HOUSE BILL NO. 217 "An Act relating to the Alaska Food, Drug, and Cosmetic Act; relating to the sale of milk, milk products, raw milk, and raw milk products; and providing for an effective date." 1:37:26 PM DIANA RHODES, STAFF, REPRESENTATIVE GERAN TARR, highlighted that the raw milk and food exempt from regulations bill no longer included raw milk or food exempt from regulations. She relayed the sponsor supported the [upcoming] amendment. 1:38:31 PM AT EASE 1:40:33 PM RECONVENED Co-Chair Foster relayed the amendment sponsor, Vice-Chair Gara, was not present to offer the amendment. Representative Guttenberg MOVED to ADOPT Amendment 1, 30- LS0593\T.2 (Wayne, 3/3/0/18) sponsored by Vice-Chair Gara (copy on file): Page 2, line 26, through page 3, line 10: Delete all material and insert: 11* Sec. 4. AS 29.71.040(a) is repealed and reenacted to read: (a) If a municipality that receives state money seeks to purchase an agricultural product and an agricultural product harvested in the state is available that is of like quality compared with a similar agricultural product harvested outside the state, the municipality (1) shall purchase the product harvested in the state if the product is priced not more than seven percent above the similar product harvested outside the state; (2) may purchase the product harvested in the state only if the product is priced not more than 15 percent above the similar product harvested outside the state. * Sec. 5. AS 29.71.040(b) is repealed and reenacted to read: (b) If a municipality that receives state money seeks to purchase a fisheries product and a fisheries product harvested or processed within the jurisdiction of the state is available that is of like quality compared with a similar fisheries product harvested or processed outside the jurisdiction of the state, the municipality (1) shall purchase the product harvested or processed within the jurisdiction of the state if the product is priced not more than seven percent above the similar product harvested or processed outside the jurisdiction of the state; (2) may purchase the product harvested or processed in the jurisdiction of the state only if the product is priced not more than 15 percent above the product harvested or processed outside the jurisdiction of the state. * Sec. 6. AS 29.71.040(c) is amended to read: (c) A solicitation by a municipality for the purchase of agricultural or fisheries products must include written notice of the purchase requirements and limitations under (a) and (b) of this section and [SHALL] specify [THE REQUIREMENT] that agricultural products harvested in the state and fisheries products harvested or processed within the jurisdiction of the state will [SHALL] be used where possible. subject to the limitations under (a) and (b) of this section. If a municipality that receives state money purchases agricultural products harvested outside the state or fisheries products harvested or processed outside the jurisdiction of the state, the municipal officer responsible for the purchase shall certify in writing the reasons that agricultural products harvested in the state or fisheries products harvested or processed within the jurisdiction of the state were not purchased." Renumber the following bill sections accordingly. Page 3, line 13: Delete "of' Insert "not less than seven percent nor more than" Page 3, line 17: Delete "of' Insert "not less than seven percent nor more than" Page 3, following line 19: Insert a new bill section to read: "* Sec. 9. AS 36.15.050(c) is amended to read: (c) A solicitation for the purchase of agricultural or fisheries products must include written notice of the preferences under (a) and (b) of this section and [SHALL] specify [THE REQUIREMENT] that agricultural products harvested in the state and fisheries products harvested or processed within the jurisdiction of the state will [SHALL] be used where possible. If the state or a school district that receives state money purchases agricultural products harvested outside the state or fisheries products harvested or processed outside the jurisdiction of the state the officer responsible for the purchase shall certify in writing the reasons that agricultural products harvested in the state or fisheries products harvested or processed within the jurisdiction of the state were not purchased." Renumber the following bill sections accordingly. Representative Kawasaki OBJECTED for discussion. Ms. Rhodes detailed the amendment had been briefly addressed by Representative Geran Tarr at a past meeting as it had been included in a previous version of the legislation. There was an existing 7 percent procurement preference. The sponsor wanted to provide flexibility for agencies that wanted to purchase Alaska grown items. The amendment would allow agencies to spend up to 15 percent more on an Alaska grown product. Co-Chair Foster noted that Vice-Chair Gara had joined the meeting. Vice-Chair Gara shared he was open to the bill sponsor's views on the amendment. The amendment maintained the 7 percent local producer's preference for fisheries and agricultural products; local producers could charge up to 7 percent higher and still win in the procurement process. He noted it had been the law for a long time. There had been a discussion about changing the preference to 15 percent, which had caused some concern that the amount may be too expensive for schools and other entities facing limited funds. The amendment reflected an earlier version of the bill that included a 7 percent local preference to help local producers and if a state or community entity (e.g. a school) wanted to go above the 7 percent they could add another 8 percent to the price in order to select the local product. He explained it would save money for schools and other entities strapped for cash as the bill would not force them to pay the extra 8 percent. The negative aspect was the uncertainty that entities would ever opt to pay an additional 8 percent for local dairy or fisheries. He requested to hear the sponsor's view on the amendment. 