Legislature(2001 - 2002)
05/02/2002 03:47 PM Senate STA
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
SENATE STATE AFFAIRS COMMITTEE
May 2, 2002
3:47 p.m.
MEMBERS PRESENT
Senator Gene Therriault, Chair
Senator Randy Phillips, Vice Chair
Senator Ben Stevens
MEMBERS ABSENT
Senator Rick Halford
Senator Bettye Davis
COMMITTEE CALENDAR
CS FOR HOUSE BILL NO. 165(RES)
"An Act relating to the Kenai River Special Management Area; and
providing for an effective date."
HEARD AND HELD
SENATE BILL NO. 370
"An Act establishing procedures relating to constitutional
conventions."
MOVED CSSB 370(STA) OUT OF COMMITTEE
CS FOR HOUSE BILL NO. 212(L&C)
"An Act requiring a subcontractor to obtain workers' compensation
insurance covering the subcontractor and the subcontractor's
employees and establishing responsibility of a contractor for
obtaining workers' compensation coverage for the subcontractor
and the subcontractor's employees if the subcontractor fails to
obtain workers' compensation coverage; and providing for an
effective date."
HEARD AND HELD
HOUSE BILL NO. 300
"An Act relating to the procurement of certain travel services."
MOVED SCSHB 300(STA) OUT OF COMMITTEE
PREVIOUS COMMITTEE ACTION
HB 165 - No previous action to record.
SB 370 - No previous action to record.
HB 212 - See Labor and Commerce minutes dated 4/25/01 and
3/28/02.
HB 300 - No previous action to record.
WITNESS REGISTER
Representative Ken Lancaster
Alaska State Capitol
Juneau, AK 99801-1182
POSITION STATEMENT: Introduced HB 165.
Mr. Jim Stratton
Director
Division of Parks & Outdoor Recreation
Department of Natural Resources
400 Willoughby Ave.
Juneau, AK 99801-1724
POSITION STATEMENT: Testified on HB 165.
Mr. Ted Wellman
President
Kenai River Special Management Area Advisory Board
3500 Twilight Lane
Anchorage, AK
POSITION STATEMENT: Testified in support of HB 165.
Mr. Sam McDowell
No address given
POSITION STATEMENT: Testified in support of HB 165.
Mr. Dale Bondurant
31864 Moonshine Dr.
Soldotna, AK 99669
POSITION STATEMENT: Testified in support of HB 165.
Mr. Don Ramsey
35774 Carlisle Dr.
Soldotna, AK 99669
POSITION STATEMENT: Testified in support of HB 165.
Dr. Gerald McBeath
No address given
POSITION STATEMENT: Testified on SB 370.
Mr. Joe Balash
Aide to Senator Gene Therriault
Alaska State Capitol
Juneau, AK 99801-1182
POSITION STATEMENT: Testified on SB 370.
Ms. Amy Erickson
Aide to Representative Lisa Murkowski
Alaska State Capitol
Juneau, AK 99801-1182
POSITION STATEMENT: Introduced HB 212.
Mr. Don Etheridge
FLCIO Alaska State
No address given
POSITION STATEMENT: Testified in support of HB 212.
Mr. Paul Grossi
Director
Division of Workers' Compensation
Department of Labor & Workforce Development
PO Box 21149
Juneau, AK 99802-1149
POSITION STATEMENT: Testified on HB 212.
Mr. Allen Wilson
Legislative Chair
Alaska State Homebuilders Association
No address given
POSITION STATEMENT: Testified in support of HB 212.
Ms. Barbara Huff-Tuckness
Director of Governmental and Legislative Affairs
Teamsters Local 959
No address given
POSITION STATEMENT: Testified in support of HB 212.
Mr. Charlie Miller
Alaska National Insurance
No address given
POSITION STATEMENT: Testified in support of HB 212.
Ms. Sara McNair-Grove
Property Casualty Actuary
Division of Insurance
Department of Community & Economic Development
P.O. Box 110805
Juneau, AK 99811-0805
POSITION STATEMENT: Testified on HB 212.
Representative Joe Hayes
Alaska State Capitol
Juneau, AK 99801-1182
POSITION STATEMENT: Introduced HB 300.
Mr. Vern Jones
Chief Procurement Officer
Division of General Services
Department of Administration
PO Box 110200
Juneau, AK 99811-0200
POSITION STATEMENT: Testified on HB 300.
Ms. Sally Huntley
Frontier Travel
Anchorage, AK
POSITION STATEMENT: Testified in support of HB 300.
Mr. Bill Beck
Airlines Online
Anchorage, AK
POSITION STATEMENT: Testified in support of HB 300.
Cindy Bettine
ABC Travel
Palmer, AK
POSITION STATEMENT: Testified in support of HB 300.
ACTION NARRATIVE
TAPE 02-27, SIDE A
CHAIRMAN GENE THERRIAULT called the Senate State Affairs
Committee meeting to order at 3:47 p.m. Present were Senators
Phillips, Stevens and Chairman Therriault.
The first order of business before the committee was HB 165.
HB 165-KENAI RIVER SPECIAL MANAGEMENT AREA
CHAIRMAN THERRIAULT said Senator Halford had some concerns about
HB 165 but was called to the Governor's office. He announced he
would hear the bill to get the issues out and hold it in
committee. He said Representative Lancaster approached him
earlier with a proposed CS that he would like to get on the table
for consideration. He asked if Representative Lancaster wanted
to make comments to the CS.
REPRESENTATIVE KEN LANCASTER said yes. He noted that the
proposed CS was version J.
SENATOR PHILLIPS wanted to make sure that the township ranges had
been thoroughly checked because there were mistakes made in the
past.
