HOUSE BILL NO. 234 "An Act relating to brewpubs, and continuing the existence of the Alcoholic Beverage Control Board; and providing for an effective date." REPRESENTATIVE LISEL MCGUIRE, SPONSOR, testified in support of the legislation. She explained that Section 1 of the bill allows for the sale of "growlers" of up to five gallons per day, as stated in current statute, but eliminates a technical provision that required a brewery must be on the premises in order to sell a "growler" to customers. She explained that this provision prevented the Moose's Tooth Brewery [Anchorage] from being in the marketplace, since their brewery was in Ship Creek. She also noted that an earlier version of the bill pertained to gallonage, which was removed from the bill based on testimony in the [House] Labor and Commerce Committee that indicated that it was a fundamental policy decision better suited to a separate vehicle. In response to a question by Co-Chair Williams, Representative McGuire confirmed that this change would be implemented by amendment. Representative McGuire also noted that Section 3 extends the Alcoholic Beverage Control Board to June 30 2007. She referred to a Legislative Budget and Audit (LB&A) report commending the Board's success. She pointed out that suggested changes from the Department of Public Safety were forthcoming, one of them stemming from the LB&A audit. She stated that her office did not have objections to the Administration's amendments. In response to a question by Representative Stoltze, Representative McGuire defined a "growler" as being a micro brewery that distributes an amount under five gallons. She stressed that the bill did not change this amount requirement. PAT DAVIDSON, DIRECTOR, DIVISION OF LEGISLATIVE AUDIT provided information on the department's audit of the board. She stated that the audit had recommended a three-year extension, due to some operational deficiencies discovered during the audit. She noted that overall they believed the continuation of the Alcoholic Beverage Control Board was in the best public interest. DOUGLAS GRIFFIN, DIRECTOR, ALCOHOLIC CONTROL BOARD testified via teleconference in support of the legislation. He stated that they would prefer a four-year, rather than a three-year extension of the board. He commended the audit procedure and noted that the Board was making recommended changes and acknowledged that the Board was experiencing funding shortfalls. MATT JONES, MOOSE'S TOOTH, ANCHORAGE testified via teleconference in support of the bill. DAN COFFEE, ATTORNEY, ANCHORAGE testified via teleconference in support of the legislation. He noted he had served on the board of fisheries as well. He commended the Alcoholic Beverage Control Board for its excellent work. He observed that their only problems were funding shortfalls. He supported the extension of the board and expressed industry support for the amendment pertaining to brewpubs. He asked for information regarding forthcoming amendments from the Administration and how to comment on these changes. Representative Stoltze referred to the provision of the bill that provided for free samples, and asked whether this practice was new. Mr. Coffee stated that this was a standard procedure for brewpubs, allowing them to provide small samples for potential customers. Representative Croft MOVED amendment #1. Section 1 - Pg. 2, Lines 6-8 (5) sell beer manufactured on the premises licensed under the beverage dispensary license to a person licensed as a wholesaler under AS 04.11.160; sales under this paragraph may not exceed 15,000 gallons [OR THE AMOUNT SOLD UNDER THIS PARAGRAPH IN CALENDAR YEAR 2001, PLUS 10 PERCENT, WHICHEVER AMOUNT IS GREATER]. Should be amended to read: (5) sell beer manufactured on the premises licensed under the beverage dispensary license to a person licensed as a wholesaler under AS 04.11.160; sales under this paragraph may not exceed 15,000 gallons OR THE AMOUNT SOLD UNDER THIS PARAGRAPH IN CALENDAR  YEAR 2001, PLUS 10 PERCENT, WHICHEVER AMOUNT IS  GREATER.  Section 2 - Pg. 2, Lines 24-27 (B) to a wholesaler licensed under AS 04.11.160; sales under this subparagraph may not exceed 15,000 gallons [OR THE AMOUNT SOLD UNDER THIS SUBPARAGRAPH IN CALENDAR YEAR 2001, PLUS 10 PERCENT, WHICHEVER AMOUNT IS GREATER]; Should be amended to read: (B) to a wholesaler licensed under AS 04.11.160; sales under this subparagraph may not exceed 15,000 gallons OR THE AMOUNT SOLD UNDER THIS SUBPARAGRAPH IN  CALENDAR YEAR 2001, PLUS 10 PERCENT, WHICHEVER  AMOUNT IS GREATER; Co-Chair Williams OBJECTED. Representative McGuire stated that the intent of the amendment was to preserve the existing statute as written in relation to gallonage and percentage. She explained that when the Committee Substitute from the House Labor and Commerce Committee had been written, it had inadvertently excluded a portion of the existing statute. Co-Chair Williams REMOVED his OBJECTION. There being NO OBJECTION, the amendment was Adopted. Representative Stoltze MOVED Amendment #2. Amendment No. 2 *Section . AS 04.06.010 is amended to read: Sec. 04.06.010. Establishment of board. There is  established in the Department of Public Safety the [THE] Alcoholic Beverage Control Board [IS ESTABLISHED] as a regulatory and quasi-judicial agency. [THE BOARD IS IN THE DEPARTMENT OF REVENUE, BUT FOR ADMINISTRATIVE PURPOSES ONLY.] Co-Chair Harris OBJECTED. WILLIAM TANDESKE, COMMISSIONER, DEPARTMENT OF PUBLIC SAFETY, provided information about Amendment #2, that effectively transfers the Alcoholic Beverage Control Board from the Department of Revenue to the Department of Public Safety. He noted