor needs to monitor certified payroll. That's their job."
He spoke of one contract that included the Loussac Library, the
East High School Teen Career Center, and Anaktuvuk Pass Housing
projects. He said if he reads this bill correctly, he would have
to go to the Mat-Su Valley, the school district, and to find out
who the housing authority is in Anaktuvuk Pass to monitor the
certified payrolls. He contended:
It's just not feasible. We have a clearinghouse here.
That's where the certified payrolls are turned in.
That's where interested parties can go to find them.
It only makes sense, gentlemen, and we'd appreciate it
if you would take a little more care in looking at
this bill. I don't think it's right for the workers of
Alaska.
SENATOR SEEKINS asked if INPAT monitors the payrolls now.
MR. ROGERS replied it monitors certain projects - some
contractors and sometimes their own contractors.
SENATOR SEEKINS asked for an estimate of the amount of time it
took.
MR. ROGERS replied that it takes about 20 percent of his
organizer's time and about 7 percent of his own time.
CHAIR BUNDE asked Mr. Rogers if he was aware of any federal
government clearinghouse and whether folks would have access to
that information.
MR. ROGERS replied that the federal Department of Labor is and
that one must write to Seattle to request copies of certified
payroll.
MR. SCOTT BRIDGES, Teamsters Local 959, told members:
This bill as drafted is disruptive to workers because
it seriously dilutes the practicability to enforce
rights that are afforded under this body of law. By
scattering compliance with Title 36 and other wage
statutes, workers are placed in further jeopardy of
losing earned wages to unscrupulous contractors. I
don't know that any of us could accurately estimate
the amount of loss to workers that exists today with
the staffing levels that exist at the Department of
Labor. At a time when economic pressures attack the
worker at home with greater influence is greater than
any other element of our society, this bill proposes
to add a little more pressure to that.
The bill suggests that it would eliminate a double
recording requirement. There are many practical means
of overcoming that particular problem, which is not
quite so monumental to the individual contractor as
some might have us believe. Eliminating a clerical
position at the Department of Labor, which is also
suggested by those who proposed this legislation,
would further cripple the DOL's enforcement
capability. At this time, after I have spoken with
several of the enforcement officers with the
Department of Labor, they have suggested to me that
they get so many complaints but they're able to
enforce only those that are pretty much slam dunk
cases. They simply do not have the time in their work
week to handle the load that exists today.
In our state's effort to stimulate the stagnant
economy, we need to be looking towards
entrepreneurialism as an economic stimulus for greater
growth rather than regulations of this type. With that
entrepreneurialism we're going to get that economic
growth and we'll have enhanced revenues that the state
so drastically needs. I appreciate the time. I think
that this bill is one that in its present form should
go away and I would appreciate this committee's
assistance in taking a much harder look at this.
CHAIR BUNDE asked how he proposes to pay for the service so the
state can continue to provide the same level of service.
MR. BRIDGES replied that eliminating one clerical position was
going to be a drop in the bucket in the suggested $115 million
fiscal note. He suggested keeping the "$100 in and $100 out" and
putting that money in the hands of the workers so they can spend
it at the businesses in his community. Whatever taxes come in
from those construction dollars would enhance the state's
revenues even under the current tax structure.
SENATOR SEEKINS noted that Mr. Wieger's earlier reference to
$115 million was two decimal places off. The amount is $1.15
million.
MR. BRIDGES said a clerical position would not account for much
of that.
MR. JOE SMITH, part owner of Gastineau Contractors, said he has
concerns about shifting the recording of certified payroll from
the Department of Labor to the contracting entities. For a
company that bids on Davis Bacon jobs, it's important to have an
agency monitoring their competition. A contracting agency might
be less inclined to dedicate the resources needed to do the job
as its hands are full administering the contract. They don't
have the expertise or the motivation to monitor the certified
payroll, which would be especially true of small jobs.
MR. SMITH explained that $2,000 is the lower limit where Davis
Bacon kicks in so a $200 in and out fee represents 10 percent of
a job that size. A sliding scale makes a lot more sense.
CHAIR BUNDE asked if he believes this is a valuable service and
if a sliding fee scale was used, whether he would be willing to
pay additional funds so the state could maintain the service.
MR. SMITH replied he would.
MR. THOMAS BOEDEKER, City Manager of Soldotna, said he is
chairman of the Alaska Municipal League legislative committee.
