HB 233-RATES: MOTOR VEHICLE WARRANTY WORK  3:10:16 PM CHAIR BJORKMAN reconvened the meeting and announced the consideration of CS FOR HOUSE BILL NO. 233(TRA) am "An Act relating to rates and time allowances for motor vehicle warranty work; and relating to unfair practices by manufacturers." 3:10:55 PM DAVID GOFF, Staff, Representative Frank Tomaszewski, Alaska State Legislature, Juneau, Alaska, gave a brief overview of changes to HB 233 by the House: • Clarification that the guides for [repair] times were independent time guides, not the manufacturer [prescribed] time guides. • Provision for dealers to be protected from penalties for doing manufacturers' warranty work. He said HB 233, section four prohibited surcharges to recoup costs for warranty work, similar to protections provided in 22 other states. • Change in wording to allow [charging for] fractions of hours and not just [full or whole] hours. 3:13:15 PM CHAIR BJORKMAN announced invited testimony for HB 233. 3:13:45 PM LESTER NICHOLS, President, Alaska Auto Dealers Association, Fairbanks, Alaska, introduced himself and referred to an economic impact study of an Illinois law [similar to HB 233] that went into effect January 1, 2022. The report was titled "Improving the Motor Vehicle Franchise Act" [by the Illinois Economics Policy Institute and the Illinois Project for Middle Class Renewal]. He read from the report's Executive Summary: [Original punctuation provided.] By bringing pay for warranty work up to competitive  local area standards, the Multiplier Act has generated  positive economic impacts in Illinois. The Act: • Boosts worker earnings at Illinois' auto dealers by between three percent and seven percent relative to similar workers, resulting in $143 million annually for skilled mechanics in middle-class jobs that cannot be outsourced. • Reduces employee turnover at Illinois' auto dealers by nine percent, helping to combat labor shortages. • Increases hours worked per week at auto dealers by as much as six percent compared to other private industry workers in Illinois. • Grows the state's economy by $302 million, a $2.11 economic multiplier per dollar in wage gains. • Generates $21 million in state tax revenues and $21 million in local tax revenues every year. • Promotes safety and reliability by ensuring that skilled mechanics can devote the proper time needed to correctly diagnose and fix vehicle problems. 3:14:41 PM MR. NICHOLS highlighted several points from the summary, including that all auto dealer employees received pay increases of three to seven percent and skilled mechanics received $143 million annually. He emphasized that employee turnover [in Illinois] was reduced by nine percent and pointed out that HB 233 is meant to combat labor shortages [in Alaska], pay mechanics better and hang on to mechanics [already employed]. He also highlighted the growth in the [Illinois] state economy and that safety and reliability were improved by correctly diagnosing and fixing vehicle problems. He stated this was in the best interests of everybody: consumers, manufacturers, mechanics and [auto dealership] business owners. 3:16:05 PM MR. NICHOLS mentioned opposition to HB 233 which pointed out that chart eight on page eight of the report, "Improving the Motor Vehicle Franchise Act in Illinois" notes a wage increase of only 2.9 percent. He said the opposition pointed out that the increase in wages was less than the rate of inflation in the area. He contested that characterization by quoting the study, reading from the paragraph preceding figure eight, page eight: [Original punctuation provided.] A 2.9 percent net increase in monthly earnings translates into a $180 gain ($2,166 per year) for the 46,212 employees who were already employed at car dealerships prior to the law, or $100.1 million annually. Moreover, higher earnings attracting and retaining 1.2 percent more employees relative to neighboring states means that an additional 543 workers were directly employed due to the law. At the average monthly earnings of $6,549 (or annual earnings of $78,588), these workers account for another $42.7 million in labor income. Adding the earnings effect and the employment effect together produce a $142.7 million total boost to employees at auto dealerships in Illinois in the first year of the law (Figure 8). 3:17:39 PM MR. NICHOLS continued to read from the report, "Improving the Motor Vehicle Franchise Act in Illinois', page eight, final paragraph to support the expectation that HB 233 will significantly improve wages and opportunities, directly and indirectly related to auto dealerships in Alaska: [Original punctuation provided.] The $142.7 million expansion of mechanics' pay creates more than 1,500 jobs across Illinois, including the 543 jobs directly at car dealerships themselves (Figure 9). Over 200 indirect jobs are created throughout the supply chain as auto dealers are reimbursed the correct amount for work performed, their bottom lines are improved, and they can make additional purchases for their establishments. Finally, nearly 800 jobs are created as the skilled auto mechanics and techniciansand indirectly employed workers as well have more money to spend at local stores, restaurants, and other small businesses. 3:18:14 PM MR. NICHOLS read from the report, "Improving the Motor Vehicle Franchise Act in Illinois", page nine: [Original punctuation provided.] ADDITIONAL IMPLICATIONS OF THE LAW  The Multiplier Act ended the practice of underpaying certified mechanics and technicians for completing warranty repairs. By promoting equal pay for equal work, the law reduced employee turnover at car dealerships and helped combat labor shortages. Instead of being expected to earn below-market rates for tasks completed at unrealistic time allotments mandated by out-of-state and foreign corporations, skilled mechanics can now devote the proper time to correctly diagnose vehicle problems to meet reliability standards and repair manufacturing defects that are the fault of the automakers. This improvement in safety for drivers has occurred at no cost to Illinois consumers, with warranty work remaining free to car owners (McMahon, Alfirevich, & Marquardt, 2023). 3:19:05 PM MR. NICHOLS countered the arguments of auto manufacturers against HB 233 that the bill would not really change anything except to line the pockets of [auto dealership] businesses, charging that the manufacturers would prefer to line their own pockets. He said the [manufacturers'] comments that HB 233 would raise prices [for warranty repairs] were a threat. He noted that the manufacturers' response to changes in franchise law in 22 states was to introduce surcharges. He said the surcharges were not a punishment to the dealers as much as to the entire state economy, to consumers and to everybody. 3:20:28 PM CHAIR BJORKMAN expressed appreciation for the testimony and the committee's support for HB 233. 3:21:00 PM MR. GOFF highlighted that, according to Mr. Nichols' testimony, $14-15 million additional revenue would come into the state through the pockets of auto dealership [mechanics and other] employees as a result of HB 233 and that would be a great benefit to the state. He advocated for the potential of HB 233 to keep mechanics in dealerships in Alaska and keep the dealerships businesses healthy. 3:21:36 PM CHAIR BJORKMAN held HB 233 in committee.