HOUSE LABOR AND COMMERCE STANDING COMMITTEE April 10, 1997 3:23 p.m. MEMBERS PRESENT Representative Norman Rokeberg, Chairman Representative John Cowdery, Vice Chairman Representative Bill Hudson Representative Joe Ryan Representative Gene Kubina MEMBERS ABSENT Representative Jerry Sanders Representative Tom Brice COMMITTEE CALENDAR HOUSE BILL NO. 67 "An Act relating, for purposes of eligibility for a permanent fund dividend, to an absence from the state while on an unpaid sabbatical under the longevity bonus program; and providing for an effective date." - MOVED HB 67 OUT OF COMMITTEE * SPONSOR SUBSTITUTE FOR HOUSE BILL NO. 189 "An Act relating to sale of tobacco and tobacco products; and providing for an effective date." - HEARD AND HELD * SPONSOR SUBSTITUTE FOR HOUSE BILL NO. 159 "An Act relating to sale, gift, exchange, possession, and purchase of tobacco and tobacco products; and providing for an effective date." - HEARD AND HELD (* First public hearing) PREVIOUS ACTION BILL: HB 67 SHORT TITLE: LONGEVITY BONUS SABB'TCL:PFD ELIGIBILITY SPONSOR(S): REPRESENTATIVE(S) RYAN JRN-DATE JRN-PG ACTION 01/15/97 66 (H) READ THE FIRST TIME - REFERRAL(S) 01/15/97 67 (H) STATE AFFAIRS, LABOR & COMMERCE, FIN 02/25/97 (H) STA AT 8:00 AM CAPITOL 102 02/25/97 (H) MINUTE(STA) 03/27/97 (H) STA AT 8:00 AM CAPITOL 102 03/27/97 (H) MINUTE(STA) 04/01/97 894 (H) STA RPT CS(STA) NT 5DP 2NR 04/01/97 894 (H) DP: JAMES, BERKOWITZ, HODGINS, DYSON, 04/01/97 894 (H) IVAN; NR: ELTON, VEZEY 04/01/97 894 (H) ZERO FISCAL NOTE (REV) 04/09/97 (H) L&C AT 3:15 PM CAPITOL 17 04/09/97 (H) MINUTE(L&C) 04/10/97 (H) L&C AT 3:15 PM CAPITOL 17 BILL: HB 189 SHORT TITLE: RESTRICT TOBACCO SALES SPONSOR(S): REPRESENTATIVE(S) COWDERY, Austerman, Ryan JRN-DATE JRN-PG ACTION 03/12/97 640 (H) READ THE FIRST TIME - REFERRAL(S) 03/12/97 640 (H) LABOR & COMMERCE, JUDICIARY 04/03/97 922 (H) SPONSOR SUBSTITUTE INTRODUCED-REFERRALS 04/03/97 922 (H) L&C, JUDICIARY 04/09/97 (H) L&C AT 3:15 PM CAPITOL 17 04/09/97 (H) MINUTE(L&C) 04/10/97 (H) L&C AT 3:15 PM CAPITOL 17 BILL: HB 159 SHORT TITLE: TOBACCO PURCHASE, POSSESSION, SALE, ETC. SPONSOR(S): REPRESENTATIVE(S) KOTT, Mulder, Kohring, Sanders, Ryan JRN-DATE JRN-PG ACTION 02/25/97 465 (H) READ THE FIRST TIME - REFERRAL(S) 02/25/97 465 (H) LABOR & COMMERCE, JUDICIARY 02/27/97 519 (H) COSPONSOR(S): SANDERS 03/27/97 871 (H) SPONSOR SUBSTITUTE INTRODUCED-REFERRALS 03/27/97 872 (H) L&C, JUDICIARY 04/09/97 (H) L&C AT 3:15 PM CAPITOL 17 04/09/97 (H) MINUTE(L&C) 04/10/97 (H) L&C AT 3:15 PM CAPITOL 17 WITNESS REGISTER NANCY JONES, Director Permanent Fund Dividend Division Department of Revenue P.O. Box 110460 Telephone: (907) 465-2323 POSITION STATEMENT: Answered questions regarding HB 67. CASEY SULLIVAN, Legislative Administrative Assistant to Representative John Cowdery Alaska State Legislature Capitol Building, Room 416 Juneau, Alaska 99801 Telephone: (907) 465-3879 POSITION STATEMENT: Presented SSHB 189. BOB BARTHOLOMEW, Deputy Director Income and Excise Audit Division Department of Revenue P.O. Box 110420 Juneau, Alaska 99811-0420 Telephone: (907) 465-2320 POSITION STATEMENT: Responded to questions on SSHB 189 and SSHB 159. LOREN JONES, Director Division of Alcoholism and Drug Abuse Department of Health and Social Services P.O. Box 110650 Juneau, Alaska 99811-0650 Telephone: (907) 465-2071 POSITION STATEMENT: Responded to questions on SSHB 189 and SSHB 159. ERIC MYERS 2834 Knik Avenue Anchorage, Alaska 99517 Telephone: (907) 248-3366 POSITION STATEMENT: Testified in support of SSHB 189 and against SSHB 159. DIANA KUHNS, Chief Operating Officer Western Pacific Division American Cancer Society 8111 Country Woods Drive Anchorage, Alaska 99502 Telephone: (907) 344-9165 POSITION STATEMENT: Testified in support of SSHB 189 and against SSHB 159. PATRICIA SENNER, Executive Director Alaska Nurses Association 257 East Third Avenue, Number 3 Anchorage, Alaska 99501 Telephone: (907) 274-0827 POSITION STATEMENT: Testified in support of SSHB 189. NANCY KUHN 2060 Amy Dyan Fairbanks, Alaska 99712 Telephone: Not provided POSITION STATEMENT: Testified in support of SSHB 189 and against SSHB 159. JENNY MURRAY P.O. Box 201200 Anchorage, Alaska 99520 Telephone: Not provided POSITION STATEMENT: Read a statement on behalf of Dr. John Petraitis in support of SSHB 189. She also testified against SSHB 159. REPRESENTATIVE PETE KOTT Alaska State Legislature Capitol Building, Room 204 Juneau, Alaska 99801 Telephone: (907) 465-3777 POSITION STATEMENT: Sponsor of SSHB 159. BOBBY SCOTT Jan's Distributing, Incorporated 521 Izembek Circle Anchorage, Alaska 99508 Telephone: (907) 243-5267 POSITION STATEMENT: Testified in support of SSHB 159. SYLVIA SCOTT 7400 East 17th Avenue Anchorage, Alaska 99504 Telephone: (907) 333-3347 POSITION STATEMENT: Testified in support of SSHB 159. SUSAN FRICHETTI 10336 Stewart Eagle River, Alaska 99577 Telephone: (907) 694-7944 POSITION STATEMENT: Testified in support of SSHB 159. CATHERINE REARDON, Director Division of Occupational Licensing Department of Commerce and Economic Development P.O. Box 110806 Juneau, Alaska 99811-0806 Telephone: (907) 465-2534 POSITION STATEMENT: Responded to questions on SSHB 159. ACTION NARRATIVE TAPE 97-37, SIDE A Number 0001 CHAIRMAN NORMAN ROKEBERG called the House Labor and Commerce Standing Committee to order at 3:23 p.m. Members present at the call to order were Representatives Rokeberg, Ryan, Cowdery and Hudson. Representative Kubina arrived at 4:09 p.m. HB 67 - LONGEVITY BONUS SABB'TCL:PFD ELIGIBILITY Number 0133 CHAIRMAN ROKEBERG announced the committee would address HB 67, "An Act relating, for purposes of eligibility for a permanent fund dividend (PFD), to an absence from the state while on an unpaid sabbatical under the longevity bonus program; and providing for an effective date." He asked Representative Ryan to explain the legislation. Number 0154 REPRESENTATIVE JOE RYAN, sponsor of HB 67, explained he introduced the bill to correct an oversight. He said last year, people who were eligible for the longevity bonus were allowed the opportunity to take a sabbatical, once every five years, for purposes of service in the Peace Corps, Congress, medical treatment, et cetera, and for up to 220 days to settle the estate or the individual's deceased parent, spouse's sibling, stepchild, et cetera, without losing the eligibility for the longevity bonus. Representative Ryan explained, "Previous to that time, if you lost your eligibility once, that was it. You were forever off the program. This way they could take this sabbatical and retain it." He noted that while the person is outside of the state, they do not receive their longevity bonus. At the same time, inadvertently, they could be disqualified for their PFD check. He said he feels that since a person would be giving up their longevity bonus for the period they were outside the state, they shouldn't also be denied the eligibility for the permanent fund check. Representative Ryan said, "So what this bill basically does is just allowing an exception for these folks - unpaid sabbatical leave under Alaska 47.45.035 or sabbatical under 43.23.005, subparagraph (H). And it basically says you can take this once every five years - sabbatical and you will give up your longevity bonus payments for the period of time you're absent, but you won't also lose you eligibility for the permanent fund. You retain your eligibility for your permanent fund dividend check." He asked for the support of the committee. Number 0355 CHAIRMAN ROKEBERG noted there are two versions of the legislation, HB 67, LS0331\A, which is the original version. There is also CSHB 67(STA), LS0331\E. He asked Representative Ryan to explain the differences between the bills and what his wishes are. REPRESENTATIVE RYAN explained there was an amendment made in the House State Affairs Committee to allow people over the age of 65 to be able to utilize this mechanism. He said his intention is in the original bill which allowed the people who were on a sabbatical to participate. He stated he didn't want to make it all inclusive for large groups of other people, but there were some members of the State Affairs Committee who liked it. Representative Ryan pointed out that the sabbatical, under AS 43.23.005(h), is what was added in the State Affairs Committee. He said his preference is to adopt the original version of the bill and disregard the committee substitute from the State Affairs Committee. Number 0474 REPRESENTATIVE JOHN COWDERY asked if there is an intention of prorating for time a person wasn't in the state. REPRESENTATIVE RYAN explained in testimony given by Ms. Jones, Director, Permanent Fund Dividend Division, people could lose up to as much as two years' eligibility and then would have to go through the re-eligibility program to get their eligibility back. It depends on what periods of time they took and the different years. If a person was gone six months in two different years, they would exceed the number of days they are allowed to be absent from the state and they could lose eligibility for one year and the next thinks that is unfair. What he is trying to do by introducing the legislation is to provide an extra benefit for the people who have been living in Alaska for a long time and have qualified for the longevity bonus. Number 0606 CHAIRMAN ROKEBERG explained he would discuss what he perceives as the differences between the original and the State Affairs version. The State Affairs version allows anybody over the age of 65 to be absent from the state, even though they're not eligible for the longevity bonus. The bonus program eligibility has run out, therefore, anybody that is over 65 could be absent for the state for 12 months and still would qualify for their permanent fund. REPRESENTATIVE RYAN noted that wasn't his intention. CHAIRMAN ROKEBERG said the original version is specifically directed at people who are qualified the longevity bonus program. REPRESENTATIVE RYAN agreed. Number 0707 NANCY JONES, Director, Permanent Fund Dividend Division, Department of Revenue, came before the committee. She explained HB 67 would make the unpaid sabbatical an allowable absence for the purposes of the Permanent Fund Dividend Division. Currently, a person can take a longevity bonus sabbatical, that is enacted under new laws, and come back and still be eligible to receive a longevity bonus payment. Ms. Jones said the bill is proposing that even though they are gone more than 180 days the state still pays them a dividend even though they have been out for a whole year. She stated, "The longevity program is maintaining only their eligibility - it's not paying them, but this bill is proposing that the permanent fund dividend program then pay them for that same period of absence." Ms. Jones informed the committee that it is currently possible for a person to take a sabbatical and still be eligible for the PFD. The current rule about the absence is that a person cannot exceed 180 days which is six months. So if a person was planning and straddled two calendar years, they would still be eligible to receive a PFD. She said, "We are concerned right now that we