He noted the statute requires withheld money due a contractor to
accumulate at a 10.5 percent interest if it's not paid within 30
days of billing. Right now municipalities are not earning
anything near 10.5 percent on their investments. This bill would
not let him make a final payment to a contractor that might be
due because of a subcontractor or any number of other issues.
Under this bill, a municipality would be required by law to pay
10.5 percent interest while it waited for the Department of
Labor to resolve a dispute.
TAPE 03-14, SIDE B
MR. BOEDEKER also had concerns with the dispute resolution
process itself, and asked what kind of disputes would trigger
the process. He said right now the department enforces the
prevailing wage law. There are a number of interpretations of
what work is covered or not covered and the municipalities have
neither the jurisdiction nor the expertise to deal with the
interpretations the department has made. He found it difficult
to believe that filing copies with the municipality only will
allow the department to make its determinations. A burden would
be placed on the municipality "to do all the leg work" every
time an issue arises.
He also expressed concern about how long the municipality would
be required to keep the records. Contractors keep records while
they are active and don't organize them to be researched after a
job is closed. He concluded that an amendment is needed that
says if a municipality is withholding funds while awaiting the
department's certification, it is not subject to retainage
interest.
CHAIR BUNDE asked Mr. Fisher to look at the following issues:
· Electronic submission of the information
· A graduated fee
· The interest concerns on retained payments
· Emergency provisions
· The state's need to generate revenue
· The percentage of private versus state contracts
He asked Mr. Fisher to provide the committee with feedback on
those issues.
SENATOR STEVENS also asked Mr. Fisher to look into the impact of
exempting municipalities.
CHAIR BUNDE said he also wants to know how one would access the
federal repository's information if this bill becomes law.
SENATOR SEEKINS said he would like to know if any other state
requirements have to be met in addition to the certification of
payroll before payout is made and how many reports the
department currently receives on certified payrolls. He also
wanted to know what the volume of the paper flow is and, as it
comes in, whether the reports are filed with or without review.
He further asked if the affidavit includes the same type of
report that is filed weekly or whether it just states that
prevailing wages were paid.
SENATOR DAVIS asked if there are one or two filings between the
department and the contracting agency.
MR. FISHER said based on the bill, the expectation would be that
the contractor would file a notice of intent to proceed, which
would be accompanied by a $100 fee. When the project for that
particular contractor was complete, that contractor would file
an affidavit saying that he/she had paid proper wages and the
contractor's portion of the contract was complete, accompanied
by a $100 fee.
SENATOR DAVIS noted a clerk's position costing about $30-$40,000
would be eliminated. She asked where the other money in the
fiscal note would come from.
MR. FISHER replied that the revenue generation would come from
the filing fees. The cost savings of $40 to $50,000 are from
eliminating the position.
SENATOR DAVIS asked whether the bill is based on the model of
the Little Bacon Davis Act.
MR. FISHER responded that he just recalled they eliminated
$67,000 from the budget for the clerical position. He didn't
have an answer to how the act came into being.
SENATOR DAVIS said the reason she brought that up is because SB
111 might be eliminating something that is required by the
federal government.
MR. FISHER replied that he is unaware of a requirement but would
ask the question and get a response.
CHAIR BUNDE held the bill and said he would share the
information with the committee when it came back.
SB 113-FINANCIAL INSTITUTION EXAMINATIONS/CFAB
CHAIR BUNDE announced SB 113 to be up for consideration.
MR. MARK DAVIS, Director of Banking, Securities and
Corporations, said SB 113 makes two changes; the first is to the
banking code, Title 6, which governs small loan companies (loans
of $25,000 or less). Right now, Title 6 requires that small loan
companies be examined every year; the rest of the banking
industry is on an 18-month examination schedule. SB 113 proposes
[changing Title 6 companies] to an 18-month schedule also. That
does not mean a small loan company would not be examined more
frequently if examiners felt it should be for some reason. It
would allow the division to eliminate a banking position.
The second change is to Title 44, which deals with state
government. The Alaska Commercial Fishing Agriculture Bank
(CFAB) falls under Title 44. SB 113 proposes to drop CFAB's
required annual qualitative examination by the division. By
statute, CFAB must provide the legislature with an audited
financial statement performed by outside auditors and that has
always been done and is still being done. He feels the outside
audit report is sufficient to let the members of CFAB know the
financial condition of CFAB or whether their loans are in bad
condition.
