04/20/2004 02:04 PM Senate L&C
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ALASKA STATE LEGISLATURE
SENATE LABOR AND COMMERCE STANDING COMMITTEE
April 20, 2004
2:04 p.m.
TAPE(S) 04-34
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. 272
"An Act relating to certain monetary advances in which the
deposit or other negotiation of certain instruments to pay the
advances is delayed until a later date; and providing for an
effective date."
MOVED CSSB 272(L&C) OUT OF COMMITTEE
CS FOR HOUSE BILL NO. 428(JUD)
"An Act relating to civil liability for acts related to
obtaining alcohol for persons under 21 years of age or for
persons under 21 years of age being on licensed premises."
MOVED CSHB 428(JUD) OUT OF COMMITTEE
CS FOR HOUSE BILL NO. 15(FIN) am
"An Act relating to fair trade practices and consumer
protection, to telephone solicitations, to charitable
solicitations; and providing for an effective date."
MOVED SCS CSHB 15 (L&C) OUT OF COMMITTEE
SENATE BILL NO. 349
"An Act requiring licensure of midwifery birth centers; and
providing for an effective date."
MOVED SB 349 OUT OF COMMITTEE
SENATE BILL NO. 389
"An Act relating to the conversion of certain corporations to
limited liability companies; and providing for an effective
date."
MOVED SB 389 OUT OF COMMITTEE
SENATE BILL NO. 392
"An Act relating to the expenses of investigation, hearing, or
public advocacy before the Regulatory Commission of Alaska, to
calculation of the regulatory cost charge for public utilities
and pipeline carriers to include the Department of Law's costs
of its public advocacy function, to inspection of certain books
and records by the attorney general when participating as a
party in a matter before the Regulatory Commission of Alaska;
and providing for an effective date."
MOVED SB 392 OUT OF COMMITTEE
SENATE BILL NO. 387
"An Act authorizing the making of certain commercial fishing
loans to eligible community quota entities for the purchase of
certain fishing quota shares; and providing for an effective
date."
MOVED SB 387 OUT OF COMMITTEE
SENATE BILL NO. 369
"An Act exempting a person who allows a student of the
University of Alaska to gain practical work experience with the
person while participating in a practicum from vicarious
liability as an employer, and exempting the student
participating in a practicum from the Alaska Wage and Hour Act
and workers' compensation coverage."
SCHEDULED BUT NOT HEARD
PREVIOUS COMMITTEE ACTION
BILL: SB 272
SHORT TITLE: DEFERRED DEPOSIT ADVANCES (PAYDAY LOANS)
SPONSOR(s): RULES
01/21/04 (S) READ THE FIRST TIME - REFERRALS
01/21/04 (S) L&C, FIN
04/06/04 (S) L&C AT 2:00 PM BELTZ 211
04/06/04 (S) Heard & Held
04/06/04 (S) MINUTE(L&C)
04/15/04 (S) L&C AT 1:30 PM BELTZ 211
04/15/04 (S) Scheduled But Not Heard
04/20/04 (S) L&C AT 2:00 PM BELTZ 211
BILL: HB 428
SHORT TITLE: CIVIL PENALTY: MINORS & ALCOHOL
SPONSOR(s): REPRESENTATIVE(s) MEYER
02/04/04 (H) READ THE FIRST TIME - REFERRALS
02/04/04 (H) L&C, JUD
02/25/04 (H) L&C AT 3:15 PM CAPITOL 17
02/25/04 (H) Moved Out of Committee
02/25/04 (H) MINUTE(L&C)
02/26/04 (H) L&C RPT 5DP
02/26/04 (H) DP: CRAWFORD, LYNN, ROKEBERG,
02/26/04 (H) GUTTENBERG, GATTO
03/18/04 (H) JUD AT 1:00 PM CAPITOL 120
03/18/04 (H) Heard & Held
03/18/04 (H) MINUTE(JUD)
03/19/04 (H) JUD AT 1:00 PM CAPITOL 120
03/19/04 (H) Moved CSHB 428(JUD) Out of Committee
03/19/04 (H) MINUTE(JUD)
03/24/04 (H) JUD RPT CS(JUD) 4DP 1AM
03/24/04 (H) DP: SAMUELS, ANDERSON, GRUENBERG,
03/24/04 (H) MCGUIRE; AM: GARA
03/29/04 (H) DIVIDE THE AMENDMENT WITHDRAWN
03/29/04 (H) TRANSMITTED TO (S)
03/29/04 (H) VERSION: CSHB 428(JUD) AM
03/31/04 (S) READ THE FIRST TIME - REFERRALS
03/31/04 (S) L&C, JUD
04/13/04 (S) L&C AT 1:30 PM BELTZ 211
04/13/04 (S) -- Meeting Canceled --
04/15/04 (S) L&C AT 1:30 PM BELTZ 211
04/15/04 (S) Scheduled But Not Heard
04/20/04 (S) L&C AT 2:00 PM BELTZ 211
BILL: HB 15
SHORT TITLE: SOLICITATIONS/CONSUMER PROTECTION
SPONSOR(s): REPRESENTATIVE(s) FATE
01/21/03 (H) PREFILE RELEASED (1/10/03)
01/21/03 (H) READ THE FIRST TIME - REFERRALS
01/21/03 (H) L&C, STA, FIN
01/29/03 (H) L&C AT 3:15 PM CAPITOL 17
01/29/03 (H) <Bill Postponed>