the language change was to remove "for administrative purposes only". He explained that the purpose of the change was not to change function of the Board, but rather to recognize that the nine employees of the Board were employed by the state of Alaska, such as with other boards within the Department of Public Safety, such as the Council on Domestic Violence and Sexual Assault. He stressed that this change was directed at the licensing and review function of the Alcoholic Beverage Control Board. Co-Chair Harris asked whether officers of the Alcoholic Beverage Control Board would carry weapons in order to respond to dangerous situations. Mr. Tandeske stated he did not support Board investigators carrying weapons. He gave the example of Division of Family and Youth Services, when officers entered into volatile situations, and maintained that weapons were not necessary for ABC investigators and would only escalate such situations. He also noted that this would create additional issues of recruiting and training. In response to another question by Co-Chair Harris, Mr. Tandeske confirmed that local police officers would support the efforts of the Alcoholic Beverage Control Board officers. Representative Croft asked about the practical effect of moving the Alcoholic Beverage Control Board to the Department of Public Safety. Mr. Tandeske explained that this was a portion of the process of realigning functions within all departments, and that the Department of Revenue expressed that the Board was more properly placed in the Department of Public Safety, given that they are a quasi- judicial, investigative and enforcement agency. He added that if other parts of the state required officers, their becoming official State employees he noted that their function was autonomous within the Department. Representative Croft asked why the Board was not indicated as being "only administrative" within the Department of Public Safety. Mr. Tandeske reiterated that the officers were employees of the state of Alaska. He differentiated this from the Alcoholic Beverage Control Board, but referred to enforcement officers and administrative staff. He stressed that the Board will still be separate in order to consider licensing and other quasi-judicial issues. Co-Chair Harris REMOVED his OBJECTION. There being NO OBJECTION, amendment #2 was adopted. Representative Stoltze MOVED Amendment #3, *Sec. . AS 04.06.020 is amended to read: Sec. 04.06.020. Appointment and qualifications. The board consists of seven [FIVE] members: the  commissioner of public safety, the commissioner of  revenue, and five members appointed by the governor and confirmed by a majority of the members of the legislature in joint session. A member of the board may not hold any other state or federal office, either elective or appointive. Two members of the board shall be persons actively engaged in the alcoholic beverage industry, except that no member may hold a wholesale license or be an officer, agent, or employee of a wholesale alcoholic beverage enterprise. No three members of the board may be engaged in the same business, occupation, or profession. At least three members of the board shall represent the general public. A board member representing the general public or an immediate family member of a board member representing the general public may not have any financial interest in the alcoholic beverage industry. In this section, "immediate family member" means a spouse, child, or parent. *Sec. . AS 04.06.030 is amended to read: Sec. 04.06.030. Terms of office; chair. (a) The  commissioners of public safety and revenue shall serve  as members during their tenure as commissioner. The  other m[M]embers of the board shall be appointed for overlapping terms of three years. (b) Except for the commissioners of public safety and  revenue, a [A] vacancy occurring in the membership of the board shall be filled within 30 days by appointment of the governor for the unexpired portion of the vacated term. (c) The board shall select a chairman from among its members. *Sec. . AS 04.06.060 is amended to read: Sec. 04.06.060. Quorum and majority. Four [THREE] members of the board constitute a quorum for the conduct of business, except that a majority of the whole membership of the board must approve all applications for new licenses, and all renewals, transfers, suspensions, and revocations of existing licenses. If a majority of the board is present and voting, the director, with the consent of the members present, may cast a tie-breaking vote. Representative Stolze MOVED to AMEND the amendment to include other designees for the two Commissioners. Co-Chair Harris OBJECTED. Representative Croft OBJECTED. Commissioner Tandeske explained the proposed changes of the amendment. He noted that when the proposal was originally made to move the ABC Board to the Department of Public Safety, the Department took a closer look at Title 4 enforcement that specified procedures. He cited a finding in the LB&A audit that recommended that the Board be expanded from five to seven members. He referred to the Administration's concern regarding alcohol related issues. He maintained that the Department of Public Safety brought to the Board resources and skills that address the consequences involved in these issues. He acknowledged that the Department of Revenue had contributed other skills to the Board over the past ten years. He stated that the Department viewed this change as an opportunity to readdress language in statutes that were 25 years old. Representative Croft referred to page 22 of the audit, and its reference to the possibility of