ALASKA STATE LEGISLATURE
HOUSE STATE AFFAIRS STANDING COMMITTEE
February 21, 2006
8:07 a.m.
MEMBERS PRESENT
Representative Paul Seaton, Chair
Representative Carl Gatto, Vice Chair
Representative Bob Lynn
Representative Jay Ramras
Representative Berta Gardner
Representative Max Gruenberg
MEMBERS ABSENT
Representative Jim Elkins
COMMITTEE CALENDAR
CONFIRMATION HEARING(S)
Public Defender
Quinlan Steiner -
- CONFIRMATION(S) ADVANCED
HOUSE BILL NO. 375
"An Act relating to the retirement benefit liability account and
appropriations from that account; relating to deposits of
certain income earned on money received as a result of State v.
Amerada Hess, et al., 1JU-77-847 Civ. (Superior Court, First
Judicial District); and providing for an effective date."
- MOVED HB 375 OUT OF COMMITTEE
SENATE BILL NO. 224
"An Act establishing Older Alaskans' Day."
- MOVED SB 224 OUT OF COMMITTEE
CS FOR SENATE BILL NO. 12(STA)
"An Act relating to financial relationships with persons
conducting business in or having headquarters in countries that
support or ignore slavery and trafficking in persons."
- HEARD AND HELD
HOUSE BILL NO. 344
"An Act relating to the commissioner of administration's
appointing agents to perform for compensation certain
transactions related to vehicles; and providing for an effective
date."
- HEARD AND HELD
HOUSE CONCURRENT RESOLUTION NO. 27
Urging the Alaska Retirement Management Board and the Alaska
Permanent Fund Corporation to divest all holdings held in
companies with business activities or holding investments in
Iran and North Korea.
- SCHEDULED BUT NOT HEARD
PREVIOUS COMMITTEE ACTION
BILL: HB 375
SHORT TITLE: RETIREMENT BENEFIT LIABILITY ACCT/PF
SPONSOR(s): WAYS & MEANS
01/17/06 (H) READ THE FIRST TIME - REFERRALS
01/17/06 (H) W&M, STA, FIN
01/20/06 (H) W&M AT 9:00 AM CAPITOL 106
01/20/06 (H) Heard & Held
01/20/06 (H) MINUTE(W&M)
01/25/06 (H) W&M AT 9:00 AM CAPITOL 106
01/25/06 (H) Heard & Held
01/25/06 (H) MINUTE(W&M)
01/27/06 (H) W&M AT 9:00 AM CAPITOL 106
01/27/06 (H) Heard & Held
01/27/06 (H) MINUTE(W&M)
01/30/06 (H) W&M AT 9:30 AM CAPITOL 106
01/30/06 (H) Heard & Held
01/30/06 (H) MINUTE(W&M)
02/01/06 (H) W&M AT 9:00 AM CAPITOL 106
02/01/06 (H) <Bill Hearing Canceled>
02/03/06 (H) W&M AT 9:00 AM CAPITOL 106
02/03/06 (H) <Bill Hearing Canceled>
02/06/06 (H) W&M AT 9:00 AM CAPITOL 106
02/06/06 (H) Moved CSHB 375(W&M) Out of Committee
02/06/06 (H) MINUTE(W&M)
02/08/06 (H) W&M RPT CS(W&M) NT 3DP 1NR
02/08/06 (H) DP: WILSON, GRUENBERG, WEYHRAUCH;
02/08/06 (H) NR: SAMUELS
02/21/06 (H) STA AT 8:00 AM CAPITOL 106
BILL: SB 224
SHORT TITLE: OLDER ALASKANS' DAY
SPONSOR(s): SENATOR(s) STEVENS G
01/09/06 (S) PREFILE RELEASED 1/6/06
01/09/06 (S) READ THE FIRST TIME - REFERRALS
01/09/06 (S) STA
02/02/06 (S) STA AT 3:30 PM BELTZ 211
02/02/06 (S) Moved SB 224 Out of Committee
02/02/06 (S) MINUTE(STA)
02/03/06 (S) STA RPT 5DP
02/03/06 (S) DP: THERRIAULT, ELTON, WAGONER,
HUGGINS, DAVIS
02/08/06 (S) TRANSMITTED TO (H)
02/08/06 (S) VERSION: SB 224
02/10/06 (H) READ THE FIRST TIME - REFERRALS
02/10/06 (H) STA
02/21/06 (H) STA AT 8:00 AM CAPITOL 106
BILL: SB 12
SHORT TITLE: LIMIT RELATIONS WITH CERTAIN NATIONS
SPONSOR(s): SENATOR(s) DYSON
01/11/05 (S) PREFILE RELEASED 12/30/04
01/11/05 (S) READ THE FIRST TIME - REFERRALS
01/11/05 (S) STA, JUD
02/08/05 (S) STA AT 3:30 PM BELTZ 211
02/08/05 (S) Heard & Held
02/08/05 (S) MINUTE(STA)
04/14/05 (S) STA AT 3:30 PM BELTZ 211
04/14/05 (S) Moved CSSB 12(STA) Out of Committee
04/14/05 (S) MINUTE(STA)
04/15/05 (S) STA RPT CS FORTHCOMING 4DP
04/15/05 (S) DP: THERRIAULT, HUGGINS, DAVIS, ELTON
04/18/05 (S) STA CS RECEIVED
NEW TITLE
04/26/05 (S) JUD RPT CS(STA) 4DP 1NR
04/26/05 (S) DP: SEEKINS, FRENCH, THERRIAULT,
HUGGINS
04/26/05 (S) NR: GUESS
04/26/05 (S) JUD AT 8:30 AM BUTROVICH 205
04/26/05 (S) Moved CSSB 12(STA) Out of Committee
04/26/05 (S) MINUTE(JUD)
05/02/05 (S) TRANSMITTED TO (H)
05/02/05 (S) VERSION: CSSB 12(STA)
05/03/05 (H) READ THE FIRST TIME - REFERRALS
05/03/05 (H) STA, JUD
02/16/06 (H) STA AT 8:00 AM CAPITOL 106
02/16/06 (H) Heard & Held
02/16/06 (H) MINUTE(STA)
02/21/06 (H) STA AT 8:00 AM CAPITOL 106
BILL: HB 344
SHORT TITLE: VEHICLE TRANSACTION AGENTS
SPONSOR(s): REPRESENTATIVE(s) KOHRING, RAMRAS
01/09/06 (H) PREFILE RELEASED 1/6/06
01/09/06 (H) READ THE FIRST TIME - REFERRALS
01/09/06 (H) STA, FIN
02/16/06 (H) STA AT 8:00 AM CAPITOL 106
02/16/06 (H) Heard & Held
02/16/06 (H) MINUTE(STA)
02/21/06 (H) STA AT 8:00 AM CAPITOL 106
WITNESS REGISTER
QUINLAN G. STEINER, Director
Central Office
Public Defender Agency
Juneau, Alaska
POSITION STATEMENT: Testified as appointed director of the
Public Defender Agency.
REPRESENTATIVE BRUCE WEYHRAUCH
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Introduced HB 375 as sponsor.
KEVIN RITCHIE
Alaska Municipal League (AML)
Juneau, Alaska
POSITION STATEMENT: Answered questions during the hearing on HB
375.
SENATOR GARY STEVENS
Alaska State Legislation
Juneau, Alaska
POSITION STATEMENT: Introduced SB 224, as sponsor.