are, again, opening up an allowable absence for a very select few people because there is no more requirements. The longevity program is not allowing more people to become eligible. It's only maintaining the eligibility of the people currently on." She noted that last year 29,733 people received at least one longevity bonus payment. Ms. Jones informed the committee that the State Affairs Committee substitute said that anyone who was qualified for the longevity bonus program on January 1, 1997, would be eligible to take a sabbatical and still be eligible for the dividend. MS. JONES said, "We at PFD have an alternative. We think that we can work out eligibility requirements for people who are out on a sabbatical, either by regulation or a statute, which would allow the disqualification of a double year that Representative Ryan alluded to. If a person does stay out from January through December 31, of a dividend qualifying year, they will not only get the next year dividend, but since they weren't back before the new qualifying year then they would miss another year. So we think that we can work out, in regulation, where a person wouldn't lose two dividends. But we feel that the program should, right now, be on equal footing. Neither program pays an individual for being outside of Alaska for traveling in excess of 180 days and right now they're equal. This bill is proposing to then -- not be eligible to get a longevity payment, but then receive a dividend." Number 0935 REPRESENTATIVE COWDERY asked if his understanding is correct in saying that Ms. Jones' statement about changing regulation would accomplish the same thing. MS. JONES indicated that isn't correct. They could accomplish a regulation that would not allow a person to be in jeopardy of losing two dividends. They still wouldn't get paid for the year they were gone, but when they come back they still would be eligible to receive the next dividend. Number 1000 CHAIRMAN ROKEBERG asked if the bill doesn't accomplish that. MS. JONES said it doesn't. It would pay them in a qualifying year while they were gone. CHAIRMAN ROKEBERG clarified they would lose it the year they were gone, but not lose it the next year. MS. JONES answered in the affirmative. CHAIRMAN ROKEBERG asked Ms. Jones if she could come up with an amendment to the bill that would do that rather than spending time writing regulations. MS. JONES indicated she could. Number 1021 REPRESENTATIVE HUDSON referred to his interpretation of the State Affairs Committee version of the bill and said, "It sounds to me like under the age that individual who was qualified on January 1, 1997, received longevity bonus payments - no longer qualified, is eligible for this sabbatical purposes. But I'm 65 in December, so I would not be. Is that correct?" MS. JONES indicated Representative Hudson is correct. She said if he was not on the roles for the longevity program as of January 1, 1997, then this wouldn't apply. REPRESENTATIVE HUDSON said he is trying to figure out what kind of equity that provides. He said, "It clearly states that if they turn 65 on January 1, 1997, but they don't get the longevity bonus because that program went out of style, so for me at any rate - any bill that I sign onto I want to make certain that all people are treated equal. And for that reason, I certainly wouldn't support this." Number 1119 REPRESENTATIVE RYAN asked how many people have taken the sabbatical. MS. JONES indicated she didn't have those figures with her. REPRESENTATIVE RYAN asked Ms. Jones if she knows how many people had to forfeit their PFDs because they did make long trips out of the state. MS. JONES said didn't have the figures with her. CHAIRMAN ROKEBERG asked her if she knows how many people may have lost their longevity bonus because they made trips out of Alaska. MS. JONES responded she didn't know. She stated that there are strict requirements that a person would start to lose their eligibility if they were gone more than 30 days. If a person was gone 30 days, they wouldn't get a check for that time. They could come back and still be eligible. She noted since they have been ratcheting down the program, any infraction that a person commits totally makes it void that you cannot become eligible again. She said she believes the maximum is 90 days in that if a person is absent in excess of 90 days, they would be totally out of the program. Number 1259 CHAIRMAN ROKEBERG said Ms. Jones mentioned that the department could develop regulations. He asked if the department has started drafting any regulations. MS. JONES said they are waiting to see what transpires with the legislation. Number 1271 REPRESENTATIVE HUDSON asked if the state has provided for the spouses of our congressional delegation to receive their dividend. He said he knows there was some court action that essentially denied them over a number of years. He asked if the legislation would be a vehicle to do that. MS. JONES explained it is addressed in HB 2, which is currently in the Senate. CHAIRMAN ROKEBERG asked Ms. Jones how long it would take her to draft an amendment that would allow the loss of one year's PFD while on sabbatical, but not the other year which is the real loss. In other words, a double penalty. MS. JONES indicated it wouldn't take her very long to draft an amendment. Number 1349 REPRESENTATIVE RYAN said it is quid pro quo. You give up the longevity bonus way of life, but you retain your eligibility for the permanent fund. You only do it once every five years. He said he doesn't believe this will incur a great financial hardship for the state for this particular class of people. He said if we want to get into the political philosophy of giving particular groups of people special privileges, then we can run rampant with that. Representative Ryan stated the purpose of the bill is to save the longevity bonus, but at the same time make (indisc.). Number 1400 CHAIRMAN ROKEBERG asked if there was anyone else to testify on the bill. There being no further witnesses, he closed the public hearing on HB 67. CHAIRMAN ROKEBERG said HB 67 would exempt any loss of any PFDs to any longevity bonus member's eligibility who took a sabbatical. He said after this problem was discovered, he sent a letter to his constituents currently receiving the longevity bonus to warn them of the potentiality of the possible losses up to two years of permanent fund eligibility. Chairman Rokeberg said, "I think the point of the State Affairs issue, and the point that we were trying to avoid is not to have a double hit. If somebody wants to leave the state for a year, then they're not here. So perhaps you (indisc.) then they should give up the permanent fund dividend, but they shouldn't be penalized twice when they come back off their sabbatical. That's one argument and that's what Ms. Jones was talking about - that fix. So then you have this other one from State Affairs which is completely out of hand, I think, I don't care for it at all, which is putting people who are not even in the longevity bonus program on some different special footing. I totally reject that, but I'm concerned that your bill exempts any loss of the permanent fund vis-a-vis, the fact that they wouldn't get it for one year. But I mean that's a judgement call." Number 1493 REPRESENTATIVE RYAN noted $250 a month for 12 months is $3,000 of general fund money. He said, "$1,100 or $1,200 out of permanent fund money, if it weren't paid to the recipient, would remain in the earnings reserve. It's a pretty good trade, three to one and we're getting three times as much general fund money back to giving out one-third to the permanent fund. It seems to me that's pretty good business." CHAIRMAN ROKEBERG indicated he will fully support the original version of HB 67. He noted it has a Finance Committee referral Number 1607 REPRESENTATIVE COWDERY made a motion to adopt HB 67. Hearing no objection, HB 67 was adopted. REPRESENTATIVE COWDERY made a motion to move HB 67 out of committee with individual recommendations and with the accompanying zero fiscal notes. CHAIRMAN ROKEBERG asked if there was an objection to moving HB 67. Hearing none, HB 67 moved out of the House Labor and Commerce Standing Committee. SSHB 189 - RESTRICT TOBACCO SALES Number 1676 CHAIRMAN ROKEBERG announced the next order of business would be SSHB 189, "An Act relating to sale of tobacco and tobacco products; and providing for an effective date." Number 1712 REPRESENTATIVE HUDSON moved that the committee adopt SSHB 189, Version E, dated 03/27/97, be adopted. Hearing no objection, SSHB 189 was before the committee. CASEY SULLIVAN, Legislative Administrative Assistant to Representative John Cowdery, Alaska State Legislature, came before the committee to explain SSHB 189. He said the bill limits public access to tobacco products in retail premisses. As it is currently written, one can sell and purchase tobacco products on a licensed liquor premise from retailers with a tobacco endorsement or by licensed vending machines. Mr. Sullivan said the bill adds a section where it allows only the sales clerk to have access to any tobacco product prior to sale. This will ban self-service tobacco displays found today in many stores and will put more responsibility on retail employees who sell the tobacco products. He stated Americans for Nonsmoker Rights have noted that banning self-service displays may reduce youth access in two ways. One, youth may be less likely to attempt purchase when they have to request tobacco from a store employee and show identification, rather than just handing the product to the clerk; and two, the absence of display makes it more difficult to shoplift tobacco products. Mr. Sullivan pointed out that approximately 171 different cities have adopted similar laws to restrict this public access. He urged support for the legislation. Number 1796 REPRESENTATIVE RYAN referred to page 2, line 5, of the legislation, which relates to sales by vending machines, and asked how sales by vending machines will be controlled. MR. SULLIVAN explained currently in statute, AS 11.76.100 (B), there are already stipulations that pertain specifically to vending machines. He explained subsection (B) says a vending machine must be located in a place that is directly and continually supervised by a person employed on the licensed premise during the hours the vending machine is accessible to the public. Number 1846 REPRESENTATIVE COWDERY said the tobacco and health issue has been a hot issue over the last couple of years. He said another piece of legislation that pertains to tobacco taxes may not work. By raising the cigarette tax to $1 per pack, he doesn't believe it will keep our youth from smoking. Representative Cowdery informed the committee he had smoked for 40 years and quit. Number 1941 REPRESENTATIVE RYAN referred to the amount of money being spent to combat drugs and said it has driven the price up very high. Yet we find drug use by our youth population is at an all time high. If they can afford the cost of drugs, he would seriously doubt that $1 per pack tax on cigarettes would have any impact whatsoever. CHAIRMAN ROKEBERG asked