02/07/03 (H) L&C AT 3:15 PM CAPITOL 17
02/07/03 (H) Moved CSHB 15(L&C) Out of Committee
02/07/03 (H) MINUTE(L&C)
02/10/03 (H) L&C RPT CS(L&C) NT 3DP 4AM
02/10/03 (H) DP: CRAWFORD, ROKEBERG, ANDERSON;
02/10/03 (H) AM: LYNN, GATTO, GUTTENBERG, DAHLSTROM
02/18/03 (H) STA AT 8:00 AM CAPITOL 102
02/18/03 (H) Heard & Held
02/18/03 (H) MINUTE(STA)
02/25/03 (H) STA AT 8:00 AM CAPITOL 102
02/25/03 (H) Scheduled But Not Heard
03/11/03 (H) STA AT 8:00 AM CAPITOL 102
03/11/03 (H) Heard & Held
03/11/03 (H) MINUTE(STA)
03/13/03 (H) STA AT 8:00 AM CAPITOL 102
03/13/03 (H) Moved CSHB 15(STA) Out of Committee
03/13/03 (H) MINUTE(STA)
03/26/03 (H) STA RPT CS(STA) NT 3DP 4NR
03/26/03 (H) DP: SEATON, GRUENBERG, WEYHRAUCH;
03/26/03 (H) NR: HOLM, LYNN, DAHLSTROM, BERKOWITZ
02/19/04 (H) FIN AT 1:30 PM HOUSE FINANCE 519
02/19/04 (H) Heard & Held
02/19/04 (H) MINUTE(FIN)
02/23/04 (H) FIN AT 1:30 PM HOUSE FINANCE 519
02/23/04 (H) Moved CSHB 15(FIN) Out of Committee
02/23/04 (H) MINUTE(FIN)
02/24/04 (H) FIN RPT CS(FIN) NT 7DP 3NR
02/24/04 (H) DP: HAWKER, CROFT, CHENAULT, FATE,
02/24/04 (H) MEYER, HARRIS, WILLIAMS; NR: STOLTZE,
02/24/04 (H) JOULE, MOSES
03/03/04 (H) TRANSMITTED TO (S)
03/03/04 (H) VERSION: CSHB 15(FIN) AM
03/04/04 (S) READ THE FIRST TIME - REFERRALS
03/04/04 (S) L&C, JUD
03/25/04 (S) L&C AT 1:30 PM BELTZ 211
03/25/04 (S) Heard & Held
03/25/04 (S) MINUTE(L&C)
04/06/04 (S) L&C AT 2:00 PM BELTZ 211
04/06/04 (S) Heard & Held
04/06/04 (S) MINUTE(L&C)
04/13/04 (S) L&C AT 1:30 PM BELTZ 211
04/13/04 (S) -- Meeting Canceled --
04/20/04 (S) L&C AT 2:00 PM BELTZ 211
BILL: SB 349
SHORT TITLE: MIDWIFERY BIRTH CENTER LICENSING
SPONSOR(s): SENATOR(s) DAVIS
02/16/04 (S) READ THE FIRST TIME - REFERRALS
02/16/04 (S) L&C, FIN
04/20/04 (S) L&C AT 2:00 PM BELTZ 211
BILL: SB 389
SHORT TITLE: CORP. CONVERSION TO LIMITED LIABILITY CO.
SPONSOR(s): LABOR & COMMERCE
04/15/04 (S) READ THE FIRST TIME - REFERRALS
04/15/04 (S) L&C
04/20/04 (S) L&C AT 2:00 PM BELTZ 211
BILL: SB 392
SHORT TITLE: REGULATORY COMMISSION OF ALASKA
SPONSOR(s): LABOR & COMMERCE
BILL: SB 387
SHORT TITLE: COMMERCIAL FISHING LOANS FOR QUOTA SHARES
SPONSOR(s): RULES BY REQUEST OF THE GOVERNOR
04/13/04 (S) READ THE FIRST TIME - REFERRALS
04/13/04 (S) CRA, L&C
04/19/04 (S) CRA AT 1:30 PM FAHRENKAMP 203
04/19/04 (S) Moved SB 387 Out of Committee
04/19/04 (S) MINUTE(CRA)
04/20/04 (S) L&C AT 2:00 PM BELTZ 211
WITNESS REGISTER
Mr. Richard Schmitz
Staff to Senator Cowdery
Alaska State Capitol
Juneau, AK 99801-1182
POSITION STATEMENT: Commented on SB 272 for sponsor.
Mr. Ed Sniffen
Department of Law
PO Box 110300
Juneau, AK 99811-0300
POSITION STATEMENT: Supports SB 272.
Mr. Steven Cleary, Executive Director
Alaska Public Interest Research Group
Anchorage AK
POSITION STATEMENT: Supports SB 272.
Ms. Deborah Fink
No address provided
POSITION STATEMENT: Opposes SB 272.
Mr. Jim Davis, Supervising Attorney
Alaska Legal Services
Anchorage AK
POSITION STATEMENT: Opposes SB 272.
Mr. Terry Lutz, Chief Financial Institution Examiner
Division of Banking, Securities and Corporations
Department of Community & Economic Development
PO Box 110800
Juneau, AK 99811-0800
POSITION STATEMENT: Commented on SB 272.
Mr. Chip Wagoner
Alaska Catholic Conference
Juneau AK
POSITION STATEMENT: Commented on SB 272.
Mr. Mark Davis, Director
Division of Banking, Securities and Corporations
Department of Community & Economic Development
PO Box 110800
Juneau, AK 99811-0800
POSITION STATEMENT: Commented on SB 272.
Representative Kevin Meyers
Alaska State Capitol
Juneau, AK 99801-1182
POSITION STATEMENT: Sponsor of HB 428.
Ms. Cindy Cashen
Mothers Against Drunk Drivers (MADD)
Juneau AK
POSITION STATEMENT: Supports HB 428.
Mr. O.C. Madden, Director
Human Resources and Loss Prevention, Brown Jug, Inc.
Anchorage AK
POSITION STATEMENT: Supports HB 428.
Mr. Dave Lambert
Fairbanks AK
POSITION STATEMENT: Supports HB 428.
Ms. Jessica Paris
MADD Youth in Action Program
Juneau AK
POSITION STATEMENT: Supports HB 428.
Ms. Suzanne Cunningham
Staff to Representative Meyer
Alaska State Capitol
Juneau, AK 99801-1182
POSITION STATEMENT: Commented on HB 428 for sponsor.