REPRESENTATIVE LANCASTER said there were mistakes when the
process was started a couple of years ago that were corrected.
He said HB 165 related to adding lands to the Kenai River Special
Management Area (KRSMA). The CS takes out 3,543 acres along the
south side of Kenai Lake from Snug Harbor Road up to the dam and
the powerhouse at Cooper Lake. He hoped this would address
concerns that were expressed to him.
CHAIRMAN THERRIAULT asked if the road went through the
highlighted area on the map in the bill packet.
REPRESENTATIVE LANCASTER said it did. He said this process has
been going on for at least two years. As mayor of Soldotna, he
sat on the board that held public hearings about the addition of
these lands. He noted they were all state lands and there would
be no acquisition or purchasing of new lands. HB 165 would put
the lands into the Department of Natural Resources (DNR) so that
the lands could be managed by DNR. The plan was adopted after
committee meetings and public hearings over two years in
Anchorage and on the Kenai Peninsula. He said DNR adopted the
language portion of the plan in December 1997. The lands must be
transferred by the Legislature. This was what HB 165 attempts to
do.
SENATOR PHILLIPS asked how many acres were in the transfer.
REPRESENTATIVE LANCASTER said about 4,200 acres.
SENATOR PHILLIPS asked if that was reduced from 7,900.
REPRESENTATIVE LANCASTER said yes. He noted that HB 165 had no
fiscal note.
CHAIRMAN THERRIAULT asked if moving the lands into this
designation added restrictions on the use of the land.
REPRESENTATIVE LANCASTER said DNR had a process to allow public
access or use of the lands. The other departments that currently
control this land did not. He believes HB 165 would give the
public a process to be able to access the lands.
CHAIRMAN THERRIAULT asked if the lands were in the general state
domain in DNR.
MR. JIM STRATTON, Director, Division of Parks & Outdoor
Recreation, Department of Natural Resources, said the lands were
currently in general state lands and managed by the Division of
Parks & Outdoor Recreation for outdoor recreation purposes. The
addition of these lands would allow DNR to improve recreational
access to the lands. He said there were a couple of projects DNR
was interested in but they weren't able to sign the obligation
that they would manage the lands and facilities for outdoor
recreation access in perpetuity because the lands were not
designated to Parks & Outdoor Recreation. He said when those
lands were designated, they would be able to do that and begin to
develop some projects such as improved boat launch ramps.
CHAIRMAN THERRIAULT asked if there was any organized group in the
area that opposed HB 165.
MR. STRATTON said he was not aware of any.
REPRESENTATIVE LANCASTER said he was not aware of any. He said
Senator Torgerson had some concerns, but he hoped the CS would
clear those concerns up.
CHAIRMAN THERRIAULT asked if the CS had been brought to Senator
Torgerson's attention.
REPRESENTATIVE LANCASTER said a copy had been given to his aide.
MR. STRATTON said DNR supported HB 165 with the proposed CS.
CHAIRMAN THERRIAULT pointed at the map in the bill packet and
asked if the highlighted area was the acreage the CS dropped out
of the plan.
REPRESENTATIVE LANCASTER & MR. STRATTON said that was correct.
CHAIRMAN THERRIAULT pointed at the un-highlighted area of the map
and asked if that was the acreage that was being added.
REPRESENTATIVE LANCASTER said there was more acreage than the map
showed. In addition to that acreage, there was also acreage in
the Moose Pass area and on the upper part of the Kenai River.
CHAIRMAN THERRIAULT asked if there was anybody present to testify
regarding HB 165.
MR. TED WELLMAN, President of the KRMSA Advisory Board, said he
had served on the Board since 1995 and was instrumental in
developing the plan that resulted in HB 165. He said he was also
vice-president of the Kenai River Property Owners' Association.
He said he was a 55-year resident of Alaska and had used the
Kenai River all his life and had owned property there for over 20
years. He supported HB 165. The land additions were developed
through the public hearing process with meetings in Anchorage,
Soldotna, Cooper Landing and Moose Pass. He said the lands were
selected close to the Kenai River so the entire watershed and
habitat would be protected. He said he is not aware of any
opposition. He said a number of organizations supported the
addition of these lands, including the Cook Inlet Agriculture
Association, the Cooper Landing Community Club, Alaska Fly
Fishing, Alaska Wildland Adventures, the City of Soldotna, the
Kenai Peninsula Borough, the Friends of Cooper Landing and the
Kenai River Property Owners' Association.
CHAIRMAN THERRAIULT asked if there were any questions for Mr.
Wellman. There were none.
MR. SAM MCDOWELL said he has lived in Alaska since 1948. He has
been involved in resource management issues for over 50 years.
He said if we don't support HB 165, we would never have a river
like the Kenai again. He said habitat is the most important
thing, followed by resources and then users, because if you don't
protect the habitation, there won't be any resources and there
won't be anything for the users.
CHAIRMAN THERRIAULT asked if there were any questions for Mr.
McDowell. There were none.
MR. DALE BONDURANT said he owns property along 2000 feet of the
Kenai River, which he has put in a conservation easement to
protect forever. He said the Kenai is one of the most important
resources in the country and we need to protect it. He said he
fully supports HB 165. He said he believes in access as well.
In 1997, he filed a federal suit to make sure that we had access
to all of the rivers in the country. He said it's very important
that we continue with this type of thing. He said he would like
to see the acreage that was removed in the CS protected as well.
CHAIRMAN THERRIAULT asked if there were any questions for Mr.
Bondurant. There were none.
MR. DON RAMSEY said he was a 35-year resident of Alaska. He
said he used the Kenai River to catch fish for his family for the
winter. He said he owned 430 feet of frontage on the Kenai River
that he has taken very good care of. He said he supports the
acquisition of the lands to protect the river because it is a
great resource and enjoyed by residents and visitors and has
great commercial value.