Mr. Sullivan, "Why did you not provide for the provision for existing freestanding, for example, or separate premised tobacco shops to be able to sell tobacco products." MR. SULLIVAN stated it is still covered statutorily under AS 43.70.075. He said when retail premises apply for a business license, they have to also obtain a tobacco endorsement. Essentially, any retail premise can sell tobacco products with a tobacco endorsement. Mr. Sullivan read from AS 43.70.075, "Unless a person has a business license endorsement issued under this section, a person may not sell cigarettes, cigars, tobacco, or products containing tobacco as a retailer. An endorsement required under this section is in addition to any other license or endorsement required by law." Number 2046 MR. SULLIVAN explained that AS 43.50.010 discusses the actual license. He read, "A person may not sell, purchase, possess, or acquire cigarettes as a manufacturer, distributor, direct-buying retailer, vending machine operator, or buyer without a license. (b) The department, upon application and payment of the fee, shall issue a license to each manufacturer, distributor, direct-buying retailer, vending machine operator, or buyer." Mr. Sullivan explained that the definition section goes on to discuss those areas which would probably include tobacco shops. He said the bill limits, in one area, the public access to tobacco products and retail premises. The bill would ban self-service tobacco displays in retail premises, and to buy tobacco would have to be done through the sales clerk. He read from SSHB 189, "the sales occurs in a manner that allows only the sales clerk to have access to the cigarettes, cigars, tobacco, or product containing tobacco prior to sale." Number 2198 CHAIRMAN ROKEBERG asked if there are provisions in the bill relating to selling tobacco products in the bush where people may only be supplied by special mail deliveries. MR. SULLIVAN indicated he didn't understand the question. CHAIRMAN ROKEBERG asked how a person would buy cigarettes if they live out in Anaktuvuk Pass. MR. SULLIVAN explained the legislation doesn't address provisions relating to mail order. He said in the bush, people go to the general store and at those stores, a buyer would have to go through the employee. Number 2226 REPRESENTATIVE COWDERY said, "Rural areas that didn't have licensed -- that were dry areas wherever they were sold, they would have to be sold through a licensed premises out of (indisc.) and the person selling would be responsible to assure that the age of the buyer is of legal age." He said he doesn't know what could keep someone from shipping something in even in dry areas. Number 2267 REPRESENTATIVE HUDSON questioned how much annual revenue is received from tobacco taxes. Number 2281 BOB BARTHOLOMEW, Deputy Director, Income and Excise Audit Division Department of Revenue, responded the annual revenue is $15 million. REPRESENTATIVE HUDSON asked what the annual estimate of the cost of current penalties that would be imposed upon dealers for selling to youth. He said he would like to know what the current law produced in the way of penalty receipts to the state. Number 2319 LOREN JONES, Director, Division of Alcoholism and Drug Abuse, Department of Health and Social Services, came before the committee. He said his division has been asking that same question as they have reviewed the tobacco legislation in terms of their enforcement. Mr. Jones said they haven't found any records where any tobacco seller or vendor has ever been convicted of selling to a minor under the age of 19. He pointed out that in the restrictions that are placed on a license, either through AS 43.50 or AS 43.70, it requires a conviction in court before they can act. He said they haven't found any records where any vendor has ever been convicted of selling to a minor. Mr. Jones said the revenues received by the state for the penalties for sale are zero. Number 2349 REPRESENTATIVE COWDERY asked if he is saying that the law is on the books, but it's not enforced. MR. JONES explained there are many kids that have been arrested and fined in court for possession. No seller, to his knowledge, has ever been convicted in court for selling to a minor. REPRESENTATATIVE COWDERY asked Mr. Jones what his personal opinion is why a seller has never been convicted. MR. JONES said he believes it is twofold. It is a resource issue. He said, "If you are a local police department and you're required to enforce this, if you are out of school or driving down the street or you arrest the minor for other violations and you see the person with tobacco, you have observed the crime being committed. That youth possesses. In order to determine whether a vendor has sold requires some effort on the police department and they have many other priorities and low resources. The difference with alcohol beverages is you have the Alcohol Beverage Control (ABC) Board that has enforcement officers and they have powers. They can go in and observe. They can watch liquor stores." Mr. Jones explained that currently the enforcement of the tobacco ordinance is left up to local police departments and they have many many other priorities, including liquor violations, drunk driving, domestic assaults. He said while some legislation talks about enforcing the increase of penalties, nobody is willing to say, "Pay overtime at the local police departments so they would actually do it." He said the fines against the vendors aren't high enough and there is no real entity in the state that is charged with enforcing the tobacco laws except local police. Mr. Jones explained the second place where that comes in is when a liquor license holder pays their license fee to the state, it is refunded back to the municipality in which it was gained. He referred to the people who hold liquor licenses in Anchorage and said when they pay their biannual fees, that money is refunded back to the municipality of Anchorage. If they do not enforce local liquor laws, the commissioner of the Department of Revenue can withhold that revenue sharing money. That is an enticement for the local police department to enforce liquor laws. TAPE 97-37, SIDE B Number 0001 REPRESENTATIVE COWDERY said, "We, in our -- I think we imposed or suggested a $300 fine. So if we made that $20,000 or $50,000, it probably would have no effect?" MR. JONES said if half of that fine were to be given to the local police departments, they would probably go after it. He noted one of the ways that some of the drug laws are enforced is through the forfeiture of assets. If a dealer is convicted, you can take their car or their boat. When police departments get some of that money, that is an inducement. Mr. Jones said there may be other ways to transfer some of the revenues from tobacco tax increases back to local communities to encourage them to enforce. Mr. Jones said the department feels that enforcement is one element to the package and they don't think it's a substitute for the increase in the tax, especially if the enforcement is simply increasing the penalties of things that are never enforced. He said his department would much rather see the tax and some enhanced enforcement. Number 0099 CHAIRMAN ROKEBERG asked what the department's official position is on the bill. MR. JONES referred to the original version of the bill and said they were opposed to it because you could only sell in a liquor store. He said they currently don't have an official position on the sponsor substitute. Number 0119 ERIC MYERS testified via teleconference from Anchorage on behalf of himself. He stated he would like to commend Representative Cowdery for his sincere interest in the issue. Mr. Myers said Representative Cowdery's proposal, in context, would actually be a very complimentary piece of legislation to the overall effort, including education efforts, youth access restrictions, enforcement and increases in the tobacco tax. Mr. Myers said, "One thing we need to keep in mind here with this - even with the proposal such as this, the expectations need to be limited -- investigations -- very aggressive compliance with vendors has shown that unless you achieve compliance rates, which are professionally unattainable in the order of about 85 percent, you don't see substantial (indisc.) of teen smoking." Mr. Myers stated enforcement is really the issue. You can create all sorts of laws, there are lots on the books, but they aren't being enforced. He said he would encourage the committee to specifically ask representatives of the tobacco industry for their commitment and state publicly their support for this particular piece of legislation. He informed the committee of a New York Times story titled, "Why the Tobacco Industry Found Taxes Hazardous to its Health," and said the real thing the tobacco industry fears the most is tobacco taxes. Number 0266 DIANA KUHNS, Chief Operating Officer, Western Pacific Division, American Cancer Society, testified via teleconference from Anchorage. She applauded Representative Cowdery for introducing the legislation and offered support of the American Cancer Society. Ms. Kuhns explained that at this point in time, there isn't much data available regarding the impact of tobacco consumption in relationship to the legislation. She said her organization supports the bill because they believe it would reduce youth access to tobacco and would help separate tobacco into an adult product class. Ms. Kuhns offered an invitation to sit down with Representative Cowdery and share information and scientific data which does prove that taxation is an effective measure in reducing youth consumption of tobacco. REPRESENTATIVE COWDERY said he would be happy to discuss the issue further with Ms. Kuhns. Number 0351 PATRICIA SENNER, Executive Director, Alaska Nurses Association, testified via teleconference from Anchorage. She said in addition to being a registered nurse, she is the mother of three children. She stated the Alaska Nurses Association is in favor of SSHB 189 because it reduces the opportunity for teenagers to purchase tobacco products by limiting the types of locations at which they are sold. Ms. Senner said she has been upset at a local grocery store which is frequented, at lunch time, by high school students. Cigarettes in that grocery store are located right in the front main isle where they're easily accessible. She said the grocery store also owns a tobacco shop located right down the street from two schools. As soon as the shop opened, they put Joe Camel in neon lights in the front window. She said her organization believes that a tobacco tax is probably the best method of reducing youth consumption of tobacco products, but they also want to make it more difficult for youths to access tobacco products sold in stores. REPRESENTATIVE ROKEBERG asked if the Joe Camel sign is still in the window. MS. SENNER indicated it is still up and has been there since the day they opened. She said, "Carrs said they were trying to discourage youth from taking - buying cigarettes from their grocery store, but they left the cigarettes right in the front isle right behind the cashier (indisc.) and then they put Joe Camel up in the front window (indisc.)