Mr. Jim Pound
Staff to Representative Hugh Fate
Alaska State Capitol
Juneau, AK 99801-1182
POSITION STATEMENT: Commented on HB 15 for sponsor.
Ms. Cindy Drinkwater
Department of Law
PO Box 110300
Juneau, AK 99811-0300
POSITION STATEMENT: Commented on HB 15.
Mr. Bob Flint
Hartig & Rhodes
Direct Marketing and Publishers
Anchorage AK
POSITION STATEMENT: Opposes HB 15.
Ms. Ann Darr
Magazine Publishers of America
No address provided
POSITION STATEMENT: Opposes HB 15.
Ms. Myra Pugh
Staff to Senator Bettye Davis
Alaska State Capitol
Juneau, AK 99801-1182
POSITION STATEMENT: Commented on SB 349 for sponsor.
Ms. Judy Davidson
Mat-Su Midwifery
No address provided
POSITION STATEMENT: Supports SB 349.
Ms. Kathryn Piatt
Frontier Midwifery
Soldotna AK
POSITION STATEMENT: Supports SB 349.
Ms. Kelly DeSieyes
Women's Way Midwifery
Soldotna AK
POSITION STATEMENT: Supports SB 349.
Ms. Barbara Norton, co-owner
Geneva Woods Birth Center
Anchorage AK
POSITION STATEMENT: Supports SB 349.
Ms. Dana Brown
Fairbanks AK
POSITION STATEMENT: Supports SB 349.
Ms. Kay Kanne, Executive Director
Juneau Family Birth Center
Juneau AK
POSITION STATEMENT: Supports SB 349.
Mr. Mark Hickey
Aleut Corporation
th
211 4 St., Suite 108
Juneau AK
POSITION STATEMENT: Supports SB 389.
Mr. David Jensen, CEO
Aleut Corporation
No address provided
POSITION STATEMENT: Supports SB 389.
Mr. Daniel Patrick, Senior Assistant Attorney General
Regulatory Affairs
Department of Law
PO Box 110300
Juneau, AK 99811-0300
POSITION STATEMENT: Supports SB 392.
Mr. Pat Luby, Advocacy Director
AARP Alaska
Juneau AK
POSITION STATEMENT: Supports SB 392.
Mr. Greg Winegar, Director
Division of Investments
Department of Community & Economic Development
PO Box 110800
Juneau, AK 99811-0800
POSITION STATEMENT: Supports SB 387.
ACTION NARRATIVE
TAPE 04-34, SIDE A
SB 272-DEFERRED DEPOSIT ADVANCES (PAYDAY LOANS)
CHAIR CON BUNDE called the Senate Labor and Commerce Standing
Committee meeting to order at 2:04 p.m. Present were Senators
Bettye Davis, Ralph Seekins and Chair Con Bunde. Senator Gary
Stevens arrived at 2:05 and Senator Hollis French arrived at
2:10. The first order of business to come before the committee
was SB 272.
SENATOR RALPH SEEKINS moved to adopt CSSB 272(L&C), version /S.
There were no objections and it was so ordered.
MR. RICHARD SCHMITZ, staff to Senator Cowdery, sponsor,
explained that the original bill had a $1,000 cap on the amount
that could be loaned, which was lowered to $500 in the CS. The
new version allows only two rollovers so a person can't go into
perpetual debt. The lender also has to post a bond giving the
Division of Banking closer scrutiny and offer the consumer a
payment plan before initiating a legal action to collect on a
default. Damages a lender can recover are limited to $700, down
from $1,000 and he can only charge $15 per $100 loaned. The
original bill allowed for some additional interest. A couple of
other minor changes were made like raising the NSF fee from $25
to $30, which is an amount that another bill puts in statute.
MR. ED SNIFFEN, Department of Law, clarified that the fees a
lender can charge include the $15 per $100 plus a $5 origination
fee. A stylistic change included removing a problem with third-
party collectors. In the original version, third-party
collectors were required to comply with the payment plan, which
was problematic because the Division of Banking didn't have
jurisdiction over them. The CS requires a payment plan to be
offered by the lender before taking any other action on a
default. He stood by his previous testimony on other issues in
the bill.
CHAIR BUNDE noted that the general public seems to think this is
enabling legislation that would create something that doesn't
exist in Alaska now. However, that is not correct. This is
simply regulating a legal industry that currently exists in
Alaska.
MR. SNIFFEN concurred with that saying that's why the Department
of Law supports it. There is some room for debate on whether or
not the current form of this industry is legal or not in Alaska,
because of the Small Loan Act and the usury statute structure
that is a little confusing, but pending legal action might
clarify that. This legislation goes a long way in dealing with
the problems in the industry, although it's not a perfect fix.
MR. STEVE CLEARY, Executive Director, Alaska Public Interest
Research Group (AKPIRG), said that other states have a somewhat
varied track record with payday loans. Recently, Georgia capped
the annual percentage rate at 60 percent, whereas this bill has
the rate at approximately 470 percent.
So, we've been testifying and trying to show how
dangerous these types of loans are to consumers. In
Georgia, they basically shut them down, particularly
around military bases because they were preying on
military families who couldn't afford to get on a
cycle of debt. This bill purports to just be a short-
term fix for consumers, but oftentimes what happens is
consumers get on a cycle of debt that they aren't able
to escape from.
The compromise AKPIRG has come up with is changing the minimum
term of the loans from 14 days to 30 days, which would allow
consumers two pay periods to get this loaned money back. It also
would allow people who are only paid once a month a chance to
better repay this loan. One of the payday lenders testified that
he gave roughly 26,000 loans in a year to 24,000 different
customers, meaning that most customers are only choosing one
loan per year. If the amount of time allocated to these
customers were doubled, it would have a negligible affect on the
profits of payday lenders. He urged the committee to change the
length of the loan term from 14 to 30 days, which would roughly
halve the annual percent rate to 200 percent.
MS. DEBORAH FINK, a lender, said she would answer questions.