CHAIRMAN THERRIAULT noted that the Future Management section on
page 2 of the background information provided by KRMSA said,
"Facility development for most of the new land would not be
consistent with KRMSA's intent." He said he had been trying to
express his concern over this in his previous question about
development.
He asked if there was anybody else who wished to testify on HB
165. There was nobody.
HB 165 was held in committee.
The next order of business before the committee was SB 370.
SB 370-CONSTITUTIONAL CONVENTION PROCEDURES
CHAIRMAN THERRIAULT said the Senate State Affairs Committee
introduced SB 370 at his request. He said the bill deals with
the constitutional convention question that is on the ballot
every 10 years and would be on the ballot this year. He said he
looked into the events that would occur if the voters approved a
constitutional convention. He said the lieutenant governor was
responsible for issuing the call for a constitutional convention.
This call was to be issued as close as possible to the original
call for the Alaska Constitutional Convention in 1955 unless the
legislature placed different provisions in statute, which had not
been done.
He said he wasn't sure we would want the delegates to be selected
in the same districts that they had been in 1955. He was
concerned that those districts would not meet court approval
because they wouldn't stand up to the one man one vote standard.
He said SB 370 would restrict the call from being issued for
approximately one year until October 1, 2003. He said this delay
would allow the next legislature and governor to negotiate the
passage of legislation to spell out the parameters under which
the call would be made. He said the legislature could look at
the geographical areas the delegates should be elected from.
DR. GERALD MCBEATH said he participated in two recent symposia on
the constitutional convention ballot referendum that would be on
the ballot this fall. One was for the statewide League of Women
Voters convention in Kenai. The other was a symposium sponsored
by Common Ground, which is an organization that looks at public
issues. He said there were several questions regarding the
uncertainty of what would happen if the voters were to approve
the referendum calling for a constitutional convention. He said
SB 370 reduces uncertainty by spelling out when the call would be
made and how delegates would be selected. At both symposia,
there was a question about whether the delegates would be subject
to the Alaska Public Offices Commission (APOC) rules. He said SB
370 addresses that concern.
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He said it was not clear why October 1 was selected in Sec.
15.50.080. The current Lieutenant Governor could issue the call
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on November 6 but SB 370 would eliminate that possibility and
only allow the incoming lieutenant governor to issue the call.
He said this would give the legislature an opportunity to have
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hearings during the first session of the 23 Legislature. He
said Sec. 15.50.090 laid out a system of electing 80 delegates.
He felt 80 delegates would be too many. He suggests mirroring
the legislative election districts by having 60 seats, one
delegate from each house district and one from each senate
district. According to SB 370 the constitutional convention
would be held in Fairbanks. He said this makes sense because
that was where the original convention was held but the Fairbanks
of 1955 was very different from Fairbanks today. He believed SB
370 was a step in the right direction and served a useful
purpose.
CHAIRMAN THERRIAULT asked for his affiliation.
DR. MCBEATH said he was a professor of political science at the
University of Alaska Fairbanks and was considered an expert in
the field. He wrote The Alaska State Constitution: A Reference
Guide, which was published in 1997.
SENATOR PHILLIPS asked if he had any practical experience as an
elected official.
DR. MCBEATH said he served on the Fairbanks Northstar Borough
Board of Education from 1986 to 1995.
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CHAIRMAN THERRIAULT said October 1 was chosen as the date for
the call in order to put the issue before the legislature during
the next session. He said it was a fairly arbitrary date but it
allowed for enough time for the legislature to hold hearings and
work out a piece of legislation with the administration. There
would also be time after that to bring the public up to speed and
allow the candidates enough time to run a campaign.
CHAIRMAN THERRIAULT said he understood the concern over the
number of delegates and would be open to changing the number. He
said he selected 80 delegates because he was concerned about the
rural districts, which cover large geographical areas. In those
districts, there was the potential for two delegates from the
same community to be elected because that community happened to
have the largest population in the district. He said Dr.
McBeath's proposal seemed to be a compromise between the original
55 delegates at the 1955 convention and the 80 delegates proposed
in SB 370.
He said individuals campaigning to be delegates ought to be
subject to APOC provisions. If the public was concerned about
money influencing campaigns for legislators, then he expected
there would be the same level of concern when the candidate would
be making structural changes to the constitution.
SENATOR PHILLIPS asked why the original Constitutional Convention
was held in Fairbanks.
DR. MCBEATH said he spoke with Thomas Stewart, who served as
Secretary to the Convention and was a Superior Court judge. Mr.
Stewart said the main reason they wanted to get the Convention
out of Juneau was because there were too many bars. He said the
second reason was because they felt that holding the Convention
in the atmosphere of a university town would contribute to the
development of a model constitution. He said they also wanted it
away from the site of legislative activity.
SENATOR PHILLIPS asked if the convention would be held in
October.
MR. JOE BALASH, Senate State Affairs Committee Aide, said the
call would not be made until October of 2003. The delegates
would be elected at the next general election in 2004. The dates
of the convention would be up to the lieutenant governor and
would be one of the items in the call.
SENATOR PHILLIPS said if the convention was held during the
academic year, there might not be enough room on campus.
MR. BALASH said the intent of SB 370 was not to spend a lot of
time with the details. He said the dates of the convention were
certainly something that should be considered. Delaying the call
for one year would give the legislature an opportunity to have
hearings on the issue and work out the details.
SENATOR PHILLIPS said the original Convention was held from
November of 1955 through February or March of 1956.
DR. MCBEATH agreed. He said there was a break to allow the
delegates to return to their communities and discuss the issues.