." Number 0492 NANCY KUHN testified via teleconference from Fairbanks on behalf of herself. She informed the committee members she is the mother of four. Ms. Kuhn explained that currently there are no United States laws nor proposed laws that are going to limit tobacco sales (indisc.) out to the liquor outlets. There is no scientific data of how this measure will impact underage consumption of tobacco. There are currently no state laws, although there are some proposed in Vermont and Minnesota, that would ban self-service displays of tobacco. Approximately 170 local jurisdictions across 11 states presently have ordinances that ban self-service displays of tobacco. She said the local ordinances are relatively recent and there isn't any available data regarding their impact on tobacco consumption by youth. Ms. Kuhn informed the committee there is a 1995 study by the Center for Behavioral and Community Health of San Diego State University which concludes stores that have allowed customers access to tobacco are more likely to sell tobacco to minors than stores that did not. They attribute this to the fact that the simple act of having to request the product reinforces the special age restrictions to the clerk. The authors of the California study also concluded that the large restricting self- service displays of tobacco will reinforce the message that tobacco products are not in the same class as candy, soda pop and potato chips. Ms. Kuhn said although she supports HB 189, she would also like to take a firm stand in saying that increasing the price of tobacco, through increased taxation, is a proven and effective method to reduce youth consumption of tobacco. She said it is recommended by the Surgeon General, the General Accounting Office of the United States and the American Medical Association and numerous health organizations. Ms. Kuhn said she would hope that the legislature would be sure that any program that is intended to limit tobacco use by children would include a tobacco tax and it would be center piece of any decision. She thanked the committee for listening. CHAIRMAN ROKEBERG informed Ms. Kuhn that the Senate had passed tobacco tax legislation earlier that day. Number 0657 JENNY MURRAY, testified via teleconference from Fairbanks. She read the following testimony into the record on behalf of Dr. John Petraitis. "My name is Dr. John Petraitis. I live at 30319 List Circle in Eagle River. I'm an assistant professor at University of Alaska, Anchorage, and I have studied ways of curving youth addiction to tobacco products. Unfortunately, I could not be here today, so I have asked Jenny Murray to share with you scientific evidence that applies to HB 189. That bill was written to limit youth their access to tobacco, any (indisc.) a bill seeks to reduce the supply of tobacco to youth in hopes of limiting the consumption of tobacco by youth. "Currently there are no federal or state laws comparable to HB 189. However, approximately 170 localities across the country have ordinances which ban self-service displays of tobacco. Unfortunately, these local ordinances are relatively recent and there are no available data regarding their impact on tobacco consumption rate by youth. There is, however, one published study that looks to link between self-service displays and sales rates to youth. That study concluded that stores with self-service displays of tobacco are more likely to sell tobacco to minors than stores that kept tobacco behind the counter. Unfortunately, that study only looked at the sales of tobacco to youth, something that was not eliminated in either type of store, yet those stores with only behind the counter displays. The study did not look at consumption of tobacco by youth, therefore, there are no scientific conclusions that can be drawn about effects of HB 189 on youth consumption. However, clear scientific conclusions can be drawn about the link between the price of tobacco and youth consumption. Study after study suggests that increasing the price of tobacco through increased taxation is likely to have a stronger more immediate and a more long-lasting effect on tobacco consumption by youth. "In conclusion, HB 189 might modestly reduce some sales of tobacco to youth, but by contrast, increasing tobacco taxes will eliminate much of the demand and consumption of tobacco by youth. This is why the U.S. Surgeon General and the American Medical Association have concluded that any serious policies to curve youth smoking must include tobacco tax increases as a center piece. Nothing - nothing - nothing the Alaska legislature will do is likely to have the same effect on youth smoking, therefore, the (indisc.) suggests that HB 189 might be a useful addition to tobacco tax increases, but it would make a poor substitute. Thank you very much for your time." Number 0770 CHAIRMAN ROKEBERG said he would like to speak to the sponsor about clarifying amendments. He referred to legislation introduced the previous session called the loose cigarette bill. He asked Representative Cowdery if he would have an objection to adding that to his bill. It wouldn't allow single cigarettes to be sold. REPRESENTATIVE COWDERY said he would consider that a friendly amendment. CHAIRMAN ROKEBERG indicated he has some concerns about the clarity of the legislation, the way it is structured and the mailing to rural areas. He said the way he understands the bill, it would prohibit the sales via mail. Number 0856 REPRESENTATIVE COWDERY explained he would be open to any amendments that would be effective regarding that issue. However, he has questions as to how can you stop people from ordering cigarettes. He said he believes that would be difficult to enforce. Number 0897 REPRESENTATIVE RYAN referred to stores giving incentives to get one of their cards to cash checks, et cetera. People are asked at the register if they have a card and they put it through the scanner. That information is kept in a computer and is sold to companies that issue coupons, et cetera. So they only send you the coupons that reflect the items which they manufacture that you purchase. This saves them a lot of money. Representative Ryan said it would be very easy for people who issue drivers licenses to put a bar code on the license that would verify the age of the person. People in the stores could scan the bar code and tell for sure whether the person was of age. It would also keep a record of who bought what. CHAIRMAN ROKEBERG indicated it is his intention to hold the bill over so that he can consult with the sponsor. He referred to the first section of the bill and said language is being deleted that says, "selling or giving tobacco to a minor." Chairman Rokeberg said by deleting the words, "giving tobacco to a minor," it takes away the ability to punish anybody for actually giving tobacco away. He asked what the intention was. MR. SULLIVAN explained it was a grammatical and stylistic change by the drafter. He said he wasn't provided with an explanation of the change. CHAIRMAN ROKEBERG said the SSHB 189 would be held over for further consultation with the bill sponsor. Number 1044 CHAIRMAN ROKEBERG called for a brief at-ease at 4:39 p.m. He called the meeting back to order at 4:45 p.m. SSHB 159 - TOBACCO PURCHASE, POSSESSION, SALE, ETC. Number 1071 CHAIRMAN ROKEBERG announced the next order of business would be SSHB 159, "An Act relating to sale, gift, exchange, possession, and purchase of tobacco and tobacco products; and providing for an effective date," sponsored by Representative Pete Kott. He informed the committee there is a committee substitute for the sponsor substitute, Version K. He said he would entertain a motion to adopt the committee substitute. Number 1096 REPRESENTATIVE COWDERY moved to adopt CSSSHB 159(L&C), Version K. Hearing no objection, CSSSHB 159(L&C), Version K, LS0287/K, Ford, 04/09/97, was adopted. Number 1113 REPRESENTATIVE PETE KOTT came before the committee to explain differences between SSHB 159 and CSSSHB 159(L&C). He said the age is being changed from 19 to 21. He noted the changes occur several times in the legislation. Representative Kott said Alaska has a serious problem with minors consuming tobacco products. The legislation is an attempt to help that problem. Representative Kott stated it is his understanding that 21 percent of high school students smoke some form of tobacco product. He noted that across the United States it is even a wider problem with over a million kids that are starting to use tobacco products. REPRESENTATIVE KOTT informed the committee that there are currently state laws that restricts youth from purchasing tobacco products if they're under the age of 19. He said based on the numbers, 21 percent of high school students smoke. The current laws aren't working and the legislation is a tool that might help ridge the problem. Number 1210 REPRESENTATIVE KOTT said the committee substitute for the sponsor substitute puts more esteem into the laws that are designed to protect the kids from smoking. It raises the age of consent to 21 and all people under 21 who purchase or possess tobacco products are subject to punishment. Punishment for the first offense is $250, $500 for the second offense and $1,000 for the third offense. Second, it makes it illegal to sell or give a tobacco product to a minor under the age of 21. The penalties are $250 for the first offense, $500 for the second offense and $1,000 for the third offense. The legislation also requires the merchants to check identification of people who they have reason to believe that they are under the age of 27. He indicated this would be added protection. The merchants will tell their employees about this law and they will have their employees sign a statement saying they know about the law. REPRESENTATIVE KOTT explained the legislation also contains some strict guidelines on the governing of sale of tobacco by vending machines. It is designed to ensure that persons under 21 will not be able to purchase tobacco from vending machines. REPRESENTATIVE KOTT informed the committee members there is a provision in the bill that encourages municipal enforcement by requiring the court to separately account for fines that are assessed based on a conviction. The language in the legislation offers some opportunity to provide some of the monies collected back to the municipal law enforcement authorities. The legislature can appropriate money back to law enforcement for enforcement. REPRESENTATIVE KOTT stated there is a provision that after a couple of times of being delinquent, a merchant could lose their license to sell tobacco products. Number 1444 REPRESENTATIVE RYAN indicated that some clerks are under 21 and handle tobacco products. REPRESENTATIVE KOTT said he doesn't believe that was addressed in the bill. He said it would be prudent, on behalf of the individual merchant, to hire someone that is of age. REPRESENTATIVE RYAN noted there are high school students who work at gas stations, et cetera. He said he was wondering if they would be able to sell