Legislature(2003 - 2004)

04/01/2004 03:35 PM Senate STA

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                    ALASKA STATE LEGISLATURE                                                                                  
            SENATE STATE AFFAIRS STANDING COMMITTEE                                                                           
                         April 1, 2004                                                                                          
                           3:35 p.m.                                                                                            
TAPE (S) 04-25                                                                                                                
MEMBERS PRESENT                                                                                                              
Senator Gary Stevens, Chair                                                                                                     
Senator John Cowdery, Vice Chair                                                                                                
Senator Bert Stedman                                                                                                            
MEMBERS ABSENT                                                                                                                
Senator Gretchen Guess                                                                                                          
Senator Lyman Hoffman                                                                                                           
COMMITTEE CALENDAR                                                                                                            
SENATE BILL NO. 231                                                                                                             
"An  Act   shortening  the  time  periods   after  which  certain                                                               
unclaimed  property is  presumed to  be abandoned;  and providing                                                               
for an effective date."                                                                                                         
     MOVED CSSB 231(STA) OUT OF COMMITTEE                                                                                       
CS FOR HOUSE BILL NO. 91(FIN)                                                                                                   
"An Act relating  to medical benefits for  retired peace officers                                                               
after 20 years of credited service."                                                                                            
     MOVED SCS CSHB 91(STA) OUT OF COMMITTEE                                                                                    
SENATE BILL NO. 354                                                                                                             
"An Act  relating to complaints  filed with,  and investigations,                                                               
hearings, and orders  of, the State Commission  for Human Rights;                                                               
making  conforming amendments;  and  providing  for an  effective                                                               
     MOVED CSSB 354(STA) OUT OF COMMITTEE                                                                                       
SENATE JOINT RESOLUTION NO. 30                                                                                                  
Urging  the United  States Congress  to amend  the No  Child Left                                                               
Behind Act of 2001.                                                                                                             
     SCHEDULED BUT NOT HEARD                                                                                                    
PREVIOUS COMMITTEE ACTION                                                                                                     
BILL: SB 231                                                                                                                  
SHORT TITLE: DECREASE TIME TO CLAIM UNCLAIMED PROPERTY                                                                          
SPONSOR(s): RULES BY REQUEST OF THE GOVERNOR                                                                                    
05/21/03       (S)       READ THE FIRST TIME - REFERRALS                                                                        
05/21/03       (S)       STA, FIN                                                                                               
04/01/04       (S)       STA AT 3:30 PM BELTZ 211                                                                               
BILL: HB  91                                                                                                                  
SHORT TITLE: RETIRED PEACE OFFICER'S MEDICAL BENEFITS                                                                           
SPONSOR(s): REPRESENTATIVE(s) ANDERSON                                                                                          
02/12/03       (H)       READ THE FIRST TIME - REFERRALS                                                                        
02/12/03       (H)       L&C, FIN                                                                                               
02/21/03       (H)       L&C AT 3:15 PM CAPITOL 17                                                                              
02/21/03       (H)       Moved Out of Committee                                                                                 
02/21/03       (H)       MINUTE(L&C)                                                                                            
02/24/03       (H)       L&C RPT 4DP 1NR                                                                                        
02/24/03       (H)       DP: GATTO, CRAWFORD, GUTTENBERG,                                                                       
02/24/03       (H)       ANDERSON; NR: ROKEBERG                                                                                 
03/18/03       (H)       FIN AT 1:30 PM HOUSE FINANCE 519                                                                       
03/18/03       (H)       Heard & Held                                                                                           
03/18/03       (H)       MINUTE(FIN)                                                                                            
02/17/04       (H)       FIN AT 1:30 PM HOUSE FINANCE 519                                                                       
02/17/04       (H)       Heard & Held                                                                                           
02/17/04       (H)       MINUTE(FIN)                                                                                            
02/19/04       (H)       FIN AT 1:30 PM HOUSE FINANCE 519                                                                       
02/19/04       (H)       Moved CSHB 91(FIN) Out of Committee                                                                    
02/19/04       (H)       MINUTE(FIN)                                                                                            
02/23/04       (H)       FIN RPT CS(FIN) NT 3DP 7NR                                                                             
02/23/04       (H)       DP: CROFT, FATE, WILLIAMS; NR: MEYER,                                                                  
02/23/04       (H)       HAWKER, JOULE, MOSES, CHENAULT, FOSTER,                                                                
02/23/04       (H)       HARRIS                                                                                                 
03/04/04       (H)       TRANSMITTED TO (S)                                                                                     
03/04/04       (H)       VERSION: CSHB 91(FIN)                                                                                  
03/05/04       (S)       READ THE FIRST TIME - REFERRALS                                                                        
03/05/04       (S)       STA, L&C, FIN                                                                                          
03/18/04       (S)       STA AT 3:30 PM BELTZ 211                                                                               
03/18/04       (S)       Heard & Held                                                                                           
03/18/04       (S)       MINUTE(STA)                                                                                            
04/01/04       (S)       STA AT 3:30 PM BELTZ 211                                                                               