MARIE DARLIN, Coordinator
AARP Capital City Task Force
Juneau, Alaska
POSITION STATEMENT: Testified in support of SB 224.
SENATOR FRED DYSON
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Testified as sponsor of SB 12.
MICHAEL BARNHILL, Assistant Attorney General
Labor and State Affairs Section
Civil Division (Juneau)
Department of Law
Juneau, Alaska
POSITION STATEMENT: Answered questions during the hearing on SB
12.
TOMAS H. BOUTIN
Deputy Commissioner
Office of the Commissioner
Department of Revenue
Juneau, Alaska
POSITION STATEMENT: Answered a question during the hearing on
SB 12.
VERN JONES, Chief Procurement Officer
Central Office
Division of General Services
Department of Administration
Juneau, Alaska
POSITION STATEMENT: Answered questions during the hearing on SB
12.
JASON HOOLEY, Staff
to Senator Fred Dyson
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Highlighted language in SB 12 on behalf of
Senator Dyson, sponsor.
DUANE BANNOCK, Director
Director's Office
Division of Motor Vehicles
Department of Administration
Anchorage, Alaska
POSITION STATEMENT: Testified during the hearing on HB 344.
ACTION NARRATIVE
CHAIR PAUL SEATON called the House State Affairs Standing
Committee meeting to order at 8:07:24 AM. Representatives
Gatto, Lynn, Ramras, Gardner, and Seaton were present at the
call to order. Representative Gruenberg arrived as the meeting
was in progress.
^CONFIRMATION HEARING(S)
^Public Defender
8:08:52 AM
CHAIR SEATON announced the first order of business, the
confirmation hearing for the appointee to the position of Public
Defender.
8:08:53 AM
QUINLAN G. STEINER, Director, Central Office, Public Defender
Agency, as appointed director of the Public Defender Agency,
imparted his personal history, including his educational
background and job experience. He said he has tried cases and
spent considerable time in appeals. Since being appointed to
the Public Defender agency, he stated, he has been working to
create efficiency and better-managed caseloads. He said the
Public Defender's costs are driven primarily by caseload
increases beyond its control; the agency is obligated to take
all cases appointed by the court.
8:10:46 AM
MR. STEINER offered examples of the steps being taken to be more
efficient, including: training lawyers, shifting resources, and
working on a database management system. He said there are 13
offices, statewide, and 140 employees.
8:11:32 AM
CHAIR SEATON asked what the public defender client load is per
attorney.
8:11:52 AM
MR. STEINER answered that it depends on the case. For example,
felony cases take longer, so the attorneys working on them take
fewer cases then attorneys working on misdemeanors. A felony
attorney may have a pre-trial caseload of up to 25, whereas a
misdemeanor attorney may carry as many as 100-150 cases.
8:12:17 AM
CHAIR SEATON asked if one of the efficiency measures is to have
lawyers specialize in certain cases.
8:12:32 AM
MR. STEINER responded that that is true in Anchorage, where
there are specialized units; however, the outer lying offices
don't have enough work to specialize in that fashion. He noted
that post-conviction relief applications don't necessarily
require a lot of investigation in the community where they have
taken place, so one efficiency measure is to have those cases be
handled in Anchorage. The same applies to appeals, he added.
8:13:57 AM
MR. STEINER, in response to a question from Representative
Gatto, explained that under statute, the public defender
actually represents all clients and he/she appoints an assistant
public defender to handle the case. In more complicated cases,
two attorneys are assigned to handle the matter.
8:14:40 AM
MR. STEINER, in response to a question from Representative
Gardner, confirmed that when he was younger he had a few
speeding tickets, but no other convictions.
8:14:45 AM
REPRESENTATIVE RAMRAS thanked Mr. Steiner for being willing to
serve in the capacity of public defender.
8:15:14 AM
REPRESENTATIVE GRUENBERG directed attention to letters in the
committee packet from Margi A. Mock, Assistant Public Defender,
and Paul E. Malin, expounding upon the multitude of positive
aptitudes and skills of Mr. Steiner, especially in terms of the
appointee's ability to testify in a capable and unflappable
manner. Considering those traits, he asked Mr. Steiner, "Why do
you believe it's in the agency's and the state's best interest
for you to make a conscious choice not to testify before the
legislature on important issues of policy?"
8:19:11 AM
MR. STEINER replied that he is happy to testify and answer
questions, but will stop short of rendering an opinion regarding
whether or not a particular piece of legislation is or is not
good public policy. He stated his willingness to provide
feedback as to the effect of legislation on the Public
Defender's client base and budget, and whether or not the
legislation is constitutional. He explained, "Our statute does
not appear to authorize devoting resources to developing a
position on a public policy matter, and therefore I have decided
not to render an opinion on such matters.
8:19:50 AM
REPRESENTATIVE GRUENBERG noted that previous public defenders
have taken the opposite position.
8:20:07 AM
MR. STEINER said he doesn't know for certain what the specific
policy has been in the past. In response to a follow-up
question from Representative Gruenberg, he said he has spoken
with at least two of the prior public defenders, but he is not
certain that issue was discussed; however, he said he has
discussed the issue with others in the agency, and some of them
agree with his position, while others do not.
8:20:36 AM
REPRESENTATIVE GRUENBERG explained that his concern with the
issue stems from the fact that a number of members of the House
Judiciary Standing Committee have noted Mr. Steiner's absence
and feel that the position he is taking is a very unfortunate
one. He asked Mr. Steiner if he would commit to taking a more
active position in the future.
8:21:26 AM
MR. STEINER responded that he is happy to testify on any piece
of legislation, subject to the aforementioned limitations.
8:21:39 AM
REPRESENTATIVE GRUENBERG said it would be helpful if Mr. Steiner
were available to answer questions and illustrate how pieces of
proposed legislation would affect his clients.
8:21:43 AM
MR. STEINER said he would be happy to do that.
8:21:55 AM
REPRESENTATIVE GRUENBERG said he would like to have both sides
of the argument present, and he stated his appreciation for Mr.
Steiner's cooperative attitude.
8:22:42 AM
MR. STEINER, in response to a request for clarification from
Chair Seaton, said if a committee is certain they want him to
come he will, but he noted that making himself available for
every single bill would take him away from other
responsibilities that he has. He concluded, "I elect to appear
when I think it's very important to [the] agency, or there's a
dramatic effect that should be considered ...."
8:23:14 AM
REPRESENTATIVE GRUENBERG moved to advance the name of Quinlan
Steiner to the joint session of the House and Senate; he
requested unanimous consent. There being no objection, the
nomination of Quinlan Steiner, as appointee to the position of
Public Defender was advanced.
HB 375-RETIREMENT BENEFIT LIABILITY ACCT/PF
[Contains discussion of HB 376, HB 377, and HB 238.]
8:23:42 AM
CHAIR SEATON announced that the next order of business was HOUSE
BILL NO. 375, "An Act relating to the retirement benefit
liability account and appropriations from that account; relating
to deposits of certain income earned on money received as a
result of State v. Amerada Hess, et al., 1JU-77-847 Civ.
(Superior Court, First Judicial District); and providing for an
effective date."
