ALASKA STATE LEGISLATURE
HOUSE LABOR AND COMMERCE STANDING COMMITTEE
April 22, 2002
3:25 p.m.
MEMBERS PRESENT
Representative Lisa Murkowski, Chair
Representative Andrew Halcro, Vice Chair
Representative Kevin Meyer
Representative Norman Rokeberg
Representative Harry Crawford
Representative Joe Hayes
MEMBERS ABSENT
Representative Pete Kott
COMMITTEE CALENDAR
SPONSOR SUBSTITUTE FOR HOUSE BILL 315
"An Act allowing employers that are small businesses, small
nonprofit organizations, or small associations for insurance
purposes to join state employee insurance coverage as a group;
and providing for an effective date."
- MOVED CSSSHB 315(L&C) OUT OF COMMITTEE
HOUSE BILL 520
"An Act relating to business licenses, business license
endorsements, and business license and license endorsement fees,
to a trade and business development fund, and to the
international trade and business endowment; and providing for an
effective date."
- MOVED HB 520 OUT OF COMMITTEE
HOUSE JOINT RESOLUTION 49
Relating to preparation of a joint state-federal research and
development plan.
- MOVED CSHJR 49(L&C) OUT OF COMMITTEE
PREVIOUS ACTION
BILL: HB 315
SHORT TITLE:GROUP HEALTH INSURANCE FOR PRIVATE GROUPS
SPONSOR(S): REPRESENTATIVE(S)ROKEBERG
Jrn-Date Jrn-Page Action
01/14/02 1957 (H) PREFILE RELEASED 1/11/02
01/14/02 1957 (H) READ THE FIRST TIME -
REFERRALS
01/14/02 1957 (H) STA, L&C, FIN
02/15/02 2281 (H) SPONSOR SUBSTITUTE INTRODUCED
02/15/02 2281 (H) READ THE FIRST TIME -
REFERRALS
02/15/02 2281 (H) STA, L&C, FIN
03/21/02 (H) STA AT 8:00 AM CAPITOL 102
03/21/02 (H) Scheduled But Not Heard
03/26/02 (H) STA AT 8:00 AM CAPITOL 102
03/26/02 (H) Heard & Held
03/26/02 (H) MINUTE(STA)
03/28/02 (H) STA AT 8:00 AM CAPITOL 102
03/28/02 (H) Heard & Held
03/28/02 (H) MINUTE(STA)
04/02/02 (H) STA AT 8:00 AM CAPITOL 102
04/02/02 (H) Moved CSSSHB 315(STA) Out of
Committee
04/02/02 (H) MINUTE(STA)
04/03/02 2773 (H) STA RPT CS(STA) NT 5DP 2NR
04/03/02 2773 (H) DP: WILSON, CRAWFORD,
STEVENS, FATE,
04/03/02 2773 (H) HAYES; NR: JAMES, COGHILL
04/03/02 2774 (H) FN1: (ADM)
04/08/02 2839 (H) COSPONSOR(S): WILSON, SCALZI
04/10/02 2871 (H) COSPONSOR(S): DYSON
04/22/02 (H) L&C AT 3:15 PM CAPITOL 17
BILL: HB 520
SHORT TITLE:BUSINESS LICENSE FEES/BUS DEVELOPMNT FUND
SPONSOR(S): LABOR & COMMERCE
Jrn-Date Jrn-Page Action
04/16/02 2953 (H) READ THE FIRST TIME -
REFERRALS
04/16/02 2953 (H) L&C, FIN
04/22/02 (H) L&C AT 3:15 PM CAPITOL 17
BILL: HJR 49
SHORT TITLE:STATE-FEDERAL JOINT RESEARCH PLAN
SPONSOR(S): LABOR & COMMERCE
Jrn-Date Jrn-Page Action
04/12/02 2906 (H) READ THE FIRST TIME -
REFERRALS
04/12/02 2906 (H) L&C, FIN
04/22/02 (H) L&C AT 3:15 PM CAPITOL 17
WITNESS REGISTER
JANET SEITZ, Staff
to Representative Norman Rokeberg
Alaska State Legislature
Capitol Building, Room 116
Juneau, Alaska 99801
POSITION STATEMENT: Testified on behalf of the sponsor of SSHB
315.
GUY BELL, Director
Health Benefits Section
Division of Retirement & Benefits
Department of Administration
PO Box 110203
Juneau, Alaska 99811-0203
POSITION STATEMENT: During the discussion of SSHB 315,
discussed the process the department would follow were the
legislation enacted.