BILL: SB 354                                                                                                                  
SHORT TITLE: HUMAN RIGHTS COMMISSION PROCEDURES                                                                                 
SPONSOR(s): RULES BY REQUEST OF THE GOVERNOR                                                                                    
02/27/04       (S)       READ THE FIRST TIME - REFERRALS                                                                        
02/27/04       (S)       STA, JUD                                                                                               
03/23/04       (S)       STA AT 3:30 PM BELTZ 211                                                                               
03/23/04       (S)       Heard & Held                                                                                           
03/23/04       (S)       MINUTE(STA)                                                                                            
04/01/04       (S)       STA AT 3:30 PM BELTZ 211                                                                               
WITNESS REGISTER                                                                                                              
Betty Martin, Comptroller                                                                                                       
Department of Revenue                                                                                                           
Treasury Division                                                                                                               
PO Box 110400                                                                                                                   
Juneau, AK  99811-0400                                                                                                          
POSITION STATEMENT:  Testified on SB 231                                                                                      
Rachel Lewis                                                                                                                    
Department of Revenue                                                                                                           
Treasury Division                                                                                                               
Unclaimed Property Section                                                                                                      
PO Box 110400                                                                                                                   
Juneau, AK  99811-0400                                                                                                          
POSITION STATEMENT:  Testified on SB 231                                                                                      
Melanie Millhorn, Director                                                                                                      
Department of Administration                                                                                                    
Division of Retirement and Benefits                                                                                             
PO Box 110200                                                                                                                   
Juneau, AK  99811-0200                                                                                                          
POSITION STATEMENT:  Testified on CSHB 91(TRA)                                                                                
Anselm Staack, Chief Financial Officer                                                                                          
Department of Administration                                                                                                    
Division of Retirement and Benefits                                                                                             
PO Box 110200                                                                                                                   
Juneau, AK  99811-0200                                                                                                          
POSITION STATEMENT:  Testified on CSHB 91(TRA)                                                                                
Larry Semmens                                                                                                                   
City of Kenai                                                                                                                   
210 Fidalgo Ave., St.200                                                                                                        
Kenai, AK 99611                                                                                                                 
POSITION STATEMENT:  Opposed CSHB 91(TRA)                                                                                     
Julie Benson                                                                                                                    
Ketchikan, Alaska 99901                                                                                                         
POSITION STATEMENT:  Testified in support of CSHB 91(TRA)                                                                     
Kevin Richie, Executive Director                                                                                                
Alaska Municipal League                                                                                                         
217 2nd Street Suite 200                                                                                                        
Juneau, AK 99801                                                                                                                
POSITION STATEMENT:  Testified on CSHB 91(TRA)                                                                                
Scott Nordstrand                                                                                                                
Department of Law                                                                                                               
PO Box 110300                                                                                                                   
Juneau, AK  99811-0300                                                                                                          
POSITION STATEMENT:  Testified on SB 354                                                                                      
Paula Haley, Executive Director                                                                                                 
Office of the Governor                                                                                                          
Human Rights Commission                                                                                                         
800 A Street, Suite 204                                                                                                         
Anchorage, AK 99501-3669                                                                                                        
POSITION STATEMENT:  Testified on SB 354                                                                                      
Lisa Fitzpatrick                                                                                                                
Office of the Governor                                                                                                          
Human Rights Commission                                                                                                         
800 A Street, Suite 204                                                                                                         
Anchorage, AK 99501-3669                                                                                                        
POSITION STATEMENT:  Testified on SB 354                                                                                      
ACTION NARRATIVE                                                                                                              
TAPE 04-25, SIDE A                                                                                                            
CHAIR  GARY  STEVENS called  the  Senate  State Affairs  Standing                                                             
Committee meeting  to order  at 3:35  p.m. Present  were Senators                                                               
Cowdery, Stedman and Chair Gary Stevens.                                                                                        
        SB 231-DECREASE TIME TO CLAIM UNCLAIMED PROPERTY                                                                    
CHAIR GARY STEVENS announced SB 231 to be up for consideration.                                                                 
