HOUSE LABOR AND COMMERCE STANDING COMMITTEE March 15, 1994 3:00 p.m. MEMBERS PRESENT Rep. Bill Hudson, Chairman Rep. Joe Green, Vice Chairman Rep. Brian Porter Rep. Eldon Mulder Rep. Bill Williams Rep. Joe Sitton MEMBERS ABSENT Rep. Jerry Mackie COMMITTEE CALENDAR *HB 453: "An Act amending the motor fuel tax to establish a different tax levy on residual fuel oil used in and on watercraft; and providing for an effective date." PASSED FROM COMMITTEE *HB 290: "An Act exempting certain sports officials from workers' compensation coverage." PASSED FROM COMMITTEE *HB 487: "An Act relating to the sale, display, or distribution of material harmful to minors at places where minors are present or allowed to be present and where minors are able to view such material; and prohibiting the sale or display of certain audio recordings, phonograph records, magnetic tapes, compact discs, or videotapes, without warning labels and opaque wrappings." HEARD AND HELD IN COMMITTEE (* First public hearing.) WITNESS REGISTER REP. GARY DAVIS Alaska State Legislature State Capitol Juneau, Alaska 99801-1182 465-2693 Position Statement: Sponsor of HB 453 C.J. ZANE Holland America Lines 880 H Street, Suite 200-A Anchorage, Alaska 99501-3400 274-9019 Position Statement: Supported HB 453 (Spoke via teleconference) BERNIE SMITH Tesoro P.O. Box 3369 Kenai, Alaska 99611 776-8191 Position Statement: Supported HB 453 (Spoke via teleconference) JAMES BURNS Petro Marine 3111 C Street Anchorage, Alaska 99503 562-5000 Position Statement: Supported HB 453 CHRIS GATES, Director Division of Economic Development Department of Commerce and Economic Development P.O. Box 110804 Juneau, Alaska 99811-0804 465-2017 Position Statement: Supported HB 453 ROBERT ERICKSON Teamsters Local 959 306 Willoughby Ave. Juneau, Alaska 99801 586-3225 Position Statement: Supported HB 453 KENT DAWSON, Lobbyist P.O. Box 20790 Juneau, Alaska 99802 463-2533 Position Statement: Supported HB 453 BEN ESCH 310 K, #709 Anchorage, Alaska 99501 276-6131 Position Statement: Supported HB 290 (Spoke via teleconference) BRUCE KREMENER 3327 Moorewalk Rd. North Pole, Alaska 99705 488-7964 Position Statement: Supported HB 290 (Spoke via teleconference) DON SHANNON 232 Bentley Drive Fairbanks, Alaska 99701 Position Statement: Supported HB 290 (Spoke via teleconference) BILL BRODERSON 1612 Madison Dr. Fairbanks, Alaska 99709 479-0270 Position Statement: Supported HB 290 (Spoke via teleconference) MIKE BORGEFORD 1801 Parks Highway Wasilla, Alaska 99654 373-5276 Position Statement: Supported HB 290 (Spoke via teleconference) BOB SIMS P.O. Box 240024 Douglas, Alaska 99824 364-2316 Position Statement: Supported HB 290 JACK PHELPS, Staff Rep. Pete Kott Alaska State Legislature State Capitol Juneau, Alaska 99801-1182 465-3777 Position Statement: Presented HB 487 REED STOOPS, Lobbyist Motion Picture Association 240 Main Street #600 Juneau, Alaska 99801 463-3223 Position Statement: Opposed HB 487 PREVIOUS ACTION BILL: HB 453 SHORT TITLE: TAX ON RESIDUAL MARINE FUEL OIL SPONSOR(S): REPRESENTATIVE(S) G.DAVIS JRN-DATE JRN-PG ACTION 02/09/94 2316 (H) READ THE FIRST TIME/REFERRAL(S) 02/09/94 2316 (H) L&C, STATE AFFAIRS, FINANCE 03/15/94 (H) L&C AT 03:00 PM CAPITOL 17 BILL: HB 290 SHORT TITLE: EXEMPT SPORTS OFFICIALS FROM WORKERS COMP SPONSOR(S): REPRESENTATIVE(S) MULDER JRN-DATE JRN-PG ACTION 04/22/93 1430 (H) READ THE FIRST TIME/REFERRAL(S) 04/22/93 1431 (H) L&C, STATE AFFAIRS 03/15/94 (H) L&C AT 03:00 PM CAPITOL 17 BILL: HB 487 SHORT TITLE: SALE/DISPLAY OF MATERIAL HARMFUL TO MINOR BILL VERSION: SSHB 487 SPONSOR(S): REPRESENTATIVE(S) KOTT JRN-DATE JRN-PG ACTION 02/14/94 2379 (H) READ THE FIRST TIME/REFERRAL(S) 02/14/94 2379 (H) LABOR & COMMERCE, JUDICIARY, FINANCE 02/24/94 2522 (H) SPONSOR SUBSTITUTE INTRODUCED-REFERRALS 02/24/94 2522 (H) LABOR & COMMERCE, JUDICIARY, FINANCE 03/15/94 (H) L&C AT 03:00 PM CAPITOL 17 ACTION NARRATIVE TAPE 94-23, SIDE A Number 001 CHAIRMAN HUDSON convened the meeting at 3:10 p.m. HB 453 - TAX ON RESIDUAL MARINE FUEL OIL Number 070 REP. GARY DAVIS, Prime Sponsor of HB 453, presented the following sponsor statement on HB 453: House Bill 453 is simple, straight forward legislation. House Bill 453 will attempt to create an equal playing field between Alaska's residual fuel oil industry and their counterparts in the Lower 48 and Canada. Residual fuel oil is the residue from crude oil after the light oils, gasoline, naphtha, kerosine, and mid- distillates, are extracted in the refining process. The only applications for residual fuel oil in Alaska are asphalt, cruise ship fuel and reinjection into the pipeline. This product is subject to the state's motor fuel tax. The tax rate for residual fuel oil is five cents per gallon. As a result of the current rate of taxation on this product, Alaska's residual fuel oil is automatically noncompetitive with the same product available elsewhere. The cruise ship industry is the prime potential market for this fuel oil. However, even though many ships cruise Alaska waters during the summer, minimal quantities of this extremely tax