MARY RAYMOND
The Ark
259 E. Bayview Avenue
Homer, Alaska 99556
POSITION STATEMENT: Expressed excitement with regard to SSHB
315.
MARY ROSENZWEIG, Director
Substance Abuse Directors Association
4111 Minnesota Drive
Anchorage, Alaska 99503
POSITION STATEMENT: Testified that passage of SSHB 315 is a
solution to the serious problem of affordable health insurance
for Seaview Community Services.
SUSAN SCUDDER, Executive Director
Council on Domestic Violence & Sexual Assault
Department of Public Safety
PO Box 111200
Juneau, Alaska 99811-1200
POSITION STATEMENT: During the discussion of SSHB 315,
expressed the need to offer benefits in order to recruit
qualified individuals for community-based nonprofit programs.
MARIE DARLIN, AARP
(No address provided)
POSITION STATEMENT: Testified in support of SSHB 315.
MARGIE BAUMAN
(No address provided)
POSITION STATEMENT: During the discussion of SSHB 315,
suggested that on page 3, line 26, subparagraph (C), be changed
such that legitimate owners of small businesses who have only
themselves as an employee can be included.
JACK McRAE, Senior Vice President
Blue Cross Blue Shield of Alaska
P.O. Box 327
Seattle, Washington 98111-0327
POSITION STATEMENT: During discussion of SSHB 315, expressed
concern with regard to the state becoming involved in personal
health care.
WILLIAM CRAIG
Alaska Independent Blind;
Alaska Information Radio Reading Service
613 Degroff Street
Sitka, Alaska 99835
POSITION STATEMENT: Testified, under discussion of SSHB 315, as
to the difficulties in finding insurance that is priced at a
reasonable cost and provides a reasonable plan.
AMY ERICKSON, Staff
to Representative Lisa Murkowski
House Labor and Commerce Standing Committee
Alaska State Legislature
Capitol Building, Room 408
Juneau, Alaska 99801
POSITION STATEMENT: Presented HB 520 and HJR 49 on behalf of
the House Labor and Commerce Standing Committee, sponsor by
request, chaired by Representative Lisa Murkowski.
JEFF BUSH, Deputy Commissioner
Office of the Commissioner
Department of Community & Economic Development
PO Box 110800
Juneau, Alaska 99811-0800
POSITION STATEMENT: Testified that the department is supportive
of HB 520 because it would stabilize the funding source for the
department's economic development and trade activities.
CATHERINE REARDON, Director
Division of Occupational Licensing
Department of Community & Economic Development
PO Box 110806
Juneau, Alaska 99811-0806
POSITION STATEMENT: During discussion of HB 520, answered
questions.
BARBARA PROPES, Scan Home
2490 Belmont Drive
Anchorage, Alaska
POSITION STATEMENT: Testified that the increase embodied in HB
520 is reasonable.
SCOTT McMURREN
McMurren & Goodman
6040 Yukon
Anchorage, Alaska 99507
POSITION STATEMENT: Testified in support of HB 520.
ACTION NARRATIVE
TAPE 02-62, SIDE A
Number 0001
CHAIR LISA MURKOWSKI called the House Labor and Commerce
Standing Committee meeting to order at 3:25 p.m.
Representatives Murkowski, Halcro, Meyer, Rokeberg, and Crawford
were present at the call to order. Representative Hayes arrived
as the meeting was in progress.
HB 315 - GROUP HEALTH INSURANCE FOR PRIVATE GROUPS
CHAIR MURKOWSKI announced that the first order of business would
be SPONSOR SUBSTITUTE FOR HOUSE BILL 315, "An Act allowing
employers that are small businesses, small nonprofit
organizations, or small associations for insurance purposes to
join state employee insurance coverage as a group; and
providing for an effective date."
Number 0076
REPRESENTATIVE HALCRO moved to adopt Version 22-LS1177\B,
Craver, 4/18/02, as the working document. There being no
objection, Version B was before the committee.
REPRESENTATIVE ROKEBERG, speaking as the sponsor of SSHB 315,
informed the committee that [Version B] incorporates changes in
intent language in the legislation. He highlighted the
following substantive change: on page 2, line 17, the language
"stop loss" was deleted and "lower cost options including
limited benefit and high deductible" language was inserted.
