CS FOR HOUSE BILL NO. 219(JUD) "An Act relating to background investigation requirements for state employees whose job duties require access to certain federal tax information; relating to current or prospective contractors with the state with access to certain federal tax information; establishing state personnel procedures required for employee access to certain federal tax information; and providing for an effective date." 2:16:37 PM BRANDON S. SPANOS, DEPUTY DIRECTOR, TAX DIVISION, DEPARTMENT OF REVENUE, presented the bill. He explained that HB 219 authorized agencies to mandate national criminal history record checks that included fingerprinting, for state employees and contractors accessing certain federal tax information. The Internal Revenue Service's (IRS) "Publication 1075" (published by the Department of the Treasury, Internal Revenue Service and updated September 30, 2016) specified the requirements that state and local agencies must follow to obtain certain federal tax information directly from the IRS. The IRS enacted the measures to safeguard the information. He related that the bill applied primarily to three departments: The Department of Revenue, Child Support Services Division and the Tax Division; the Department of Labor and Workforce Development (DLWD), and the Department of Health and Social Services (DHSS). He reiterated that the 2016 update for Publication 1075 required the criminal history record checks that included fingerprinting. The state implemented the background checks but needed further authority to require fingerprinting. He summarized that essentially, the bill authorized the fingerprinting requirement. The fingerprints were submitted to the Department of Public Safety (DPS) who sent them to the Federal Bureau of Investigation (FBI) for the national criminal history check. 2:18:53 PM Mr. Spanos discussed the Sectional Analysis (copy on file): Section 1 Amends AS 12.62.400 by adding a new subsection. This will require an agency to submit the fingerprints of current or prospective employees or contractors whose job duties require access to federal tax information (defined in AS 39.55.015(e)(3) and 36.30.960(d)(3)) to the Department of Public Safety for submission to the Federal Bureau of Investigation to obtain a criminal history record. Defines "agency", "employee" and "contractor". Section 2 Amends AS 36.30 by adding a new section. This section establishes state personnel procedures for obtaining and submitting fingerprints for current or prospective contractors if a contract with the state requires access to federal tax information. Defines "agency", "contractor" and "federal tax information". Section 3 Amends AS 39 by adding a new chapter. This new chapter addresses state personnel procedures related to federal tax information. Adds AS 39.55.010 This section explains the purpose of the chapter-- to establish procedures to safeguard federal tax information which will apply to a current or prospective state employee whose job duties require access to federal tax information. Adds AS 39.55.015 This section requires current and prospective state employees whose job duties require access to federal tax information to provide information to an agency for a state and national criminal history record check. Defines "agency", "employee", "federal tax information", "return", and "return information". Section 4 Provides the effective date of July 1, 2018. Senator Stevens asked what areas of the state the employees that required fingerprinting were located. Mr. Spanos only knew the location of the DOR employees that were primarily located in Anchorage and Juneau. He offered that an employee could go to any law enforcement agency for fingerprinting. Co-Chair MacKinnon asked whether the Office of Children's Services was affected by the bill. Mr. Spanos did not know the answer. Vice-Chair Bishop wondered what the procedure was for sending fingerprints to the FBI. 2:22:43 PM KATHRYN MONFREDA, CHIEF, CRIMINAL RECORDS AND IDENTIFICATION BUREAU, DIVISION OF STATEWIDE SERVICES, DEPARTMENT OF PUBLIC SAFETY, ANCHORAGE (via teleconference), explained that fingerprints for employment or licensing purposes were received as a "rolled" set of fingerprints on a "hard card format." The department digitized the fingerprints and compared them in the state's system that was a consortium of 8 states systems in one shared database. Subsequently, they were sent electronically to the FBI for the background check. The FBI destroyed the fingerprints after the background check was completed. Co-Chair MacKinnon OPENED public testimony. Co-Chair MacKinnon CLOSED public testimony. 