8:24:11 AM
REPRESENTATIVE BRUCE WEYHRAUCH, Alaska State Legislature,
introduced HB 375 as sponsor. He noted that the bill had been
introduced by and first heard in the House Special Committee on
Ways and Means as part of a group of bills that dealt with the
unfunded liability in the public employees' retirement system
(PERS) and the teachers' retirement system (TRS). He said HB
375, 376, and 377 all dealt with unfunded liability, the latter
dealing with a $340 million appropriation to PERS and TRS to aid
in reducing the unfunded liability. The other two bills would
have established a mechanism to take money from the Alaska
Housing Finance Corporation (AHFC) dividend and the Amerada Hess
funds in the permanent fund and put them into a liability
account proposed in HB 375. He continued:
What the committee basically recognized is that
because of the political machinations associated with
the use of those funds ..., probably the best thing to
do was to establish the fund first so that if there
[were] any funds that were to be appropriated to
address the PERS and TRS liability ..., the money
would be used for that purpose.
REPRESENTATIVE WEYHRAUCH noted that the last section of the bill
addresses Title 39 of PERS and Title 14 of TRS. He continued:
So, ... this bill ... does not set up a designated
account, because those are unconstitutional. It does
set up an account, though, that money can be paid into
for payment of the unfunded liability for those two
... retirement systems.
REPRESENTATIVE WEYHRAUCH said the account would be somewhat
similar to Alaska's public education fund.
8:26:08 AM
CHAIR SEATON asked if it would be left up to the administration
to determine payments out of the account.
8:26:37 AM
REPRESENTATIVE WEYHRAUCH said the legislature would appropriate
money out into the account that would be used for payment of
those funds. The administration, he said, would have a voice in
the process.
8:27:10 AM
CHAIR SEATON explained that he is weighing this bill in
relationship to HB 238, the latter of which established a
specific mechanism for a payment schedule and "how that went
through communities." He surmised, "Under this system we don't
say how that will be done; we would just set it up, and then the
administrator of the [Division of] Retirement & Benefits could
pick the winners or the losers ...."
8:27:19 AM
REPRESENTATIVE WEYHRAUCH responded, "That's correct; it leaves
it discretionary."
8:27:34 AM
CHAIR SEATON noted that HB 375 would allow the money to go to
school districts.
8:27:37 AM
REPRESENTATIVE WEYHRAUCH confirmed that's correct.
8:27:43 AM
REPRESENTATIVE GATTO, regarding the fiscal note for HB 375,
offered his understanding that school districts would get help
to pay off their PERS/TRS liability. He said the state already
does that. He clarified, "Whenever we allocate the money for
education it includes a whopping portion to help the districts
pay off their PERS/TRS. So, this is in addition to that."
8:28:18 AM
REPRESENTATIVE WEYHRAUCH said the money in the fund could be
used in addition to that, and the appropriation bill - if
approved without amendment - would appropriate roughly $300
million into TRS. The legislature on it's own could appropriate
additional funds into those systems, he said. He concluded,
"So, the answer to your question is yes."
8:28:36 AM
REPRESENTATIVE GATTO said the proposed bill would put a burden
on Amerada Hess earnings, when there are other people looking
toward that fund. He suggested that if the goal is to help
school districts with their PERS/TRS liability, "why not just
take the governor's $90 million and make it ... whatever
number's appropriate to include this, rather than go after this
individual fund?"
8:29:26 AM
REPRESENTATIVE WEYHRAUCH noted that the bill in its original
form would have used funds from Amerada Hess and AHFC dividend;
however, the current version of the bill does not recommend
using pools of money from those either of those funds. He
explained that he mentioned those funds in his introduction to
give a history of the bill. He said, "The intent of the [House
Special Committee on Ways and Means] in moving this bill in its
form out to [House State Affairs Standing Committee] was to
indicate that there's no specific fund or monies identified that
would go into this fund whatsoever." He added that those funds
could be used to appropriate money into the fund; however, that
is a broader legislative determination that would be made "down
the line" that has nothing to do with the establishment of this
fund.
8:30:18 AM
REPRESENTATIVE GATTO asked if the House Special Committee on
Ways and Means has heard requests for Amerada Hess money.
8:30:40 AM
REPRESENTATIVE WEYHRAUCH answered no. He said after the House
Special Committee on Ways and Means held meetings around the
state [during the 2005 interim], it became apparent that there
is a huge unfunded liability that needs to be addressed in order
to help local communities, local governing bodies, and school
districts with their financial situation. Another signal coming
from the administration, he noted, was that a recurring source
of revenue needed to be found to address those unfunded
liabilities in the local entities' PERS and TRS systems. He
stated that the only source of recurring revenue Alaska has is
oil revenue from the North Slope, certain small tax revenues,
and interest on income earned on existing accounts such as the
Constitutional Budget Reserve (CBR), the permanent fund, and
existing PERS and TRS accounts. The only other recurring
sources that were identified through the committee process were
either to make a direct appropriation from the legislature,
which uses recurring sources of revenue, or to use funds from
Amerada Hess or the AHFC dividend - both recurring sources of
revenue. Representative Weyhrauch said it also became apparent
that to identify specifically those pools of money created
broader political and policy issue and would have weighed the
bill down.
8:31:52 AM
REPRESENTATIVE GARDNER suggested that since the fiscal note
still includes mention of Amerada Hess, an updated fiscal note
may be needed.
8:32:26 AM
REPRESENTATIVE WEYHRAUCH said he anticipates that the fiscal
note will be changed in the next committee of referral.
8:32:46 AM
REPRESENTATIVE GRUENBERG referred to [subsection (b) in Section
1, on page 1, lines 8-12 of the bill, which read as follows:
(b) Money in the retirement benefit
liability account may be appropriated to the state and
political subdivisions of the state, including
regional educational attendance areas, for employer
contributions to pay past service liabilities of the
public employees' retirement system and the teachers'
retirement system. Income earned on money in the
account may be appropriated to the account.
REPRESENTATIVE GRUENBERG asked why a limitation was being made
to employer contributions, past liabilities, and service
liabilities, instead of broadening the language to say just
liabilities.
REPRESENTATIVE WEYHRAUCH responded that the past service
liability is primarily what has lead to the unfunded liability
in the existing system.
8:33:49 AM
REPRESENTATIVE GRUENBERG said he understands that; however, he
explained the reason for changing the language to the broader
term of "liabilities" would be to take into consideration that
the legislature is incapable of determining all the future needs
and benefits of the fund. He said it would give the legislature
more flexibility.
8:34:10 AM
REPRESENTATIVE WEYHRAUCH, in response to a question from
Representative Gruenberg, said he would not oppose such an
amendment.
8:34:33 AM
CHAIR SEATON opened public testimony.
8:34:53 AM
KEVIN RITCHIE, Alaska Municipal League (AML), stated that [the
unfunded liability] truly is a big problem. It is higher in
some communities than in others. The only two choices available
on the local level, he relayed, is to raise taxes or to cut
services. He said probably 50 percent of a boroughs
appropriation goes to schools. He stated, "The only reason that
we're asking for state assistance in this problem is simply
[that] that's what states are set up to do. And in this
particular case, we're very lucky that the state has vastly
superior revenue sources to help out the problem ...." In most
communities, he said, taxes have been rising steadily. This
year, the State Chamber of Commerce has adopted addressing the
PERS/TRS and community dividend problems as two of its top six
business issues.
8:37:02 AM
MR. RITCHIE, responding to a previous question from
Representative Gatto, said the state is putting money into
school districts each year, but the problem is bigger than is
visible on the surface. He offered a comparison of a home loan
and only putting part of the money needed each year to pay off
the home loan. He continued:
I've been sitting with the Alaska Retirement
Management Board, and I think the way they're looking
at the problem is we're doing two things at the same
time. One is: the annual appropriations are keeping
that immediate level of percent of salary
contributions suppressed, so we're not feeling the
impact of that. But essentially it's kind of like
we're, at the same time, putting money in to the
system to pay off some of that liability - it sort of
shaves off the top of the mountain, so you don't end
up rising as high in the future.