CFAB was created in 1980 and experienced some difficulties in
1985. The banking examiners were used in 1985 to examine the
bank and then about two years later the legislature passed the
current statute. He explained that the banking section of the
division does not make money. It requires more funds to run than
it generates in fees. Dropping that requirement would save an
examiner's position and the time could be used to focus on other
state banks, which he views as the department's primary mission.
CFAB no longer has state funds; it once had $32 million in state
funds but paid those back early in 1998. CFAB is not open to the
public, except for some very small loans and one must be a
member to borrow money.
CHAIR BUNDE asked if it is fair to say that the CFAB examination
isn't really so much a consumer protection effort as it is an
effort to give it the state's imprint of quality.
MR. DAVIS said he thought that was the intent when the statute
was passed as CFAB had some financial difficulties in the 80s
that it worked through. It is not a regular bank and the bank
examiners' function is to look at state charter banks and make
sure they are sound.
CHAIR BUNDE asked if it is fair to say that the external audit
that CFAB goes through every year is comprehensive and would
provide members with needed information to make judgments about
the quality of CFAB.
MR. DAVIS replied the portion of the CFAB statute in Title 44
requires that outside auditors provide financial statements - a
full audit. By statute, the financial statements must be
provided to the legislature. The division is also proposing that
legislative audit functions be removed but remain in statute.
That means if any problem should arise, the legislature has full
subpoena power and could use the banking examiners if it wanted
to. An acceptable accounting principle statement would contain
much of the same information and non-performing loan or asset
information would show up.
SENATOR STEVENS said he wanted a definition of what the
qualitative examination actually entailed and asked who reviewed
the CFAB audit if not the division. He noted, "It would be
wasted time spent with me giving me an audit."
MR. DAVIS replied that by statute, CFAB is required to provide
the legislature and the governor's office with an outside audit,
which is unique. When it's sent to the governor's office, he
assumed it would be sent to his division as it has been before.
He understood that it goes to the Division of Legislative Budget
and Audit when it's sent to the legislature.
SENATOR STEVENS asked to know more about the qualitative exam
and how much it cost.
MR. DAVIS responded that is language used in the statute and he
doesn't know what it means. It doesn't appear in any other
banking statute. The examination last year took 10 days and cost
$6,300; in FY03, it's going to cost the division about $635,000
to do bank exams. The division will accept $276,000 in fees and
therefore lose about $359,000. The division is trying not to
lose so much money.
To reduce costs, the last administration decided not to go
through every loan, but when examining an FDIC state charter
bank, the division goes through every loan.
SENATOR SEEKINS said it seems to him like the audits that are
currently done are not a consumer protection feature, but more
of a membership assurance project.
MR. DAVIS replied that's how CFAB views it.
CHAIR BUNDE said SB 113 will not balance the division's budget
and asked Mr. Davis if he would entertain the notion that the
cost of doing the examinations should be borne by the people he
examines on a break-even basis.
MR. DAVIS replied that would be a goal, but he needed to work on
it. Overall the division makes a fair profit; the Securities
section makes a greater profit. It puts $10 to $12 million into
the general fund and provides a good service; the Banking
section loses $359,000.
SENATOR FRENCH asked if the division would save about $6,000 per
year by eliminating the examination.
MR. DAVIS said yes and that right now an examiner spends 10 days
at CFAB and that time could be spent somewhere else with another
entity. He said they are working at Bidcos [ph], the relatively
new private financial groups of which there are two in the
state. They inject money into the economy.
SENATOR FRENCH asked if the division won't gain a whole
examiner's position for the entire year, but instead will get 10
days worth of work out of a person on another project.
MR. DAVIS said that is right and to put it in perspective, the
state bank, which is much larger, will take the same time as
CFAB. He would rather spend the time on the state bank and have
the examiners available to shift to the securities section, as a
lot of new securities brokers have opened for business in Alaska
within the last couple of years.
CHAIR BUNDE asked if the division anticipates saving $126,000.
MR. DAVIS replied yes and said that bank examiners are paid well
and are highly skilled.
SENATOR SEEKINS said the bill changes the examination
requirement to once every 18 months instead of once every 12
months. He asked Mr. Davis if he anticipates any unnecessary
risk in small loans.
