HOUSE FINANCE COMMITTEE April 15, 2004 1:51 P.M. TAPE HFC 04 - 84, Side A TAPE HFC 04 - 84, Side B TAPE HFC 04 - 85, Side A CALL TO ORDER Co-Chair Williams called the House Finance Committee meeting to order at 1:51 P.M. MEMBERS PRESENT Representative John Harris, Co-Chair Representative Bill Williams, Co-Chair Representative Kevin Meyer, Vice-Chair Representative Mike Chenault Representative Hugh Fate Representative Richard Foster Representative Mike Hawker Representative Reggie Joule Representative Carl Moses Representative Bill Stoltze MEMBERS ABSENT Representative Eric Croft ALSO PRESENT Representative Lesil McGuire; Representative Dan Ogg; Pete Ecklund, Staff, Representative Bill Williams; Linda Sylvester, Staff, Representative Bruce Weyhrauch; Nico Bus, Acting Director, Division of Administrative Services, Department of Natural Resources; Heath Hilyard, Staff, Representative Lesil McGuire PRESENT VIA TELECONFERENCE Bob Loeffler, Director, Division of Mining Land and Water, Department of Natural Resources, Anchorage; Kathy Hartman, Co-Owner Fantasies Club, Anchorage; Don Hudson, Physician, Alaskan Regional Hospital, Anchorage; Carol Hartman, Co- Owner Fantasies Club, Anchorage; Kara Nyquist, Director of the Covenant House, Attorney, Anchorage; Terry Dittman, Parent-Teacher-Student Association (PTSA), Anchorage; Andree McLeod, Anchorage; Diana L. Straub, Assembly Member, Wasilla; Officer Pablo Paiz, Anchorage Police Department, Anchorage; Regina Manteufel, Anchorage SUMMARY HB 333 An Act relating to an endowment for public education; and providing for an effective date. CS HB 33 (FIN) was reported out of Committee with a "no recommendation" and with three new fiscal notes by the Department of Natural Resources, one new zero note by the Department of Revenue, one new fiscal note by the Department of Revenue, fiscal note #1 by the Department of Education & Early Development and fiscal note #4 by the University of Alaska. HB 367 An Act relating to the licensing and regulation of sex-oriented businesses and sex- oriented business entertainers; relating to protection of the safety and health of and to education of young persons who perform in adult entertainment establishments; and providing for an effective date. CS HB 367 (FIN) was reported out of Committee with "no recommendation" and with a new fiscal note by the Department of Community & Economic Development, a new zero note by Department of Public Safety and zero note #2 by the Department of Labor & Workforce Development. HB 533 An Act relating to the state's administrative procedures and to judicial oversight of administrative matters. CS HB 533 (JUD) was reported out of Committee with a "do pass" recommendation and with a new fiscal note by Department of Law, indeterminate note #1 by the Alaska Court System, indeterminate note #2 by the Commercial Fisheries Entry Commission, and indeterminate note #3 by the Department of Health & Social Services. HOUSE BILL NO. 333 An Act relating to an endowment for public education; and providing for an effective date. Co-Chair Harris MOVED to ADOPT work draft #23-LS099\G, Bullock, 4/14/04, as the version of the legislation before the Committee. (Copy on File). Representative Joule OBJECTED, asking for a description of the changes made to the draft. REPRESENTATIVE DAN OGG, SPONSOR, spoke to the changes made to the work draft, noting the main difference was repealing the sectional reference to SB 7, Section 8. In the "G" version, Page 3, Lines 15-17, contains new language that further clarifies that. Page 6, Lines 9-12, addresses a previous oversight; the language was needed because the grant is not included as net income in the existing school trust fund. Representative Joule inquired if the work draft allowed the University to generate funds as originally intended through the endowment with the 5% split. In addition to that, the University would keep 250 thousand acres of land to help generate income. Representative Ogg agreed that was correct. Representative Joule pointed out that he had not supported SB 7. Representative Joule WITHDREW his OBJECTION stating that there should be further consideration on the House floor. There being NO further OBJECTION, the committee substitute was adopted. Co-Chair Williams MOVED to ADOPT Amendment #1. (Copy on File). Co-Chair Harris OBJECTED. BOB LOEFFLER, (TESTIFIED VIA TELECONFERENCE), DIRECTOR, DIVISION OF MINING LAND AND WATER, DEPARTMENT OF NATURAL RESOURCES, ANCHORAGE, stated that the amendment was created to rectify a technical change in how revenues are accounted for in oil and gas leases. Because of the manner in which royalty settlements are handled, a contract should include all revenue. Mr. Loeffler added that in order to accomplish the sponsor's intent, language was changed so that it would only affect new revenue, and in this case, revenue from oil and gas leases following the effect of the proposed act. He pointed out this was a technical change. Co-Chair Harris asked if the Representative Ogg supported Amendment #1. Representative Ogg replied he did. Co-Chair