JANET SEITZ, Staff to Representative Norman Rokeberg, Alaska
State Legislature, testified on behalf of the sponsor of SSHB
315. She explained that this legislation would allow the State
of Alaska to obtain a policy or policies of group health care
insurance for small businesses defined as two to fifty
employees, nonprofit organizations, small associations for
insurance purposes as a group, and special service
organizations. Special service organizations can be an
individual employed in one of these entities, corporations, or
nonprofit organizations who deal with childcare facilities,
operating a residential childcare facility, foster home,
maternity home, assisted living home, community-based center,
and home care. She noted that the aforementioned entities are
all licensed by the state and the licensing authorities to which
the bill refers.
MS. SEITZ specified that this legislation is an effort to form a
pool of people who would be able to provide insurance. The
state would put out a request for proposals (RFP) and thus the
state wouldn't self-insure this group as it does its own
employees. This would be offered through private insurance
carriers and the businesses and nonprofit organizations could
join. As specified in the bill, the entities would have to
submit a written request to the department, receive confirmation
from the commissioner, and pay the premiums.
Number 0311
CHAIR MURKOWSKI asked if there is any procedure in which an
entity could be rejected. She related her understanding that
the application has to be filed and those groups defined in the
legislation would be [in the pool].
MS. SEITZ replied yes. She pointed out that on page 3,
subsection (d) states that a qualified entity must certify that
it's going to meet the definition, agree to pay the premiums,
sign a statement under penalty of unsworn falsification and
fraud in order to register.
REPRESENTATIVE ROKEBERG pointed out that in his eight years
serving on the House Labor and Commerce Standing Committee he
has fought to allow private insurance companies to enter the
State of Alaska. However, there has been a great deal of
frustration with regard to the escalation of insurance costs.
The affordability of health insurance costs for nonprofits in
this state is coming in to question now, which is also the case
for small businesses. This has become a very serious problem,
he said. Representative Rokeberg expressed his hope that having
a larger number of people covered and a well designed menu with
a potentially higher stop loss deductible and various other
menus, will allow a lower cost, more affordable, and higher
quality plan to be offered. He noted that the state is
redefining what it takes to be a multiple employer welfare
arrangement (MEWA). Therefore, this legislation attempts to
bring together those people who can't readily join together and
offer them a mechanism to lower their health costs.
REPRESENTATIVE CRAWFORD recalled the discussion with regard to
[the definition of "association for insurance purposes"]. He
also recalled that the House State Affairs Standing Committee
discussed eliminating the upper limit defining how many
employees an entity could have and be considered [an association
for insurance purposes].
REPRESENTATIVE ROKEBERG related that it would probably work to
amend the language such that it referred to business enterprises
with two to fifty employees, which would be consistent with the
state's insurance statutes. Then nonprofit organizations could
be exempt from the cap.
MS. SEITZ pointed out that Version B only limits the two to
fifty employees for an association for insurance purposes and
businesses. Nonprofit organizations don't have an employee cap
included in the definition on page 4, lines 2-4.
CHAIR MURKOWSKI directed attention to page 3, line 15, which
refers to "composed of businesses or nonprofit organizations or
both". Therefore, she questioned how the employee cap wouldn't
be required for nonprofit organizations.
MS. SEITZ pointed out that page 3, lines 14-19, is the
definition of "association for insurance purposes". In that
particular group the combined total can be two, but not more
than fifty employees. An "association for insurance purposes"
can be a group of businesses or nonprofits or both. However, if
an entity is simply a nonprofit, then that entity would fall
under the definition on page 4 that doesn't specify an employee
limit. In response to Representative Rokeberg, Ms. Seitz
reiterated that the definition on page 3, line 19 is the
definition of the "association for insurance purposes" if the
groups come together.
CHAIR MURKOWSKI interjected that an "association for insurance
purposes" is different than a nonprofit organization.
REPRESENTATIVE HAYES inquired as to whether there is anything
under the [definition of] "association for insurance purposes"
that [would allow] a self-insured individual to join under the
large umbrella of "association for insurance purposes".
MS. SEITZ explained that a business that wants to join an
"association for insurance purposes" could be a group of people
who come together and form an association for insurance
purposes. Furthermore, a special services organization that is
a single employee and meets the definition would qualify.