tobacco. REPRESENTATIVE KOTT said he doesn't want anybody under 21 to be able to sell tobacco products. He noted existing law doesn't cover that either. Number 1520 REPRESENTATIVE KUBINA said he would think that if you can't possess cigarettes, you couldn't sell them. He asked if marijuana should be included. REPRESENTATIVE KOTT said he wouldn't want to venture into that area since it is already an illegal substance. REPRESENTATIVE KUBINA asked how the law would work on a military base. REPRESENTATIVE KOTT indicated the similar procedures would implemented that were used when the drinking age was raised. REPRESENTATIVE KUBINA questioned how mail orders would be controlled. REPRESENTATIVE KOTT said he would suspect that since a person is required to be of age to purchase tobacco, if they ordered tobacco and weren't 21, they would be in violation. He said he would think the wholesalers would come up with a mechanism either through sending a driver's license or some kind of confirmation to work out those details. Number 1616 REPRESENTATIVE KUBINA asked, "If we can't get anybody to enforce our laws at 19, how are we going to get them to enforce them at 21?" REPRESENTATIVE KOTT said there is a misconception that the laws aren't being enforced. He informed the committee members it is his understanding that last year in Juneau and Anchorage there were approximately 1,000 citations issued for underage smoking. It's not like it's not being done, but certainly it's a lot more widespread than the fines would indicate. Representative Kott said with the provision that would suggest that the legislature can look at reimbursing or submitting to the municipalities or boroughs a portion of the fines collected, it may act as an incentive. Number 1676 REPRESENTATIVE RYAN asked "Representative Kott, would you entertain taking some of the recommendations that were previously said to put up the level of the fines and give those to the municipalities in which the enforcement took place, and then to withhold the business license fees if the municipalities don't feel they want to participate in the enforcement of this law? It would seem to me that if we had an incentive that would help them cover their costs, we might get a lot more cooperation out of them rather than to just have them ignored because it was said they have a lot more serious things - rape, robberies, drive-by shootings, burglaries and they - - probably this is way down the priority list because it takes manpower and expense and they can't justify it with the magnitude of other things, but if they were going to get $500 every time they stopped a kid with a cigarette in his hand it would pay off." REPRESENTATIVE KOTT said he wouldn't have a problem reimbursing municipal officials the entire amount if that could be done. He said he believes the only way that could be done is to provide legislative intent into the statute itself. REPRESENTATIVE KOTT said he would like to note some suggested changes. He directed the committee to page 4, line 4, which read, "$100 for a first offense within a two-year period,..." He said to be consistent with the other areas of the bill he would recommend that the amount be changed to $250. Representative Kott said another change he would like to suggest is on page 3, line 2, delete, "for consumption on the licensed premises,". The reason for the deletion is that there is no provision in the bill that would afford vending machines to be located in package stores. He said it conforms to existing law. He noted there was a concern by the Division of Licensing in that if a license is revoked, there shouldn't be the ability to go back to the division under a different name and purchase another license. CHAIRMAN ROKEBERG suggested Representative Kott prepare an amendment in writing. Number 1936 CHAIRMAN ROKEBERG referred to Version H of SSHB 159 and read page 2, lines 30 and 31, "The sale of a tobacco product through a vending machine is permitted if the vending machine is located in a place that is open to the public but to which a person under the age of 21 is denied access;". He questioned what these places are besides licensed premises. He asked what places would they be denied access if they weren't licensed premise. REPRESENTATIVE KOTT indicated it could be bars. CHAIRMAN ROKEBERG referred to using the age of 27 of a perspective purchaser to ask for identification and asked if that is a federal requirement. REPRESENTATIVE KOTT indicated it is a federal requirement. Number 2060 CHAIRMAN ROKEBERG said he has concern about what he considers the fiscal note to the private sector. He said the cost to employers to have to inform their sales clerks, signing forms and keeping the records for a period of time might seem minor, but it can start adding up, particularly with large retail organizations. REPRESENTATIVE KOTT said he has weighed all the evidence and it is his belief the positives that would be obtained from the bill certainly outweigh the negatives. There will be a small amount of details involved by the private sector. He said he would suspect that what would happen is that there would be some kind of a stamp placed on the back of an employment application which is generally kept until an employee terminates. He said he doesn't think an undo amount of burden will be created. Number 2190 REPRESENTATIVE COWDERY said if there is an added burden to the retailers, the retailer will adjust the price of the product to take care of that. He said that was the answer he got regarding similar legislation he had introduced. REPRESENTATIVE KOTT said he believes this is really an added protection for the employer in case there is a revocation hearing involved. If he/she has it on file, it will be a lot easier to go before the board under the Administrative Procedures Act (APA). He said it may be only a penny per application. Number 2285 CHAIRMAN ROKEBERG said, "Basically the fiscal note as it relates to the fact that the court has to forward to the Department of Commerce and Economic Development a record of all this and then the court additionally has to separate the monies and the fines in the accounts. In your bill, the money goes into the general fund with a potential appropriation by the legislature and local law enforcement here, which is like a permissive indirect dedicated fund. I mean in light of the testimony you heard today, I think this committee would like you to look into -- I think this committee would like to see some kind of incentive to the municipalities to enforce the law with that direct portion, and as we mentioned the ABC beverage prototype. You might want to look at that." REPRESENTATIVE KOTT said they could certainly look at that. He said the fiscal note is a little over $8,000. The court, currently, forwards information. He said what they are being asked to do is separate the information within their computer system. They currently don't have that ability. There will have to be a one-quarter time person to determine what portion of the revenue is then sent to the Department of Commerce and Economic Development comes from fines. He noted they are in the process of updating their computer system. The software package was supposed to have been on-line and if it were on-line, there wouldn't be a fiscal note at all. Number 2451 REPRESENTATIVE RYAN said by allowing the municipality or whomever to keep the fine, the court system can levy their charges or costs against the individual... TAPE 97-38, SIDE A Number 0001 REPRESENTATIVE RYAN continued, "This would be a wonderful opportunity to really add some teeth to these people and for practical purposes, eradicate juveniles from having tobacco." Number 0040 REPRESENTATIVE KOTT noted the purpose of the bill is to curve tobacco use among youth and not to raise revenue. Hopefully, with the fines in the bill, there will be considerations before someone attempts to purchase tobacco. He said with attempting to purchase there would be a fine. A person can currently try to purchase tobacco and there is no law against it. Number 0094 CHAIRMAN ROKEBERG asked Representative Kott to review the loose cigarette bill that he had introduced the previous session. Chairman Rokeberg indicated the committee would take testimony on Representative Kott's bill. Number 0183 BOBBY SCOTT, Jan's Distributing, Incorporated, testified via teleconference from Anchorage. He indicated his business is a wholesale business that does business throughout the state of Alaska. Mr. Scott said he would like to commend Representatives Kott, Ryan, Mulder, Kohring and Sanders for their effort to put a bill forward to help prevent youth from getting access to and using tobacco products. He explained his business has a lot of walk-in customers that come into their shop and they are asked for identification when they come in. Mr. Scott informed the committee they service between 300 and 400 customers. In speaking with his customers, they indicated they are in favor of tougher laws as opposed to an increased tax, thus it would eliminate a lot of theft that they are currently dealing with such as robbing stores. He thanked the committee for listening. Number 0314 REPRESENTATIVE COWDERY referred to name brand cigarettes and generic brand and asked Mr. Scott if he has an idea of what our youth predominately buys. MR. SCOTT said when he attended other meetings at the schools, he noticed a majority are smoking brand name cigarettes. He said with an increased tax, a lot of them will probably switch to generic brands as opposed to quitting. REPRESENTATIVE COWDERY questioned what the price differences are. MR. SCOTT replied that it is approximately $1 difference per pack. Number 0427 CHAIRMAN ROKEBERG asked what their geographic boundary is for wholesale. MR. SCOTT informed the committee they are in Anchorage, Eagle River, Wasilla, Talkeetna, Fairbanks and down the peninsula. He noted they also have a bush site that does ship out to other parts of the state of Alaska, including the rural areas. CHAIRMAN ROKEBERG asked if there is any way to check the age of the people who order by mail. MR. SCOTT said other than with a credit card, he doesn't know of any other way. CHAIRMAN ROKEBERG asked if it would be possible that someone would make a mail order and not be of age. MR. SCOTT said that could very well happen. He said when the tobacco shops opened, kids were making orders using their cat's name and were getting cigarettes sent to them. CHAIRMAN ROKEBERG pointed out Mr. Scott said he was a wholesaler and asked if the people he deals with has to have some kind of a license or endorsement. MR. SCOTT said his business basically sells to retail outlets such as store chains, independent mom and pop gas stations, et cetera. CHAIRMAN ROKEBERG questioned if his business also sells to the general public. MR. SCOTT indicated that they do. CHAIRMAN ROKEBERG questioned what licenses or endorsements his business holds. MR. SCOTT said he believes a business license and a tobacco license. Number 0527 REPRESENTATIVE COWDERY asked what the size is of the normal mail order relating to tobacco. MR. SCOTT indicated he didn't have that information