SENATOR JOHN  COWDERY motioned to adopt  the committee substitute                                                               
(CS) for  SB 231  for discussion purposes.  It was  identified as                                                               
work draft  dated 12/5/03.  There being no  objection, it  was so                                                               
BETTY MARTIN,  State Comptroller with the  Department of Revenue,                                                               
introduced herself and Rachel Lewis.  She explained that the bill                                                               
was introduced late  in the previous session and  dealt only with                                                               
increasing the  dormancy claims on  unclaimed property.  Over the                                                               
interim,  the Department  of Revenue  and the  Department of  Law                                                               
worked to bring Alaska's unclaimed  property law into conformance                                                               
with the  Unclaimed Property Uniform  Act passed in 1995  and the                                                               
CS is the result of that effort.                                                                                                
SENATOR  JOHN  COWDERY asked  what  kind  of property  they  were                                                               
talking about.                                                                                                                  
RACHEL  LEWIS   with  the  Unclaimed  Property   Section  of  the                                                               
Department of Revenue  explained that it has to do  with any kind                                                               
of intangible money such as  payroll checks, utility deposits, or                                                               
health insurance  reimbursements that  have been sent  to someone                                                               
and  remain un-cashed  for a  certain dormancy  period. The  only                                                               
tangible property they receive are safe deposit boxes.                                                                          
SENATOR  COWDERY asked  if  they wanted  to  reduce the  dormancy                                                               
period from five years to three years.                                                                                          
MS. LEWIS said reducing the  dormancy period would make it easier                                                               
to  find people,  but actually  they're  just requesting  various                                                               
property reductions that  are in line with  the Uniform Unclaimed                                                               
Property Act.                                                                                                                   
SENATOR COWDERY noted  that most checks he's seen have  a 180 day                                                               
limit before  they become  stale dated and  he wondered  how they                                                               
were addressing those.                                                                                                          
MS.  LEWIS explained  that just  because there  is an  expiration                                                               
date  doesn't   cause  them  to  be   eliminated  from  unclaimed                                                               
property. State of  Alaska and government items  are usually good                                                               
for one  year while Alaska warrants  are now good for  six months                                                               
before they are listed as unclaimed property.                                                                                   
SENATOR COWDERY asked whether there  are expenses associated with                                                               
unclaimed property that they try to recover.                                                                                    
MS. LEWIS said  no. Unclaimed property is held  in perpetuity for                                                               
the owner and the information is a matter of public record.                                                                     
CHAIR GARY STEVENS asked about opposition to the bill.                                                                          
MS.  LEWIS  said  they  haven't   heard  any  opposition  because                                                               
everyone benefits.                                                                                                              
CHAIR  GARY STEVENS  noted  that Mary  Ellen  Beardsley from  the                                                               
Attorney General's Office was online to answer questions.                                                                       
SENATOR BERT  STEDMAN asked how  long unclaimed property  is held                                                               
before it's reabsorbed.                                                                                                         
MS. LEWIS  told him  it's never absorbed.  Prior to  1986, Alaska                                                               
had an estate  law that had a seven years  claim period, but that                                                               
is no  longer the case.  The committee substitute makes  it clear                                                               
that the request  is to reduce the reporting period;  there is no                                                               
request  to reduce  the period  for claiming  unclaimed property.                                                               
Property may be  claimed by subsequent generations  if that's how                                                               
long it takes before the owner is identified.                                                                                   
She advised  that most of the  requested changes are all  in line                                                               
with the Uniform Unclaimed Property Act, but three are not.                                                                     
Section  5   is  a   new  type   of  unclaimed   property  called                                                               
demutualization. This  has to do  with mutual  companies deciding                                                               
they  wanted  to  enhance their  financial  security  by  turning                                                               
policyholders  into stockholders.  Because  of  this, they  don't                                                               
have records  on the  policyholders because  the accounts  may be                                                               
several decades old. Section 5  calls for those proceeds and that                                                               
stock  to be  reportable as  unclaimed property  at the  time the                                                               
policyholder is known to be lost.                                                                                               
Alaska  is the  only state  that has  the provision  addressed in                                                               
Section  10,  which  is  that   unclaimed  property  reports  for                                                               
diminutive amounts  are not required.  Businesses may  hold small                                                               
amounts of  unclaimed property until the  aggregate total reaches                                                               
$750  at which  time an  unclaimed property  report is  due. This                                                               
reduces needless paperwork.                                                                                                     
Turning to  Section 13 she  informed members that  the Department                                                               
of Revenue  must publish annually  the name of every  person that                                                               
has  unclaimed  property  of  more   than  $100.  Last  year  the                                                               
publishing cost for  that was $30,000 and they  received just 348                                                               