CHAIR BUNDE asked for her reaction to extending the loan term
from 14 to 30 days.
MS. FINK replied that would essentially reduce the income from
the fees, which would make payday loans a loosing proposition
for any of the people who did it. "We would have to double our
customer base in order to cover that cost...."
MR. JIM DAVIS, Alaska Legal Services, said this is, in effect,
enabling legislation.
It will make legal what is, in effect, illegal, which
is to charge 400 to 1,000 percent interest on
consumers and it's motivated for no other reason
except to terminate the lawsuit pending in front of
the Superior Court here in Anchorage, which will, if
left undisturbed, lead to a ruling and, in all
probability, that says these kinds of businesses are
violating existing Alaska law....
He pointed out that SB 272 would make legal an interest in
excess of what the Gambino crime family charged on similar
loans. Other purported protections in the bill will not protect
consumers in fact - monitoring by the Division of Banking, for
one.
Without additional staff, there will be no
monitoring.... And apparently there are no additional
staff people that are going to be added because there
is no fiscal note to this bill. So, you'll have no
effective monitoring by the Division of Banking or any
other division of the state. You'll have reams of data
under this bill provided to the Division of Banking or
to another division of the state, but without new
staff to look at these reams of data, it'll just be in
a box sitting in a warehouse someplace....
CHAIR BUNDE responded that there is a $226,000 fiscal note,
which he asked Mr. Lutz to address.
SENATOR FRENCH arrived at 2:10 p.m.
MR. TERRY LUTZ, Financial Institution Examiner, Division of
Banking, Securities and Corporations, Department of Community &
Economic Development (DCED), said he had a lot to do with the
revenue side of the fiscal note and explained that the
expenditure side was done by Director Mark Davis who anticipated
several hearings initially, which accounts for the contractual
amount of $103,000. Division of Personal Services has to add an
examiner and a clerk. The travel is pretty much self-
explanatory.
MR. CHIP WAGONER, Alaska Catholic Conference, said the main
issue of whether loans should be for two weeks or 30 days is
what affect that would have on the consumers, which he thought
was pretty easy to figure out, and what affect it would have on
the industry, which wasn't easy to figure out. Before the bill
leaves this committee, he thought it incumbent upon the
committee to get written facts and figures from the industry as
to what affect it would really have. Without that information,
he didn't see how the issue could be evaluated.
SENATOR BETTYE DAVIS said she wasn't aware that it might be
illegal to conduct this kind of business in Alaska and wanted to
know if the court would make a decision soon. "If that's the
case, why would we want to bother about regulating this if it
turns out to be illegal?"
MR. MARK DAVIS, Director, Division of Banking, Securities and
Corporations, responded:
These loans have been made for some time under a
perceived exemption to the Small Loan Act, which
exempts, some people argue, loans up to $500. That's
in litigation. However, the Act also has an exemption
for certain types of other activities such as
pawnbrokers. What we're suggesting is the regulation
of this industry, which, I think, will tend to exist
in one form or another, no matter what the outcome of
the litigation.... In 44 states, the state's answer
has been to regulate them.
SENATOR SEEKINS said he didn't think the Legislature wanted to
eliminate the industry and he looked at this as regulation
rather than enabling legislation. He moved to pass CSSB
272(L&C), version /S, from committee with individual
recommendations and attached fiscal note.
SENATOR FRENCH objected because he thought they would be passing
enabling legislation that the state is better off without and he
wanted to allow the lawsuit to work its way through the court
system.
CHAIR BUNDE asked for the roll. Senators Gary Stevens, Ralph
Seekins and Chair Con Bunde voted yea; Senators Bettye Davis and
Hollis French voted nay; and CSSB 272(L&C) moved from committee.
CSHB 428(JUD)-CIVIL PENALTY: MINORS & ALCOHOL
CHAIR CON BUNDE announced CSHB 428(JUD) to be up for
consideration.
REPRESENTATIVE KEVIN MEYER, sponsor, said HB 428 was requested
by Mothers Against Drunk Drivers (MADD) and Brown Jug. It simply
tries to deter kids from asking adults to buy alcohol for them
and tries to deter adults from buying alcohol for kids. "The way
to do this is to have businesses take civil action against these
people who try to do it." A business in Anchorage has already
used this technique, nicknamed 'Hey, Mister' on about 100
people. Once a person is notified of a civil action, he is given
a choice of either paying a fine of $1,000 or going to an
education program sponsored by MADD and other organizations to
get $700 waived. Most people choose to participate in this
program.
He explained that three different groups of people buy alcohol
for minors - older brothers and sisters, homeless people and sex
offenders (who probably have other motives). This bill has
passed the House with no opposition. There was a concern that
businesses would be forced to take this type of action, but it
is totally optional. It doesn't cost the state or the city
anything.
SENATOR HOLLIS FRENCH said he totally agreed with the intent of
the bill and asked what happens to the $1,000 once Brown Jug
gets its mitts on it.
REPRESENTATIVE MEYER answered that Brown Jug's testimony states
that it waives $700 of the fine and keeps $300, if the offender
agrees to go through the alcohol education program. The $300
covers their administrative costs.
MR. O.C. MADDEN, Director, Human Resources and Loss Prevention,
Brown Jug, Inc., explained that the municipal assembly adopted
this ordinance last year. The civil penalty has been used to
encourage a bunch of youngsters who would not have otherwise
received treatment to get involved in a treatment program.
We offer a bonus to our employees to seize fake IDs
from minors and minors who illegally enter licensed
premises and now we are offering a bonus to employees
to interrupt these third-party sales where an adult
has purchased alcohol for a minor. We use the $300 to
pay the bonus to the employee; we waive $700 of the
$1,000 if the minor will agree to sign up for
treatment. Virtually all of them have. We are also
able to do the same thing with the adults who are
purchasing alcohol for minors. We found this to be a
very effective tool and due to some questions we have
from other licensees around the state that are
interested in doing the same thing, we approached
Representative Meyers with this idea.