Harris WITHDREW his OBJECTION. Representative Chenault asked if it would include mineral exploration. Mr. Loeffler replied it would. There being NO further OBJECTION, the Amendment #1 was adopted. Representative Joule reiterated that he did not know how he felt about the proposed legislation. Co-Chair Williams advised that he had requested additional language be added, pointing out that it has taken the University 40-years to get up and going. He did not know what would happen in the future years if the University needed further funding. He believed that the legislation would help the University for future planning, allowing more time for property management. Representative Joule spoke to support for the University's growth, noting that he was not a supporter of SB 7. He anticipated that the proposed legislation would repeal that act. Co-Chair Williams commented that it could take up to twenty years to develop a land management plan for 250,000 acres. He did not know what would happen in the next twenty years and that the proposed legislation would help the University plan for the future. Representative Joule referenced the last version of SB 7, pointing out that there was an issue of borough-selected lands and entitlements. He understood that the University would not be able to choose lands over the boroughs. He asked if headway was being made for the boroughs and their entitlements. Mr. Loeffler acknowledged that the Department is making headway and completing a 12,000-acre initial entitlement. At the previous rate, it would have taken fifty years to get the land to all the municipalities. He thought that would be available by the end of the decade. Representative Joule asked if there was a plan for statewide conveyance to those boroughs. Mr. Loeffler offered to provide that information to the Committee. Co-Chair Harris referenced the Department of Natural Resources fiscal note, pointing out the $412 thousand dollars coming from the FY05 University endowment. NICO BUS, ACTING DIRECTOR, DIVISION OF ADMINISTRATIVE SERVICES, DEPARTMENT OF NATURAL RESOURCES, explained that the legislation would transfer $353.9 thousand dollars out of the general fund and $59 thousand dollars out of the land disposal income fund into the University Endowment Fund and the Public School Trust Fund for the first year. That ratio would change over the years. He added that it would be the amount of money for any new resource development revenue to be generated after the effective date of the legislation. Co-Chair Harris asked the intent of the $459 thousand dollar note in the FY05 expense budget. Mr. Bus explained that the th most current note was dated April 9, and the note referenced by Co-Chair Harris no longer applies. Co-Chair Harris mentioned the timber sale receipts. Mr. Bus stated that the amount of timber sales that would be lost through the program could amount up to $21.8 thousand dollars. Co-Chair Harris noted an additional request from administrative services component in the amount of $48 thousand dollars. Mr. Bus advised that in the first year, the Department would need to change the computer programs to be able to implement capability for revenues coming out of the various leases and accounts, moving into the school trust fund and the University endowment. After the initial investment, it would cost $15 thousand dollars for maintenance level up keep. He maintained that this would double the current accounting structure. Representative Chenault inquired about the fiscal analysis accompanying the note. Mr. Bus explained that in the initial conversion, it would be $10 thousand dollars; by the end of the year, it would amount to $7 thousand dollars and would fund a part time position. Representative Hawker reminded members of a previous discussion with Representative Ogg regarding the Supreme Court challenge that had been made to SB 7. He understood that ruling did not violate the Constitution as being an appropriation and they declined to rule whether making this type of grant to the University was a violation of a dedication of funds. He inquired if that had been resolved. Representative Ogg replied that it has not and was still before the Supreme Court. Representative Hawker questioned if HB 333, which transfers interest to the University, would be affected by the outcome of that court case. Representative Ogg responded that the bill before the Committee attempts to differentiate between that concern. However, they are similar issues and the accounts have been bifurcated. He added that the University portion could be subject to that concern but that the school portion should not. Representative Hawker grilled the representative that the sponsor did not appear comfortable providing assurance that the bill before the Committee was sufficiently different and that it would not be subject to a court challenge. Representative Ogg acknowledged that he did not know and that a potential challenge could be out there. PETE ECKLUND, STAFF, REPRESENTATIVE BILL WILLIAMS, attempted to clear up some of the fiscal concerns. He