disproportionate influence by alcohol members, but maintained that the intent of the recommendation was to add two more public members. Commissioner Tandeske clarified that the suggestion was for two other members, specifying that one might be from the medical community and one from law enforcement. Representative Croft asked why there was a change from an audit recommendation of a public health/medical community and law enforcement member to two commissioners. Commissioner Tandeske reiterated that alcohol issues were the focal point. He expressed his commitment to personally participate on the Board if the bill was passed into law, and suggested that he would fulfill the law enforcement member recommendation. He noted that from an administrative standpoint, it seemed unusual for a Commissioner not to be part of a Board within their own Department. Representative Stoltze referenced the language that stated, "a member of the board may not hold any other state or federal office" and asked if the Commissioner was exempt from this requirement. Co-Chair Harris recommended that a technical change be made. Representative Stoltze MOVED to AMEND amendment #3 to include "except appointed Commissioners or their designees" after "a member of the board". Representative Foster stressed that given the controversial issues that typically come before the Alcoholic Beverage Control Board, continuity of representation was necessary. Commissioner Tandeske stated his support of the language change, and expressed his commitment to maintaining continuity on the board. In response to a question by Co- Chair Harris, Commissioner Tandeske confirmed that he thoroughly briefed any designees on board issues. Representative Croft concurred with Representative Foster, and highlighted the distinction between the Council on Domestic Violence or other organizations, in that the Alcoholic Beverage Control Board was a semi judicial body. He questioned whether a commissioner ought to be included in such a body. He asked why the Board was being moved out of the Department of Revenue to the Department of Public Safety and again referred to the audit recommendation to add public members to the Board from health and law enforcement, rather than the two commissioners. He suggested that the language be re-drafted to take that recommendation into consideration. TAPE HFC 03 - 62, Side B  Representative Stoltze WITHDREW amendment #3. In response to a question by Representative Foster, Commissioner Tandeske responded that he also sat on the Western States Information Network Policy Board, and the Executive [Committee] of the Land Mobile Radio Project [Board]. Representative Foster stressed that the Alcoholic Beverage Control Board required extensive executive sessions that could last for a period of days, and pointed out that this would add another burden to the Commissioner's level of commitment. He asked if the Commissioner would by necessity send representatives to these important meetings. Representative Stoltze MOVED amendment #4. Co-Chair Harris OBJECTED. *Sec. . AS 04.06.110 is amended to read: Sec. 04.06.110. Peace officer powers. The director and the persons employed for the administration and enforcement of this title may, with the concurrence of the commissioner of public safety, exercise the powers of peace officers when those powers are specifically granted by the board. Powers granted by the board under this section may be exercised only when necessary for the enforcement of the [CRIMINALLY PUNISHABLE PROVISIONS OF THIS TITLE,] regulations of the board[, AND OTHER CRIMINALLY PUNISHABLE LAWS AND REGULATIONS, INCLUDING INVESTIGATION OF VIOLATIONS OF LAWS AGAINST PROSTITUTION AND PROMOTING PROSTITUTION DESCRIBED IN AS 11.66.100 - 11.66.130 AND LAWS AGAINST GAMBLING, PROMOTING GAMBLING, AND RELATED OFFENSES DESCRIBED IN AS 11.66.200 - 11.66.280]. Commissioner Tandeske emphasized that the Alcoholic Beverage Control Board officers were most properly equipped to handle alcohol related issues, and not issues of prostitution and gambling. He noted the limited personnel resources, and the need to properly align personnel for tasks. Representative Croft recalled initial discussions in 1999, when it was reasoned that Alcoholic Beverage Control Board officers often viewed these related issues, and could expeditiously handle them in the line of their duties. Commissioner Tandeske stated that he was not part of those discussions. He referenced his experience in law enforcement, and noted that employees' authority should align with their responsibilities. Representative Hawker referred to the LB&A audit and noted the divergence of opinions on whether investigators ought to function as peace officers or administrative investigators. He asked if this was a move toward the duties of a peace officer. Commissioner Tandeske emphasized the value of the Alcoholic Beverage Control Board officers to the State. He emphasized, however, that they were not law enforcement officers. Representative Hawker asked if the Department of Public Safety would show any preference for an ABC officer wished to enter law enforcement. Commissioner Tandeske noted that all applicants for law enforcement were treated equitably. Representative Stoltze expressed his hope that this amendment might prevent ABC officers from "clamping down" on cribbage players at recreational halls. Co-Chair Harris REMOVED his OBJECTION. Amendment #4 was ADOPTED. Representative Stoltze renewed his motion to MOVED Amendment #3. DEAN GUANELI, CHIEF ASSISTANT ATTORNEY GENERAL, DEPARTMENT OF LAW, testified regarding potential changes to the amendment. He stated