SENATOR SEEKINS asked which statute deals with persons who buy
alcohol for minors.
REPRESENTATIVE MEYER replied that it falls under AS 4.16.060.
SENATOR FRENCH asked if the bill goes after the fake IDs or the
Hey, Mister sale.
REPRESENTATIVE MEYER replied that Brown Jug has been very
aggressive in getting fake IDs, but that action falls under a
different bill and a different statute. This bill focuses on the
Hey Mister sales.
MR. DAVE LAMBERT, Fairbanks, said he owns two establishments and
strongly supported HB 428. He said a similar bill about minors
entering premises passed a couple of years ago had worked very
well. It gave employees incentive to go after minors trying to
purchase. Prior to that, most employees didn't care.
SENATOR FRENCH asked how the $1,000 is divvied up when he is
successful in one of these suits.
MR. LAMBERT replied that he has five in the works right now and
has received partial payment on two of them. An employee
receives $500 for catching his first offender. After that, he
gets $250 for each one - after the money is collected.
So, all of a sudden the door-people and bartenders are
really paying attention to checking IDs.... A thousand
dollars isn't that much if a minor comes into a
premises and is served and goes out and gets in a
wreck. A thousand dollars doesn't go very far to cover
our legal fees.
SENATOR FRENCH asked if he could assume that the other half of
the money in the first instance and the other three quarters of
it in the second in the subsequent instances go to him as the
bar-owner.
MR. LAMBERT replied yes, after he collects it. He strongly
supports the training, but he doesn't think it should be part of
this bill. The city of Fairbanks doesn't have the money to go
after small things.
SENATOR SEEKINS asked if paragraph (B) puts a foster parent at
risk for the actions of a 14 or 15 year old who wants him to buy
a six-pack.
REPRESENTATIVE MEYER replied that he didn't think so, because
it's currently legal for parents to buy alcohol for their kids
within their own home and for their own use.
SENATOR SEEKINS clarified that he was wondering about a person
who has legal custody of an unemancipated minor.
REPRESENTATIVE MEYER said he didn't know.
MS. CINDY CASHEN, MADD Juneau Chapter, said she is also
representing the other three MADD Alaska Chapters in Anchorage,
Mat-Su and Fairbanks and supported HB 428 because it will assist
in the prevention of underage drinking. The Alaska Youth Risk
Behavior Survey is conducted annually. The latest one included
42 schools out of 19 districts with 2,175 completed
questionnaires for grades 9 - 12. According to the survey, 38.7
percent of teenagers claim they had at least one drink in the 30
days prior to filling out the survey; almost 27 percent claimed
five or more drinks within a couple of hours, binge drinking, in
the previous month. In comparison, 29.9 percent of Alaskan
adults reported binge drinking one or more times in the past
month. This bill will help prevent that by adding a tool to
community policing.
SENATOR GARY STEVENS asked if Anchorage is the only area that
has a program and if MADD would be involved if it were here.
MS. CASHEN replied that's true. MADD would be involved in the
communities that wanted to start the program.
MS. JESSICA PARIS, MADD Youth In Action Program, said as an
opponent of underage drinking, she supports HB 428, because it
proposes a unique, free and proactive way to prevent underage
drinking and the tragedies associated with it like dropping out
of high school, premature sexual activity, car crashes, etc.
"This bill provides the incentives for store owners to get
involved and help prevent these transactions."
MS. PARIS stated that a $1,000 civil fine is an appropriate
amount because it is enough to impact either an adult or a
youth. It is compensation for an otherwise thankless task of
providing extra staff, confronting people in their parking lot,
sending legal documents and risking being taken to court by the
defendant.
MS. SUZANNE CUNNINGHAM, Staff to Representative Meyer, explained
that AS 4.16.051 does not prohibit a parent or a guardian or the
legal spouse of that person from giving alcohol to a minor. It
doesn't say legal guardian specifically, but the bill includes
that. She wasn't sure about the foster parent question.
CHAIR BUNDE noted there was no further testimony and closed the
public hearing.
SENATOR SEEKINS moved to pass CSHB 428 (JUD) from committee with
individual recommendations and attached fiscal note. Senators
Bettye Davis, Hollis French, Ralph Seekins, Gary Stevens and
Chair Con Bunde voted yea; and CSHB 428(JUD) moved out of
committee.
HB 15-SOLICITATIONS/CONSUMER PROTECTION
CHAIR CON BUNDE announced HB 15 to be up for consideration and
that some agreement had been reached between the competing
interests that resulted in an amendment. He moved amendment 1
and objected for discussion purposes.
23-LS0058\VA.1
Craver
A M E N D M E N T 1
OFFERED IN THE HOUSE BY REPRESENTATIVE FATE
TO: CSHB 15(FIN) am
Page 8, lines 14 - 15:
Delete all material.
Insert "[MAGAZINE, PERIODICAL,] sound recording or [,] book
through [, OR MEMBERSHIP IN] a book or record club"
Page 8, line 20, following "(11)":
Insert "by a publisher, or a publisher's agent operating
under a written agreement between a publisher and the agent, who
is soliciting the sale of a publisher's magazine if
(A) the buyer has the right to review the
magazine and cancel the subscription for the magazine
within seven days after receipt of the magazine; a
cancellation request is timely if the request is
mailed, properly addressed and postmarked, postage
prepaid, within seven days after receipt of the
magazine; and
(B) the right of cancellation and refund is
fully disclosed to the buyer before or at the time the
initial invoice is received by the buyer;
(12)"
Page 8, line 22:
Delete "(12)"
Insert "(13) [(12)]"
Page 8, line 24:
Delete "(13)"
Insert "(14) [(13)]"
Page 8, line 26:
Delete "(14)"
Insert "(15) [(14)]"
Page 8, line 29:
Delete "(15)"
Insert "(16) [(15)]"
Page 9, line 5:
Delete "(16)"
Insert "(17) [(16)]"
Page 9, line 6:
Delete "(17)"
Insert "(18) [(17)]"
Page 9, line 11:
Delete "(18)"
Insert "(19) [(18)]"
MR. JIM POUND, staff to Representative Hugh Fate, sponsor,
deferred comments to Cindy Drinkwater and Bob Flint.