MR. RITCHIE said the bill is a vessel and, from that standpoint,
he said he thinks it's a "very good first step."
CHAIR SEATON asked Mr. Ritchie if AML has any questions
regarding leaving the appropriation up to administrative
determination.
8:39:41 AM
MR. RITCHIE said it's a tough issue. He said school districts
are all in one big program, but in municipalities, some
communities will have significantly higher liabilities than
others. He reminded the committee that when a number, such as
$6 billion in liability is comprised of the individual
liabilities of 120 cities and boroughs that are added together.
He said the formula has not been figured out yet as to "how do
you achieve the goal of not burdening citizens [who] really had
no part in making this problem?" He emphasized AML's desire to
be involved in that discussion.
8:41:24 AM
CHAIR SEATON said there has been a suggestion to take out the
specificity of the past service cost liability, which could mean
money could be distributed - not based on the past vagrancies of
the state system that had contribution rates that weren't enough
to pay for past liabilities - to communities that don't have a
past service cost or don't have an unfunded liability. He asked
Mr. Ritchie, "Would you see that as positive or as a negative in
trying to get over this?" He clarified that in one way the
money would be spread to a lot of different communities that
don't have a past service cost, but then there will be less
money to address those unfunded liabilities. He said, "I'm
trying to figure out where AML would come down on whether you
want to keep this to addressing the hole that has been dug by
the system, or whether you want to allow it to be just address
the system liabilities, which could include normal cost rates."
8:42:48 AM
MR. RITCHIE said that he appreciated the flexibility for the
future. He pointed out that if the state paid the past service
liability, the $6 billion debt, "we'd be fine." In other words,
he explained, it makes more sense to target the [$6 billion]
problem and use legislation to address problems that arise in
the future.
8:43:55 AM
CHAIR SEATON, upon determining that no one else wished to
testify, closed public testimony.
8:44:03 AM
REPRESENTATIVE GRUENBERG said that due to testimony by Mr.
Ritchie, he would not offer the amendment.
8:44:59 AM
CHAIR SEATON commented that this legislation is similar to HB
238, and therefore if the committee would like to forward it
from committee, he would not object. However, he said he would
be happy to hold the legislation for further consideration if
the committee so desires.
8:46:08 AM
REPRESENTATIVE GATTO moved to report CSHB 375(W&M) out of
committee with individual recommendations and the accompanying
fiscal note that will be modified. There being no objection,
CSHB 375(W&M) was reported out of the House State Affairs
Standing Committee.
SB 224-OLDER ALASKANS' DAY
8:47:44 AM
CHAIR SEATON announced that the next order of business was
SENATE BILL NO. 224, "An Act establishing Older Alaskans' Day."
The committee took an at-ease from 8:47:55 AM to 8:51:06 AM.
SENATOR GARY STEVENS, Alaska State Legislation, introduced SB
224, as sponsor. He said the bill would designate the second
Wednesday of September as "Older Alaskans' Day." He said the
idea came about during a recent visit to the senior center in
Kodiak. He stated the importance of Alaska's seniors, noting
that they are among the fastest growing population in the
country. He said Alaska's seniors contribute millions to the
economy, give an enormous amount of volunteer time to many
organizations, and share their wisdom and experience to
everyone. He stated that he thinks it would be fitting to set a
day aside to recognize the accomplishments of Alaska's older
citizens.
[REPRESENTATIVES LYNN and GRUENBERG mentioned a conflict of
interest.]
8:53:44 AM
REPRESENTATIVE GRUENBERG moved Amendment 1, as follows:
On page 1, line 7:
Delete "quiet"
Insert "raucous"
REPRESENTATIVE GRUENBERG withdrew Amendment 1.
8:54:19 AM
CHAIR SEATON closed public testimony, then reopened it to
accommodate a testifier present in the room.
8:54:36 AM
MARIE DARLIN, Coordinator, AARP Capital City Task Force,
testified in support of SB 224. She stated that older Alaskans
contribute much to the community. She noted her letter of
support included in committee packet.
8:55:38 AM
CHAIR SEATON closed public testimony.
8:55:59 AM
REPRESENTATIVE GARDNER stated her support of SB 224.
8:56:10 AM
REPRESENTATIVE LYNN moved to report SB 224 out of committee with
individual recommendations. There being no objection, SB 224
was reported out of the House State Affairs Standing Committee.
SB 12-LIMIT RELATIONS WITH CERTAIN NATIONS
8:57:02 AM
CHAIR SEATON announced that the next order of business was CS
FOR SENATE BILL NO. 12(STA), "An Act relating to financial
relationships with persons conducting business in or having
headquarters in countries that support or ignore slavery and
trafficking in persons."
8:57:15 AM
SENATOR FRED DYSON, Alaska State Legislature, as sponsor of SB
12, told the committee that leaving in Section 4, on page 3 of
CSSB 12(STA), was an oversight, and he would appreciate a motion
from the committee to remove that language.
8:57:49 AM
REPRESENTATIVE GATTO moved Amendment 1, to delete Section 4 from
the bill. There being no objection, Amendment 1 was adopted.
8:58:40 AM
SENATOR DYSON said subsequent to the last hearing of SB 12 on
2/16, he spoke with the people in the governor's office who
expressed concern that the bill goes beyond the [Administrative
Order No. 227 (AO 227)] issued in December of 2005 in two ways.
First, he said AO 227 only covers purchases made by the
executive branch, and does not include the judicial and
legislative branches. Second, while encouraging purchasers and
contractors in the administration to inquire into the policies
of the companies that are headquartered in Tier 3 countries, it
does not preclude companies from purchasing from Tier 3
companies. The proposed legislation would preclude Alaska from
purchasing from Tier 3 companies, as well as from companies that
are headquartered in those countries. Additionally, companies
that conduct business in those countries "may" be requested to
state their policy when doing business there.
SENATOR DYSON stated, "It is our intention that we not be aiding
and abetting those who are trafficking in human bodies - women
and children, mostly - by inhuman conduct while we're there."
He spoke of an article which reported that during the United
Nations' efforts rebuilding in Kosovo, it was revealed that
there were contractors and United Nations officials who were,
during the course of their stay in Kosovo, contracting for child
prostitutes to live in their home and be servants. Senator
Dyson said he asked every one of the major oil companies that
deal with Alaska [how SB 12 would affect them]. He said they
responded that this is something that ought to be done.
SENATOR DYSON told committee members that they may hear from the
administration that it is concerned about the bill's requirement
that Alaska not make purchases from companies that have their
headquarters in Tier 3 countries. He said, "If you look at the
list for the Tier 3 countries, I think it's very unlikely that
that will happen."
9:02:02 AM
SENATOR DYSON said the committee may also hear that whenever an
investment firm or entity gets involved in doing anything except
being a prudent investor, it opens the door to all kinds of
problems. He said he expects the administration to warn the
legislature that it needs to be extremely careful when it starts
"serving social purposes and idealistic purposes with [its]
fiscal policy - [its] purchasing and investments." Senator
Dyson indicated that he thinks the committee has taken care of
most of the problems in the bill with the adoption of Amendment
1.
9:03:22 AM
CHAIR SEATON, referring back to Senator Dyson's mention of the
individuals in Kosovo who had "contracted for child
prostitutes," asked, "This doesn't address individual acts at
all, does it?"
