SB 272-WORKERS COMP AND WORKER SAFETY  MR. PAUL GROSSI, Director of the Division of Workers' Compensation, stated changes have been made to address concerns of the industry. CHAIRMAN MACKIE stated the intent was not to move SB 272 out of committee, but to have a hearing and let the House version come over to the Senate. Chairman Mackie expressed concerns about municipalities and timber industry self-insured groups. MR. GROSSI said SB 272 will eliminate the premium tax on workers' compensation insurance, enact the user fee, and establish a special account for funding workers' compensation and Occupational Safety & Health Administration (OSHA). Employers must cover workers with workers' compensation in three ways; purchase a workers' compensation insurance policy, certify they are self-insured, or become a member of the Joint Insurance Association (JIA). SB 272 is an attempt to establish that all employers pay the same rate based on the number of claims filed. The more claims submitted, the more employers will pay, and less claims will mean lower payments. SB 272 will promote safer working environments, allow all employers to pay at the same rate, and will eventually eliminate reliance on the general fund. Mr. Grossi stated 16 states use an approach similar to that in SB 272. OSHA needs to be ruled by the State and not be taken over by the federal government. CHAIRMAN MACKIE asked if Mr. Grossi had seen correspondence from the Alaska Forest Association and Sealaska regarding self-insured agencies that are concerned about SB 272. MR. GROSSI said no. MR. MICHAEL HINCHEN, General Manager of the Alaska Timber Insurance Exchange (ATIE), stated ATIE was founded in 1980 by members of the Alaska Loggers Association and is owned by its policy holders. Workers' compensation insurance costs have been reduced and improved workplace safety has resulted for workers. ATIE has concerns about SB 272 and HB 378, the companion bill to SB 272. The new user fee results in double taxation. Workers' compensation insurance premiums pay for losses, claims administration costs, and other administrative expenses. Lost payments make up 50-70 percent of the premiums that are collected for any given policy year. ATIE and other insurers would be taxed on lost payments that have already been subject to a premium tax. Mr. Hinchen referred to AS 21.09.210. The double taxation will have an adverse financial impact on ATIE and other insurance companies. If SB 272 does pass, ATIE will need to accrue an expense and a liability for future user fee payments that are based on lost reserves that relate to 1999 and prior policy lost reserves. ATIE policy holder surplus will be reduced by $417,000. The policy holder surplus is the owners' equity portion that these employers in the State and the timber companies have put up to fund the exchange. This would reduce the surplus by eight percent. The projected net income for the year 2000 would be reduced by 13 percent, and the substitution of user fees for premium taxes for claims occurring during 2000 would reduce the projected net income by 15 percent. SB 272 is bad public policy because the control of the funding for OSHA and the Division of Workers' Compensation will be taken away from the legislature. Funding for the Division of Workers' Compensation (DWC) would be spent on workers' compensation and benefit payments. Pressure for the Alaska Workers' Compensation Board to rule against an employer when a claim is heard before the board would increase. Number 844 MR. DWIGHT PERKINS, Deputy Commissioner of the Department of Labor (DOL), stated the legislature does have power over appropriations, and that will not change. No input about double taxation has been received from companies. MR. DON SHANNON, Alaska Safety Advisory Council, stated if SB 272 will force companies to "beef up" safety programs, that is a good thing. Mr. Shannon stated support for SB 272.