claims. They  already list all  the names on the  Internet, which                                                               
cost  almost nothing  and that  listing  generated 1,800  claims.                                                               
It's more cost efficient for  the department to reach people over                                                               
the Internet, she said.                                                                                                         
Section 15  streamlines the meaning  of "last known  address" and                                                               
Section 16 deals with gift  certificates. As per the Uniform Act,                                                               
they are changing the reporting  period to three years instead of                                                               
five, but they are expanding  the definition of gift certificates                                                               
to include electronic gift cards as well.                                                                                       
CHAIR GARY  STEVENS announced that  he intended to move  the bill                                                               
from committee,  but there wasn't  a quorum. The bill  would move                                                               
as soon as a quorum was reestablished.                                                                                          
3:50 p.m.                                                                                                                     
     CSHB  91(TRA)-RETIRED PEACE OFFICER'S MEDICAL BENEFITS                                                                 
CHAIR  GARY  STEVENS   announced  CSHB  91(TRA)  to   be  up  for                                                               
consideration. He noted that it was heard previously.                                                                           
SENATOR  BERT  STEDMAN  said  he would  move  the  State  Affairs                                                               
committee substitute  when a quorum  was reestablished  and asked                                                               
whether discussion could take place in the meantime.                                                                            
CHAIR GARY  STEVENS agreed and  asked Senator Stedman  whether it                                                               
was  correct that  the  CS  calls for  the  initial  costs to  be                                                               
absorbed by the State rather than the local municipalities.                                                                     
SENATOR STEDMAN said that is true.                                                                                              
MELANIE  MILLHORN, Director  of  the Division  of Retirement  and                                                               
Benefits, introduced herself  and Mr. Staack who  was involved in                                                               
the preparation of the draft fiscal  note. It calls for the State                                                               
to pay  for the cost  to PERS  employers and also  addresses some                                                               
concerns  raised by  municipalities  regarding  the first  fiscal                                                               
note. The  projections look  at a  percentage of  individuals who                                                               
would benefit from the legislation  and indicates that 25 percent                                                               
of  those  employees  who  positively  benefit  would  make  that                                                               
election.  Therefore the  municipalities  were concerned  because                                                               
they  believe  that  more  of their  employees  would  make  that                                                               
selection.  Because of  this,  MERCER  Human Resource  Consulting                                                               
provided the revised calculations. The  following, from page 2 of                                                               
the  draft  fiscal  note  shows  how  a  higher  retirement  rate                                                               
assumption   would  affect   the  unfunded   liability  and   the                                                               
corresponding employer rates.                                                                                                   
Alternate Assumptions:                                                                                                        
                     %         % of      % of P/F Increase in                                                                   
                     Members   Total     Payroll    Unfunded                                                                    
                     Affected Payroll               Liability                                                                   
                                                    (in Dollars)                                                              
Current Assumption 21%         0.11%     0.97%      $8,000,000                                                                
50% Retirement       40 %      0.19%     1.68%      $11,400,000                                                               
75% Retirement       60%       0.27%     2.39%      $14,800,000                                                               
100% Retirement      79%       0.35%     3.11%      $18,200,000                                                               
CHAIR GARY  STEVENS asked whether  the figures included  state as                                                               
well as municipal employees.                                                                                                    
MS.  MILLHORN told  him  it  includes state  and  all other  PERS                                                               
employers who would benefit from HB 91.                                                                                         
SENATOR STEDMAN asked  her to explain the  difference between the                                                               
$856,000 on the original fiscal note and the accrued liability.                                                                 
ANSELM  STAACK,  Chief  Financial  Officer for  the  Division  of                                                               
Retirement and Benefits,  explained that when the  bill passes it                                                               
places  new benefits  in place.  The current  assumption includes                                                               
everyone expected  to take advantage  of the change  and projects                                                               
an  immediate  $8  million  unfunded  liability.  Those  are  the                                                               
employees  that would  be  the most  expensive  because they  are                                                               
under 50  years of  age, have  close to  20 years  employment and                                                               
would probably terminate within the year.                                                                                       
The previous  fiscal note used  only the State of  Alaska figures                                                               
and the draft  fiscal note shows the total cost  for the State of                                                               
Alaska and all subdivisions. The  $8 million is amortized over 25                                                               
years and for FY 2005 the total would be $1.7 million.                                                                          
SENATOR STEDMAN noted  that the draft fiscal note  shows that the                                                               
unfunded liability would  range from $8 million  to $18.2 million                                                               
depending  on  how  many people  exercise  the  early  retirement                                                               
benefit to capture the cost of health insurance.                                                                                
MR.  STAACK agreed  and added  that you'd  never see  100 percent                                                               
participation  in the  police and  fire  population because  some                                                               