MS. CINDY DRINKWATER, Department of Law (DOL), explained that
Amendment 1 is similar to language that about five other states
have in their telemarketing registration laws. The reasoning
behind it is that some of the scams that are associated with
magazine subscription sales are believed to be perpetrated by
entities that are often considered to be clearing houses or
wholesalers or some other entity that doesn't have
responsibility for the ultimate product, but is mostly concerned
with making a quick sale over the telephone. Amendment 1 makes
an exemption for a publisher, or an agent of his, operating
under a written agreement for the sale of that publisher's
magazine if two conditions apply. The first condition is that
the buyer has the right to review the magazine and cancel the
subscription for it within seven days of receipt of the magazine
and that the right of cancellation and refund is fully disclosed
to the buyer at the time the initial invoice is received or
before. She felt this would address some of the issues the
Direct Marketing Association has raised. However, the Consumer
Protection Unit urged an alteration, which would involve two
small words on line 15. It would read, "The right of
cancellation and refund is fully disclosed in writing to the
buyer." She supported that, because in reality the solicitations
happen and a month or two later, the magazine arrives and the
consumer might not remember that they were told in a phone
conversation that they had a right to cancel their subscription.
CHAIR BUNDE asked if this notice would come with the invoice.
MS. DRINKWATER replied that is correct.
SENATOR SEEKINS moved to amend Amendment 1 on line 15 after
"disclose" by adding "in writing". There were no objections.
SENATOR GARY STEVENS said you get the invoice after getting the
magazine and thought that was kind of late to receive the
notice.
MS. DRINKWATER replied that she would like to see the consumer
receive something much closer in time to the solicitation, but
believed that some notice in writing with an opportunity to
cancel is the critical feature.
SENATOR SEEKINS moved to amend Amendment 1 for the second time
on line 12 after "receipt of the magazine" by adding "or at the
time the initial invoice is received by the buyer, whichever is
later".
TAPE 04-34, SIDE B
SENATOR FRENCH objected to understand the amendment and then
withdrew his objection.
CHAIR BUNDE announced that there were no further objections to
the second amendment to Amendment 1.
CHAIR BUNDE asked if there was further discussion on Amendment 1
as amended. There were no objections and Amendment 1 was
adopted.
MR. ROBERT FLINT, Hartig & Rhodes, Direct Marketing Association,
said he thought he had an agreement, but not after the committee
adopted Amendment 1. Adding "in writing", which has been the
consistent position of the Department of Law, isn't consistent
with industry practices and forbids people to charge the product
on their credit card at the time of the call.
I think we're back to square one. That's not the way
the business works. We do have in your packets, I
hope, our Freedom of Information Act request that
suggests that there is such a low level of complaints
from 2000 and 1999 that there is no discernible
practice of abuse regarding this.
MS. ANN DARR, Magazine Publishers of America, said:
We're selling a magazine subscription! Every American
knows what a magazine is. There's nothing mysterious
or questionable about it. We have the best review,
return or cancel guarantee in the world. If somebody
doesn't want it, we'll credit them or cancel the
billing. If they decide they don't like it after two
months or three months or six months, we'll cancel all
unmailed issues. It's making it too complicated to
sell a simple magazine subscription. We offer many
wonderful things to Americans through magazines. We
offer information about retirement, financial issues,
information for elderly persons, entertainment for
children, educational articles, articles about
history.... So, we don't feel there is anything
mysterious about selling a magazine subscription, that
there is anything the consumer is confused about. If
they say they want it, we believe we should be able to
consider it sold with their ability to cancel and not
have to confirm it in writing.
CHAIR BUNDE asked, "Even if that confirmation comes with the
invoice?"
MS. DARR answered, "They don't always get an invoice. If they
have given us their credit card and that's how they want to pay
for it, they're not going to get an invoice."
CHAIR BUNDE asked Mr. Pound if he cared to comment on the deal
that was broken.
MR. POUND replied that the "in writing" issue is the one that
Ms. Drinkwater and Mr. Flint were consistently arguing,
primarily because according to the Direct Marketing Association,
most of these deals are done with credit cards over the
telephone. Requiring "in writing" would make it impossible to
make credit card sales over the phone.
CHAIR BUNDE asked Ms. Drinkwater how many complaints are
registered yearly about magazine scams.
MS. DRINKWATER answered there were five complaints in 2003 about
magazine scams, which may not seem like a huge number, but the
quality of the complaint is what she considers. These were
complaints from senior citizens who are on a limited income who
had gone to great lengths to try to cancel their magazine
subscriptions and were simply unable to cancel or were unable to
get through to a live person at the 800 number they were given.
She did not want to change any of the other 17 exemptions that
exist in the current statute.
SENATOR SEEKINS moved to pass SCS CSHB 15(L&C)am from committee
with the attached fiscal note and individual recommendations.
Senators Hollis French, Gary Stevens, Ralph Seekins, Bettye
Davis and Chair Con Bunde voted yea; and SCS CSHB 15(L&C)am
moved from committee.
SB 349-MIDWIFERY BIRTH CENTER LICENSING
CHAIR CON BUNDE announced SB 349 to be up for consideration.
MS. MYRA PUGH, staff to Senator Bettye Davis, sponsor, explained
that currently there are six birth centers in Alaska; five more
are registered and one is licensed. The owners, who are
certified direct entry and certified nurse midwives, unanimously
concluded they need to have one license standard for all birth
centers.
CHAIR BUNDE asked if in other enterprises that involve the
Division of Licensing, the licensees have to bear the cost of
licensing and if that was the case now.
MS. PUGH replied that is the case, but wanted the department to
verify that.
MS. JUDY DAVIDSON, owner and operator, Mat-Su Midwifery, said
she does over 100 births per year.
