HOUSE BILL NO. 239 "An Act relating to the Uniform Commercial Code; relating to secured transactions; amending Rule 79, Alaska Rules of Civil Procedure; and providing for an effective date." Co-Chair Therriault provided members with proposed committee substitute, work draft 1-LS0455\K, 2/17/00 (copy on file). Vice Chair Bunde MOVED to ADOPT work draft 1-LS0455\K, 2/17/00. There being NO OBJECTION, it was so ordered. REPRESENTATIVE LISA MURKOWSKI testified in support of the legislation. She explained that the committee substitute incorporates minor technical changes submitted by the National Conference of Commissioners on Uniform State Laws. She observed that it is the first time that the code has been updated in 25 years. She maintained that all interested parties reviewed the legislation. The legislation accommodates electronic filing and centralized filing systems, expands the scope of property for secured transactions, and updates the uniform commercial code (UCC). The bill would take affect July 1, 2001. The House Labor and Commerce and Judiciary committees passed the legislation with "do pass" recommendations. SHARON YOUNG, STATE RECORDER, STATE RECORDER'S OFFICE, DEPARTMENT OF NATURAL RESOURCES, ANCHORAGE testified via teleconference in support of the legislation. She maintained that the legislation would simplify and modernize the filing system and would benefit users with a modest fiscal cost. Most of the operational impacts could be handled internally. (TAPE CHANGE, HFC 00 - 78, SIDE 2)  Ms. Young review the contractual expense. Programming changes would be needed to bring the system into compliance with the legislation. The central filing system would need to implement the usage of check digits, as a means to verify accuracy of a file number. The contractual costs in FY01 would be $10.5 thousand dollars. There would be additional programming costs of $20 thousand dollars in the second year, related to electronic filing of applications. In response to a question by Representative J. Davies, Ms. Young explained that procedures for the secured transactions would be largely the same. The legislation changes where the filings occur. Alaska currently has a convoluted system of filing. The bulk of filings are done in the central filing office. Many lenders also file at the local level due to their uncertainty regarding filing requirements. This results in unnecessary dual filings and duplication. The legislation would eliminate the bulk of local filings. There are 35 local filing locations. The legislation includes a lengthy transition period. She did not think that any policy issues were addressed in the legislation. Representative J. Davies questioned who makes the filings and if the legislation would make filings easier. Ms. Young noted that the user groups are principally financial institutions, including out-of-state lending institutions. Ms. Young explained that the system is currently paper based. Electronic filing would do away with signature requirements. Lenders in and out-of-state could do electronic filings. Representative Foster questioned if the legislation would affect the Nome Office. Ms. Young stated that most of the rural offices do not do a lot of UCC filings. She did not think that the remote offices (with the possible exception of Bethel) would be significantly impacted. The major impact would be in urban areas. Vice Chair Bunde observed that the entire component generates more than it takes for operation. Ms. Young clarified that their agency does not receive the benefit of the funds that they generate. LINDA KESTERSON, ASSISTANT ATTORNEY GENERAL, DEPARTMENT OF LAW testified via teleconference. She stated that the only policy decision is to change filings from local areas around the state to a central location. She noted that there has been a general policy shift around the country toward the use of central filing locations. Changes to the UCC are to bring it up to date; there are no substantive changes beyond an attempt to make it easier and better to use. She reviewed the articles affected by the legislation. She maintained that there are no significant legal shifts in any of the articles. She observed that the intent is for the changes to be enacted throughout the nation by July 1, 2001. Representative J. Davies questioned if the legislation has been reviewed in depth. Ms. Kesterson assured him that the Department of Law reviewed the legislation in depth. JERRY KURTZ, ATTORNEY, ANCHORAGE testified via teleconference in support of the legislation. He gave a brief review of his credentials. He was Alaska's representative to the National Conference of Commissioners on Uniform State Law. The legislation gives security for lenders and debtors. He maintained that no major policy changes have been made by the legislation. He stressed that the balance between creditors and debtors has not been changed. Some additional protections were added for debtors. Creditors must act in good faith. DONALD RAPSON, DRAFTING COMMITTEE ON ARTICLE IX, NATIONAL CONFERENCE OF COMMISSIONERS ON UNIFORM STATE LAW testified via teleconference in support of the legislation. He explained that he has been involved with this body of law for 50 years. He observed that the body of law has been in existence for a long time. The law serves the needs of business: lenders and debtors. The legislation updates the law to take advantage of new technology, such as financial software. It allows the use of healthcare insurance receivables as a form of collateral. He agreed that there have been no major policy changes and observed that all sides discussed the changes with care. He stressed that the legislation requires a bank or lending company with offices in multiple locations throughout the United States to file only in the state in which it is incorporated. Currently, filings are required in every state in which the entity is in business. Representative Foster MOVED to report CSHB 239 (FIN) out of Committee with the accompanying fiscal note. There being NO OBJECTION, it was so ordered. Vice Chair Bunde maintained that since the filing fees generated more than they cost that they could be reduced. CSHB 239 (FIN) was REPORTED out of Committee with a "do pass" recommendation and with fiscal impact note by the Department of Natural Resources, publish date 2/11/00.