SENATE BILL NO. 216 An Act relating to fees or assessment of costs for certain services provided by state government, including hearing costs related to the real estate surety fund; fees for authorization to operate a postsecondary educational institution or for an agent's permit to perform services for a postsecondary educational institution; administrative fees for self-insurers in workers' compensation; business license fees; fees for activities related to coastal zone management, training relating to emergency management response, regulation of pesticides and broadcast chemicals, and subdivision plans for sewage waste disposal or treatment; and providing for an effective date. NANCY SLAGLE, DIRECTOR, DIVISION OF BUDGET REVIEW, OFFICE OF MANAGEMENT AND BUDGET, OFFICE OF THE GOVERNOR provided members with a sectional analysis of SB 216 (copy on file). She reviewed the sectional analysis. * Section 1. Allows the Department of Commerce and Economic Development to charge costs of hearings related to the Real Estate Surety Fund. This is a fund shift from the General Fund. There is a cap in how much can be held in this fund. The Fund is approaching its cap. * Section 2. Allows the Department of Education to charge fees by regulation for applications to operate and permits related to postsecondary education institutions. * Section 3. Allows the Human Rights Commission to charge fees for education and training services. * Section 4. Allows the Department of Labor to charge a 4 percent user fee on self insured employers. Municipalities and local 3 governments would be exempted. * Section 5. Allows the Department of Natural Resources to charge a fee for direct costs associated with the Exploration Incentive Program for mine development. * Section 6. Allows municipalities to charge for prisoners in their facilities up to $70.0 dollars a day. Representative Mulder questioned if Section 6 would refers to prisoners in state funded contract jails. JERRY SHRINER, SPECIAL ASSISTANT DEPARTMENT OF CORRECTION explained that Section 6 only applies to municipal prisoners. Prisoners held on a state charge could not be assessed the fee. There would no impact on the General Fund. In response to a question by Representative Parnell, Mr. Shriner explained that state contract jails are paid for a lump sum number of beds regardless if they are full. Representative Mulder noted that Juneau and Anchorage are the only two municipalities charging under municipal law. Representative Brown MOVED to insert after "may charge a prisoner," "prosecuted under a municipal ordinance or held in a municipal facility" on page 3, line 21. There being NO OBJECTION, it was so ordered. * Section 7. Allows the Department of Transportation and Public Facilities to charge for the use of state marine or harbor facilities and requires municipalities that lease state marine or harbor facilities to charge comparable fees and account for those fee separately. * Section 8 & 12. Involve the removal of the exemption of gasohol for the definition of motor fuel. Ms. Slagle estimated that the State lost $6.0 million dollars in FY 96 from the exemption of gasohol in the motor fuel definition. BOB BARTHOLOMEW, DEPUTY DIRECTOR, INCOME AND EXCISE AUDIT DIVISION, DEPARTMENT OF REVENUE explained that gasohol is being sold year around. He could not estimate how the tax would effect the price or availability of gasohol. 4 * Section 9. Increases business licenses fees charged by Occupational Licensing by $12.50 dollars per year for a two year license. * Section 10. Allows the Department of Military and Veterans Affairs to charge fees for emergency management response training. * Section 11. Allows the Department of Environmental Conservation to charge chemical firms fees for pesticide and broadcast chemical use and for review of subdivision plans for sewage waste disposal. Representative Therriault asked the estimated fee cost. Ms. Slagle stated that the estimated yearly income for pesticide and broadcast chemical use fees is $100.0 thousand dollars. The estimation yearly income from subdivision sewage disposal plan review fees would be $22.0 thousand dollars. JANICE ADAIR, DIRECTOR, DIVISION OF ENVIRONMENTAL HEALTH, DEPARTMENT OF ENVIRONMENTAL CONSERVATION explained that the Department would be allowed to charge a fee for subdivision sewage disposal plan review only in areas outside a borough or municipality. Only approximately 10 percent of the plans would be affected. The estimated fee per subdivision sewage plan would be $300 hundred dollars. Representative Mulder questioned if plans could be approved by civil engineers. Ms. Adair explained the current procedure. She noted that the Department of Environmental Conservation does the compliance review in all areas of the State except for Valdez. She noted that waste water and sewage disposal is being reviewed to ensure that lots are sized sufficiently and water systems are far enough away from an on lot sewage system. Representative Mulder questioned if there is a duplication of the civil engineer's review. Ms. Adair explained that the civil engineer reviews municipal ordinances or Title 29 requirements. She noted that Anchorage has adopted ordinances on this topic. She acknowledged that the Department of Environmental Conservation reviews work completed by the civil engineer. Representative