MR. DAVIS answered that right now there are eight licensees,
seven are owned by Wells Fargo. At the present time, given that
ownership structure, he didn't think there would be any risk
from changing to 18 months. He emphasized that if the division
needs to examine someone more frequently, like a new licensee
that is having difficulty, it would do so.
CHAIR BUNDE thanked participants for their comments and said the
committee would bring SB 113 up again next week.
SB 120-CLAIMS BY STATE-EMPLOYED SEAMEN
CHAIR BUNDE announced SB 120 to be up for consideration.
MS. SUSAN COX, Assistant Attorney General, explained that SB 120
would have the state limit its waiver of sovereign immunity as
it pertains to injury claims brought by state employees who
happen to be seamen and instead provide for worker's
compensation coverage for those state employees. The Governor's
transmittal letter indicates that the intent of the bill is to
provide state employees who are seamen with worker's
compensation coverage, similar to all other state employees. To
do that, the statute by which the legislature has waived the
state's sovereign immunity, thereby opening itself up to
litigation in tort claims, personal injury claims, and maritime
personal injury claims, must be amended.
MS. COX explained that amending AS 09.52.050 is an approach that
was identified in a 1963 Attorney General's opinion and was
referenced in an Alaska Supreme Court decision on a case known
as the State of Alaska Department of Public Safety vs. Robert
Brown in 1990. At that time, the [court] held that the Alaska
Workers' Compensation Act could not be applied to be the
exclusive remedy of state employees, because the state had
waived its immunity without limitation for personal injury
actions. If the state wanted to withdraw its consent to suit and
apply worker's compensation to its state employees who are
seamen, it could do so in a bill like this.
She explained from 1983-1991 most state employed seamen who
worked aboard our state ferries had collective bargaining
agreements that provided for workers' compensation benefits in
lieu of the Jones Act and other maritime remedies. For eight
years those employees enjoyed workers' compensation coverage in
lieu of litigation. In 1991, a different Alaska Supreme Court
decision, another (Dale) Brown decision, said that collective
bargaining agreements providing for workers' compensation
instead of the Jones Act were void and therefore couldn't be
negotiated as a matter of union contract.
MS. COX said the purpose of this bill is to bring the state
employees who are seamen under workers' compensation and take
the state out of the realm of maritime remedies and Jones Act
coverage. The Department of Law expects it to ultimately save
the state money. The effective date is July 2003, but if
enacted, it would apply only to injuries or illness occurring
after that date. So, anyone who was injured in the last three
years, because of the three-year statute of limitations under
the Jones Act, would still be able to bring suit under the laws
that exist now.
MS. COX expects a legal challenge if this law is passed. She has
looked at legal arguments pertaining to those. The Robert Brown
decision from the Alaska Supreme Court and other cases from
several jurisdictions point in this same direction. She added
that decisions by the U.S. Supreme Court in the last five years
have made it clear that if a state does not consent to be sued,
the Congress cannot impose liability upon the state.
2:57 p.m.
CHAIR BUNDE asked what the volume of claims is, how it compares
with workers' compensation and what the state's net gain would
be.
MS. COX replied that at this point in time the Department of Law
handles the litigation with ferry employees. The department
expects to see a continuation of some cases for injuries that
occurred in the last three years. Starting with the effective
date of this law, new injuries and illnesses would go to the
workers' compensation system. The state is self-insured and
workers' compensation is obviously a no-fault remedy. The
department would expect to see, by and large, automatic coverage
of workers' compensation matters and an eventual reduction in
the amount of litigation the Department of Law would have to
handle.
CHAIR BUNDE asked about the volume of claims the department is
dealing with. He also asked if all employees of the Alaska
Marine Highway System are seamen and whether they have to meet
other criteria under this legislation.
MS. COX replied that for all intents and purposes, those who
work aboard the vessels are seamen and are covered under the
maritime remedies that she referred to. Office workers onshore
are not necessarily seamen. The department deals with a much
higher volume of claims with respect to the maritime workers in
the ferry system than other state agencies.
SENATOR STEVENS asked about the Dale Brown decision and the
basis for voiding the contract.
MS. COX answered in the Dale Brown decision, the Alaska Supreme
Court decided as a matter of labor law, that unions could not
bargain away their individual members' rights, pre-injury, under
the federal law.
SENATOR FRENCH asked if this would put all state employees under
the same workers' compensation scheme.
MS. COX replied that is the plan.