9:04:02 AM
SENATOR DYSON answered that's correct. He added, "But we're
interested in the company having an exclusive policy."
9:04:14 AM
CHAIR SEATON reasoned, "If a company has an explicit policy
precluding any of those kind of actions, but they're
headquartered in one of the countries that gets identified, we
would be precluded from buying from that company, even though it
has that policy." He then surmised that the intent is to get
the companies headquartered in those countries to put pressure
on the countries in order to do business with the State of
Alaska.
9:04:59 AM
SENATOR DYSON responded that's correct. He offered his
understanding that the governments of all the Tier 3 companies
are often openly complicit in the human rights abuses that are
going on.
9:05:21 AM
REPRESENTATIVE GARDNER asked for clarification regarding
language [relating to requirements for procedures] on page 2,
lines 12-13, which read: "must be adapted to the special needs
of the judicial branch".
9:05:53 AM
SENATOR DYSON said he will find out the meaning of that language
and get back to Representative Gardner.
9:06:06 AM
REPRESENTATIVE GARDNER asked if the State of Alaska currently
has any contracts or dealings that would be modified or
invalidated as a result of SB 12.
9:06:28 AM
SENATOR DYSON said he doesn't know. He said, "In light of some
information that Representative Ramras has come up with in
another related field, it's very possible." He said he has
heard that on a federal level the ranking of the nations has had
a salutary effect, and he expressed his hope that as other
states adopt this kind of legislation, the financial pressure
will have an impact. He noted that the State of California
ranks as the eighth or ninth biggest economy in the world, and
getting states to do what Alaska is doing - to be responsible
about their investments - should be helpful.
9:07:29 AM
REPRESENTATIVE LYNN noted that there are 14 nations listed [at
the Tier 3 level], mentioning in particular an issue about port
security and the United Arab Emirates. He also mentioned the
countries of Saudi Arabia, Qatar, and Kuwait. He asked Senator
Dyson to comment on helping to "liberate these people."
9:08:12 AM
SENATOR DYSON responded:
Several of the oil companies that do business here are
also doing major business in those countries, and I am
hoping that this will be a clarion call for those guys
to have an explicit policy that they communicate to
those governments that in this area of trafficking in
human beings, you can't go on with business as usual.
9:08:39 AM
REPRESENTATIVE GRUENBERG observed that the bill talks about
whether a company has headquarters in another country, whereas
Administrative Order No. 227 talks about the company being
established and headquartered, or incorporated and headquartered
in the country. He said he can see why "established and
incorporated" was eliminated because of the conjunctive "and";
however, he noted, "You could have a company that isn't
'headquartered,' but is incorporated in the country, or is
established in the country, or is owned in whole or in major
part by a person residing in the country." He asked the bill
sponsor how he would feel about including that type of language
in the bill.
9:10:31 AM
SENATOR DYSON said he would have no problem adding that language
to the bill, because it is more explicit and complete.
9:10:52 AM
CHAIR SEATON opened public testimony.
9:11:25 AM
MICHAEL BARNHILL, Assistant Attorney General, Labor and State
Affairs Section, Civil Division (Juneau), Department of Law,
explained that his purpose in being present for the hearing was
to answer questions regarding Section 4, which was removed.
9:12:31 AM
CHAIR SEATON asked if the bill would cause the state to avoid
contracts that are currently constructed or if it would just
apply to future contracts.
9:12:40 AM
MR. BARNHILL replied, "I think it would only apply with
prospective effect, because it requires the implementation of
procedures, and I would assume that those procedures would only
take effect for the future, not for the past."
9:13:09 AM
CHAIR SEATON asked Mr. Barnhill to give the matter further
consideration.
9:13:25 AM
MR. BARNHILL explained that the Alaska State Constitution
includes a contracts clause; the state cannot unilaterally void
contracts that are in existence. He indicated that the state
could seek to amend those contracts through a process of
negotiation.
CHAIR SEATON said, "So then, the contract provision in the
constitution would basically prevent this from putting us into a
situation where we would be violating a contract and ... would
have financial liabilities for the violation of that."
MR. BARNHILL responded, "I believe that's correct."
9:13:58 AM
REPRESENTATIVE GRUENBERG said there is a statute that says that
acts are prospective only, unless there is a retroactivity
clause adopted.
9:14:05 AM
MR. BARNHILL said that is true with respect to the effective
date of the legislation.
9:14:20 AM
REPRESENTATIVE GRUENBERG asked Mr. Barnhill if, with that in
mind, he thinks it would be necessary to add an applicability
clause to the bill stating that "this only applies to ... future
contracts."
9:14:27 AM
MR. BARNHILL answered no. He explained that SB 12 calls for the
implementation of new procedures, thus, the applicability could
be taken up in the regulations or the procedures.
9:15:08 AM
REPRESENTATIVE GARDNER referred again to the language on page 1,
beginning on line 8, which read:
The procedures must be based on the competitive
principles consistent with this chapter and must be
adapted to the special needs of the legislative
branch, as determined by the legislative council
REPRESENTATIVE GARDNER noted that the same language exists on
page 2, beginning on line 11, but pertaining to the judicial
branch. She asked Mr. Barnhill for a definition of "special
needs".
9:15:46 AM
MR. BARNHILL explained, "This is existing language in the
state's procurement code, so I can only assume that both the
legislative and the judicial branches, when this statute was
being drafted, felt they had special needs that were unique to
their branches, with respect to procurement, and so, this would
give them flexibility to tailor their procurement needs to the
uniqueness of those branches."
9:16:13 AM
REPRESENTATIVE GARDNER asked Mr. Barnhill if he thinks those
"special needs" could be used as an excuse or a reason to not
comply with the intent and provisions of SB 12.
9:16:35 AM
MR. BARNHILL answered, "I doubt it."
9:18:17 AM
CHAIR SEATON asked, "When the administrative order went in that
dealt with these same issues in a ... slightly different way,
... was there an impact on contracts at that time?"
9:18:38 AM
TOMAS H. BOUTIN, Deputy Commissioner, Office of the
Commissioner, Department of Revenue, answered, "Not to my
knowledge."
9:18:55 AM
VERN JONES, Chief Procurement Officer, Central Office, Division
of General Services, Department of Administration, stated that
AO 227 requires the state to seek a certified copy of a
company's policy against human trafficking if that company was
incorporated and headquartered in a Tier 3 country. The
proposed legislation would prevent the state from doing business
with any of those same companies. Since AO 227 was enacted in
December, the administration knows of no instances where it has
received a copy of the certified statement against human
trafficking. Mr. Jones stated, "The only conclusion that we can
draw from that is that since then, I believe, we have not done
business with any countries that are headquartered ... and
incorporated in those Tier 3 countries." He said there is a
lack of data relating to how much business is done with
companies that are headquartered in [Tier 3] countries.
Furthermore, he said there is no good way of determining which
companies are or are not headquartered in Tier 3 countries,
other than asking the question each time the state does a
procurement, which is what it has been doing.
9:20:38 AM
CHAIR SEATON asked Mr. Jones to confirm that the administration
normally doesn't know where companies are headquartered when
they contract with the state.
9:20:57 AM
MR. JONES answered that's correct. He said the companies are
only required to have an Alaska business license and be
qualified to do business within Alaska.
9:21:09 AM
REPRESENTATIVE GARDNER asked Mr. Jones if it is reasonable to
conclude that SB 12 is about making an important statement and
perhaps having a certain leadership role in an attempt to
address the issues, but won't have any "real effect on the
ground here in Alaska."