Number 0815
GUY BELL, Director, Health Benefits Section, Division of
Retirement & Benefits, Department of Administration, said that
he would discuss the process were this legislation enacted. He
informed the committee that it would be the department's intent
to work with interested groups and a professional benefits
consultant to design a plan(s) that would meet the identified
needs of those groups with which the department is working. The
plan would be developed by either a survey or focus groups or a
combination of the two. With the assistance of [the survey
and/or the focus groups], the department would develop an RFP
for a fully insured product(s). The best proposal would then be
selected. There is a process of approval of the participants
through the commissioner of the department. At that point,
those who participate would pay premiums directly to the
insurance company and the participants would work directly with
the insurer. He noted that the premiums wouldn't be paid
through the State of Alaska. The department would have a
limited role as a continuing liaison [in plan design] with
nonprofits and businesses that participated.
MR. BELL informed the committee that [this legislation] doesn't
contemplate a state subsidy. The fiscal note reflects the funds
necessary for startup costs. Furthermore, there is no state
liability for this because the liability would be taken on by
the insurance company insuring the health plan. This proposed
plan would be completely separate from any state health plan.
He explained that this proposed plan would effectively be
private insurance subject to the Employee Retirement and Income
Security Act of 1974 (ERISA) and would be fully insured.
Number 0955
REPRESENTATIVE MEYER surmised then that this proposed plan may
be similar to what the state employees have, but may be better
or worse depending upon what is negotiated between the parties;
the state won't have any involvement.
MR. BELL agreed and pointed out that when the department issues
the RFP it will have specific plan designs in mind, which may
include an array of options. There will also be a price scheme
that will be anticipated before issuing the RFP.
REPRESENTATIVE MEYER related his understanding that the savings
to the nonprofits or associations will be in regard to the
ability of various groups to come together as one in order to
obtain more affordable rates.
MR. BELL replied yes. By pooling, risk is reduced as would
administrative overhead, he said. In further response to
Representative Meyer, Mr. Bell confirmed that the cost to the
state would be for the one staff person overseeing the program
and some contractual services for a benefits consultant for plan
design.
Number 1052
REPRESENTATIVE HALCRO inquired as to whether the $133,000 of
upfront costs would be reimbursed over the course of the coming
years.
MR. BELL answered that the department doesn't contemplate a
reimbursement to the general fund (GF) for that. The costs in
future years would be a small assessment that the department
would make against the plan in order to cover the department's
modest ongoing costs.
REPRESENTATIVE HALCRO asked what would happen if no one responds
to the RFP; would the $132,000 worth of work be for naught.
MR. BELL agreed, but indicated that the cost could be less than
the full amount. He related his belief that if there were no
responses, the department would try to determine why there were
no responses and then put out a modified RFP.
Number 1139
REPRESENTATIVE MEYER inquired as to how many people this
legislation would cover.
MR. BELL answered that potentially this could cover quite a
large number of people, although it's hard to say how many will
participate. In further response to Representative Meyer, Mr.
Bell said that the department believes there should be enough
interested people that there should be some interest in bidding
on the RFP.
Number 1188
MARY RAYMOND, The Ark, testified via teleconference. She
remarked that this [legislation] is something to be excited
about because health insurance is of grave concern. Ms. Raymond
informed the committee that she is a coordinator for a small
assisted living home for which this matter is of concern. The
premiums [for the small assisted living home] are small in light
of what individuals receive in payments. Ms. Raymond concluded
by thanking the committee for this legislation, which she hoped
would [come to fruition].
Number 1250
MARY ROSENZWEIG, Director, Substance Abuse Directors
Association, testified via teleconference. She began by saying
that this legislation comes along at a very critical time for
those agencies delivering substance abuse treatment and
prevention programs around the state. Ms. Rosenzweig informed
the committee that the association has approximately 57 programs
statewide. That membership was surveyed with regard to
insurance premiums [which produced the following information].
Over a two-year period, insurance premiums on average have
increased 36 percent per employee. The premiums for health
insurance amounted to about 5.8 percent of the agency's
operating budget in the year 2000. In 2002 health insurance
premiums are 7.6 percent of the [association's] operating
budget. Ms. Rosenzweig said, "This means that the state is not
getting good value for its dollar; it means less services that
they're able to purchase for the same dollar." These sudden
increases have resulted in reducing the level of benefits by
cutting prevention and screening programs and dental and vision
coverage. Furthermore, deductibles are increasing. Over the
past two years deductibles have risen from an average of $300 to
$408. Ms. Rosenzweig stated, "For our industry, we have not
been able to increase the wage scale in years because the payors
are not paying any more for the services." This industry is at
a critical time with work force retention; employees can't stay
where there is no health insurance. Ms. Rosenzweig urged the
committee to provide relief and assistance that costs the state
little. In response to Representative Rokeberg, Ms. Rosenzweig
agreed to provide her information to his office.