We feel this bill is very appropriate in that it would
license us for doing what licensed care providers are
already doing. We would prefer to be licensed rather
than registered and [to] adhere to a single standard.
MS. KATHRYN PIATT, owner, Frontier Midwifery, said she serves a
large section of outlying communities and agreed that having one
licensed birth center is a good idea so that the standard of
care is consistent all over the state.
SENATOR GARY STEVENS asked how many births per year happen at
her facility.
MS. PIATT replied about 25, but another birth center in Soldotna
does that many, as well.
MS. KELLY DESIEYES, Women's Way Midwifery, said having a
consistent standard would not only help the birth centers, but
also the families they serve. She supported SB 349.
MS. BARBARA NORTON, Geneva Woods Birth Center, supported SB 349
for the reasons previously stated.
MS. DANA BROWN, Fairbanks, said she is the director of a non-
profit birth center that also serves outlying Bush communities
in the Interior and that she supported SB 349. Licensing will
make a better standard for birth centers throughout the state
and will continue to advance midwifery, which the public really
wants.
MS. KAY KANNE, Executive Director, Juneau Family Birth Center,
said she sat on the board of Certified Direct Entry Midwives
from its inception in 1992 until 2000. She is also the volunteer
lobbyist for the Midwives Association of Alaska. She gave the
committee background on how two kinds of birth centers came
about in Alaska - registered and licensed.
This happened back in 1992 when we passed our original
legislation to create a board of Certified Direct
Entry Midwives for licensure. We also went back to the
Health and Social Services law and changed the
line...where it said, 'The commissioner shall adopt
regulations for the registration of lay midwifery in
the State of Alaska.' Well, we no longer needed that
because we were going to be licensed by the Division
of Occupational Licensing. So, we changed that line to
address one of our other concerns, which was the fact
that the birth center regulations at the time stated
that only a physician or a nurse midwife could attend
births in a birth center. So, basically we changed the
line to say 'the registration of birth centers' and
then we changed the wording to say that 'The
commissioner shall not require that a physician or
nurse midwife be present at a birth', accidentally
leaving the word 'registered' in instead of changing
it to 'licensed'. We didn't notice that until we went
back after the law was passed and the Department said,
'Oh, we can't change these regulations for licensed
birth centers. What you've done is create a whole
different kind of birth center. So, that's how it
happened in 1992. It was never intended....
CHAIR BUNDE asked if anyone opposes this bill. Someone indicated
no.
SENATOR FRENCH moved to pass SB 349 from committee with
individual recommendations and attached fiscal note.
CHAIR BUNDE objected only to get clarification that the
registration will in deed be handled like other licensing and
actually pay for itself. He asked for the roll. Senators Ralph
Seekins, Hollis French, Gary Stevens, Bettye Davis and Chair Con
Bunde voted yea; and SB 349 moved from committee.
SB 389-CORP. CONVERSION TO LIMITED LIABILITY CO.
CHAIR CON BUNDE announced SB 389 to be up for consideration. He
said this is a housekeeping measure and was requested by several
Alaska regional Native corporations and amends existing law to
allow an Alaskan corporation that is a subsidiary to be
converted into a limited liability company. Many states already
allow this.
MR. MARK HICKEY, Aleut Corporation, thanked the committee for
sponsoring the bill and hearing it promptly. He concurred with
the chair's summary of the bill. Current definition in state law
sets out which business entities may convert to the status of
limited liability company (LLC) and corporations are not on that
list. SB 389 includes subsidiary corporations only so there are
no tax consequences to the state.
MR. HICKEY said it is possible for Aleut Corporation to convert
now, but it would have to dissolve and reform a limited
liability company. The problem this presents is that a number of
its subsidiaries have 8A minority business contractors under the
federal contracting process. One of them has 15 such individual
contracts. To dissolve the corporation, he would have to go back
to the government agencies on each contract and get a new one
put in place and then go back to the Small Business
Administration and get those approved.
This change in law will allow us to make the simple
conversion without having to go through that
cumbersome process. The basic advantage for us in
terms of being able to shift to an LLC is it's cheaper
to operate, we have fewer rules that apply, no need
for a board structure in cases of pursuing financing,
a lesser standard in terms of financial statements and
the audit requirements.
I would just like to point out on page 2 - it's really
the operative language - we have structured it pretty
carefully. It is only to a subsidiary and goes on to
say 'owned directly or indirectly'. The only reason
for the indirect part is we have, in some cases,
subsidiaries that are owned by another subsidiary of
our entity or at least in part by another subsidiary.
So, we want to be broad enough to cover that case.
Then it goes on to say 'owned by one or more parent
corporations'. There are some, but not many, entities
that are jointly owned between two corporations and
this would allow those, as well, to become LLCs, but
even in that case, the tax consequence would remain
neutral. The parent would have the obligation for the
tax obligation that had been with the prior
subsidiary.
CHAIR BUNDE asked if he was aware of any opposition to this
bill.
MR. HICKEY replied that he wasn't aware of any.
MR. DAVID JENSEN, CEO, Aleut Corporation, said his corporation
originally created C corporations, one of which is out of state,
prior to legislation that authorized incorporation of the LLCs.
To restructure Aleut Corporation for streamlining
purposes, we need to make all of our wholly owned
subsidiaries all LLCs for management reasons,
governance and so on. It makes sense for us
internally. Externally, there are no tax implications
to the state or, for that matter, to the federal
government either since we consolidate all of our
income tax returns annually anyway.
SENATOR GARY STEVENS asked if he would have to completely
disorganize and reform and get a lot of approval for contracts.
MR. JENSEN said yes and added that another alternative would be
to move the corporation from Alaska and put it in Colorado or
some other state where it can be done easily, another lengthy
process.
SENATOR SEEKINS asked why SB 389 doesn't allow just any
corporation to convert.
MR. JENSEN replied that has been proposed, but it raises tax
consequences and the subsidiary language clearly doesn't create
that problem.