2:24:35 PM Vice-Chair Bishop addressed the fiscal notes. He noted the four zero fiscal notes accompanying the bill. The first was for DOC, allocated to Administrative Services, FN6 (COR), the second was for DHSS, allocated to Administrative Support Services, FN7 (DHS), and the third was for DPS, allocated to Criminal Justice Information Systems Program, FN9 (DPS). Lastly, he pointed to the DLWD zero fiscal note, FN6 (LWF) allocated to Unemployment Insurance and relayed that the anticipated cost would be covered within the current budget through federal funds. He continued with the fiscal impact note for DOR, FN10 (REV), allocated to the Tax Division in the amount of $4.8 thousand for FY 19 and $500 in the outyears. He read from the analysis on the page 2 of the fiscal note: This bill authorizes state agencies that receive Federal Tax Information (FTI) to undergo federal background checks as now required in IRS Publication 1075. Background checks would be conducted on all current and new employees at a cost of $47 for each completed investigation. The Tax Division estimates that 102 employees will be fingerprinted in the first year, and approximately 10 employees in subsequent years. Co-Chair MacKinnon asked whether DOR had to adopt new regulations with passage of the legislation. Mr. Spanos answered in the negative. Co-Chair MacKinnon asked why the department did not calculate the cost of fingerprints as revenue on the fiscal note. Mr. Spanos replied that the cost of fingerprinting did not change the department's revenue. He added that losing the ability to receive the federal information would negatively impact the department. Co-Chair MacKinnon inquired whether DOR was charging anyone to perform fingerprinting. Mr. Spanos responded that DOR planned to pay for the fingerprinting and not charge the employees. 2:27:07 PM AT EASE 2:29:07 PM RECONVENED Vice-Chair Bishop pointed to the following from the fiscal note, "An updated background check will also be required every ten years." He assumed that did include fingerprinting. Mr. Spanos replied in the affirmative. Vice-Chair Bishop asked what changed on fingerprints after 10 years. Mr. Spanos responded that he thought the same thing and considered maintaining a record of the fingerprints for resubmission if possible. However, the background checks were required every 10 years. Co-Chair MacKinnon noted that some of the fiscal notes reported that fingerprinting cost $47 per set, and the Legislative Finance Division (LFD) believed that a small amount of revenue would be generated from fingerprinting. However, she understood that Mr. Spanos stated DOR would not charge employees for fingerprinting. She wanted to discuss the issue of storing someone's personal information and any liability issue that might result for the state as a result. She requested further review of the DPS fiscal note. 2:31:16 PM Vice-Chair Bishop pointed to one last DOR fiscal impact note allocated to the Child Support Services Division in the amount of $10 thousand for FY 19 and $1.5 thousand in the outyears. He mentioned that $6.6 thousand was in Federal Receipts and the remaining $3.4 thousand in Undesignated General Funds (UGF). He read from page 2 of the analysis: The Child Support Services Division has 196 employees who will be fingerprinted in the first year, and approximately 32 employees each subsequent year. Every 10 years, background checks must be renewed. Background checks would be conducted on all current and new employees at a cost of $47 for each completed investigation. Vice-Chair Bishop relayed that he had concerns regarding what happened to the background check information after ten years. Co-Chair MacKinnon questioned whether regulations were necessary for the Division of Child Support Services with passage of the bill. She purported that the fiscal note did not speak to the question. 2:33:04 PM Co-Chair MacKinnon returned to the DPS fiscal note and asked Ms. Monfreda to comment regarding storage of employee's background information for ten years and the FBI destruction of fingerprints. She referred to an earlier version of the DPS fiscal note that reported revenue from the collection of fingerprints. Ms. Monfreda reiterated that the department's fiscal note was zero because the fee collected for processing the fingerprints was equal to the cost charged by the FBI, which billed DPS monthly. She continued that the reason for the 10 year renewal was that fingerprints changed through the aging process or were worn down. She reiterated that the FBI destroyed the fingerprints and DPS stored the fingerprints. Fingerprints over one-year old were unacceptable to the FBI. Co-Chair MacKinnon confirmed that DPS was storing the fingerprints. Ms. Monfreda replied in the affirmative. CSHB 219(JUD) was HEARD and HELD in committee for further consideration. 2:35:20 PM AT EASE 2:35:51 PM RECONVENED