Number 1412
SANDY TURLEY, Seaview Community Services, testified via
teleconference. She informed the committee that Seaview
Community Services is a nonprofit human services agency in
Seward. Ms. Turley read the following testimony:
Seaview employees were covered by Humana and so Humana
withdrew their insurance coverage from all of Alaska
in 2000. As a small agency with 40 employees, finding
an alternative was difficult. We were fortunate to be
eligible to join the United Way Nationwide Group -
Blue Cross Blue Shield plan out of Maryland. In FY
[fiscal year] '01 while we were on the United Way's
Blue Cross Blue Shield, our rates were the best we had
ever had. The Alaska United Way agencies were forced
out of the national BCBS [Blue Cross Blue Shield] plan
as of December 31, 2001, in the middle of our fiscal
year, without expenses and revenues already budgeted.
As we begin looking for alternatives, there were few
options and the rates we were quoted were
astronomical. The best rates were 150 percent more
than the United Way Blue Cross Blue Shield rates. We
worked for three months to come up with an affordable
plan. We were forced to drop dental, prevention,
prescription, mental health, and chemical dependency
coverage in order to be able to continue to offer
health care to our employees that we could afford
[and] that was within our budget. The additional cost
was shared by the employees with an increased copay
and by the agency with an increased premium cost. We
could not maintain the same level of coverage because
neither agency or the employees could bear the cost of
the increase. We had 22 employees on insurance in
December and now, in April, we only have 13. We are
currently at risk of not qualifying for group rates
because of not enough enrollees. The rise in health
care costs and decrease in coverage are an immediate
and serious threat to recruitment and retention. I
fear that dissatisfied employees will start looking
for other jobs with better insurance and that we will
be unable to hire new people because our insurance is
just not competitive. As a small agency, losing one
ore two key positions can threaten our ability to
provide services for an entire program. Passage of
House Bill 315 is a solution to the serious problem of
affordable health insurance for our agency.
Number 1529
SUSAN SCUDDER, Executive Director, Council on Domestic Violence
& Sexual Assault, Department of Public Safety (DPS), explained
that the Council on Domestic Violence administers state and
federal funds to more than 21 programs around the state. These
are community-based nonprofit programs that have experienced
amazing increases in their health insurance costs over the past
few years. The increases have reached the point at which staff
positions have been cut in order to maintain the same level of
health insurance, which results in fewer services to the
community. Ms. Scudder emphasized the importance of these
programs having qualified staff that can obtain benefits. She
noted that these jobs aren't the best paying jobs and thus when
the benefits are cut, it becomes nearly impossible to recruit
good people for these jobs.
Number 1664
MARIE DARLIN, AARP, said that AARP is thankful that this
legislation has been introduced because this has been of concern
in reviewing the long-term care needs. Many small organizations
are attempting to meet [long-term care] needs and often [these
small organizations are] home and community-based care. These
home and community-based care organizations have always had the
concerns surrounding employee benefits. [Without benefits],
these organizations lose employees and the organization's
ability to provide services is lost. Therefore, AARP urges the
committee's support of HB 315.
Number 1664
MARGIE BAUMAN testified via teleconference and noted that she is
the owner and sole employee of her own business. She suggested
that on page 3, line 26, subparagraph (C) be changed such that
legitimate owners of small businesses who have only themselves
as an employee can be included. She informed the committee that
the insurance carrier that held the group professional policy
with which she participated dropped the entire group after the
company was found not to be in compliance with insurance laws.
She noted that although she is in good health, no one wants to
insure her [because] she has had cancer and her doctor has done
additional testing and may want to again. Therefore, she has no
insurance and when she goes to the hospital she pays "top
dollar" because she isn't represented by an insurance company
that has a deal with the hospital. Furthermore, the state
comprehensive plan is cost prohibitive for her. Ms. Bauman said
that she wants a health care plan in which she can participate
and pay her fair share of the costs. In conclusion, Ms. Bauman
pondered why this legislation hasn't garnered any comments and
testimony from hospitals and medical organizations.
REPRESENTATIVE ROKEBERG pointed out that if Ms. Bauman joined
with someone who performs similar work, then the two could
become an association and qualify to join.