1:44:26 PM Co-Chair Foster replied that Ms. Rhodes had indicated the sponsor's support. Representative Wilson communicated she was amenable to the 7 percent. She provided a scenario where an entity chose to go up to 12 percent to purchase carrots, but simultaneously opted not to pay 9 percent for another type of product. She remarked the amendment took a subject with strict rules and would leave it up to each district to choose between 7 and 15 percent. She was uncertain how the change would comport with existing procurement rules. She wondered whether the change could result in law suits or complaints because the percentage would no longer be consistent. Currently entities had to opt for the producer within the 7 percent range. She did not know how allowing an entity to select a producer between the 7 and 15 percent range would work. Vice-Chair Gara did not see a possibility for a law suit. The law would maintain the existing 7 percent local preference. No one would have the ability to sue a school district or other entity for deciding to pay an additional 8 percent. For example, the law would require paying the additional 7 percent and if a local dairy cost 9 percent more, the school district, prison, or other state entity could choose to pay the extra amount. Representative Wilson clarified there were two bidders on a procurement. She gave an example of an Alaskan business and a Washington business submitting bids to provide milk. Under existing law, an Alaskan business could bid up to 7 percent more and still win the bid. She believed if the bid from the Alaskan business was 9 percent more the entity would have to select the Washington business because there was only a 7 percent addition. She believed the amendment would allow an entity to pay 9 percent, which she thought was contrary to procurement rules. Representative Pruitt agreed with the amendment. He stated a municipality or school district would have to put the range in their procurement code because they could not randomly change the percentage. He detailed entities had to have a standard in their procurement codes. He elaborated that a code could either specify 7 percent or up to 15 percent. Entities' procurement decisions would be based on their procurement codes. The entities would not decide how to apply their procurement haphazardly, which would be subject to a lawsuit. He explained that would not be allowable. He detailed a municipality would have to publish its procurement rules at the beginning of a process. An applicant would then apply based on the specified procurement rules. He clarified the rules would be made known beforehand, not in the middle of a procurement process. 1:49:06 PM Representative Wilson asked if it was the intent for the state to use the range of 7 and 15 percent. She remarked the state would still have the requirement for state contracts including corrections and other. Vice-Chair Gara replied that a bidder would bid a price. If a price was 8 percent more, the municipality, school district, or state entity would be allowed to pay the extra 1 percent. There were already rules to apply to two sets of bids for milk - they were both at 7 percent and there were rules for deciding which bids qualified and which did not; those rules would remain. The amendment merely gave a district or other entity the right to choose a local product as long as it did not exceed an additional 8 percent. Representative Wilson clarified her understanding of the amendment. She believed Vice-Chair Gara was stating that in the first round of bidding if with the 7 percent added, an Alaskan entity would still be lower than the milk from out- of-state and they would win the bid based on the 7 percent. She asked for verification that the school district or the state could choose to then pay 8 percent instead of the 7 percent that had been bid. Vice-Chair Gara replied in the negative. He believed that was the source of the confusion. He clarified that if something was bid at 7 percent, the school district [or other entity] would take the product at the 7 percent. The school district would not be allowed to give a producer more than the bid price. He provided an example where local dairy bid at 9 percent more. He explained the school district could choose whether to accept the 9 percent bid or go with another bid because it was only obligated to pay 7 percent. 1:51:26 PM Representative Wilson pointed to language in Section 9 of the amendment on pages 2 and 3. She observed that if something was bought from out-of-state, the purchasing entity may be required to submit additional paperwork detailing why the out-of-state bidder had been selected. She asked where the paperwork would go and who would determine what it looked like. Vice-Chair Gara asked Representative Wilson to repeat the location in the amendment she was referencing. Representative Wilson read from Section 9 of the amendment: A solicitation for the purchase of agricultural or fisheries products must include written notice of the preferences under (a) and (b) of this section and [SHALL] specify [THE REQUIREMENT] that agricultural products harvested in the state and fisheries products harvested or processed within the jurisdiction of the state will [SHALL] be used where possible. If the state or a school district that receives state money purchases agricultural products harvested outside the state or fisheries products harvested or processed outside the jurisdiction of the state the officer responsible for the purchase shall certify in writing the reasons that agricultural products harvested in the state or fisheries products harvested or processed within the jurisdiction of the state were not purchased." Representative Wilson observed the section was a mandate. She asked where the paperwork would be filed and who would determine its accuracy. Vice-Chair Gara answered that it was a requirement for entities to state the reason why they rejected a local bidder. The reasons would be included in procurement code. Representative Guttenberg stated the language in the amendment consistently referred to municipality. He noted it did not refer to school districts until page 3 of the bill. He asked if the definition of municipality covered school districts. He noted that not all school districts were connected to a municipality. He provided examples including the Yukon Koyukuk School District in the Interior and some Southeast and possibly Southwest communities. He wanted to ensure the reference to municipalities in one section covered school districts. 1:54:29 PM Vice-Chair Gara replied that the amendment governed the same entities that the procurement code covered. The amendment did nothing to change that. He noted the bill sponsor may know exactly which entities were covered, but the amendment did not change that law. Ms. Rhodes answered that Vice-Chair Gara was correct. She elaborated the amendment changed nothing in the procurement code. The covered entities were school districts and municipalities that received state money. Representative Wilson MAINTAINED the OBJECTION. A roll call vote was taken on the motion. IN FAVOR: Ortiz, Pruitt, Thompson, Gara, Grenn, Guttenberg, Seaton, Foster OPPOSED: Kawasaki, Tilton, Wilson The MOTION PASSED (8/3). There being NO further OBJECTION, Amendment 1 was ADOPTED. Vice-Chair Gara addressed the fiscal notes from the Department of Commerce, Community and Economic Development. The note reflected a cost of $5,000 and a change in revenue of $10,000 for FY 19 through FY 24. 1:57:21 PM Co-Chair Seaton MOVED to REPORT CSHB 217(FIN) out of committee with individual recommendations and the accompanying fiscal note. CSHB 217(FIN) was REPORTED out of committee with a "do pass" recommendation and with one previously published fiscal impact note: FN3 (DNR). 1:58:07 PM AT EASE 1:58:44 PM RECONVENED