Mulder argued that civil engineers "are going to be extremely cautious about making those kind of determinations and putting their name on any document." Representative Therriault asked if all organized boroughs would do their own review. Ms. Adair agreed that the 5 implication is that all organized boroughs would do their own review. She referred to a letter of intent adopted by the Senate. She noted that the Department of Environmental Conservation did not support the amendment to make organized boroughs responsible for this review. She noted that the implementation date of July 1, 1996, would occur in the middle of the construction season. She stressed that with more time some organized municipalities could take over the review, but estimated that some second class cities will not be able to implement the review. Ms. Adair clarified that the Department would not charge a fee in areas that have their own system. Representative Therriault acknowledged that local communities should do the function. He stressed that there should be more time to allow negotiation between the Administration and local governments. He expressed concern with the section. Ms. Adair noted that the Administration supports the restriction requiring that each of the four parcels within the lot is at least 1 acre in size. Ms. Adair noted that the Administration would like to have "outside of an organized borough or municipality" deleted from the bill. She emphasized that the Department would continue to work with local governments. Representative Brown asked if it is clear that municipalities have the authority to charge fees if they assume this function. Ms. Adair could not confirm that there is authorization in statute. She pointed out that Anchorage and Valdez charge fees. She stressed that there is nothing in Title 29 to preclude municipalities from charging a fee. She noted that there is specific language in the Department's statues stating that to the extent that a program is done by a municipal government the Department of Environmental Conservation may not charge a fee for that service. In response to a question by Representative Martin, Ms. Slagle explained that there are only three sections that have any effect on expenditures. She noted that unrestricted general fund dollars would be freed by the transfer to program receipts. Representative Brown MOVED to delete "outside an organized borough or municipality" on page 5, lines 13 & 14. There being NO OBJECTION, Amendment 1 was so ordered. Representative Grussendorf referred to page 3, line 20. He suggested that "prosecuted or held" be changed to "prosecuted and held". He MOVED to RESCIND Amendment 1. There being NO OBJECTION, it was so ordered. He MOVED to 6 AMEND Amendment 1 by adding "prosecuted and held". There being NO OBJECTION, it was so ordered. He MOVED to adopt Amendment 1 as amended, "may charge a prisoner prosecuted and under a municipal ordinance." There being NO OBJECTION, it was so ordered. PAUL GROSSI, DIRECTOR, WORKMEN'S COMPENSATION, DEPARTMENT OF LABOR discussed Section 4. He noted that the section was included to approximate the fee that employers pay when they buy a workers' compensation policy. He emphasized that the legislation would assure that self-insurers pay their fair share. He estimated that the amount is less than they would pay if they purchased a workers' compensation policy. He noted that state and local governments are exempt. He noted that local governments were included in the original version. He explained that the State was excluded because it was deemed that the State already pays. The legislation was amended in the Senate Finance Committee. The University is also exempted from the requirement. Representative Grussendorf questioned if the legislation could be amended to include a fee of up to 4 percent. Mr. Grossi explained that it would be possible to make the amendment. He was uncertain of the effect. Representative Martin noted that the University was encouraged to become self insured to save funds. Mr. Grossi agreed that self-insurers save money. He emphasized that some of the Division's workload is accounted to interaction with self-insurers. In response to a question by Representative Martin, Mr. Grossi noted that approximately $55.0 thousand dollars would be charged to CARRS Inc. Representative Therriault summarized that the 4 percent would be based on the amount paid out in previous years. (Tape Change, HFC 96-167, Side 2) Mr. Grossi noted that the Division's total cost is $2.6 million dollars. Representative Martin MOVED to adopt Amendment 3 (copy on file). Amendment 3 would delete the requirement for self insurers to pay 4 percent of the total amount reported in the report filed by the employer under AS 223.30155 (m), for the preceding calendar year and substitute a $100 hundred dollar fee. Representative Brown OBJECTED. Representative Brown OBJECTED. DWIGHT PERKINS, SPECIAL ASSISTANT, DEPARTMENT OF LABOR noted 7 that the Department intended that the fee be included in SB 216 from its origin. He spoke in support of the amendment. He maintained that self-insurers receive the same work from the Department that employers that are not self insured receive. Mr. Grossi explained that the Division regulates self- insured employers, conduct hearings to resolve disputes, provides