He said the temperature that year was 30 below zero.
CHAIRMAN THERRIAULT said the dates of the convention were not
figured into the determination of October 1 as the date of the
call.
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MR. BALASH said the October 1 date would also allow for a
special session if it were necessary because of a veto.
SENATOR PHILLIPS said 30 below was a good incentive to get the
job done quickly.
CHAIRMAN THERRIAULT joked that Fairbanks had torn down a lot of
its bars since 1955.
SENATOR STEVENS joked that the convention could be held in Adak
where there were no bars.
CHAIRMAN THERRIAULT said he was open to suggestions regarding the
number of delegates.
SENATOR PHILLIPS said 60 sounded like a more workable number than
80. He noted that the Senate with 20 members was able to get
things done faster than the House of Representatives with 40
members.
SENATOR STEVENS said it looked like some of the original
delegates in 1955 were elected from judicial districts.
DR. MCBEATH said in 1955 the Legislature drew up a new scheme
rather than using the legislative districts. Seven of the
districts were based on judicial districts and 12 to 15 delegates
were elected on a statewide basis. He noted that scheme would
not meet the one man one vote Supreme Court requirement.
CHAIRMAN THERRIAULT said SB 370 was intended as default language.
If the legislature wanted to come up with something different, it
could. He said without an agreement by the legislature, SB 370
would be the default rather than the 1955 language, which would
cause a problem with the one man one vote requirement.
SENATOR STEVENS asked how many times the constitutional
convention question had been on the ballot since statehood.
DR. MCBEATH said this would be the fifth time.
SENATOR PHILLIPS noted that it passed in 1970.
DR. MCBEATH said it passed in 1970 but was challenged and
invalidated. He said the question was on the ballot again in
1972 and that is why we now have the question on the ballot every
10 years from 1972. He noted that the ballot measure was
defeated in 1972, 1982 and 1992. In 1992, the vote was 63%
against.
SENATOR STEVENS asked what the voter turnout was in 1992. He
said voter turnout in 1982 was 50%.
CHAIRMAN THERRIAULT asked Senator Phillips if he wanted to move
an amendment to change the number of delegates to 60.
SENATOR PHILLIPS moved Amendment #1, changing the number of
delegates to 60, one elected from each house district and one
from each senate district.
CHAIRMAN THERRIAULT clarified that "Two delegates shall be
elected from each house district" would be deleted on page 1,
line 12 and replaced with language electing one delegate from
each house district and one delegate from each senate district
for a total of 60 delegates. He asked if there was any objection
to Amendment #1.
SENATOR PHILLIPS asked Dr. McBeath if 60 was a good number.
DR. MCBEATH noted that there were 55 delegates in 1955 because
there were 55 framers of the American Constitution and they felt
that was a significant number. He said 60 seemed like a good
number because 60 people could fit in one room and have a floor
discussion on an issue.
CHAIRMAN THERRIAULT asked if there might be a problem with having
an even number rather than an odd number of delegates.
DR. MCBEATH said that was always a question.
CHAIRMAN THERRIAULT said that just meant there would be a tie and
things would fail. He said Amendment #1 was before the
committee. He asked if there was any objection to Amendment #1.
There being no objection, Amendment #1 was adopted.
CHAIRMAN THERRIAULT asked if there were any other amendments.
There were none. He asked if there were any other issues to come
before the committee on SB 370. There were none.
SENATOR PHILLIPS moved CSSB 370(STA) out of committee with
attached fiscal note and individual recommendations.
There being no objection, CSSB 370(STA) moved out of committee
with attached fiscal note and individual recommendations.
The next order of business before the committee was HB 212.
HB 212-WORKERS' COMP:CONTRACTORS & SUBCONTRACTOR
MS. AMY ERICKSON, Aide to Representative Lisa Murkowski and the
House Labor & Commerce Committee, said HB 212 addressed a decade-
long issue regarding workers' compensation insurance coverage for
sole-proprietors, individuals working for themselves without
employees. Current statutes did not require sole-proprietors to
carry workers' compensation insurance but did require general
contractors to carry workers' compensation insurance on their
employees. She said the workers' compensation board determined,
based on the relative nature of work test, that in certain cases
injured sole-proprietors were actually acting as employees of the
general contractor. Because of these determinations, insurance
companies charged general contractors additional premiums for
sole-proprietors. She said sometimes these extra premiums were
charged after the policy was audited and therefore had not been
anticipated nor included in their bid.
She said a statewide task force was established to look at the
problem, identifying several different possibilities. HB 212 is
the ultimate compromise the task force came up with. She said
requiring sole-proprietors to provide their own workers'
compensation coverage would eliminate any gray area, give all
parties equity and allow for risks and associated costs to be
anticipated and recovered in the bidding process.
CHAIRMAN THERRIAULT said the committee had given Ms. Erickson a
copy of a proposed CS. He asked if she had a chance to discuss
the CS with Representative Murkowski.
MS. ERICKSON said although Representative Murkowski had seen the
CS, they had not had a chance to discuss it because she had been
on the floor all day.
CHAIRMAN THERRIAULT said he developed the CS after talking with
members of the Senate and seeing that there seemed to be a lot of
dissatisfaction with HB 212. He said he was looking for a
different way to approach the issue. He asked if there was
anyone who wished to testify.
MR. DON ETHERIDGE said he was testifying on behalf of the AFL-CIO
Alaska State in support of HB 212. He said they believed it
would create a more equitable playing field for all of the
subcontractors that bid on a project. He said some of the
subcontractors taking a risk and not purchasing the insurance
were able to underbid others and the general contractor became
liable for everything.
CHAIRMAN THERRIAULT asked if there were questions for Mr.
Etheridge. There were none.