with him. He noted they do not sell individual packages, all of their sales are basically by the carton. REPRESENTATIVE COWDERY said he would like an idea of the minimum amount they sell by mail order. MR. SCOTT indicated he would get the information. He noted it would depend on if they are shipping out to a bush grocery store or to a customer who is at home. REPRESENTATIVE COWDERY noted he would also like to know if it is one brand or if it is a mixture of brands. Number 0685 REPRESENTATIVE KOTT asked Mr. Scott if he distributes as a wholesaler only to retailers or do they have a retail license as well. MR. SCOTT said they are strictly wholesale. REPRESENTATIVE KOTT said if a retailer has a computer system and someone e-mailed them a request to purchase a case of cigarettes and provided their name, address, et cetera. They would also have to indicate age. He asked if there is currently a way to verify age via e-mail. MR. SCOTT said he doesn't believe there is any way to do that. He referred to there being pornography on the Internet and said there is no way to actually guard against anybody being under 21. Number 0765 REPRESENTATIVE COWDERY asked if there is any way to keep someone from ordering cigarettes at a lower price from a source in the Lower 48. MR. SCOTT said earlier in the month he had faxed to the committee a copy of an address he got off the Internet that was actually selling cartons of Marlboros for around $13 or $14 a carton to your door. Number 0828 SYLVIA SCOTT testified via teleconference from Anchorage on behalf of herself. She informed the committee she has four children and four grandchildren and none of them smoke. They don't smoke because she taught them right from wrong regarding smoking. Ms. Scott noted that even though their father did smoke, he has since quit. She said SSHB 159 will receive a positive and praising response from a large group of people, including herself. Ms. Scott said a lot of people have pushed for an increase in the tobacco tax as a way to stop children from smoking or using tobacco. She said although she feels it won't work, tougher laws would be a better way and HB 159 covers (indisc.) laws against youth consumption and possession. Ms. Scott relayed a situation she encountered where she came out of a store and there were three policemen talking to some kids. She said she walked down to see if they were giving them tickets for smoking. When she asked what the tickets were for, the policemen said it was because of having skateboards on the sidewalk. She said we need to toughen our laws and get our priorities where they should be. Ms. Scott indicated she has spoke to teens regarding the increased cigarette tax and they said it wouldn't bother them, they'll still get them. Number 0992 SUSAN FRICHETTI testified via teleconference from Anchorage in support of SSHB 159. She said she believes this is the direction that the legislature should be heading if we're really going to discourage tobacco use amongst our kids. Ms. Frichetti said she also believes that the legislation will help with enforcing the laws and will prevent a black market sales. It would be wise to pass the bill in order to help solve the issue of kids starting to smoke. She said she thinks retailers would be able to absorb the guidelines in the legislation. The bill would be viewed as a positive action. Number 1051 NANCY KUHN was next to testify via teleconference from Fairbanks. She noted she has four children. Ms. Kuhn said she thinks that SSHB 159 would be a step backwards in the fight against teen tobacco and so she opposes the bill. Kids smoke to rebel, to be cool and to be in with their peers. The rebellion is more frightening if you make them criminals. Teenage smoking is a health problem and not a criminal problem. Kids should not be made criminals because of smoking. The responsibility to stop the sale of tobacco to children should be with the adults who sell it, particularly those who have a financial interest in the tobacco sales. She thanked the committee members for their time and for the interest in considering the bill. REPRESENTATIVE COWDERY asked Ms. Kuhn if she thinks traffic fines stop speeders. He said that is also a penalty. We now have existing laws that says teenagers can't get alcohol, but a few still get it. Number 1173 MS. KUHN said, "I have (indisc.) with those four children and I don't think that a traffic fine ever seemed to keep them from having to show a power or anything. It was the person who held the purse strings on accessing the vehicle that got them into trouble to begin with. That was the problem or whether the responsibility lies in allowing the kids to even have access to something. So I don't think that fining kids is going to keep them from buying that tobacco. I think you have to fine the parents or fine the sellers." Number 1213 JENNY MURRAY testified via teleconference from Anchorage. She said while SSHB 159 is a bill that would strengthen the laws of restricting youth access to tobacco, it almost seems that it is a wolf in sheep's clothing. The bill seems to increase the license fee for tobacco merchants -- increases the penalties for illegal sales to underage kids. She said the bill provides no resource or mechanism for effective enforcement of the law and it would prohibit the use of the most effective enforcement mechanism which is (indisc.) coming from underaged buyers. Ms. Murray explained SSHB 159 would make it illegal for you to even attempt to purchase tobacco without providing any sort of exemption for necessary law enforcement activities. She said the real impact of the bill would be to discourage effective enforcement, while at the same time it would criminalize kids. Ms. Murray urged the committee not to move the bill. REPRESENTATIVE KOTT said he would like to point out that there is no criminal element in the legislation. It is nothing more than something very similar to a citation. You are issued a fine which you'll pay. If you're caught twice during a two-year period, the first time you'd be fined $250 and the second time it would be $500. That is $750 a kid will have to fork out. If you look at it from a cigarette tax perspective at $1 per pack, that is the equivalent of 75 cartons of cigarettes. Number 1326 ERIC MYERS testified via teleconference from Anchorage on behalf of himself. He said SSHB 159 has been disturbing to watch as it has evolved. Originally introduced, this was a classic tobacco industry (indisc.) with all of the favorite provisions. The provision that would have reinstated the possibility of using electronic switching devices was an issue that was specifically addressed, debated and rejected in 1992. He said the driver license revocation provision, which was originally in the bill, is classic and makes criminals out of victims. Mr. Myers said the subject is switched in that the attention is being focused on the kids and it avoids the topic of who is really at fault, the vendors. He said some of the most (indisc.) elements still remain in the bill such as on page 2, line 7. He said by prohibiting the attempt to purchase, this bill would gut the most effective enforcement mechanism that's available. The signage and signature provisions are simply window-dressing provisions. He pointed out kids are getting busted, but the real issue is what's happening to vendors. We already have tough laws, but they've never been enforced. Mr. Myers said the CSSSHB 159(L&C) is a desperate ploy to bump the age from 19 to 21. He indicated the average age of smoking initiation is about 14 and about 90 percent of the smokers are already hooked by the age of 19. The tobacco tax is endorsed by all leading health authorities in the nation. He stated it is the tobacco industry that is promoting SSHB 159. CHAIRMAN ROKEBERG said the committee has not heard any testimony specifically and directly that the tobacco industry supports the bill. MR. MYERS said the tobacco wholesalers strike him as being the essence of the tobacco industry. He asked if he is missing something. CHAIRMAN ROKEBERG asked Mr. Myers if he has any other evidence about the tobacco industry promoting the bill. MR. MYERS stated all of the elements in the bill are similar elements that have been used elsewhere by the tobacco industry. He said the tobacco industry is using this bill as a vehicle to distract attention from the tobacco tax. Number 1664 REPRESENTATIVE KOTT clarified that the legislation was not brought to him by the tobacco industry and it is not a bill, as far as he knows, that is promoted by the tobacco industry. It is a measure that has been acknowledged as a positive step by the American Legislative Exchange Council as well as the National Conference of State Legislators. Number 1687 DIANA KUHNS, Chief Operating Officer, Western Pacific Division, American Cancer Society, testified via teleconference from Anchorage against SSHB 159. She said her organization's position has been (indisc.) by the Surgeon General's 1994 report titled, "Preventing Tobacco Use Among Young People." The report states laws prohibiting minors possession of tobacco should be addressed only after effective regulation and enforcement at the (indisc.) in place. Effective regulation enforcement of illegal tobacco sales are not yet in place in Alaska. Ms. Kuhns said SSHB 159 would increase the fines for minors who possess tobacco and would further criminalize kids who attempt to purchase tobacco. Until those (indisc.) from the sale of tobacco are held accountable under the current law, her organization vigorously opposes any future penalties for the children. Ms. Kuhns stated tobacco taxes have been proven to be highly effective and one reason is because they are simple. They don't require police involvement or community vigilance. She referred to a recent New York Times article and said the tobacco industry has found ways around everything we have done to reduce smoking by teenagers, but they can't repeal the laws of economics. REPRESENTATIVE KOTT informed the committee members that last year when representatives of the American Cancer Society visited his office, he ran his ideas by them and they endorsed every one of them, including the increased fine. He said it's strange how things change in one year. Number 1825 CATHERINE REARDON, Director, Division of Occupational Licensing, Department of Commerce and Economic Development, came before the committee. She said she is in attendance because the Division of Occupational Licensing administers the business license program which has the tobacco endorsement attached to it. Ms. Reardon said it is her suggestion that a business, with a business license with a tobacco endorsement, that is under suspension or revocation, be prevented from obtaining another business license with a tobacco endorsement during that time of suspension or revocation. She said because business licenses are basically a revenue generator for the state, one owner is able to obtain multiple business licenses under different business names. She said she thinks that there is the likelihood that someone whose tobacco endorsement has been suspended or revoked