data base information, and maintains an injury fund. Representative Kohring expressed concern with the amendment. He noted that self-insurers do not support the amendment. He pointed to the exemption of state and local governments. Mr. Grossi explained that employers who purchase a workers' compensation plan pay a 2.7 percent annual premium tax. Self-insurers do not pay this amount. The fees paid by the premium tax goes to the General Fund. He noted that the fee is not an exact representation of costs. Mr. Dwight pointed to a seafood company that became self insured. He noted that their last workers' compensation premium was $1.4 million dollars at a premium tax of $37.0 thousand dollars. If the Company was charged a four percent fee on all compensation paid they would have paid under $15.0 thousand dollars to the State. He explained that the four percent is only charged on actual claims paid. Mr. Grossi added that even if their access premium tax were added in they would pay under $20.0 thousand dollars. Representative Mulder questioned the actual cost to process the claims. Mr. Grossi acknowledged that the concept is fair, but stressed that it would be difficult to assess the exact cost. He emphasized that there are also ancillary costs. Representative Mulder suggested that the section could be amended to state that the self insurers "shall pay a fee through regulation to cover the direct cost of administrative overhead by the Department, not to exceed four percent of the total amount reported." ERIC TOLLEFSEN, ATTORNEY, CARR-GOTTSTEIN, ANCHORAGE testified against the legislation. He noted that Carr- Gottstein Inc. would be the largest payer. He observed that their cost for the last four years would average $57.0 thousand dollars. He maintained that the tax would be paid on something that they did not purchase. He emphasized that they are self insured to save money. He pointed out that their claims are self adjusted. He noted that their fees on insurance was $19.0 thousand dollars last year. He alleged that the four percent fee would be greater than the amount 8 needed to directly fund the Division of Workers' Compensation and the Division of Insurance. He pointed out that the first year of self insurance is not reflective of the average cost of several years. Representative Mulder asked if the industry is willing to cover their cost to the system. Mr. Tollefsen stated that the industry would be willing to look at what makes sense. Representative Mulder asked why the Workers' Compensation Committee of Alaska (WCCA) did not oppose the legislation in the Senate. Mr. Tollefson acknowledged that they were not paying as much attention as they should have been. Representative Therriault asked the total amount brought in by the 2.7 percent premium tax. Mr. Grossi stated that the 2.7 percent premium tax results in approximately $4.7 million dollars. The Division of Workers' Compensation's general fund budget is approximately $2.6 million dollars. The Division of Insurance's general fund budget pertaining to self insurers is approximately $1.5 million dollars. Representative Therriault concluded that the program is self funded. Mr. Grossi maintained that the total cost is closer to $5.0 million dollars. Representative Brown questioned if the effective date should be delayed to July 1, 1997 to allow parties to find a solution. Representative Mulder expressed concern with Representative Brown's proposal. Representative Brown pointed out that if a solution is not found the issue could be brought to the next Legislature. Representative Therriault recommended that the section be deleted. Representative Brown noted that there would be less incentive to resolve the issue if the section is not contained in the legislation. Representative Parnell pointed out that the section is contained in the title. Representative Martin emphasized that the industry needs time to find a solution. Representative Therriault pointed out that the title consideration could be resolved. Representative Grussendorf agreed that the title would not prevent the section's removal. A roll call vote was taken on the MOTION to adopt Amendment 3. IN FAVOR: Kelly, Kohring, Martin, Navarre, Foster OPPOSED: Brown, Grussendorf, Mulder, Parnell, Therriault Co-Chair Hanley was absent from the vote. The MOTION FAILED (5-5). 9 Representative Mulder MOVED to delete Section 4. There being NO OBJECTION, it was so ordered. He noted that the deletion does not reflect that self insurers should pay for their service. He emphasized that the industry and Department need to work together for a solution. Co-Chair Foster MOVED to adopt Amendment 2 (copy on file). TOM WRIGHT, STAFF, IVAN IVAN explained that Amendment 2 would increase the fees charged prisoners in municipal jails from $70 to $100 dollars. Representative Mulder spoke in support of the amendment. He noted that indigent prisoners will not pay the fee. He emphasized the high prison costs in Alaska. Representative Mulder suggested that if municipalities are reimbursed the reimbursement would be used to offset the state contract jail contract. BOB COLE, DIRECTOR, ADMINISTRATIVE SERVICES, DEPARTMENT OF CORRECTIONS explained that community jails contracts are at a fixed price for FY 97 - 98. The amount was fixed by the Community Jails Task Force. There is no matching