MR. PAUL GROSSI, Director, Division of Workers' Compensation,
Department of Labor & Workforce Development, asked if the CS had
been introduced.
CHAIRMAN THERRIAULT said the CS was mentioned but was not adopted
as a working document.
MR. GROSSI said a task force consisting of homebuilders, labor,
the insurance industry, insurance brokers, the timber exchange
and the Workers' Compensation Committee of Alaska put HB 212
together. He said it was a compromise trying to deal with the
problem of the risk involved with subcontractors working for a
general contractor. He said when a subcontractor got injured
they filed a claim with the Workers' Compensation Board.
Sometimes they were found to be employees. As a result of that,
the insurance companies charged the general contractor a premium
for that potential risk. He said the homebuilders came to the
Division a couple of years ago with the issue, which prompted the
group getting together and coming up with HB 212. He said they
looked at several possible solutions, including waivers and
requiring the general contractor to cover everybody. He said the
solution in HB 212 was chosen because it was the least expensive
way of handling the problem.
CHAIRMAN THERRIAULT said the word "compromise" denoted
reluctance.
MR. GROSSI said the working group was a large, diverse group of
people and there was difficulty getting agreement among them. He
said HB 212 fixes the problem, puts certainty back into the
situation and allows for predictability of cost. He said HB 212
would allow everyone to know exactly where the liability would be
and who would be responsible for coverage.
CHAIRMAN THERRIAULT said it seemed like the uncertainty came from
the regulations of the relative nature of work test.
MR. GROSSI said the relative nature of work test was a regulation
that was a result of Supreme Court case law.
CHAIRMAN THERRIAULT said often a court case decided one factor
only to create a number of other questions, which the courts
would have to come back and clarify further. He asked if the
proposed CS would bring more clarity to the question of when a
sole-proprietor is acting as an employee.
MR. GROSSI said he sent the CS to his hearing officers to ask
them what it did. They said it codified the laws that exist
currently but it didn't really change anything. He said that
doesn't take away the uncertainty. He said it would eventually
have to be decided in the courts. He said the original bill
removes all uncertainty, which is a benefit over the way it's
done now.
TAPE 02-27, SIDE B
4:35 p.m.
CHAIRMAN THERRIAULT said that uncertainty is removed because HB
212 would require coverage regardless of the situation.
MR. GROSSI said all subcontractor sole-proprietors would be
required to have workers' compensation coverage, not all sole-
proprietors.
CHAIRMAN THERRIAULT asked why we should differentiate between
when a sole-proprietor comes into the home to lay carpet one day
and when he lays carpet in a house in a new subdivision the next
day. He said in one instance the sole-proprietor would be
required to have workers' compensation coverage and in the other
he wouldn't.
MR. GROSSI said that had more to with whether the purchaser was a
consumer or a producer. He said there is never any potential
liability for a consumer who is simply a customer.
CHAIRMAN THERRIAULT said it was the same sole-proprietor doing
the same job. He asked if Mr. Grossi had seen the revised 2002
rates for sole-proprietor policies based on assigned risk in bill
packet, which listed the dollar amounts of premiums for sole-
proprietors who purchase the insurance for themselves that were
in the bill packet.
MR. GROSSI said that probably came from the Division of
Insurance, not his office.
CHAIRMAN THERRIAULT said this would be the cost to the individual
as laid out in HB 212. He asked if there were any questions for
Mr. Grossi. There were none.
MR. ALLEN WILSON, Legislative Chair, Alaska State Homebuilders,
said he had worked on this issue for several years. He said he
faxed the proposed CS to his co-chair and one of the other task
force members to get their opinion on it. He said they were
intrigued by the approach and especially liked the definition of
a subcontractor. He said it seemed clearer than the current
relative nature of work test. He said they would like some time
to look at it and get it to other task force members and come
back and offer further input.
CHAIRMAN THERRIAULT said during the last campaign he heard from a
constituent who was a sole-proprietor doing drywall work. The
constituent complained that the State required several licenses,
insurance and bonding and he had to do a lot of work just to
cover those costs. He said the constituent wanted the
legislature to consider going in the other direction, which may
not be realistic. When he saw HB 212, he thought it was a step
in the opposite direction than his constituent was encouraging
him to go. He also heard several comments from his colleagues
that led him to believe the original version of HB 212 would have
problems passing the Senate. He asked Mr. Wilson what comments
he had heard from his association members.
MR. WILSON said the association was made up primarily of general
contractors. He said they were caught in a catch-22 where they
were asking their sole-proprietor subcontractors to get a
workers' compensation policy because they were getting charged
for it after the fact and could not recover the investment. The
sole-proprietor subcontractor is not required to get workers'
compensation coverage. He said they had to make the decision
whether to operate illegally and use the subcontractor or add
them to the payrolls, which is more expensive than the insurance
coverage. He said when you're in business for yourself,
generally the higher the risk you assume, the higher the reward.
The association members agreed that you should be able to take
that risk. However they did not want to have to pay for it. He
said that was why the nature of work test in the CS has some
appeal and he felt his association members would like it.
However, he had to ask if it provided enough protection when the
insurance companies did their audits. He said at first glance
the CS seemed to meet those requirements.
CHAIRMAN THERRIAULT asked about the workability of the nature of
work test if a sole-proprietor subcontractor brought his own
tools to the job or used a forklift on the jobsite.
MR. WILSON said especially in custom homebuilding, the general
contractor would work with the homeowner to pick out carpeting.
Because the general contractor gets a better deal on carpet
because of volume, he would purchase the carpet. The installer
would supply tack strips, glue, nails, labor and tools. He said
under the current nature of work test the installer would be
considered an employee because the general contractor supplied
the carpet. He suggested removing "materials" from subparagraph
(F) in Sec. 3 of the CS because that word might put them back in
the same situation.