pointed out that there are two notes, which are a cost to the State and that they would change with the adoption of the committee substitute. The change is from general funds to public school trust funds. The committee substitute changed one of the purposes that those funds could be used for. They could be used for paying the costs of education and the costs of managing the fund itself. Fiscal note #3, from Department of Revenue has costs, which should be moved to the "other" component. The last fiscal note addressed by Mr. Bus, Information Services component should also be changed from general funds to the "other" category. Co-Chair Harris MOVED to ADJUST the fiscal note to reflect testimony made by Mr. Ecklund. There being NO OBJECTION, the fiscal change was adopted. Representative Foster MOVED to report CS HB 333 (FIN) out of Committee with individual recommendations and with the accompanying fiscal notes. There being NO OBJECTION, it was so ordered. CS HB 33 (FIN) was reported out of Committee with a "no recommendation" and with three new fiscal notes by the Department of Natural Resources, one new zero note by the Department of Revenue, one new fiscal note by the Department of Revenue, fiscal note #1 by the Department of Education & Early Development and fiscal note #4 by the University of Alaska. HOUSE BILL NO. 367 An Act relating to the licensing and regulation of sex- oriented businesses and sex-oriented business entertainers; relating to protection of the safety and health of and to education of young persons who perform in adult entertainment establishments; and providing for an effective date. REPRESENTATIVE LESIL MCGUIRE, SPONSOR, noted that the statewide Parent-Teacher-Student Association (PTSA) passed a resolution asking the Legislature to pass a law to protect under 21-year-old employees and minors from some of the ill effects caused by strip clubs, massage parlors and other nude entertainment businesses. Accordingly, they worked to help craft HB 367. Among the findings in the statewide PTSA resolution, from a review of studies and court findings, is a showing that the operation of sexually oriented businesses (SOB) leads to higher rates of crime, including sexual assaults, prostitution, drug sales and drug use. Representative McGuire stated that the primary goals of HB 367 are to permit the legal operation of these businesses while protecting young Alaskans who work at them, to protect minors, and to protect the public from operations by those adult establishments that do not follow the law. Representative McGuire highlighted the provisions of the bill, which would protect the public and young adults in the following ways: · Prohibits nude entertainment from sharing a common entrance, restroom or hallway with businesses or residences used by minors. · Prohibits the use of closed private booths where illegal sexual activities may occur. · Prohibits the operation of sexually oriented businesses by those with felony records, or records involving sexually related, drug-related, or violence-related crimes. · Prohibits the employment of nude or semi nude entertainers under the age of 19. · Requires entertainers to obtain a license, and prove they have attended a State approved course teaching the entertainer how to protect her/himself from sexual assault; and a course teaching entertainers of wage and working condition violations that occur in that area of business. · Requires entertainers under 21 years old to show they have attended a State-approved counseling session that is aimed at letting young adults know of career and educational alternatives, financial aid and vocational training available to them as viable options to entering or remaining in a career in adult entertainment. While it is likely unconstitutional to ban all 21 year olds from these jobs, it is important that young adults at least know about other life options. Many young adults who enter into these careers come from backgrounds where those options are not generally discussed. · Entertainers under age 21 shall also be required to show they have taken a state-approved course on sexually transmitted diseases. · Businesses and entertainers are required to obtain licenses to show these requirements have been followed. The State, as it does in other areas, will set the license fees at a level to cover the State's costs of administration and enforcement. · Communities shall be apprised of adult business license applications through reasonable public notice rules. · Allows suspension of an adult entertainment business license if provisions of the law are knowingly violated. Representative McGuire pointed out the faxed testimony from Shawn Ruggley, who spent many years dancing in teen strip clubs. Ms. Ruggley mentions that the selling and buying of drugs is intermingled within that scene; it is almost as if the two were one in the same. (Copy on File). Representative Hawker MOVED to ADOPT Amendment #1, #23- LS1394\X.2, Craver, 4/15/04. (Copy on File). Co-Chair Williams OBJECTED for the purpose of discussion. Representative McGuire