won't have enough years of  employment before they reach 60 years                                                               
of age.                                                                                                                         
SENATOR  STEDMAN  suggested  ignoring  the fiscal  impact  for  a                                                               
moment and asked for a comment on the fairness issue.                                                                           
MS.  MILLHORN   replied  the  tier   system  is  the   result  of                                                               
legislative action and each tier provides different benefits.                                                                   
MR. STAACK  added that establishing  new tiers was  purposeful to                                                               
reduce costs and maintain funding  of the system. He acknowledged                                                               
that the fairness and fiscal issues do collide.                                                                                 
CHAIR GARY  STEVENS noted that  a quorum  was present and  he was                                                               
ready for a motion.                                                                                                             
SENATOR  STEDMAN  motioned  to adopt  committee  substitute  (CS)                                                               
version \S as the working  document. There being no objection, it                                                               
was so ordered.                                                                                                                 
SENATOR JOHN COWDERY  questioned whether PERS and  TRS were under                                                               
MS. MILLHORN advised  that the June 30,  2003 actuarial valuation                                                               
information  indicates  a percentage  point  loss.  For PERS  the                                                               
funding ratio was  at 75 percent and now it's  at 72 percent. The                                                               
TRS funding ratio  was at 68 percent and now  it's at 64 percent.                                                               
The recent valuation sets the  employer contribution rates for FY                                                               
2006. Based on  the current funding status for PERS  and TRS, the                                                               
division  has  requested that  legislation  be  held in  abeyance                                                               
because  this  proposal  is an  enhancement  to  an  under-funded                                                               
SENATOR COWDERY asked whether the system still has tiers.                                                                       
MS. MILLHORN  informed him that  PERS has  Tiers I, II,  and III.                                                               
Tier I was for a 25 year period.  Tier II was created in 1986 and                                                               
Tier III was created in 1996. TRS has two Tiers.                                                                                
SENATOR  COWDERY  asked if  state  and  municipal employees  were                                                               
MS. MILLHORN  said that the  fiscal note  for the version  \S CS,                                                               
represents  the  cost   to  the  State  of  Alaska   and  to  the                                                               
approximately 156 other PERS employers.                                                                                         
SENATOR  COWDERY   asked  whether   they  were  looking   to  the                                                               
communities or the State to pay.                                                                                                
CHAIR GARY  STEVENS explained that  House version called  for the                                                               
State  to pay  its  portion and  the  communities their  portion.                                                               
Version   \S  CS   would   make  the   entire   amount  a   State                                                               
LARRY  SIMMONS   from  Kenai  testified  via   teleconference  in                                                               
opposition to  CSHB 91 for  fiscal reasons. It's clear  that more                                                               
than 21 percent of eligible members  would retire if they were to                                                               
receive health benefits, he said.                                                                                               
CHAIR GARY  STEVENS noted that  the committee had copies  of both                                                               
his and MERCER's letters before them.                                                                                           
MR. SIMMONS  continued to say  that the 79 percent  assumption is                                                               
the most realistic  among the options presented. For  the City of                                                               
Kenai,  the percent  and cost  would be  higher yet  because they                                                               
don't have  any members who will  be over 60 years  old when they                                                               
have 20 years  service. If 79 percent were to  retire, that would                                                               
more than  triple the percent  of police/fire payroll. If  the 79                                                               
percent assumption  is the realistic  option, the  State's fiscal                                                               
impact  will be  $2.75 million  for FY  2005 rather  than $856.9.                                                               
That number will grow to $3.2 million per year by FY 2010.                                                                      
He calculated that if 79 percent  choose to retire in FY 2005 the                                                               
total  would  be $5.5  million  rather  than the  projected  $1.7                                                               
million. That would grow to $6.4  million in FY 2010. The cost to                                                               
the City of  Kenai would be $85,000 per year.  There is already a                                                               
5 percent  increase in PERS rates  for FY 2005 and  when combined                                                               
with the  $85,000, you're at  more than  three fourths of  a mill                                                               
property tax.  It's unlikely  that property  taxes can  be raised                                                               
for that purpose, he said.                                                                                                      
Remember, he  said, the Tier II  and III PERS members  that could                                                               
benefit  from  this  legislation  were aware  of  the  retirement                                                               
package when  they were  hired. "It's  simply not  appropriate or                                                               
prudent to  increase retirement benefits  at this time  of fiscal                                                               
difficulty at nearly every level of government," he concluded.                                                                  
CHAIR GARY STEVENS  summarized his testimony then  asked what his                                                               
thoughts are regarding the State assuming the cost.                                                                             
MR. SIMMONS admitted it would reduce  costs to the City of Kenai.                                                               
However, the bill  isn't needed and the State of  Alaska is in no                                                               
position  to pay  $5.5  million per  year  for additional  health                                                               
benefits for a select group of PERS members, he opined.                                                                         
CHAIR GARY STEVENS asked Ms. Millhorn and Mr. Staack to comment.                                                                