might choose the option of paying another $50 and slightly alter their business name. Ms. Reardon said she believes it would fit in with the intent of the legislation that that be prohibited. MS. REARDON indicated she had another suggestion. She said on page 6, where the different suspensions and penalties are mentioned, it talks about a violation of a provision of this section. She referred to line 5 which read, "violates a provision of this section or a regulation implementing this section adopted under AS 43.70.090." She stated that AS 43.70.090 is a statute which says that the Department of Commerce and Economic Development may adopt regulations necessary to determine and collect the fees imposed by this chapter. She suggested deleting on line "adopted under AS 43.70.090" so that it would also apply to other regulations that they had adopted concerning tobacco endorsements. It also appears on line 11 and 14. She said, "A connected wish in order to enable us to even think about enforcing against people who violate the endorsement regulations would be the department be given authority to adopt regulations to administer the tobacco endorsement program as a whole." That would require a minor amendment to AS 43.70.090. Number 2002 REPRESENTATIVE KOTT asked if the department will have a zero fiscal note. MS. REARDON referred to the increase of $25 to $100 for the tobacco endorsement and said it would show an increase in revenue. The anticipated increase in revenue would be $66,300 in even years and $49,200 in odd years. This is because of the two-year cycle. She noted they have more business with tobacco endorsements during even years than odd years. MS. REARDON referred to possible costs and said the system is that if someone is ever convicted of selling tobacco improperly, which hasn't occurred to her knowledge, then that information would be forwarded to the Department of Commerce and Economic Development and they would suspend the endorsement as specified by the bill. She explained that if someone were to be convicted, the department would have to file an accusation and give them an administrative hearing under the APA to basically prove that, "Yes, you were convicted; yes, you are going to get your license or endorsement suspended." There hasn't been any costs, to date, because it hasn't occurred, but she would have to assume that there is some intention to somehow provide resources to municipal police or to someone to do enforcement behind this bill. She said she would assume that she would get a notice of convictions and have to go through the hearing process. Ms. Reardon said, "One suggestion would be that perhaps someone has already had adequate due process through the conviction by the court, and so as you did with the hunting guide law last year, perhaps you could say that a hearing is not required to suspend the license. It will be an automatic result. The court convicts -- just a line that says there will be no hearing provided to suspend is based on a court conviction." She said they would have had better due process than she could have provided. That would also speed the suspension going into effect as she could be working on a hearing for six months. Ms. Reardon said if she does give a second hearing to prove that a person has been convicted, if there are going to be ten convictions a year -- in talking with the Attorney General's Office, they suggested at their $87 per hour rate that they charge the department to deal with the hearings, there would probably five days of legal costs which would be $32,600. MS. REARDON informed the committee members that there is no enforcement staff for unlicensed business activity which means that if someone chooses not to get a tobacco endorsement for their business license and continues to sell, there isn't anybody who goes out, catches them and punishes them. She said that is because the Division of Occupational Licensing is running completely off of license fees from occupations, she can't say that she will take some of the doctor's fees and spend it on the hearing. That would be contrary to the statutory setup they have for licensing fees. She explained that business license fees and tobacco endorsement money goes into the general fund, although the legislature does permit her to spend a certain amount of it on administering business licenses. To this point, that has not included paying for any enforcement staff or attendant legal activities. Ms. Reardon explained when someone calls her and tells her that someone doesn't have a tobacco endorsement, either because they lost it or never got one, her division has resorted to sending them a letter with an application. Number 2248 REPRESENTATIVE COWDERY referred to a business not having a tobacco license endorsement and asked what the division does about that. MS. REARDON said, "We send them a letter saying, `It looks like maybe you're out of compliance with the business license law.' But since the whole goal of the business license law has been as a tax - as a revenue generator, we sit there and say, `Well, the license is only $50. Is it worth the government spending more than $50 trying to go to court against the person?' And I think the answer has been, `No.' But the tobacco endorsement is intended to have a kind of regulatory function now. One of your punishments for selling illegally is losing this right to sell tobacco and if that's going to truly be a scary potential outcome, my little letter is probably not going to hurt enough to worry people." Ms. Reardon said it all comes back to enforcement. REPRESENTATIVE COWDERY asked Ms. Reardon if she has found that most of the businesses conform to the requirement of obtaining a business license. MS. REARDON responded that she doesn't know what the compliance rate is. She noted there about 67,000 business license holders in the state. Ms. Reardon said she would say a good amount have business licenses and the division tries to make it easy to get them. She said she thinks that people will get business licenses and tobacco endorsements initially, but she thinks that if they have that endorsement suspended or taken away so that it is actually impinging on their ability to make a living through cigarette sales, that is when that voluntary, "yeah, we'll cooperate with the government, we'll get the tobacco endorsement, we'll do what government says," may break down. Number 2366 REPRESENTATIVE COWDERY said that every Sunday in the Anchorage paper there is a section of (indisc.) and some say, "We're licensed and bonded," and some don't say anything. He said maybe a high percentage don't have licenses. Representative Cowdery questioned whether until there is a complaint, nobody would know. MS. REARDON said if it is something like a construction, they do have enforcement for that and it's paid for by the license fees of construction contractors. She said when they get complaints or if they notice something flagrant in the yellow pages, they do have a manner of going about it. However, that money can only be spent on construction contractors and it can't be spent on the business license part of things. Number 2411 REPRESENTATIVE COWDERY referred to the tobacco issue of tax and asked how the division would address a problem if there is a tax and cigarettes were to be bootlegged. MS. REARDON said she would probably turn to the Department of Revenue that actually collects the tobacco tax and say, "What do you do now when people don't pay tobacco tax?" She said she would assume that the Department of Revenue does have some enforcements efforts for the tobacco tax. Number 2459 BOB BARTHOLOMEW, Deputy Director, Income and Excise Audit Division, Department of Revenue, came before the committee. He said that currently as both the compliance and audit functions have been shrunk by budgets over time, Representative Cowdery's statement about priorities and dollar values do drive what they do. Tobacco has been almost a completely voluntarily.... TAPE 97-38, SIDE B Number 0001 MR. BARTHOLOMEW continued, "...with the tobacco tax given that if you were to pass that significant of an increase, the priorities are going to change because there is going to be quite a bit more money involved. So, for some of our programs, given there is no resources for auditor compliance or we prioritize, there has been very little other than voluntary compliance." He noted they follow up on tips and leads which generally comes from the industry itself. If they find somebody who is not following the business laws, that upsets them, so they will provide information to the department. Number 0032 CHAIRMAN ROKEBERG asked Ms. Reardon if she thinks that the committee should include a fine for doing business without a license and maybe institute a finder's fee to help promote the enforcement of that. MS. REARDON said she believes that it is currently a criminal misdemeanor to practice without a license. She noted the statute is vague because it is an old statute. Ms. Reardon stated she doesn't know how finder's fee might work, but she would be interested in anything that would help enforcement. Number 0069 CHAIRMAN ROKEBERG said the legislation provides for the APA to be followed and, therefore, the hearing, if there is a finding for revocation or suspension, the standard would be criminal negligence. He said he is concerned about the height of that standard. He referred to Ms. Reardon's suggestion that perhaps we could have it automatic without going through the APA and said it seems to him that if there could be an exemption, there wouldn't be a problem. But then there could be a problem as to the due process portion of it. He indicated he doesn't know how it would work, particularly with criminal negligence. MS. REARDON said, "Mr. Chair, you're correct that if I had to determine whether - not just the person was convicted, but they were convicted and criminally negligent - if it's some different standard than just convicted, I would probably have to give them a chance to defend themselves -- no it wasn't criminally negligent. But if it were an automatic trigger, if convicted -- criminally negligent or not, just if convicted they shall be suspended for a set period of time. Not maybe and not the `up to' where we had to make a subjective decision, then I think at least the hunting guide bill allowed some of this automatic triggering with no additional APA hearing." Number 0168 LOREN JONES, Director, Division of Alcoholism and Drug Abuse, Department of Health and Social Services, came before the committee. He said the Department of Health and Social Services certainly supports enforcement activities as one of the tools for denying access or decreasing access to persons under 19. The department shares concerns of how the enforcement takes place and that there be some real enforcement done. He said as Representative Kott has testified, there certainly is enforcement against the youths who use. There has been no convictions of vendors, partly because it takes the resources of the local law enforcement. Mr. Jones said they would support looking at the structure that the ABC Board has. He