9:21:46 AM
MR. JONES told Representative Gardner that she is probably
correct; the information that the administration has been able
to collect indicates that it doesn't do much business with
[companies] that are headquartered in Tier 3 countries.
9:21:56 AM
REPRESENTATIVE GATTO expressed concern about the word
"headquarters". He said the company Sony is headquartered in
Japan; however, there may be other headquarters for the same
company elsewhere. He asked, "Do ... we define it as a single
location in one of these Tier 3 countries?"
9:22:38 AM
MR. JONES said he is not certain what the definition of
headquarters is. Notwithstanding that, he noted that in AO 227,
the administration defined the companies in question as
"established and headquartered" or "incorporated and
headquartered" in a Tier 3 country. He deferred to Mr. Barnhill
for further definition.
9:23:30 AM
REPRESENTATIVE GRUENBERG said he would be offering an amendment
regarding that issue. Regarding language in the bill, he noted
that the bill drafter had written the legislature and the court
system adopts procedures, whereas the administration adopts
regulations, [as shown on page 2, line 26]. Representative
Gruenberg asked Mr. Jones if he would be amenable to changing
the word "procedures" to "regulations" on page 2, line 28, to be
consistent. He said procedures is "an informal kind of a
thing."
9:24:47 AM
MR. JONES responded that changing that language would clarify
that the administration does have to enact regulations and that
"the administrative order would have to be superseded by
regulations more specific to this bill."
REPRESENTATIVE GRUENBERG remarked that AO 227 is interesting,
and he said he thinks it's an excellent idea for people
submitting responses to requests for proposals (RFPs) to have to
disclose their policy concerning human trafficking. He said he
is considering whether it would be a good idea also to require
companies that are involved in state procurement to "have to
disclose what you have in the administrative order." He added,
"Not that it would be an either/or, but that we would engraft
that into the bill itself." He asked Mr. Jones for his
feedback.
9:26:17 AM
MR. JONES said the governor's administrative order requires a
certified copy of the company's policy against human
trafficking, only if that company is headquartered and
established in a Tier 3 country. He stated that it may be
problematic for the state to be collecting that paper for each
and every [company] that operates in a Tier 3 country. He
pointed out that there are several South American countries on
the Tier 3 list, and virtually every major corporation that
Alaska deals with has operations in those countries. He
concluded, "Of course, we'll defer to the legislature, as far as
complying with the laws that you pass, but in my opinion, that
might be a bit onerous for us."
9:27:17 AM
REPRESENTATIVE GRUENBERG said he sees benefits in this, because
it would focus companies' attention on this particular issue.
He asked if companies typically have written policies on human
trafficking.
9:27:39 AM
MR. JONES guessed that probably some of them do, but a majority
of them don't. He expressed his fear that a lack of compliance
would "prevent us from making an award in probably numerous
instances."
REPRESENTATIVE GRUENBERG said, "I'm not sure I'm satisfied
totally, but I'll come back to this."
9:28:20 AM
CHAIR SEATON closed public testimony.
9:29:35 AM
CHAIR SEATON clarified the differences between the
administrative order and the bill.
9:30:30 AM
REPRESENTATIVE GRUENBERG turned to Section 2 of the bill
[beginning on page 2, line 8]. He directed attention to a
handout he had provided [included in the committee packet],
which shows Administrative Rules. He referred to the
introductory sentence for Rule 1, which read:
There shall be an administrative director of
courts who shall, under policy guidelines provided by
the supreme court:
REPRESENTATIVE GRUENBERG then directed attention to subsection
(o), which read:
(o) Adopt and publish procedures to govern the
procurement of supplies, services, professional
services, and construction by the judicial branch.
REPRESENTATIVE GRUENBERG said:
My question is whether Section 2 of this bill modifies
that court rule and, if so, whether constitutionally
we need to put in that this is an indirect amendment
of the court rule, which will ensure that this is
constitutional. It'll require a concurrent resolution
and a title change.
9:31:53 AM
MR. BARNHILL responded that he has never thought about the
extent to which modification of the court's administrative rules
requires the enhanced vote.
9:32:09 AM
REPRESENTATIVE GRUENBERG said he would ask the Legislative Legal
and Research Services to consider that matter, "because if we
don't do it, it's not constitutional."
9:32:26 AM
REPRESENTATIVE GARDNER asked the bill sponsor if he wants to get
a legal opinion as to whether the language adopted to the
special needs of the judicial or legislative branches could be
used "to step around the provisions of this bill."
9:33:07 AM
SENATOR DYSON responded that he suspects it could be used that
way; however, both those branches of government are mostly
buying supplies, contract services, and a little bit of
equipment, and he doesn't think "it will practically have any
difference."
9:33:13 AM
REPRESENTATIVE GATTO reiterated his question regarding the
interpretation of the meaning of the word headquarters.
9:33:23 AM
MR. BARNHILL said he believes it is possible for corporations to
have multiple headquarters. He said he suspects that the bill
sponsor intends the term "headquarters" to be used broadly.
9:34:04 AM
CHAIR SEATON offered an example wherein a company had its main
headquarters in the United Kingdom [a Tier 1 country], and also
had regional headquarters in Saudi Arabia, or the United Arab
Emirates [both Tier 3 countries]. He asked if that company
could be prevented from contracting with the State of Alaska.
9:34:52 AM
MR. BARNHILL answered that that is a potential possibility. He
said he thinks there is a difference between an office and a
headquarters in the United Arab Emirates. However, if the
company characterized its operations in the United Arab Emirates
as a headquarters, then [Alaska could be precluded from doing
business with that company]. He deferred to the bill sponsor
for clarification on his intent for the meaning of the word
"headquarters."
9:35:25 AM
SENATOR DYSON responded that he meant the word to mean "the
[emphasis on 'the'] headquarters." He stated that any of the
companies doing business in a Tier 3 country will quickly make
the adaptation to make sure that "they either have sufficient
company policy to meet our standards, or that we're doing
business with one of their other headquarters in a non-Tier 3
country."
9:36:09 AM
CHAIR SEATON asked Mr. Barnhill if he thinks "that clarification
is ample on the record that this is talking about the main
headquarters of the corporation."
9:36:19 AM
MR. BARNHILL answered yes.
9:36:37 AM
REPRESENTATIVE GRUENBERG urged the bill sponsor to define
"headquarters" in the bill and leave the definition as broad as
possible. In response to a remark made by Senator Dyson, he
offered his understanding that a definition of "headquarters" is
not in AO 227. He suggested he could work on the issue with the
sponsor and Legislative Legal and Research Services.
SENATOR DYSON said he wants to understand what Representative
Gruenberg means by "as broad as possible." He pointed to the
phrases [previously mentioned by Representative Gruenberg]
regarding headquarters, which are written in the first paragraph
at the top of page 2 in AO 227: "established and headquartered,
or incorporated and headquartered".
9:38:55 AM
REPRESENTATIVE GRUENBERG responded that that's a very narrow
definition and asked Senator Dyson if that's what he wants.
SENATOR DYSON answered yes.
9:39:20 AM
REPRESENTATIVE GRUENBERG suggested he and Senator Dyson could
continue the conversation later.
9:39:41 AM
CHAIR SEATON turned to the list of tier placements and noted
that Mexico is listed on the Tier 2 Watch List. He asked,
"Would we be creating an absolute treaty violation if we require
this of [North American Free Trade Agreement (NAFTA)]
countries?"