SENATOR HOLLIS FRENCH asked why there are no tax consequences to
this move.
MR. HICKEY explained that current subsidiaries either have a tax
obligation on their own or, in many cases, they are consolidated
with the parent. If they are an LLC and a subsidiary, the tax
obligation passes up to the parent.
SENATOR GARY STEVENS moved to pass SB 389 from committee with
individual recommendations and attached zero fiscal note.
Senator Bettye Davis, Gary Stevens, Ralph Seekins and Chair Con
Bunde vote yea; and SB 389 moved from committee.
SB 392-REGULATORY COMMISSION OF ALASKA
CHAIR CON BUNDE announced SB 392 to be up for consideration and
said that it was requested by the administration.
MR. DANIEL PATRICK, Senior Assistant Attorney General,
Regulatory Affairs, Department of Law (DOL), said the need for
this bill arises as a result of last year's Executive Order 111,
which transferred the responsibility for advocacy on behalf of
the public in utility matters from the Regulatory Commission of
Alaska (RCA) to the Attorney General's Office. That has already
occurred. SB 392 is essentially a compliment to that bill. The
RCA personnel who were responsible for that advocacy now act
under the direction of the DOL. This bill would complete that
transfer of control by expressly providing four aspects of its
execution. They are:
1. The bill would clarify that regulatory cost charge
receipts, not general funds, will continue to pay of the
costs of public advocacy, but now administered by the
Department of Law - just as those off-budget receipts
historically paid for the advocacy costs when the function
was performed within the RCA.
2. The bill modifies the regulatory cost charge ceiling and
creates two distinct budget components - one for the RCA
and one for the DOL public advocacy function in order to
provide each entity with budgetary independence from the
other. The purpose for that is that the RCA, in its
context, functions as the adjudicator and the Department of
Law, as the public advocate, will be an advocate before
them as a party and it's important that there be
independence between the two as in any judicial or quasi-
judicial setting.
3. The bill provides the Department of Law with qualified
access to utility or pipeline carrier records, again
similar to that that was afforded the RCA's former public
advocacy staff in order to maintain efficient economical
access to information.
4. Finally, the bill clarifies that state agencies are exempt
from paying the allocated costs of RCA proceedings to which
the state agency is a party, because there is no net fiscal
benefit in the current arrangement. You have one state
agency, that from time to time and unexpectedly, may cost-
allocate to another state agency and then that state
agency, whether it's the state as the state or the
Department of Law public advocate, would come to the
Legislature to get a supplemental to pay those costs. So,
it would eliminate that exercise.
MR. PATRICK summarized that the bill completes the consolidation
of the public advocacy function within the DOL and gives that
function budgetary independence for the RCA. It provides the
advocate with qualified access to records and it eliminates the
inefficiency by exempting key agencies from paying RCA allocated
costs.
MR. PAT LUBY, Advocacy Director, AARP, said it has 76,000
members in Alaska, all of whom consume utilities. He said:
All too often the RCA is perceived as a referee
between competing utilities as they battle for market
share. From AARP's perspective, the RCA is our voice,
our watchdog, our public advocate in the utility
marketplace.
Now that the responsibilities for public advocacy have
been shifted to the Attorney General's Office, we know
that the budget will always be limited. The cost of
representing the public on utility issues should not
have to be weighed in comparison with other important
functions in the AG's office. If the issues before the
RCA do not, in effect, cost the Attorney General some
of his limited budget, he would be more comfortable
allowing his staff to proceed as necessary and
appropriate knowing the utilities will be picking up
the cost. This is as it should be. AARP families need
the RCA, we need them to have the budget and the staff
to do the investigations necessary for all utility
issues and we encourage your support of SB 392.
SENATOR STEVENS moved to pass SB 392 from committee with
individual recommendations and attached fiscal note. There were
no objections and it was so ordered.
SB 387-COMMERCIAL FISHING LOANS FOR QUOTA SHARES
CHAIR CON BUNDE announced SB 387 to be up for consideration.
MR. GREG WINEGAR, Director, Division of Investments, Department
of Community & Economic Development (DCED), said he appreciated
the committee hearing this bill. It is straightforward and is a
very small change to the Commercial Fishing Revolving Loan Fund.
It allows a new type of quota shareowner to qualify
for loans, which are called community quota entities.
These entities are being created as a result of
changes the National Marine Fisheries Service (NMFS)
is making in the quota share program. Essentially, 42
smaller Gulf communities will be able to form non-
profit corporations, go out in the marketplace and
purchase quota shares and lease them back to citizens
within those particular communities. The goal is to
try to improve the economic viability of these
communities through local ownership of fishing
privileges. The new federal rule is expected to take
place sometime in May. It's not in effect yet.
MR. WINEGAR said this would be a very small change to the loan
program and that he can already do this for individuals. The
loan criteria, such as interest rates and down payments, would
be the same.
There is plenty of funding. This fund is self-
sufficient and hasn't had any general funds for many
years....It will bring the loan program in line with
what NMFS is doing with the quota share program. It is
consistent with the mission of the Commercial
Revolving Loan Fund and, most importantly, it is going
to provide these loans to communities with a tool they
can use to try and generate some economic activity.
Many of them have lost a lot of quota share since
inception of the program in 1995.
SENATOR GARY STEVENS said he heard about this program in another
committee and thinks it's an excellent idea. It makes the
smaller communities more economically viable and doesn't force
anyone to sell permits.
MR. WINEGAR acknowledged that those are two good points.
CHAIR BUNDE said he was distributing testimony in support of SB
392 to the committee from Don Beamer and Gordon Jackson.
SENATOR GARY STEVENS moved to pass SB 392 from committee with
attached fiscal note and individual recommendations. Senators
Ralph Seekins, Gary Stevens and Chair Con Bunde voted yea; and
SB 392 moved from committee.
SENATOR SEEKINS moved to forward all the names of the confirmees
to the full body. There were no objections and it was so
ordered. There being no further business to come before the
committee, adjourned the meeting at 3:30 p.m.
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