MR. STAACK  pointed out  that if the  79 percent  assumption were                                                               
taken then  the current assumption  percentages would  triple. He                                                               
calculated that using the 79  percent assumption the total to the                                                               
State of Alaska would be $2.6 million in FY 2005.                                                                               
He  added that  in  2001  the Legislature  enhanced  part of  the                                                               
benefit so that it became system paid.                                                                                          
JULIE  BENSON  testified  via teleconference  from  Ketchikan  in                                                               
support of HB 91.                                                                                                               
KEVIN  RICHIE, Alaska  Municipal League,  distributed a  two page                                                               
hand out  to show what  a 5 percent  increase in the  PERS system                                                               
would cost municipalities in terms  of both dollars and mill rate                                                               
increases.  He  advised  that  his figures  were  based  on  2003                                                               
figures so they  might be off slightly, but  the financial impact                                                               
to the various municipalities would be huge.                                                                                    
4:35 p.m.                                                                                                                     
TAPE 04-25, SIDE B                                                                                                            
CHAIR  GARY STEVENS  summarized  the testimony  and  asked for  a                                                               
SENATOR STEDMAN  made a  motion to report  SCS CSHB  91(STA) from                                                               
committee  with   the  attached   fiscal  notes   and  individual                                                               
recommendations. There being no objection, it was so ordered.                                                                   
        SB 231-DECREASE TIME TO CLAIM UNCLAIMED PROPERTY                                                                    
CHAIR GARY  STEVENS noted  there was  a new  fiscal note  on CSSB
231(STA) then asked for a motion.                                                                                               
SENATOR  COWDERY  made a  motion  to  report CSSB  231(STA)  from                                                               
committee  with individual  recommendations  and attached  fiscal                                                               
notes. There being no objection, it was so ordered.                                                                             
           SB 354-HUMAN RIGHTS COMMISSION PROCEDURES                                                                        
CHAIR GARY  STEVENS announced SB  354 to be up  for consideration                                                               
and noted that the bill was heard previously.                                                                                   
SCOTT  NORDSTRAND,  Deputy   Attorney  General,  Civil  Division,                                                               
Department  of Law  (DOL), recapped  previous  testimony and  the                                                               
concerns expressed by  the Human Rights Commission  about some of                                                               
the provisions of the bill.                                                                                                     
He stated  that it's important  for the  State to talk  about the                                                               
procedures  that are  used before  the  Human Rights  Commission.                                                               
With that  in mind,  he said  he would  walk members  through the                                                               
process so they  would understand what the bill does  in terms of                                                               
the process.                                                                                                                    
If  someone feels  that they've  been discriminated  against they                                                               
may  file  a  complaint  with   the  commission.  The  commission                                                               
investigates the  complaint and ultimately produces  a finding of                                                               
whether or not there was  substantial evidence of discrimination.                                                               
If substantial evidence is found,  the next step is conciliation.                                                               
This is a mediation process in  which the commission tries to use                                                               
a professional  to bring the two  parties together to work  for a                                                               
solution.  If that  is unsuccessful,  a  failure of  conciliation                                                               
occurs and  the commission director would  prepare an accusation.                                                               
That is  like a  complaint in a  lawsuit. Discovery  would follow                                                               
and  an  attorney  would  be assigned  who  would  represent  the                                                               
director in advocating on behalf of  the person who may have been                                                               
discriminated against.  The employer  often times hires  a lawyer                                                               
and the  case goes forward  in much the  same way that  a lawsuit                                                               
would.  Ultimately there  would  be a  hearing  before a  hearing                                                               
officer.  The changes  are procedural,  but they're  important to                                                               
the participants, he said.                                                                                                      
In the 1995  Fish and Game v Meyer case  the Alaska Supreme Court                                                               
was  second-guessing how  much  evidence constitutes  substantial                                                               
evidence. They concluded that the  evidence had to be "completely                                                               
lacking in merit," which is a very low threshold.                                                                               
MR.  NORDSTRAND said  that tied  the  commissions' hands  because                                                               
they couldn't exercise  good judgment in terms of  which cases to                                                               
take to  judgment. If they  have to  take every case  forward, no                                                               
matter how  small the  evidence, the burden  is enormous  and the                                                               
system is  backlogged. This  bill, he  said, gives  the executive                                                               
director  the discretion  to dismiss  a claim  for very  specific                                                               
reasons. The  Human Rights Commission  is supportive of  that, he                                                               
assured members.                                                                                                                
Next, he said,  there is a procedural aspect to  the bill that is                                                               
particularly  important to  employers.  If a  complaint is  filed                                                               
against an employer, they might  spend thousands of dollars on an                                                               
attorney  simply  to  respond to  the  complaint.  Currently  the                                                               
system  doesn't allow  motions for  summary  judgment before  the                                                               