explained that the amendment was a collection of all the changes made to the bill in an effort to garner support. It eliminates references to age restrictions. Some of the changes come as a reflection on Supreme Court rulings that would cause legal expense and be challenged. She pointed out that most of the changes were to the age requirement. Representative Hawker MOVED to add a "friendly" amendment to Amendment #1, Page 11, Line 6, deleting "public" and inserting "pubic". There being NO OBJECTION, the amendment was amended. TAPE HFC 04 - 84, Side B  OFFICER PABLO PAIZ, (TESTIFIED VIA TELECONFERENCE), ANCHORAGE POLICE DEPARTMENT, ANCHORAGE, spoke in favor of the legislation. He was disappointed with the language of the amendment as he thought it would "water down" the bill. He commented that he has witnessed the plight of many young dancers who are victims to their employment. In addition to the employing, many employers house them. Having the businesses being licensed and regulated would keep them on the up and up. DON HUDSON, (TESTIFIED VIA TELECONFERENCE), PHYSICIAN, ALASKA REGIONAL HOSPITAL, ANCHORAGE, voiced his support for the bill, voicing concern that it had been watered down. He commented on the dramatic increase of sexually transmitted diseases that many of the young girls are treated for at local hospitals. These girls are frequently pregnant, having multiple complications. He assessed that this is a sad commentary on the life of these young people, reiterating his support for the bill. CAROL HARTMAN, (TESTIFIED VIA TELECONFERENCE), CO-OWNER, FANTASIES, ANCHORAGE, spoke strongly against the legislation. She stated that she owns a business in the industry and thought that the bill should not have been brought forward. The industry was excluded from the discussions that formulated the bill. She believed that these issues should have been addressed at a local level. There are already municipal codes which grandfather in this industry including specific requirements. She mentioned that they would not be against regulating the industry if it was handled fairly, making a better business world for everyone. The concern is with over-regulation. Ms. Hartman added that many of the alleged referenced abuses took place years ago when current laws were not in place. She added that the situation in Anchorage is totally different than those in the large cities in the Lower forty- eight states and that mishandling in the Alaskan businesses is unproven. She emphasized that there are no secondary effects from this business. Ms. Hartman disliked being called a "sexually oriented business". She stressed that there is no "sex" in the industry. She asked for specific information that could be substantiated. She referred to the reference regarding the high rate of sexually transmitted diseases, pointing out that the North Slope area has the highest amount of Chlamydia in the nation. She asked if all those girls were dancers. She claimed that the legislation was harsh and asked that it be reconsidered. KARA NYQUIST, (TESTIFIED VIA TELECONFERENCE), ATTORNEY, DIRECTOR OF COVENANT HOUSE, ANCHORAGE, spoke in strong support of HB 367. She noted that she had worked with Representatives McGuire and Gara on the legislation. She offered a brief legal description of her experience on the issue. The Alaska Supreme Court and the U. S. Supreme Court have recognized that dancing is constitutionally protected, however, both courts recognize that those judgment restrictions and that local governments have the right and duty to regulate sexually oriented businesses. The Supreme Court uses the term SOB when describing those businesses. She mentioned the secondary effects of this type of local business with increased crime including drug traffic, prostitution and sexual assault and the increase of spreading sexually transmitted diseases and wage and hour violations. Several of the minors interviewed have spoken about the things that occurred to them when working in clubs in Anchorage. Some of the things reported were: · Required to pay $50 dollars a night to work at the clubs and if they did not make that amount they then owed the house; · Encouraged to do lap dances with no clothing on; · Encouraged to engage in prostitution; · Forced to work in unclean conditions; and · Concluded that 16-year-old girls are engaging in sex. Ms. Nyquist pointed out that these things are happening in Anchorage. The club owners in the State should not employ anyone under the age of 21. She urged that the bill be passed from Committee. TERRY DITTMAN, (TESTIFIED VIA TELECONFERENCE), PARENT- TEACHER-STUDENT ASSOCIATION (PTSA), ANCHORAGE, read the testimony from Nancy Fair, Parent-Teacher-Student Association, Service High School, Anchorage. (Copy on File). She noted that they had spent over a year researching the impacts of the SOB's, finding no benefits, only negative impacts from that type of business to the children of the State. She claimed that business licensing as proposed in HB 367 would be an important step in protecting the teens. It would help