CHAIRMAN THERRIAULT asked if there were any questions for Mr.
Wilson. There were none.
MS. BARBARA HUFF-TUCKNESS, Director of Governmental and
Legislative Affairs, Teamsters Local 959, said they were in
support of HB 212. She said Teamsters Local 959 represented a
lot of truckers, some of who were in a single owner-operator
status, others who worked as owner-operators for part of the year
and as subcontractors for the other part of the year. She said
some of the truckers would purchase workers' compensation
insurance in accordance with the high-risk trucking
classification. Others would not by calling themselves business
managers or by getting a lesser policy.
She said Lynden Transport hired subcontractors during peak times
of the year and required that they have workers' compensation
insurance or buy into Lynden's plan, which was a much higher
policy. She said when the trucking industry was deregulated the
truckers themselves became very regulated. She said some
truckers did carry the insurance, but others did not. She said
if you were looking at the same costs, you would have a level
playing field. She noted that this was not a union versus
nonunion issue. She believed the policy increased to $3,000 this
year.
MS. HUFF-TUCKNESS said a trucker might decide that they were an
owner-operator and they wanted to run the risk that they were not
going to get in an accident. She said the next week that trucker
might flip their truck over and get hurt or killed. She said
current statute had a big enough loophole that those individuals
could make that choice. She said she did not wish to give an
opinion on the proposed CS because she had not had a chance to
discuss it with her colleagues.
CHAIRMAN THERRIAULT asked if there were any questions for Ms.
Huff-Tuckness. There were none.
MR. CHARLIE MILLER, Alaska National Insurance, said he would like
to touch on a couple of the questions that came up earlier. The
first was the question of consumer versus contractor and why
there should be different applications of coverage for someone
who laid carpet in a home one day and for a contractor the next.
When the sole-proprietor laid carpet in a home, there was no
legal standing for a workers' compensation claim against the
homeowner. When the sole-proprietor lays carpet for a general
contractor, there was a potential cause of action. He said those
were two completely different situations and the sole-proprietor
was not being penalized for doing one job over the other, it was
simply a matter of risk incurred.
CHAIRMAN THERRIAULT said from Mr. Miller's client's perspective,
he could understand that they would potentially have to provide
coverage.
MR. MILLER said no one provided workers' compensation coverage
for homeowners.
CHAIRMAN THERRIAULT said if a sole-proprietor subcontractor was
determined to be an employee, Mr. Miller's client would
potentially have to provide coverage.
MR. MILLER said that was correct.
CHAIRMAN THERRIAULT noted that even if it was determined that the
sole-proprietor subcontractor was not an employee, there was the
cost of the litigation to get to that point.
MR. MILLER agreed.
CHAIRMAN THERRIAULT asked if there was no way to clear up that
ambiguity.
MR. MILLER said they had hoped to do that with HB 212. He said
he understood this was what Chairman Therriault was trying to do
with the CS.
CHAIRMAN THERRIAULT said HB 212 would clear up ambiguity by
eliminating the question of who should provide the coverage. He
said there was still the issue of what rules the person would
have to play by and when it was determined they had crossed over
the line into being an employee.
MR. MILLER said that area was not as predictable as anyone would
like. He said there were two main solutions to the problem
discussed by the workgroup. One of them was HB 212. The other
was somewhat along the lines of the proposed CS, except with a
fix at the end. He said the CS did not address a solution it
just codified the problem. He said the approach they discussed
would be a fixed point where there was no chance for appeal, no
chance for the injured party to go before the board and claim
that under the conditions of the relative nature of work test
they were an employee despite whatever they had signed or what
the situation was before. He said that situation would still
exist under the proposed CS. He noted that he hadn't discussed
the proposed CS with his attorneys, but he felt it had been
discussed enough for him to feel confident in this statement. He
said cutting off avenues of appeal was an unappealing solution
because there can be situations where the sole-proprietor
subcontractor felt that the only way he would get the job was to
sign on as a subcontractor. He said he didn't feel anybody
wanted to make a public policy call that cut off avenues of
appeal.
He said once there was a claim for workers' compensation and no
premium had been paid, the only rational cost for the premium was
the cost of the claim. He said if someone were injured, the
general contractor couldn't be presented with the cost of the
claim and it wasn't reasonable to expect the injured party to
cover the cost. He said it would be possible to backdate and
charge a standard premium for the amount of time the
subcontractor-come-employee had been on the job. In that case,
he said you already knew you had lost. He said that was like
betting on a game that had already been played. He said the
injured party avoided their responsibility to prepare for the
possibility of an injury but received the same benefit as someone
who paid the premiums and prepared for that possibility.
MR. MILLER said the comment made earlier was that it was unfair
to force sole-proprietors to buy workers' compensation insurance.
He said workers' compensation is a long-established no-fault
system. He said if a contractor were to cause a situation where
someone got injured the contractor couldn't be sued or if an
employee came to work drunk or disregarded safety protocol the
contractor had no recourse to deny the claim. He said everyone
who hired employees was required to purchase workers'
compensation insurance. He said when a contractor didn't require
someone who might be working in the gray area between employee
and subcontractor to pay for workers' compensation insurance,
they were giving them the benefit that was allowed to all their
other employees. He said it could be looked at in a different
way; instead of forcing a sole-proprietor subcontractor to buy
the insurance, HB 212 really tried to make them play by the same
rules that everybody else had to play by. He said if you gave
them the benefits without requiring them to pay into the system,
every other worker who paid into the system would be paying for
their benefits. He said this argument might be similar to the
debate that's brought up in political science class that you have
the right to free speech but does that give you the right to yell
fire in a crowded theater. He said you have a right to take a
chance that you may be injured.