sensitive fuel oil are purchased in Alaska. Consequently, the state receives minimal revenue from the tax. House Bill 453 will reduce the tax rate levied on the sale of residual fuel oil, which will stimulate sales of residual fuel oil and benefit Alaska's economy. This legislation will increase job opportunities in the trucking and fuel industries. Simultaneously, state revenues will likely remain consistent and possibly increase. Number 170 REP. GREEN asked if the market would grow if the tax is lowered. Number 180 REP. DAVIS replied that he expected the market to grow as the cruise lines want to do business in Alaska. Number 220 REP. PORTER asked if it would be an advantage to the state to get commitments from the cruise lines. Number 232 REP. DAVIS replied that it would be to the advantage of the state to get commitments, but the cruise lines have been resistent to that. Number 238 REP. PORTER answered that the legislature could be resistent to lowering prices also. Number 240 REP. DAVIS stated that the statute does provide for a sunset provision. Number 247 C.J. ZANE, Director of Government and Community Relations for Holland America Lines/West Tours, Inc., testified via teleconference in support of HB 453. Mr. Zane stated that Holland America Lines supported the concept of the bill, which is to make Alaska products competitive on the world market. MR. ZANE stated that it is understandable that the committee would want some commitment from the cruise lines regarding amounts of fuel purchased, but that would be difficult because price is not the only consideration in deciding whether or not to purchase in Alaska. Another consideration is the time the cruise line has for bunkering in the various ports. An additional consideration is the availability of supply which can be affected by weather. Number 330 BERNIE SMITH, Tesoro, testified via teleconference in support of HB 453. Mr. Smith stated that last year Tesoro had over 6.5 million barrels of No. 6 fuel oil that had to be shipped out. He said that currently only about 1-1/2 percent of that is being sold to the cruise ship industry. MR. SMITH stated that HB 453 would produce a number of jobs and revenue for the Kenai Peninsula. Number 355 REP. GREEN commented that Tesoro will be saving money since they won't have to ship out the large amounts of No. 6 oil if HB 453 passed, so the state and Tesoro should share the cost. Number 367 MR. SMITH responded that Tesoro's residual is already a loss that they couldn't lower their price any more. He added that they do not have the option of putting their fuel back into the pipeline. Number 377 CHAIRMAN HUDSON asked Mr. Smith if Tesoro paid any tax on residual fuel that was being shipped out. Number 382 MR. SMITH responded no. Number 385 CHAIRMAN HUDSON asked how many jobs this decrease in tax would result in. Number 389 MR. SMITH answered twelve jobs. Number 394 JAMES BURNS, Senior Vice President, Petro Marine, testified in support of HB 453. Mr. Burns explained the process of making No. 6 oil and the costs involved. MR. BURNS noted that no other states levy a tax on this oil. Number 499 CHRIS GATES, Director, Division of Economic Development, testified in support of HB 453. Mr. Gates stated that when ships fuel up in either Sitka or Seward the local economy benefits as the ship stays in port longer and passengers spend more money. MR. GATES read two sentences from a letter from Gary Paxon, Administrator, Sitka: "HB 453 is a very important issue to the City and Borough of Sitka. If it passed we have a commitment from Pacific Northern Oil to refuel cruise ships in Sitka. This will create important jobs for our community and in the long term will give us significant opportunities as a change port." Number 521 REP. MULDER asked how long it takes to fuel up a ship. Number 525 MR. GATES responded that it depended on how empty the ship was. It could take anywhere from four hours to eight hours. Number 528 ROBERT ERICKSON, Teamsters Union, testified in support of HB 453. He stated it is estimated that if this bill passes it could mean up to fourteen new trucking jobs. Number 550 KENT DAWSON, Princess Tours, testified in support of HB 453. He stated that Princess Lines has stated in writing that at least 1/3 of its fuel will be bought in Seward if this bill is passed. Number 569 REP. PORTER moved the "O" committee substitute. No objections were heard; it was so ordered. CHAIRMAN HUDSON asked the committee to look at an amendment to tighten the definition of residual fuel oil. Number 580 MR. BURNS offered Amendment 1: page 2, line 3, after "oil" insert "otherwise known as No. 6 fuel oil" and on page 2, line 6 after "viscosity" insert "rated by kinematic units." TAPE 94-23, SIDE B Number 023 REP. MULDER moved adoption of Amendment 1. No objections were heard; it was so ordered. REP. PORTER moved to pass CSHB 453(L&C) as amended out of committee. No objections were heard; it was so ordered. HB 290 - EXEMPT SPORTS OFFICIALS FROM WORKERS COMP Number 060 REP. MULDER presented HB 290 and offered the following sponsor