insure that underage teens are not involved and it would insure that the club owners are not criminals. The PTA strongly supports raising the minimum age for both customers and strippers to 21 years. Raising the minimum age would not be inconsistent with supporting the minimum voting and military age requirements. Ms. Dittman added that participation in SOB's is frequently a pathway to drug and alcohol addiction and prostitution. Use of drugs and alcohol contributes to an unsafe environment for teens. Many of the customers at the non- liquor strip clubs arrive intoxicated. Strip clubs without a liquor licenses have no designated closing times, so when the bars close a "rush" of intoxicated customers appear in the clubs and interact with the under-aged clients. Ms. Dittman added other benefits of the bill would be statewide jurisdiction, so that all communities are protected. She strongly encouraged review of the legislation, as the industry is detrimental to individuals and to the communities. ANDREE MCLEOD, (TESTIFIED VIA TELECONFERENCE), ANCHORAGE, testified in opposition to the legislation because of the manner in which it was drafted. She stated that she is not in favor of allowing high school students to participate in stripping, but maintained that the process did not include the industry members when formulating the bill. The industry has offered to address the issues of employing high school students. Ms. McLeod emphasized that this is a local issue and observed that men and women over 18 years of age have the right to make their own decisions. Ms. McLeod recommended that the operations should be regulated around the State but that the young people in the 18-21 year old range are able to make their own decisions without the interference of State government. DIANA L. STRAUB, (TESTIFIED VIA TELECONFERENCE), PARENT- TEACHER ASSOCIATION, ASSEMBLY MEMBER, WASILLA, voiced strong support for the bill. Through the licensing process, the public will have the ability to comment. The public should have the right to comment during the renewal process and the community would be able to participate in the licensing process. It is valuable that the public can revoke these licenses. Ms. Straub recommended that the licensing process mirror the liquor licensing process and be regularly checked for compliance. Requests for application could be approved or rejected by the State for incompliance. Ms. Straub recommended that parole be added on Page 4, Line 7 & 8 and on Page 5, Line 10, also inserting cities and boroughs. REGINA MANTEUFEL, (TESTIFIED VIA TELECONFERENCE), FORMER STRIPPER, ANCHORAGE, voiced strong support for the legislation. She urged that the patrons be 21 years old. She noted that she first started dancing for the military. Those clients tend to be very rude and often would grab the dancers. She pointed out that many dancers have stage names to protect themselves from being followed. Ms. Manteufel discussed labor laws that a person cannot be paid a shift rate to work. Dancers cannot be paid their stage tips to work. Any stage tip is considered a tip and it is illegal that the owners of the club use that to suffice minimum wage. She claimed that is done everywhere and that it is illegal to have a shift-pay. Ms. Manteufel recommended that the Department of Labor & Workforce Development visit the clubs twice a year and go over the labor laws with the dancers, including information on making a wage claim. Ms. Manteufel did not support young girls table dancing naked. She stressed that there should be no naked table dancing at any age. The original bill contains one-hour assertiveness training, which she thought would be cost effective for all clubs. Ms. Manteufel referenced the domestic violence records for the State of Alaska, pointing out that the men abusing between the ages 18-21 years old are usually in the military. TAPE HFC 04 - 85, Side A  Ms. Manteufel concluded her testimony and reiterated her support for the bill. KATHY HARTMAN, (TESTIFIED VIA TELECONFERENCE), CO-OWNERS, FANTASIES, ANCHORAGE, spoke against the passage of the bill. She referenced the packet in member's files. (Copy on File). She noted that her business is in the Union and is audited every year for workmen's compensation. She stressed that much of the testimony is off base. Much of the information is being provided from very old surveys. She claimed that the "deep" research performed by Representative McGuire was not true. She responded to comments made in previous testimony. Ms. Hartman pointed out that there are only six of this type business in the Northern Alaskan area. The Municipality of Anchorage and Matsu have laws on the books regulating them. Currently, these businesses are required to do all the reporting that other businesses are required to provide. She strongly urged that the bill not be moved from Committee. Representative Hawker MOVED a conceptual to Amendment #1, Page 2, Line 15, inserting language: (4) Information on the State's wage and labor laws as it pertains to the entertainer's employment. There being