He said the system didn't forget an injured party. He said an
injured person would need to go to the doctor and they would need
money to cover their rent. He said that person would be
receiving all the benefits of having a policy even though they
had not participated in the system to that date. He said just
because they apply for a claim doesn't mean they're going to be
successful but that still costs the system in litigation
expenses. There was still some degree of confidence that they
wouldn't be forgotten. He said it seemed unfair to let them
avoid the cost of the protection because they wanted to be
independent. He noted that they were not independent after the
injury. They became very dependent on one part of the system or
another. He said that situation was what made the task force
decide against that solution. He said the other approach seemed
to be more rational because if everyone who thought they didn't
need the coverage didn't get it, it would be chaos. He said no
one expected to have an injury that prevents him or her from ever
working in that field again.
He said HB 212 does not allow any profit margin increase to the
insurance industry. He said the added policies would go through
the residual market and be assigned to a particular pool and no
insurance company makes money off of that. In fact, in the past
several years, the pool lost money and the premium payers were
subsidizing it. He said everything seemed to be lined up in
favor of HB 212 except for the fact that it was unpalatable to
tell someone they have to do something to protect themselves when
they felt that they didn't need to.
CHAIRMAN THERRIAULT asked if there were any further questions for
Mr. Miller. There were none.
MS. SARA MCNAIR-GROVE, Property Casualty Actuary, Division of
Insurance, Department of Community & Economic Development, said
the Division participated in the discussions and the task force
that came up with HB 212. She said there were two approaches
that were discussed. One was the solution that was presented in
HB 212. She said the workgroup also discussed as their most
desirable solution a way to define when a sole-proprietor was
acting as an independent contractor. She said several of the
previous testifiers had addressed the problems with that
approach. She said the current solution was a compromise and it
would provide certainty.
She said she looked at the proposed CS and would like more time
to study it. She said if there were clear guidelines on how to
determine whether somebody was an independent contractor or an
employee and make that determination stick, it would be
preferable. One of the problems with that was the premium audit
that takes place after a job ended. She said workers'
compensation policies were based on payroll, so the contractor
estimated what their payroll was going to be. After the job, the
contractor was audited to determine if their estimated payroll
met the actual payroll. She said if someone was determined at
the beginning of the job to be an independent contractor and
broke one of the conditions of the relative nature of work test
and was subsequently determined to be an employee, there would be
an additional premium based on the audit. She said if you can
clearly determine what situations merit a premium being
collected, the general contractor could plan for those costs and
wouldn't be surprised during the audit. She said that still
wouldn't eliminate the problem.
CHAIRMAN THERRIAULT asked what triggered the determination that a
subcontractor was actually an employee during the audit process.
MS. MCNAIR-GROVE said they went back and looked at what the
individual did to determine whether they had been acting as an
employee or not.
CHAIRMAN THERRIAULT asked if there was a specific list of
questions.
MS. MCNAIR-GROVE said there was a list of questions but she
didn't know what those questions were.
CHAIRMAN THERRIAULT asked what caused those back premiums to be
triggered.
MS. MCNAIR-GROVE said she didn't know the specifics. She said
she could get a list of the types of things that were looked at
that was suggested by the National Council on Compensation
Insurance.
CHAIRMAN THERRIAULT asked if there were any questions for Ms.
McNair-Grove. There were none. He asked if there was anybody
else who wished to testify on HB 212. There was nobody.
HB 212 was held in committee.
The final order of business before the committee was HB 300.
HB 300-PROCUREMENT OF TRAVEL SERVICES
REPRESENTATIVE JOE HAYES read the following from the sponsor
statement.
HB 300 will allow for the exemption of contracts for
certain types of travel services including airplane
travel, hotel accommodations and travel agency services
from the procurement procedures of AS 36.30.
In February 2002, Alaska Airlines adopted a policy
similar to other major airlines capping travel agent
commissions from 5% of the total ticket price to $10
and $20 for one-way and roundtrip airline tickets,
respectively. March 2002 brought even worse news to
the agencies when the airlines declared that all
airline commissions would cease. Alaska Airlines has
not yet cut their commissions to travel agents, but it
is expected that they will by May 2002. Due to the
abatement of commissions, it has become necessary for
many travel agencies to rely on agency fees to stay in
business.
Since HB 300 will exempt certain travel services from
procurement procedures codified in AS 36.30,
administrative agencies will be able to choose travel
providers on a case-by-case basis. This will foster
competition by allowing for the consideration of all
agencies…
Passing the bill will give all travel agencies an
opportunity to provide state travel, thus protecting
and fostering Alaskan jobs and businesses. I ask for
your support in passing this legislation.
th
REPRESENTATIVE HAYES said the events of September 11 contributed
to the situation because people weren't flying, which caused huge
losses for the airline industry. He said most state travel was
planned by travel agents who did not charge a fee because the
State said they would use their services as long as they didn't
charge a fee.
He said Southeast Alaska had to bid their travel services out
because there weren't enough travel agents in the area. He said
US Travel held that contract and charged $8 for a round trip
ticket and $4 for a one-way ticket. He said the letter dated
April 5, 2002 from the Department of Administration to AAA Travel
that was in the bill packets exemplified what HB 300 was trying
to achieve. He said HB 300 was an issue of fairness to him. If
we requested services from businesses in our communities, he said
it was only fair that we compensated them for those services.
CHAIRMAN THERRIAULT asked if the fiscal note had been higher.
REPRESENTATIVE HAYES said the fiscal note was always $228,000.