SENATOR SEEKINS asked if she had seen the letter from Beard,
Stacy, Trueb and Jacobsen.
MS. COX replied that she saw it in the hall.
SENATOR SEEKINS asked for her opinion based on the theories of
law that were set forth in it.
MS. COX said she would be happy to do that and noted she has
already evaluated some of the theories because she frequently
deals with that firm in her cases. Mr. Trueb has expressed an
interest in a uniform approach to maritime remedies for all
seamen. The Governor disagrees and she disagrees with a number
of the points Mr. Trueb raised in his letter.
SENATOR SEEKINS said he was particularly interested in a couple
of representations in the letter about the jurisdiction of all
state courts in regard to injuries.
MR. BRAD THOMPSON, Director, Division of Risk Management, said
this division acts as the self-insurer and handles the claims
filed by state employees. He noted he provided members with a
chart that compares maritime claims to those of other state
employees. The frequency of claims in 100 full time equivalent
positions (FTE) for all state employees is 8 per 100 FTE. The
Departments of Corrections, Transportation, Public Safety, and
Administration have 10 per 100 FTE. The average cost of maritime
workers' claims is $197,000 per 100 claims compared to $64,000
for workers' compensation claims.
CHAIR BUNDE said he frequently hears that commercial fishing,
logging and aviation are very high risk jobs and asked if he had
information on how the Alaska Marine Highway System jobs
compare.
MR. THOMPSON replied that he thought the Worker's Compensation
division would have a rate per 100 FTE on its annual report; he
estimated it was about 10.
CHAIR BUNDE asked if the expanded number of claims is due to the
fact that working on ferries is inherently dangerous or because
ferry workers are more inclined to present a claim.
MR. THOMPSON replied that the remedy is different. Wages are
paid to the end of the voyage and that is perhaps an incentive
for frequency of claim. Workers' compensation only compensates
for a time loss greater than three days. He pointed out that
within the Robert Brown decision, the court clearly stated that
if the state desires to limit its tort liability to the Workers'
compensation Act, it may do so by legislative enactment of an
exception to the waiver of sovereign immunity, which is what SB
120 is proposing.
SENATOR SEEKINS asked what is so dangerous about working on a
ferry and noted the claim rate is very high.
MR. THOMPSON agreed the rate of claims is high.
MR. JOE GELDHOF, Marine Engineers Beneficial Association, said
his organization represents the marine engineers on the Alaska
Marine Highway System and licensed engineers on Alaska tankers.
SB 120 only relates to state workers who are seamen and a small
number of people in the Departments of Fish and Game and Public
Safety. He said this problem has been around for years and he is
not convinced it is really good to go at this time.
TAPE 03-15, SIDE A
MR. GELDHOF noted that the marine engineers and other maritime
unions have worked with the state administration and with Susan
Cox, who has a lot of historical knowledge, in the past. He said
significant legal problems within the bill need to be addressed
before it moves out of committee. He explained in one Brown
case, the court struck down provisions based on a challenge to
contractual language brought by an individual mariner. The other
Brown case, which preceded that one by about two years,
addressed sovereign immunity and how to fix the problem, but it
was based on an attorney general's opinion issued in 1963 when
Lyndon Johnson was in the first year of his presidency. He said
that opinion is fairly dated and suggested the current attorney
general update it.
MR. GELDHOF said one theory is that sovereign immunity is
imbedded in the Alaska Constitution so it would require a
constitutional amendment rather than a statutory change. He
thought it would be wise to get an opinion from legislative
counsel and to then refer the bill to the Judiciary Committee.
He noted the bill also needs a fiscal note regarding the
administration of workers' compensation.
He added that real differences account for what appears to be
substantially more claims coming from marine activities. For
example, cooking during an 8-hour shift in a prison is
fundamentally different than on a ship when the weather gets
rough. He maintained:
If you take the Tustumena out to Dutch Harbor, it's
probably not a stationary deck and it's long days.
People are often sleep deprived.... There really are
genuine differences in the maritime trades from
landlubbers like me.
CHAIR BUNDE asked Ms. Cox to provide a fiscal note and said that
interesting legal points were raised, but the Senate President
would decide whether to refer SB 120 to the Judiciary Committee.
With no further business to come before the committee, he
adjourned the meeting at 3:15 p.m.
SENATE L&C COMMITTEE -23- March 25, 2003
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