NO OBJECTION, the conceptual amendment was adopted. Vice Chair Meyer inquired how performances in places like the Performing Arts Center and out-door theatres that from time to time offer presentations where clothing is removed, would be handled. Representative McGuire responded that the sponsor's were careful in drafting the legislation that those situations were not included. There is a definition on Page 10, outlining an adult oriented business and operating for compensation. She added that sexually oriented business is a legally tested term words used throughout the Supreme Court documentation. Co-Chair Harris MOVED to report CS HB 367 (FIN) out of Committee with individual recommendations and with the accompanying fiscal notes. There being NO OBJECTION, it was so ordered. CS HB 367 (FIN) was reported out of Committee with "no recommendation" and with a new fiscal note by the Department of Community & Economic Development, a new zero note by the Department of Public Safety and zero note #2 by the Department of Labor & Workforce Development. HOUSE BILL NO. 533 An Act relating to the state's administrative procedures and to judicial oversight of administrative matters. LINDA SYLVESTER, STAFF, REPRESENTATIVE BRUCE WEYHRAUCH, noted that Representative Weyhrauch was carrying the proposed legislation for the House State Affairs Committee. She commented that HB 533 was a part of a package put forth by the Regulation Review Committee, Chaired by Senator Therriault. The component is called Judicial extraction and would address circumstances when there is an unreasonable delay for an instate agency issue. She stated that Representative Weyhrauch was interested in carrying the bill, as it would address the impact of unreasonable delays causing irreparable harm. DAVE STANCLIFF, STAFF-REGULATION REVIEW COMMITTEE, REPRESENTATIVE PETE KOTT, stated that HB 533 was the final stage of a three-bill system, working through the Legislature and providing a safety valve. He referenced the data provided by Legislative Research. To date, only half the agencies have reported in. It is worthy to note for the record that since 1980, over 8,000 administrative cases have languished for more than a year. That does not count the contract-hearing officers. Mr. Stancliff commented it would be difficult to quantify how that would affect State government knowing it is a huge expense. The courts require that the administrative remedy must be exhausted before they can be brought before the court. He commented that the trick is to provide a safety valve without providing too easy a way to opt out of regulations. He noted that the sponsor had worked with the Department of Law. By the time it makes it to court, the court would have three options: · Site the agency to speed the process up; · Some type of alternate dispute resolution; · Claim that it was out there long enough to come to a resolution and in the matter of public interest, the court would opt to consider the case. Mr. Stancliff pointed out that the theory is, once a safety value is in place, on-going cases would become resolved. The reform is not sweeping, but to the businesses and citizens, it would be a sign that politicians understand that there are cases, which have gone on too long, and that there is an alternative option. It is anticipated that once the Department of Environmental Conservation and the Department of Education & Early Development weigh in with the contract cases, there could be somewhere between 12,000 and 15,000 cases that have gone on for more than a year. The cost is extraordinary. Mr. Stancliff pointed out the indeterminate notes. The intention is that once the cases are processed, the savings would reduce that level by offsetting them. He offered to answer questions of the Committee. Representative Hawker asked about the fiscal note from the Alaska Permanent Fund Corporation. He pointed out that note related to HB 553 (analysis) and should not be included in the file for HB 533. Representative Hawker noted that he was disappointed that Representative Weyhrauch was not present. He asked if the bill was a vehicle being considered as an administrative relief language related to the expungement statute. Mr. Stancliff replied that it had not been considered for that reason. He discussed that they would respectfully request that it remain "whole" as it is one part of a three-part process. Ms. Sylvester interjected that Representative Weyhrauch was very interested in expungement concept and had investigated that. Representative Foster MOVED to report CS HB 533 (JUD) out of Committee with individual recommendations and with the accompanying fiscal notes. There being NO OBJECTION, it was so ordered. CS HB 533 (JUD) was reported out of Committee with a "do pass" recommendation and with a new fiscal note by Department of Law, indeterminate note #1 by the Alaska Court System, indeterminate note #2 by the Commercial Fisheries Entry Commission, and indeterminate note #3 by the Department of Health & Social Services. ADJOURNMENT The meeting was adjourned at 3:53 P.M.