9:40:06 AM
MR. BARNHILL said he doesn't know, but would research that
question and get back to the committee with an answer.
9:40:54 AM
REPRESENTATIVE RAMRAS stated his support of SB 12. He said he
thinks the bill "addresses a very germane and important issue,"
and is "an appropriate moral direction" for the legislature to
take after carefully constructing the language it adopts.
9:41:32 AM
REPRESENTATIVE GRUENBERG moved Amendment 2, as follows:
On page 2, line 28:
Delete "procedures"
Insert "regulations"
9:41:56 AM
CHAIR SEATON objected for discussion purposes.
9:42:03 AM
REPRESENTATIVE GRUENBERG noted that this change would effect the
commissioner of administration, who would be required to adopt
changes to the regulatory process, which he said is set up in
the administrative procedures Act and provides for public input,
notice, and hearing if necessary.
9:42:40 AM
REPRESENTATIVE GARDNER asked Representative Gruenberg if he
wanted the amendment to also apply to the court system and the
legislature.
9:42:53 AM
REPRESENTATIVE GRUENBERG answered no. He explained that both
the court system and the legislature use the term "procedures"
rather than "regulations", which he said, "probably gets back to
the interplay between the statute and the court rule."
9:43:18 AM
JASON HOOLEY, Staff to Senator Fred Dyson, Alaska State
Legislature, on behalf of Senator Dyson, sponsor of SB 12, noted
that the word "procedures" appears again in the section of the
bill relating to the administration, on page 3, line 1.
9:44:29 AM
REPRESENTATIVE GRUENBERG moved to adopt Amendment 1 to Amendment
2, as follows:
On page 3, line 1:
Delete "procedures"
Insert "regulations"
CHAIR SEATON asked if there was any objection to Amendment 1 to
Amendment 2. There being none, it was so ordered.
9:44:46 AM
CHAIR SEATON removed his objection [to Amendment 2, as amended].
He asked if there was any further objection to Amendment 2, [as
amended]. There being none, it was so ordered.
9:45:17 AM
REPRESENTATIVE GRUENBERG moved to adopt Amendment 3, which read
as follows [original punctuation provided, with some formatting
changes]:
Page 1, line 12
After "that has headquarters in" insert:
", is incorporated in, is established in, or
is owned in whole or in major part by a person
residing in."
Page 2, line 15
After "that has headquarters in" insert:
", is incorporated in, is established in, or
is owned in whole or in major part by a person
residing in."
Page 2, line 28
After "that has headquarters in" insert:
", is incorporated in, is established in, or
is owned in whole or in major part by a person
residing in."
9:45:50 AM
CHAIR SEATON objected to Amendment 3.
9:46:05 AM
REPRESENTATIVE GRUENBERG spoke to Amendment 3. He said the
purpose is not only to include the companies that are
headquartered in Tier 3 companies. He said the language was
basically taken from AO 227. He explained the reason for using
the phrase "owned in whole or in major part" is so that "we are
not dealing with a subsidiary of some company." He said
"person" is defined in Title 1. He said Amendment 3 casts a
broader net.
9:46:43 AM
CHAIR SEATON spoke to his objection. He said he thinks it would
be administratively impossible to enforce "the percentage of
ownership of a corporation of a person who owns part of a
corporation and where that person lives."
9:47:39 AM
MR. JONES said he would agree with Chair Seaton. He said
presently the honor system is used, asking people to let the
state know if they are headquartered in [Tier 3] countries.
9:48:51 AM
REPRESENTATIVE GRUENBERG suggested asking if the company is
"owned in whole or in major part by a person residing in" [a
Tier 3 country], and having the person who answers that question
do so under oath. He explained that if the person is false
swearing, then he/she would be committing a crime. He asked Mr.
Jones if that would be administratively difficult.
9:49:50 AM
MR. JONES replied that it would not be "difficult to ask a
second question."
9:49:54 AM
REPRESENTATIVE GARDNER told Representative Gruenberg that she
runs a small business and every once in awhile there is a
potential customer with documentation requirements, and her
business complies with certain regulations "at the point of
origin." She stated, "I throw them in the trash and don't even
reply. I don't even pursue taking an order. They can give us
an order or not, but I'm not willing to spend a lot of time on
these kind of things." She continued:
And this bill, as I think we've established, isn't
going to have a huge impact on anything we do. It's a
statement of purpose, and it's taking a position on a
very important issue and, as I said, hopefully a
leadership position. But on the ground, in the actual
contracts of the State of Alaska, it may not affect a
single one. So, I don't think we need to worry about
whether people have to say under oath where they
reside .... I mean, I think it just becomes
unnecessarily cumbersome and doesn't do anything to
really help our real goal here.
9:51:19 AM
MR. JONES concurred with Representative Gardner. He said some
people believe that procedures that the state follows now are
already overly complicated, bureaucratic, and burdensome, and
[Amendment 3] may not have any practical impact, given the
activity that has been seen since the administrative order was
enacted. He said, "I think we'd tend to, on occasion,
discriminate or eliminate an otherwise responsive proposal or
bid because they didn't get their paperwork in on time, and it
would be that much more paper for us to chase."
9:52:11 AM
REPRESENTATIVE GATTO said, "We could be dealing with a place
where there are only administrators and not dealing with the
country that is full of the production, because the headquarters
is in a safe place, but the production is scattered across Tier
3 ...."
MR. JONES opined that that is certainly a possibility.
9:53:17 AM
CHAIR SEATON said a corporation would have to know who owns a
major portion of its stock and will have to certify that the
major stockholder does not reside in any of the [Tier 3]
countries. He said it would be administratively difficult for a
corporation.
9:53:50 AM
REPRESENTATIVE GRUENBERG asked if there would be any benefit to
deleting the words, "is owned in whole or in major part by a
person residing in".
9:54:15 AM
SENATOR DYSON said, "My guess is the chair's right: ...
demanding to know who their major owners are is probably a step
beyond ... that which is practical and [wouldn't] really do us
any good." He said the state is already saying to companies
that are bidding that it wants them to be compliant in many
areas, and [Amendment 3] would just be "adding ... another
phrase to the requirements of who we're going to do business
with." He concluded:
When I talked to the major oil companies about this,
they said, "This isn't a problem. If our company
doesn't have a good policy about how our citizens will
conduct themselves - our employees in these countries
- we will get one, and should have done it." And I
think that's really true. And, by and large, the
folks that the state is doing business with that are
overseas are not ... Mom and Pop shops like you and
me, they are ... big countries.
9:56:08 AM
REPRESENTATIVE GRUENBERG withdrew Amendment 3.
[SB 12 was heard and held.]
HB 344-VEHICLE TRANSACTION AGENTS
[Contains brief mention of HB 383.]
9:57:20 AM
CHAIR SEATON announced that the next order of business was HOUSE
BILL NO. 344, "An Act relating to the commissioner of
administration's appointing agents to perform for compensation
certain transactions related to vehicles; and providing for an
effective date."
9:57:35 AM
CHAIR SEATON closed public testimony.
9:58:05 AM
REPRESENTATIVE RAMRAS mentioned a conversation with former
testifier, Jim Arpino, of Affordable Used Cars, related to the
issue of document "doc" fees. He mentioned HB 383, sponsored by
Representative Gara, which would clarify the issue of the doc
fee. He stated, "I would like to draw a bright line between
what HB 344 does and what document fees do." He explained that
he wants the discussion to stay focused on "incentivizing
dealers to participate in the advance business partner [(ABP)]
programs ...."