statement: Recently, the Department of Labor, Division of Workers Compensation, has determined that amateur sports officials must be covered by worker's compensation policies under a ranking of extremely high risk. This decision, according to sports officials' associations, will cause sports organizations which contract with referees, time keepers, and line judges, to pay anywhere between 17 and 54% of their compensation for officiating to cover worker's compensation premiums. HB 290 is designed to eliminate this problem by exempting amateur sports officials from worker's compensation coverage as we do other contractual groups. Worker's compensation laws were designed to provide medical and income replacement for injured workers. Whereas few, if any, amateur sports officials are injured while officiating, the current high insurance premiums do not accurately reflect the amount of risk they experience as officials. HB 290 is supported by sporting associations, officials' groups and officials themselves throughout the state. Included in the packets are letters of support from these groups. This is a serious problem facing amateur sports in Alaska and threatens their future existence. HB 290 will eliminate this problem and allow the greatest number of people to play and officiate the games that they love to be involved in. Number 158 REP. SITTON asked if there was any position paper from the Department of Labor. Number 165 REP. MULDER responded no. Number 179 REP. SITTON stated he sees a disturbing tendency by the administration not to comment on legislation that affect the people of Alaska. Number 180 CHAIRMAN HUDSON noted that in the past the administration has provided some statement of support or nonsupport on bills. Number 193 BEN ESCH testified via teleconference in support of HB 290. Mr. Esch stated this bill is the result of an audit that concluded that since the Anchorage softball association contracted the umpires and they didn't have insurance the association was to pay insurance. MR. ESCH noted that the biggest problem he sees is the rates charged by insurance companies. MR. ESCH noted that local referees, umpires and time keepers are being charged the same worker's compensation rates as are being charged to major league baseball refs, umpires and time keepers. Number 285 BRUCE KREMENER testified via teleconference in support of HB 290. He added that the 17% rate is too high and will end up shutting down amateur sports in Alaska. Number 311 DON SHANNON testified via teleconference in support of HB 290. He stated that he referees as a hobby not for the money, and the amount of insurance is too high for people like him to continue. Number 330 REP. SITTON asked Mr. Shannon if in his fifteen years of experience had he ever seen anyone be injured. Number 340 MR. SHANNON replied no. Number 360 BILL BRODERSON testified via teleconference in support of HB 290. He stated that any raise in insurance will effectively raise his rates to officiate. This will necessarily be born out by the players. Number 360 MIKE BORGEFORD, Mat-Su Softball Association, testified via teleconference in support of HB 290. Mr. Borgeford stated he is a player, sponsor, and has helped out with tournaments in Mat-Su. He stated he supports the testimony of Mr. Esch and Mr. Kremener. MR. BORGEFORD noted that the scorekeepers receive $5.00 a game and if they worked every game possible during a season the total compensation per season would be $350.00. The minimum workman's compensation insurance currently is $79.95 for a scorekeeper, which is 22% of their wage. MR. BORGEFORD stated that the Mat-Su Softball Association's workers compensation bill last season was over $4,000.00. Since there are only 35 teams in the association, that results in over $100.00 per team. MR. BORGEFORD concluded by saying that historically injuries have been few to referees and other officials. Passage of HB 290 would be good for kids and adults to help keep them involved in sports. Number 390 BOB SIMS, President, Juneau Douglas Officials Association, testified in support of HB 290. Mr. Sims dittoed the previous supportive testimony. Number 429 REP. PORTER moved HB 290 with individual recommendations and a zero fiscal note. No objections were heard; it was so ordered. HB 487 - SALE/DISPLAY OF MATERIAL HARMFUL TO MINOR Number 435 JACK PHELPS, Staff, Rep. Pete Kott, Prime Sponsor of HB 487, offered the following sponsor statement for the record: The introduction of House Bill 487 was prompted by the sponsor's concern over the growing number of violent crimes in Alaska. Cases of reported rape, for example, nearly doubled between 1989 and 1991. Furthermore, there is growing evidence that violent crimes, especially rape and murder, are more frequently committed by young people. The sponsor believes that a contributing factor in this rising violence among young people is the increased frequently of sex-related violence as a theme in rock and rap music. This conclusion has been supported by the U.S. Attorney General's Commission of Pornography which found