said in Title IV, the ABC Board or the Department of Revenue collect the license fee for a person who is licensed to sell alcohol. That then is refunded back to the municipality in which that business does business with the restriction that the local municipality must enforce state and local ordinances and laws. He said it's not that they get back any fines that are collected from that, but they get back the actual license fee itself. Mr. Jones said for this particular case, the $100 license endorsement fee would be the pool of money that could be sent back to the municipalities as opposed to the fines collected because no fines have ever been collected. He stated there are fines for the kids and those are being collected. Mr. Jones referred to the statute regarding refunds to municipalities and said there is a structure to refund to the municipalities the actual license fee that is collected for an individual who is licensed to sell alcohol. Number 0268 CHAIRMAN ROKEBERG said the sponsor of the bill may want to consider increasing that licensure endorsement fee to generate a bigger pool of income to implement the enforcement. MR. JONES said, "I don't know if this an annual figure or biannual figure -- every two years, but I believe they refund back to municipalities close to $900,000 based on the fees that are collected." He said this would get enforcement back to local communities. MR. JONES indicated he hasn't seen the proposed committee substitute, so the department doesn't have an opinion on raising the age from 19 to 21. He said their general position is that the department does support an increase in enforcement activities if there is a viable process that results in increased enforcement, not only on the youth but also on the vendors. He noted they also view that as not a substitute for the tax. It is part of a process, but the largest impact on youth use will still be from increased taxes. Number 0387 REPRESENTATIVE ROKEBERG asked Mr. Jones if there is any way he could formulate a policy decision on the age being changed from 19 to 21. MR. JONES indicated he would and it would be fairly soon. CHAIRMAN ROKEBERG said he thinks that is a very important point. He said he would note, for the record, that he is very concerned about this and is disturbed with it being an ex-miliary person in the U.S. Army. He said the purpose of the taxation is to keep youth from commencing or taking up smoking. He said it seems like anything, you get a point of diminishing returns once you get to a certain age level. He asked what benefits are going to accrue to society by prohibiting 20-year olds from smoking. Chairman Rokeberg again asked Mr. Jones to review the age listed in the bill and get back to the committee. He also asked him if he would also check the information regarding approximately 1,000 citations issued for underage smoking in Anchorage and Juneau. Some corroboration for that would be good for the record. REPRESENTATIVE KOTT indicated he has those numbers in his office and they were provided to him last week by the Municipality of Anchorage and the City and Borough of Juneau. Number 0628 REPRESENTATIVE KOTT asked Mr. Jones if he would advocate that a tobacco board should be created similar to the ABC Board. MR. JONES said as you look at the way the enforcement bills are going, and in terms of Representative Kott's bill and others, there are restrictions on sales. He referred to Representative Cowdery's bill saying it has to be a face-to-face sale and the tobacco has to be behind a secure counter and said those issues are very similar to alcohol sales. Currently, the ABC Board has powers to investigate and they have investigators. They have powers to restrict and revoke licenses without taking individuals to court. They can take individuals to court, but they also have a procedure in statute. He said as opposed to the Department of Commerce and Economic Development and Department of Revenue, which don't have enforcement people, some of the powers to have the license to collect the fees and enforce the restrictions on the license and the sales, if the legislature desired, probably could be transferred to the ABC Board. He noted he has raised this issue with the ABC Board as a potential mechanism because they are currently in that business. Mr. Jones pointed out in many states tobacco and alcohol sales occur in grocery stores side-by-side. To his knowledge about five states have, because of Synar Amendment and tobacco enforcement, turned their tobacco enforcement over their alcohol beverage control people because they're in the same businesses and are using some of the same procedures to monitor sales. He noted the attorney general for the state of Virginia recently turned that type of enforcement over their ABC Board. Number 0768 REPRESENTATIVE KOTT said the ABC Board then returns the license fees to the local municipalities and boroughs. MR. JONES indicated that is correct. REPRESENTATIVE KOTT said, "So that's a certain designated amount that the municipalities know they have. They are then policing primarily the retailers. Don't you think it would be more effective because it would give police - Municipality of Anchorage or Juneau - more of an incentive to rebate, in some form or fashion, fines that are collected? They're not only doing the retail establishments, but they're also hitting on the underage kids or those who might be providing tobacco products to underage kids - just the neighbor walking on the street." MR. JONES explained the statute reads that they will refund back to the municipality those fees. The statute then goes on to state that the commissioner of the Department of Revenue shall withhold that refund if the commissioner of the Department of Revenue determines that they are not enforcing all state laws, local ordinances or federal rules regarding alcohol. He said most police departments receive that money. Mr. Jones said, "In the City and Borough of Juneau, which I am the most familiar with having lived here for so long and been involved in this, that money because they are not allowed to dedicate funds, basically is shown as a general fund and then shown back as a receiving of the police department. And enforcing of minor consuming, enforcing drunk driving statutes, enforcing non-sales to an intoxicated persons, no open container -- all of those are local ordinances or state laws around alcohol that they enforce. It is not simply an enforcement back on the vendors. They justify with minor consuming which is a law." He said he would assume the same thing would apply. Mr. Jones pointed out that what is missing in enforcement to date is enforcement on the vendor. Local enforcement officers are currently arresting the kids. A conviction on the vendor has never been done because it is a resource issue with the police. It takes time, effort and resources. That is what an ABC Board investigator could do. Number 0768 REPRESENTATIVE KOTT said he believes there are federal requirements for the state to come up with some enforcement with the vendors. They do spot checks, et cetera, in order to receive some federal money. He said when you look at the number of retail establishments, bars and restaurants that sell alcohol, they're dealing with a license that is worth quite a bit more than what currently exists to sell tobacco. He said even if the fee is raised to $100, we've learned from Ms. Reardon's testimony that the most we can generate is $66,000. That's half of a police officer in Anchorage. MR. JONES said, "I think I heard two questions there. One is on the federal rules what's called Synar. We are in fact required to do compliance checks to determine what the percentage of successful sales are and with the goal of by the year 2000, reducing that to 20 percent or less. That has been a responsibility of my division because if the state fails to reach that level, then there is a penalty against the substance abuse treatment and prevention block grant which comes into my division to pay for treatment and prevention programs around alcohol and drug abuse. We do those compliance checks. We are not, through that process, collecting evidence for criminal cases. We are simply attempting to find out if vendors sell and recording that as statistical information. The federal government is very clear that compliance check is not to be used for enforcement, that enforcement is a separate activity. So we are doing compliance checks. The results last year, statewide, were about 32 percent of the time a youth doing that with us could successfully purchase. That's very good compared to a lot states and it shows that 68 percent of the vendors are in fact complying with the law." MR. JONES referred to the dollar amount and said, "You're correct that $100 the way it is now -- I believe in discussion with Catherine, currently if you get a business license to operate a retail outlet and you operate five or six different stores, you have one business license. You get one tobacco endorsement for those five stores, that's $100. Catherine has talked about the possibility of saying you need a separate tobacco endorsement for each, which would certainly increase the revenues and would be more similar to a liquor outlet if you held multiple licenses -- you have to have separate licenses for each place where you sell alcohol -- that would increase the fees. You certainly, as a legislature, could raise that to $200 or $300. Some liquor licenses now for two years are up to $1,500. It depends on the amount of revenues you want to share back to municipalities to incentifize (ph) to enforce this - to give them some of the resources they need." Number 0934 REPRESENTATIVE KOTT said that was the point he was trying to make. There is not enough incentive even if it is raised four times the amount. With the number of citations that would be issued and the potential court appearances, the city would be losing money. MR. JONES said the ABC Board has at times received either federal money or some other processes whereby they have issued grants to local municipalities to pay the overtime to the police officers. He said he believes the last time they issued grants, they had about $80,000 or $90,000. The local police departments applied for a grant and they paid overtime. Mr. Jones said he and Mr. Bartholomew had discussed what they would buy and given the amount a police officer makes, if the overtime costs any where from $40 to $70 and hour, you would for $90,000 get about 2,000 hours down to about 1,300 hours depending on the price, of added enforcement if a police would in fact apply through that grant process. That's another mechanism based on a different fee and a different structure, that's in no bill that I know of now but certainly one that could be put together." Mr. Jones said if a police department wishes to enforce, they would certainly encourage them to. CHAIRMAN ROKEBERG indicated there were no further witnesses to testify. He said SSHB 159 would be held over for further consideration. ADJOURNMENT CHAIRMAN ROKEBERG adjourned the House Labor and Commerce Standing Committee meeting at 6:15 p.m.