10:02:38 AM
REPRESENTATIVE RAMRAS, in response to a comment by Chair Seaton,
clarified that his comment that the Division of Motor Vehicles
is hated - made at a previous hearing - was intended to mean
that the wait time at the division is what is disliked.
10:03:23 AM
REPRESENTATIVE GARDNER directed attention to a handout in the
committee packet, entitled, "History of the DMV Business
Partnership Program," and the following page, entitled,
"Proposal to allow Advanced Business Partners to retain a
portion of revenue generated," the third paragraph of which
read:
While this concept is a terrific bargain to the state,
if the surcharge exceeds a customer comfort zone, the
business will be returned to the DMV, defeating the
original purpose.
REPRESENTATIVE GARDNER stated that title and registration cannot
be returned to the DMV; under current legislation, dealers are
required to process title and insurance. Representative Gardner
turned to a letter in the committee packet from [Duane Bannock,
Division of Motor Vehicles], Department of Administration, dated
February 17, which read in part:
While their customers always have the right to take
their business to the DMV, these Advanced Business
Partners sell a service that they market as quicker
and more convenient and proof has shown that Alaskans
are willing to pay.
REPRESENTATIVE GARDNER said, again, that may refer to some
services offered, but not to title and registration. She said
she just wanted to clarify that matter, because it seems to be a
source of confusion. She concluded, "So, it's true that dealers
are required to do that, and they have been doing it without any
state compensation." She said she personally does not have a
problem with compensation for services. She stated, "What I do
have a problem with is if they're getting it from both sides."
10:05:43 AM
CHAIR SEATON said there are three issues to discuss: a proposal
to retain 7.5 percent of the fees collected; documentation
preparation fees, which are a totally private and separate
charge made by the dealer; and a surcharge. He said he would
like the director of the Division of Motor Vehicles to explain
the surcharge.
10:06:51 AM
DUANE BANNOCK, Director, Division of Motor Vehicles, Department
of Administration, said he is the author of not only the letter
dated 2/17, but also the "History of the DMV Business
Partnership Program" handout - both aforementioned by
Representative Gardner. Mr. Bannock explained that "customer,"
as he uses the word, can mean a citizen or a dealership. He
specified that the statutory requirement that dealerships
complete the vehicle registration is not to say that dealerships
are statutorily required to be business partners. He indicated
that business partnerships created to allow ["select auto
dealerships to process the registration and titles of vehicles
sold"] have allowed four of the eight DMV staff previously
occupied with that work to instead provide customer service.
There are approximately six of these ABPs in Alaska.
10:09:26 AM
MR. BANNOCK noted that one of the ABPs does the DMV work for
eight small dealerships in Alaska, and for that work, the ABP
charges a surcharge, because without it she collects nothing
from the State of Alaska for doing the work that in the past
only state employees were able to do.
10:10:56 AM
REPRESENTATIVE GARDNER asked Mr. Bannock if it would be fair to
say what is really being done is the privatization of state
services.
10:11:15 AM
MR. BANNOCK indicated that there is a debate over the definition
of "privatization," which he would not [address at this time].
He reiterated the benefit of lightening the workload of the DMV
through the use of ABPs, and he emphasized his commitment to
reducing the wait time at DMV.
10:12:34 AM
CHAIR SEATON asked Mr. Bannock if the surcharge of which he
spoke is the same as the $10 charged by the DMV for in-office
work, versus by-mail work.
10:12:46 AM
MR. BANNOCK answered no. He said, "I just used that in my
letter as a simple comparison."
10:12:54 AM
CHAIR SEATON asked if there is a limitation on the surcharge
exacted by the ABP.
10:13:12 AM
MR. BANNOCK said there is no governmental limit on that fee;
however, as Representative Gardner noted by reading from his own
proposal information, "if the surcharge exceeds a customer
comfort zone, the business will be returned to the DMV,
defeating the original purpose." In response to a follow-up
question from Chair Seaton, he said he has seen that happen. He
offered an example.
10:17:04 AM
REPRESENTATIVE GATTO questioned why a 7.5 percent fee should be
allowed when there is already a surcharge.
10:17:35 AM
CHAIR SEATON, in response to Mr. Bannock and Representative
Gatto, said the surcharge is permissive. The bill, he
clarified, would allow 7.5 percent of what is generated in
revenue to be returned to the preparer, in compensation for the
work done, whether he/she charges a surcharge or not. He said
he thinks the question is whether having both the surcharge and
the 7.5 percent would allow compensation for the same action.
He suggested another question to ask is whether [the 7.5 percent
that would be paid by the state] is needed, or whether the
service provided by the ABPs generates enough customer service
to be continued without that 7.5 percent. He asked
Representative Ramras if his comments offered a clearer view of
the discussion on the table.
10:19:42 AM
REPRESENTATIVE RAMRAS answered yes. He said:
We've got two really separate issues, and one is on
the table, and one may be taken up by this committee
or the Twenty-Fifth Legislature to address. We've
uncovered a pretty interesting ... issue, but I think
that you have it.
10:20:02 AM
REPRESENTATIVE GRUENBERG noted that in Mr. Bannock's "Proposal
to allow Advanced Business Partners to retain a portion of
revenue generated," he notes that ABPs are at liberty to set
their own surcharge. He asked, "If they can do that, why in the
world are we allowing them an additional 7.5 percent?" He said
he does not see any justification for that kind of governmental
handout. He observed that the fiscal note shows a cost of
$486.6 thousand the first year, increasing over the next five
years. He asked what justification there is for giving the auto
industry of Alaska a half million dollars of taxpayers' money.
In response to Mr. Bannock, he specified that he wants to know
if there is anything that prevents car dealerships from "using
the surcharge." He clarified as follows:
I guess the question becomes, "At some point in time,
are we going to have to increase registration fees, so
that we have the ability to pay private individuals
... or companies to prepare the documents, and is
there anything at all that prevents the car
dealerships from utilizing and putting on the ... $10-
or $20-dollar surcharge?"
10:23:45 AM
MR. BANNOCK said he doesn't think there is anything in law today
that prevents "anyone from charging any fee."
10:23:59 AM
REPRESENTATIVE GRUENBERG said the only people who have testified
in support of the bill are car dealers, and those opposed to the
bill are customers. He stated his concern that the industry is
clearly anticipating that HB 344 will "provide additional funds
to it."
10:25:07 AM
MR. BANNOCK said he has seen one letter of objection, which was
written by one of his employees whose opinion he values,
although he does not concur with her assessment. He emphasized
his belief that "we've done a good job of proving that this
program works." He said there is data to support the proposed
legislation, and he encouraged the committee to support the
bill. He recommended that if committee members feel there is a
problem with allowing general fund monies to go to private
organizations, they should review the same policy used by the
Alaska Department of Fish & Game (ADF&G), on which he based
"this theory."
10:26:18 AM
CHAIR SEATON said there are requirements for ADF&G's fishing
license program which prevent those vendors from attaching any
surcharge.
10:26:47 AM
REPRESENTATIVE GRUENBERG said the economics of people who sell
fishing tackle is much different than those who sell vehicles.
The latter makes thousands on a sale.
10:27:25 AM
CHAIR SEATON clarified that this issue addresses ABPs, which
does not necessarily mean auto dealers.
10:27:47 AM
CHAIR SEATON announced that HB 344 was heard and held.
ADJOURNMENT
There being no further business before the committee, the House
State Affairs Standing Committee meeting was adjourned at
10:27:53 AM.