HOUSE BILL NO. 121 "An Act relating to occupational safety and health enforcement penalties; and providing for an effective date." 9:16:26 AM REPRESENTATIVE SAM KITO, SPONSOR, explained the bill that would make changes to the state's occupational safety and health regulations in order to comply with federal law. Federal law recently increased the minimum penalties needing to be assessed. He detailed that because Alaska was a designated jurisdiction, meaning it had its own responsibility for its occupational safety and health program, it was necessary for the state to update its program in order to comply with federal law. The bill would allow the department to continue to adopt regulations as federal law changed in order to ensure the state was meeting the minimum standard. He relayed that the burden on companies was not increased due to the increase in standard. He elaborated there were existing penalty requirements. When penalties were assessed generally the state assessed about 10 percent of the allowable penalty, but the minimum standards were necessary. Without the minimum standards and without compliance with federal law, the state ran the risk of losing its designation for the jurisdiction and the program could go back to the federal government. He explained that going back to the federal government would mean that State of Alaska employees would no longer be covered under workers' compensation and the Alaska program had some specific Alaska components for occupational safety and health, which would be lost by going to the federal program. 9:19:08 AM Representative Wilson noted there had been a question and answer sheet that was not included in members' packets. She read a question that had been asked in the House Judiciary Committee: How much would the state save if Alaska's occupational safety and health jurisdiction was returned to federal Occupational Safety and Health Administration (OSHA)? She noted that the answer had been $619,000; however, penalty revenue would go to the federal treasury instead of the state General Fund totaling $1,031,000, which would result in a net loss to the state of $412,000. She was in favor of keeping programs under state jurisdiction, but she was concerned about keeping a program because the state could collect penalties on businesses. She appreciated the email the committee had received with more explanation. She wondered if people were breaking the laws. She asked where the $1 million came from. DEBORAH KELLY, DIRECTOR, DIVISION OF LABOR STANDARDS AND SAFETY, DEPARTMENT OF LABOR AND WORKFORCE DEVELOPMENT, referred to the fiscal note from the department. Currently the department collected approximately $600,000 in penalties per fiscal year. With the approximately 78 percent increase, the department estimated the collection amount would increase by about $435,000 per year, for a total of about $1 million in penalties. The penalties were not optional - they were either collected by the state or eventually the federal takeover would come in and collect the penalties. The $619,000 was the savings in state funds from the elimination of the positions and the travel and other associated costs for the enforcement program. When the savings were subtracted from the loss of the penalty amount it resulted in $412,000. She spoke to collecting penalties on businesses in Alaska. She relayed that most businesses tried to do the right thing. The department conducted a significant number of inspections every year. She relayed the department was out in the community, across industries, seeing businesses every day. Many times when violations were found, the penalties were reduced sometimes down to zero based on small business size or good faith efforts on the part of the company. She relayed that the department was not generally seeing numerous violations, which was the reason it collected less than 10 percent of the maximum allowable penalties in the course of a year. Representative Wilson wondered if the $596,000 was an average or the figure from the preceding year. She observed the figure did not capture the increase. She hoped things were improving as the department was working to educate businesses. 9:23:02 AM Ms. Kelly replied that the $596,000 was the amount from FY 16. The numbers fluctuated from year-to-year, but not so significantly for the department to calculate an average. The department was targeting its consultation efforts to try to reduce the number of violations and hopefully penalties. Vice-Chair Gara understood that under federal law the penalties had to be adjusted for inflation; however, they had not been adjusted for inflation since 1990, which resulted in the penalty change. Ms. Kelly answered in the affirmative. Vice-Chair Gara agreed that most businesses did the right thing. In the past he had represented an individual who had been killed due to an unsafe work environment and another individual who had almost been killed due to an unsafe work environment. Representative Guttenberg asked for verification that the bill would allow the department to make adjustments based on the federal specifications without requiring additional legislative action in the future. He spoke to giving an agency authority that was legislative authority and asked if it was an issue with the topic at hand. Ms. Kelly replied that the department would be allowed to make adjustments in accordance with federal penalty amounts. In order to address that the department was being given regulatory authority, the bill included language that the department would be limited to the corresponding federal penalty amounts for each violation type. The department was not being given the authority to decide what penalty amount it wanted - it could not go above and beyond the corresponding federal penalty. 9:25:53 AM Representative Guttenberg remarked that Ms. Kelly had identified the $596,000 as fairly standard. He asked the department whether it had looked at the number of OSHA inspectors it had, how many penalties there had been, and whether the number of penalties had changed with the number of employees the department had doing the work. He knew that the department had lost numerous employees over the years and that General Fund dollars had become tighter. Ms. Kelly responded she would have to follow up with the numbers. There had been some small personnel changes over the years, but it had been relatively steady. Representative Tilton referred to the inspections done by the department. She asked if the $596,000 was an accumulation of mostly small fines or larger ones. Ms. Kelly answered she would have to follow up to answer the question in an exact sense. There were many small penalties assessed over the course of a year. The department did roughly 400 enforcement inspections annually and each one of the inspections may or may not result in a penalty. Penalties were generally small, the exception came when a particularly egregious violator was identified such as the trench collapse that had been in the news a couple of years earlier. She detailed that there had been an attempt to dig a young man out with heavy equipment, which had resulted in a substantial penalty. Co-Chair Foster OPENED and CLOSED public testimony. Vice-Chair Gara addressed the one fiscal note from the Department of Labor and Workforce Development. It was anticipated increase of $217,500 in FY 18 and $435,000 annually thereafter in penalty revenue to the state. Representative Wilson clarified that the revenue would occur only if the penalties were fined. She explained that the figure in the fiscal note was an estimate only. She surmised the amount was unknown and hoped the department would not be writing numerous citations because things were going well in the business community. Co-Chair Seaton MOVED to REPORT HB 121 out of committee with individual recommendations and the accompanying fiscal note. There being NO OBJECTION, HB 121 was REPORTED out of committee with a "do pass" recommendation and with one previously published fiscal impact note: FN1 (LWF). 9:30:49 AM AT EASE 9:32:35 AM RECONVENED