commission and this bill sets up a system to allow that.                                                                        
Sometimes,  after  the accusation  stage  the  claims or  charges                                                               
change. Under  the current system,  the commission may  amend the                                                               
complaint and  add the  other charge.  However, in  the amendment                                                               
process  the substantial  evidence  requirement  is bypassed.  In                                                               
this bill,  he said,  if you  add a  substantively new  claim you                                                               
must go  back and make  sure there is  a finding of  new evidence                                                               
before it can be added to the accusation.                                                                                       
SENATOR COWDERY  asked if there is  a method for the  employer to                                                               
recover attorney fees.                                                                                                          
MR.  NORDSTRAND said  there is  a statutory  provision about  the                                                               
commission  awarding attorney  fees, but  it is  seldom done.  He                                                               
explained that it's the director's  representative in the form of                                                               
a human  rights advocate -  a state attorney presenting  the case                                                               
and the employer has a  defending attorney. If attorney fees were                                                               
awarded  to  an  employer,  they  would have  to  come  from  the                                                               
commission or  the State. He  wasn't aware  of a case  where that                                                               
CHAIR  GARY STEVENS  asked if  his  office and  the Human  Rights                                                               
Commission had  come to  agreement on most  of the  issues raised                                                               
MR.  NORDSTRAND replied  there were  three  disputed issues.  The                                                               
commission wanted  to change language  on how you  define whether                                                               
you  have  reasonably  mitigated  your  damages.  The  commission                                                               
wanted  to   use  "reasonably  diligent"   and  the   DOL  wanted                                                               
"reasonable and diligent." DOL conceded the difference.                                                                         
The second disagreement was how  to amend the complaint and under                                                               
what  standard.   DOL  proposed  that  you   couldn't  amend  the                                                               
complaint without  "good cause." The commission  prefers that you                                                               
amend "reasonably  and fairly."  DOL conceded that  difference as                                                               
Still in  dispute is the front  pay issue. DOL proposes  to limit                                                               
front pay  to two  years because  those are  speculative damages.                                                               
Frankly, he  said, there is no  agreement on that issue  and it's                                                               
up  to the  Legislature  to  decide whether  or  not that's  good                                                               
policy.  The administration's  position is  that two  years is  a                                                               
fair  remedy. In  conclusion he  said  the commission's  remedial                                                               
powers are  not all  encompassing. As  it stands,  the commission                                                               
cannot order  punitive damages or  emotional distress  damages as                                                               
you could if  the case were taken to court.  "All we're saying is                                                               
one other  limitation. If you  go to  the system where  the State                                                               
provides the  lawyer, provides the  process and the  employer has                                                               
no hope of  recovering any attorney fees even if  they win, let's                                                               
limit it to two years."                                                                                                         
CHAIR  GARY  STEVENS asked  where  "reasonable  and diligent"  is                                                               
MR. NORDSTRAND pointed  out that it's in Section 6  at the bottom                                                               
of page 4.                                                                                                                      
CHAIR GARY STEVENS asked Paula  Haley or Lisa Fitzpatrick whether                                                               
they agreed with the change.                                                                                                    
LISA  FITZPATRICK, Human  Rights Commission,  said she  agreed on                                                               
the first issue.                                                                                                                
CHAIR GARY STEVENS asked for an amendment to reflect the change.                                                                
SENATOR  COWDERY motioned  to amend  SB 354  on page  4, line  31                                                               
deleting  the  words  "reasonable  and  diligent"  and  inserting                                                               
"reasonably  diligent."  There  being no  objection  amendment  1                                                               
CHAIR GARY  STEVENS asked where  the second issue was  located in                                                               
the bill.                                                                                                                       
MR. NORDSTRAND said that relates  to the standards for amending a                                                               
complaint  found on  page 3,  line  27. Delete  "showing of  good                                                               
cause"  and  insert  "reasonably  and fairly"  between  "be"  and                                                               
"amended" in the same sentence.                                                                                                 
CHAIR GARY STEVENS asked for a motion.                                                                                          
SENATOR COWDERY  motioned to  adopt amendment 2  on page  3, line                                                               
27. Delete  the first sentence in  Section 5 (c) and  insert, "An                                                               
accusation  may   be  reasonably   and  fairly  amended   by  the                                                               
commission." There being no objection, it was so ordered.                                                                       
CHAIR GARY  STEVENS asked  for the location  of the  third issue,                                                               
which was related to the two year front pay issue.                                                                              
MR. NORDSTRAND said that is on page 4, line 23.                                                                                 
CHAIR GARY STEVENS asked Ms. Fitzpatrick to comment.                                                                            
MS.  FITZPATRICK advised  that  the Human  Rights Commission  has                                                               
discussed the  issue and has  voted against putting  a limitation                                                               
on the number of  years or the amount of time  that front pay may                                                               
be  awarded.  Front pay  is  an  infrequently used  but  valuable                                                               