that the current statute (AS 04.06.020) would not prevent a commissioner from being a member of the Board. He maintained that the language restricted them from holding any "other" office, other than that which they currently hold. He suggested that courts would view the statute as a whole, and not consider membership on the ABC Board a conflict. He did not believe any other statutes existed that would prevent the Commissioner from being on the board. Representative Croft maintained that the language "other" referred to the Board position, and restricted the members from holding positions apart from the Board. Mr. Guaneli reiterated his belief that the courts would take into consideration the legislative intent that the commissioners of Revenue and Public Safety hold Board positions. He suggested that it would be simple to insert more language, such as "other than the commissioners of Public Safety and Revenue". Co-Chair Harris asked if this type of language was common and necessary, and whether it could simply be omitted. Mr. Guaneli noted that he hesitated to suggest that change, since it was part of the original intent of the statute. Representative Foster stressed that he did not support the amendment. He recalled the regulations that prevented the sale of Class III licenses for fifteen years in the state of Alaska. He observed that a commissioner sitting on the Board would have a disproportionate amount of influence compared to other members. He stated his uneasiness about granting a regulatory agency undue power over a board and then allowing the commissioner to sit on that board and grant licenses. Commissioner Tandeske responded that it had not occurred to him that he would be more influential than any other party on the Board. He acknowledged the concern over the issue with Class III licenses. Representative Foster gave examples of potential conflicts of interest for board members. He maintained that in small villages, many public officials might have an interest in a bar or other business that presented a conflict of interest. He observed that the commissioner of Public Safety might have an inherent conflict of interest sitting on the Alcoholic Beverage Control Board. Representative Stoltze WITHDREW Amendment #3. Mr. Coffee commented on the amendments. He questioned the reason behind moving the Alcoholic Beverage Control Board to the Department of Public Safety. He noted the Administration's desire to address alcohol related issues, but pointed out that the agency was currently functioning well. He observed that the bill would effectively make this quasi-judicial and regulatory agency a part of the Department of Public Safety, which is in the criminal enforcement business. He asked what was to be gained by making employees a part of the Department, and pointed out that board and commissions must remain independent. He commended the withdrawal of the amendment that allowed the Commissioner to be on the board, for purposes of continuity. He acknowledged that enforcement officers did stumble upon gambling and prostitution activities in the course of duties. He observed that the Alcoholic Beverage Control Board had four executive directors during his tenure, and noted that each one had worked to ensure compliance with liquor laws, and did not focus on criminal enforcement. He again asked about the benefit of making such changes to an agency that has existed since statehood. Representative Foster MOVED to report HB 234 out of Committee with the accompanying fiscal note. Representative Stoltze OBJECTED. Representative Stoltze suggested that a conforming title change must be made to accommodate amendments. Representative Foster WITHDREW his MOTION. Representative Stoltze MOVED a conforming title amendment. There being NO OBJECTION it was so ordered. Representative Croft expressed the intent to follow the recommendation of the auditors by adding board members from health care and law enforcement. Co-Chair Harris addressed the fiscal note. He suggested that it should include the cost of operating the agency. LANDA BAILY, SPECIAL ASSISTANT, DEPARTMENT OF REVENUE, explained that the movement of the Alcoholic Beverage Control Board from the Department of Revenue to the Department of Public Safety resulted in a zero fiscal note by the Department of Revenue. Co-Chair Harris asked why there was no fiscal note from the Department of Public Safety. Commissioner Tandeske noted that the fiscal note was attached to the Executive Order when it was submitted and added that operational funding was reflected in the Department's FY 04 budget plan. Co-Chair Harris requested that a fiscal note reflecting the cost of operations from the Department of Public Safety accompany the bill the floor. Representative Croft asked how this differed from the zero budget line item related to community schools. Co-Chair Harris maintained that the cost of eliminating the Community Schools program in statute was zero. He maintained that the cost of having the Alcoholic Beverage Control Board operated by Department of Public Safety should be reflected in a fiscal note. Commissioner Tandeske reiterated that the suggestion [amendment] of adding Board members was withdrawn. Co-Chair Harris maintained that he wished to see a fiscal note. Representative Foster MOVED to report HB 234 out of Committee with the accompanying fiscal note. There being NO OBJECTION it was so ordered. CSHB 234 (FIN) was REPORTED out of Committee with individual recommendations, a previously published zero fiscal note from the Department of Revenue (#1) and a new fiscal impact note from the Department of Public Safety.