that exposure to sexually violent material resulted in acts of sexual aggressiveness and antisocial behavior. It is self-evident that some material, whether in a visual or aural format, may not be suitable for distribution to children. At a minimum, the seller should make some attempt to alert parents to the contents of such material and to shield innocent young people from unwanted contact with such material. House Bill 487, while recognizing the constitutional restraints imposed on the legislature's ability to curtail distribution of certain material, acts on the state's legitimate interest in providing some level of protection to children who may be harmed by unwanted exposure to the material. The bill would regulate the distribution, sale, and display of two different types of material. First, it would require that printed matter, if it visually depicts material harmful to minors and is displayed in a place where minors are apt to view the material, must be covered by an opaque wrapper and individually sealed. The definition of material harmful to minors in this section is drawn from the obscenity definition set forth by the U.S. Supreme Court. Second, the bill requires labeling on any audio recording or music video recording that contains lyrics harmful to minors. The label is required to give a parental advisory that the recording contains lyrics that include or describe material harmful to minors. The bill also applies the wrapping and sealing requirements of the first part of the bill to certain audio and video recordings. For audio and video recordings the definition of material harmful to minors is expanded to include certain kinds of violence. Violation of the provisions of HB 487 would be a Class B misdemeanor on first offense, and a Class A misdemeanor on subsequent convictions. Number 490 REP. SITTON asked if the language on page 1, line 13, "harmful to minors in any place where minors are present" applied to material found in the minor's home. Number 495 MR. PHELPS answered that he thought that was a good question and thought that on the face of it it appears that it would be true. Number 507 REP. SITTON questioned whether Michelangelo's "David" would be determined to fall under the language on page 2, line 14. Number 514 MR. PHELPS answered that material referenced under this section would have to satisfy all three descriptions to apply. He further stated that it was clear "David" would not fall under this section. Number 520 REP. SITTON asked if the language on page 2, line 11, was the language from a Supreme Court decision. Number 525 MR. PHELPS answered that the previous statement was true and further stated that what's added to the Miller definition is the word "minors." He added that you can argue that this is a looser standard as it now specifically references minors. Number 529 CHAIRMAN HUDSON asked if the sponsor had any opinion on the Department of Law's concerns. Number 540 MR. PHELPS stated that the sponsor felt that if the items in question truly fit the Supreme Court's definition of obscenity he could not imagine why they would be provided to minors from an official entity. Number 550 CHAIRMAN HUDSON suggested that the comments provided by the Department of Law should be fully considered. Number 557 REED STOOPS, Lobbyist, Motion Picture Association of America and the Recording Industry, testified in opposition to HB 487. Mr. Stoops stated he believes the bill to be unconstitutional, unworkable and unenforceable. MR. STOOPS stated he believes HB 487 to be unconstitutional because the definition regarding violent behavior is subjective and is protected by the first amendment. MR. STOOPS stated that he believes there is a violation of due process because under HB 487 action could be taken before something is deemed harmful to minors. MR. STOOPS added that HB 487 could be under inclusive and doesn't treat all things the same. MR. STOOPS contended that HB 487 is unworkable as the industry would have to decide case by case on over 10,000 recordings a year what is offensive and what is not; and furthermore what standards should/would be used. MR. STOOPS added that HB 487 was impracticable as it would require only the recordings to be sold in Alaska be wrapped and he questioned whose responsibility that would be. MR. STOOPS informed the committee that the recording industry already has a rating system done on a voluntary basis. TAPE 94-24, SIDE A Number 001 MR. STOOPS suggested that if the legislature wanted to do something they should do a constitutional definition on what is harmful to minors. Number 073 CHAIRMAN HUDSON appointed a subcommittee of Rep. Sitton and himself on HB 487. Number 089 MR. PHELPS commented that the sponsor shared the concerns heard today, and he felt that the practical application of what obscenity means needs to be tightened up. MR. PHELPS added that the sponsor was supportive of the voluntary compliance of the industry to the degree it extends, but believes it should be uniformly applied. Number 115 CHAIRMAN HUDSON adjourned the meeting at 4:50 p.m.