He said this number was based on the prices that were being
charged by US Travel. He said the State believed the contract
with US Travel would probably have to be renegotiated and the
fees would probably increase. He said we were going to have to
pay the same price whether we dealt with one agency or several
because of economy of scales.
CHAIRMAN THERRIAULT said his personal preference was to remove
the findings and intent section of HB 300. He asked if there was
anything in the section that was necessary.
REPRESENTATIVE HAYES said that was the way the bill was drafted.
He said it could be done in a letter if it pleased the committee.
CHAIRMAN THERRIAULT asked if there were any questions for
Representative Hayes. There were none.
MR. VERN JONES, Chief Procurement Officer, Department of
Administration (DOA), said in the past, travel agencies received
their revenue from airlines, hotels and rental car companies.
The consumers, including the State, did not have to pay for their
services. He said that had changed since all of the major
airlines had or were soon going to cut commissions completely.
He said it was the State's policy to get services for free
whenever possible and only after they could not get the services
for free would they bid out for services. He said this policy
resulted in contracts in Juneau, Wrangell, Petersburg, Haines,
Cordova, Seward and Dillingham.
MR. JONES said HB 300 would not prevent the State from
establishing travel agency contracts but DOA intended to follow
the intent of the bill and work with industry representatives to
establish a fee schedule of what the State would be willing to
pay for the services. He said any agency willing to provide
their services at or below the costs set forward in the fee
schedule would be eligible to receive State business. He said
once the travel agents met those requirements, the choice of
agents would be at the discretion of the traveler, the division
or the department. He noted that HB 300 would not affect
existing state contracts because they were legal and binding and
the State had an obligation to fulfill them.
He said HB 300 was not without cost. He said DOA estimated the
difference between competitively awarded contracts and negotiated
fees to be around $8 per ticket. Based on the volume of travel
conducted by the State, that would be about $230,000 per year.
He said the State bought about 50,000 tickets per year, 11,000 of
which were purchased directly from the airlines. The remaining
39,000 tickets were purchased through travel agencies. He said
he believed $8 was a conservative estimate.
CHAIRMAN THERRIAULT asked if anything in the findings and intent
section of HB 300 needed to remain in the bill as a directive to
DOA.
MR. JONES said DOA would perform the same with or without the
intent language. He said HB 300 wouldn't prevent DOA from doing
a competitive procurement if they thought it was necessary, but
it was DOA's intent to follow the intent of the bill.
CHAIRMAN THERRIAULT asked if there were any questions for Mr.
Jones. There were none.
MS. SALLY HUNTLEY, Frontier Travel, said her company has done
business with the State since 1982 and hired staff specifically
to work with the State. She said they've never received any
money from the State. She said competition between agencies has
kept the cost for State tickets fairly low. She encouraged
support of HB 300 because it would keep a lot of people employed
and it would keep the State's ticket costs competitive and fair.
She said car companies and hotels have also cut commissions to
travel agencies. She said travel agencies provided an incredible
service and would like to continue to do so.
MS. HUNTLEY said the State did a phenomenal amount of business.
She said at the pre-bid meeting that morning the prospective
bidders asked for an idea of how much the contract was worth.
She said they were not able to get an answer and did not know
what they were getting into with the contract. She said she
would be able to take on several million more dollars worth of
business, but she could not take on five or ten million more
dollars worth of business because of the size of her agency. She
said she could continue providing service at the level she is
providing currently if HB 300 passed.
SENATOR PHILLIPS asked if she came down from Anchorage to testify
on HB 300.
MS. HUNTLEY said she had because she felt very strongly about
this bill.
CHAIRMAN THERRIAULT asked if there were any further questions for
Ms. Huntley. There were none.
MR. BILL BECK, President of Airlines Online, said they have seven
staff and 15 independent contractors who work through their
office. He said they support HB 300. He said competition is the
best motivator to keep service standards high. He said there was
an advantage to establishing a fee structure and allowing choice
based on that fee structure. He said he was also at the pre-bid
conference and said DOA wanted bids for 17 areas around the state
but could not give any estimates of how much those contracts
would be worth, which made it very difficult to come up with a
bid and provide for the appropriate amount of staff to handle the
contract. He noted that the Juneau contract with US Travel would
have to be renegotiated and that cost was likely to go up. He
said support of HB 300 would provide better competition and
service.
CHAIRMAN THERRIAULT asked if there were any questions for Mr.
Beck. There were none.
MS. CINDY BETTINE said she owned two travel agencies in Palmer
and Wasilla, employing 13 women, 4 of which were certified travel
counselors. She requested support of HB 300. She said the lack
of commission and net compensation was a big issue but was not
the most important issue. She said all travel agents were not
created equal. She said some agencies were waiving their fees
and assigning the least experienced agent to the State account.
She said the State may be saving $20 to $30 in fees but may be
paying much more for their ticket because they were working with
inexperienced agents. She said this was especially important
when considering the fiscal note. She said it was important that
the travel business remain competitive and HB 300 would probably
achieve that. She would like to see the bill passed through the
committees and to the Senate floor so travel agencies could
continue providing service and saving travelers money.
CHAIRMAN THERRIAULT asked if there were any questions for Ms.
Bettine. There were none. He asked if committee members felt
the same way he did about removing the findings and intent
section.
SENATOR PHILLIPS moved Amendment #1, deleting Sec. 1.
CHAIRMAN THERRIAULT asked if there was any objection to Amendment
#1.
There being no objection, Amendment #1 was adopted.
SENATOR PHILLIPS moved SCSHB 300(STA) out of committee with
attached fiscal note and individual recommendations.
There being no objection, SCSHB 300(STA) was moved out of
committee with attached fiscal note and individual
recommendations.
ADJOURNMENT
There being no further business before the committee, the Senate
State Affairs Committee meeting was adjourned.
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