remedy that hasn't presented a problem, she said.                                                                               
She agreed  with Mr.  Nordstrand that  it is  inherently somewhat                                                               
speculative, but nationally  the courts recognize it  as a remedy                                                               
that is available to litigants  in civil rights cases. Even there                                                               
it is rarely invoked, but it needs to be available.                                                                             
CHAIR GARY STEVENS recapped the commission's position.                                                                          
SENATOR COWDERY  opined that two years  is too much and  he would                                                               
support an amendment for one year.                                                                                              
CHAIR GARY STEVENS asked Mr. Nordstrand to comment.                                                                             
MR.  NORDSTRAND  stated that  three  of  the seven  commissioners                                                               
supported the two year limitation. "I  don't think this is out of                                                               
the mainstream  in terms of  a result,"  he said. He  pointed out                                                               
that if  there were a  particularly egregious case,  the employee                                                               
could  go  the  courts  to recover  more.  These  are  commission                                                               
remedies and all other remedies would be available in court.                                                                    
CHAIR GARY  STEVENS summarized that  the Human  Rights Commission                                                               
prefers no limit to front pay  and the Department of Law suggests                                                               
a two  year limit and Senator  Cowdery believes a one  year limit                                                               
is sufficient.                                                                                                                  
SENATOR  STEDMAN said  he wouldn't  object to  an amendment  from                                                               
Senator Cowdery.                                                                                                                
SENATOR COWDERY  made a motion  to adopt  amendment 3 on  page 4,                                                               
line 23 deleting "two years"  and inserting "one year" to address                                                               
the  front  pay  issue.  There  being no  objection,  it  was  so                                                               
CHAIR  GARY STEVENS  asked if  there were  any further  issues to                                                               
MS.  FITZPATRICK  stated  that  the  commission  wasn't  in  full                                                               
agreement  with  part of  Section  4  relating to  administrative                                                               
dismissal for certain enumerated reasons.  On page 3, line 7 they                                                               
suggest inserting  "timely" before  "initiating" or  deleting all                                                               
of line 7.  As written the option to go  forward in another forum                                                               
is   misleading  to   the  layperson   because  there   are  time                                                               
constraints on actions.                                                                                                         
CHAIR GARY STEVENS asked Mr. Nordstrand to respond.                                                                             
MR. NORDSTRAND  expressed the concern  that placing a  warning in                                                               
statute would  create a statutory inner-connection  that wouldn't                                                               
work very  well. This doesn't  mean that the  commission couldn't                                                               
or  shouldn't warn  people of  this  in their  process, he  said,                                                               
because they  should let it be  known that there is  a statute of                                                               
SENATOR COWDERY  remarked that he  didn't like the fact  that the                                                               
employer isn't able  to recovery expenses even if  they win. Even                                                               
if you win you lose, he said. He  asked if there was a remedy for                                                               
MR. NORDSTRAND said there is a  provision in AS 18.80.130 (e) for                                                               
that. He  read: "The commission  may order payment  of reasonable                                                               
expenses,  including  reasonable  attorney fees  to  any  private                                                               
party  before   the  commission  when  the   commission,  in  its                                                               
discretion,  determines  the  allowance is  appropriate."  That's                                                               
honored by  the exception more than  the rule, he said,  and it's                                                               
unlikely that there  is much impetus for the  commission to award                                                               
attorney fees  against itself for  losing the case. To  fix that,                                                               
you'd have to change the language or devise an alternative.                                                                     
CHAIR GARY STEVENS asked Ms. Fitzpatrick for a comment.                                                                         
MS. FITZPATRICK  said she wasn't  familiar with the  language and                                                               
deferred to Paula Haley.                                                                                                        
PAULA  HALEY, Human  Rights  Commission  staff, informed  members                                                               
that the  provision has been  invoked rarely in her  sixteen year                                                               
CHAIR GARY STEVENS announced his  preference was to send the bill                                                               
on to the Judiciary Committee and they could address that issue.                                                                
SENATOR  COWDERY  agreed, but  asked  the  Department of  Law  to                                                               
consider his concern.                                                                                                           
MR.  NORDSTRAND asked  whether he  wanted something  prepared for                                                               
that committee.                                                                                                                 
SENATOR COWDERY stated that he  would like the issue addressed in                                                               
this bill if possible.                                                                                                          
MR. NORDSTRAND agreed to assist.                                                                                                
CHAIR  GARY STEVENS  asked  for  a motion  to  move  the bill  as                                                               
SENATOR  COWDERY  made  a  motion  to  move  CSSB  354(STA)  from                                                               
committee  with individual  recommendations  and attached  fiscal                                                               
note. He asked  for unanimous consent. There  being no objection,                                                               
it was so ordered.                                                                                                              
CHAIR GARY STEVENS announced that the committee would hear SJR
30 at another time then adjourned the meeting at 5:00 p.m.                                                                      

Document Name Date/Time Subjects