requirement in the contracts. The cost per care varies per contract. The Department did not object to the amendment. He did not think there would be a savings to the State. He noted that many contract jails are supported in part by local funds. The State only pays the full cost in one or two contracts. He emphasized that many communities feel that the state share does not meet the total operating cost of the jails. Representative Grussendorf spoke against the amendment. A roll call vote was taken on the MOTION to adopt Amendment 2. IN FAVOR: Kohring, Mulder, Kelly, Foster OPPOSED: Martin, Navarre, Parnell, Therriault, Brown, Grussendorf Co-Chair Hanley was absent from the vote. The MOTION FAILED (4-6). Representative Therriault referred to Section 11. He noted constituent frustration with the administration of reviews of subdivision sewage plans. Representative Brown pointed out that the funding has been removed which would have allowed the Department of Environmental Conservation to continue the function. 10 Representative Therriault disagreed that the funding was cut for the function. He pointed out that the funding was left in the transfer to statewide public services. The Department choose to take the cut that was given and spread it to this function. Representative Brown pointed out that the result is that the money is not in the budget. She emphasized that the function will not be done if there is no money to pay for it. Ms. Adair summarized that the Subcommittee did not specifically identify subdivision planning reviews in the reduction to the Division of Statewide Public Service. She emphasized that this is the only function that is funded one hundred percent by general funds. She stressed that the Department cannot make further reductions without eliminating programs. She stated that this is the only area that the reduction could be taken from. Representative Therriault questioned if the municipality could empower a local engineer to do the review. Ms. Adair could not answer. She pointed out that this is a public health function. There may be restrictions on delegating to a private entity a public health function that is seen as an inherent power of government. She emphasized that the Department wants to establish the function on a fee structure so that a local government could take it over. She suggested that it may not be as controversial as a local fee program if it is established by the State. Ms. Slagle noted that there is a drafting error in the effective date section. She noted that Sections 8 and 12 are not reflected in the effective date clause. She noted that Section 16, on page 6 needs to be amended to include Sections 8 and 12. Representative Navarre MOVED to amend Section 16 by including Sections 8 and 12. Representative Brown MOVED to report HCS CSSB 216 (FIN) out of Committee with individual recommendations and with the accompanying fiscal notes. There being NO OBJECTION, it was so ordered. HCS CSSB 216 (FIN) was reported out of Committee with "no recommendation" and with nine fiscal impact notes, two by the Office of the Governor, 1/12/96, one by the Department of Natural Resources, 5/2/96, one by the Department of Revenue, 5/2/96, one by the Department of Environmental Conservation, 5/4/96, one by the Department of Commerce and Economic Development, 1/12/96, one by the Department of Education, 5/2/96, Department of Military and Veterans 11 Affairs, 1/12/96 and one by the Department of Labor. (Tape Change, HFC 96-168, Side 1) SENATE BILL NO. 216 An Act relating to fees or assessment of costs for certain services provided by state government, including hearing costs related to the real estate surety fund; fees for authorization to operate a postsecondary educational institution or for an agent's permit to perform services for a postsecondary educational institution; administrative fees for self-insurers in workers' compensation; business license fees; fees for activities related to coastal zone management, training relating to emergency management response, regulation of pesticides and broadcast 16 chemicals, and subdivision plans for sewage waste disposal or treatment; and providing for an effective date. Representative Mulder MOVED to RESCIND the Committee's action in reporting HCS CSSB 216 (FIN) from Committee. There being NO OBJECTION, it was so ordered. Co-Chair Hanley noted that the removal of Section 4 resulted in the need for a Resolution adopting a title change. Representative Mulder MOVED to RESCIND the Committee's action in failing to adopt Amendment 3. There being NO OBJECTION, it was so ordered. Representative Mulder MOVED to adopt Amendment 3. There being NO OBJECTION, it was so ordered. Representative Mulder MOVED to report HCS CSSB 216 (FIN) out of Committee with individual recommendations and with the accompanying fiscal notes. HCS CSSB 216 (FIN) was reported out of Committee with "no recommendation" and with nine fiscal impact notes, two by the Office of the Governor, 1/12/96, one by the Department of Natural Resources, 5/2/96, one by the Department of Revenue, 5/2/96, one by the Department of Environmental Conservation, 5/4/96, one by the Department of Commerce and Economic Development, 1/12/96, one by the Department of Education, 5/2/96, Department of Military and Veterans Affairs, 1/12/96 and one by the Department of Labor.