Number 1793
JACK McRAE, Senior Vice President, Blue Cross Blue Shield of
Alaska, testified via teleconference. Mr. McRae noted that the
company is very sympathetic to the large rate increases. He
said he would address the insurance carrier that left the state
and the large increases due to that insurance carrier leaving
the state. He related his understanding that an insurance
carrier came into the state and sold a product that wasn't a
licensed product in the state. Furthermore, the product was
priced on a national basis rather than looking at health care
costs in Alaska. That combination of not being licensed in the
state and the costs of health care in Alaska would have resulted
in that carrier having to increase its rates substantially in
order to stay in the state. When that carrier moved out, the
nonprofits had to come to other carriers in Alaska which price
the product as it would be for any other group in Alaska. He
attributed much of that large increase to the [fact] that there
was a carrier that had under priced a product for the
marketplace and when the insurance was rewritten, the price
became consistent with the marketplace in Alaska.
MR. McRAE expressed concern with regard to the state becoming
involved in personal health care. Many of the individuals have
the ability to become associations. As a matter of fact, Blue
Cross Blue Shield writes quite a few associations in Alaska.
Mr. McRae also expressed concern with regard to the state being
a conduit for the RFP. He posed a situation in which [Blue
Cross Blue Shield] contracts with a company that becomes
insolvent and there are claims that need to be paid. He
inquired as to who would pay for those claims. Would the
premium be collected from the state because the state was the
conduit for the RFP, he asked.
MR. McRAE informed the committee that Blue Cross Blue Shield
isn't afraid of competition, but legislation such as SSHB 315
could impact carriers wanting to come to Alaska and sell
products. Mr. McRae concluded by stating Blue Cross Blue
Shield's supports the concept of the association business, which
seems to be a viable approach. He reiterated the question as to
whether the state wants to become involved as a conduit for
insuring private entities.
Number 1938
REPRESENTATIVE ROKEBERG asked whether there would be an
insolvency situation if there is a third party underwriter
actually underwriting the group.
MR. McRAE answered that it would be possible, although he noted
that he didn't have [Version B] before him.
REPRESENTATIVE ROKEBERG interjected that Version B specifies
that [the RFP] goes out to a private sector underwriter. He
related his belief that [under the current language] the state
wouldn't be liable. With regard to expectations [of low cost],
Representative Rokeberg noted his agreement with Mr. McRae. In
regard to associations, Representative Rokeberg asked if Mr.
McRae was referring to MEWAs or any other type of association
that's allowed.
MR. McRAE related his belief that Blue Cross Blue Shield of
Alaska writes other types of associations other than MEWAs.
Whenever pooling occurs, there are winners and losers because
some will have a lower rate that will increase while others will
have a higher rate that will decrease.
REPRESENTATIVE ROKEBERG asked if that would be due to the
experience of the employee.
MR. McRAE clarified that in theory the experience of the pool
should be different than that of the individuals. However, if
there is one group that's a fairly high risk group, then it
would be rated higher and pay a larger premium than would a low
risk group. When those two groups are put together, one
[group's rate] increases and one [group's rate] decreases.
REPRESENTATIVE ROKEBERG inquired as to the underwriting
difference if there was a group of child care workers and a
group of drug and alcohol counselors.
MR. McRAE said that he wasn't qualified to answer an actuarial
question.
CHAIR MURKOWSKI related her understanding that Mr. McRae is
concerned with the state being the conduit for the RFP and the
possibility of the state having some liability in that regard.
MR. McRAE replied yes.
CHAIR MURKOWSKI echoed Representative Rokeberg's belief that
[Version B] addressed his concern.
Number 2088
WILLIAM CRAIG, Alaska Independent Blind; Alaska Information
Radio Reading Education Service, explained that the Alaska
Information Radio Reading Education Service reads papers to
blind people over a special radio band in the Anchorage and
Fairbanks areas. This organization employs 10-15 disabled
people. Mr. Craig said that although the organization isn't
necessarily seeking lower cost insurance, this [legislation]
would allow the organization to provide better insurance than it
currently provides. Under the insurance the organization has
now employees frequently have to wait six months before using it
and there's a high deductible. Furthermore, aging employees
face increased insurance costs, including the deductible. He
pointed out that as a small group, the organization finds it
difficult to find insurance that is priced at a reasonable cost
and provides a reasonable plan.
CHAIR MURKOWSKI, upon determining that no one else wished to
testify, closed public testimony on SSHB 315.
Number 2160
REPRESENTATIVE ROKEBERG informed the committee that he has a few
small amendments. He moved that the committee adopt conceptual
Amendment 1, which read:
Page 2, line 20
After "a policy"
Insert "or politics"
There being no objection, conceptual Amendment 1 was adopted.
Number 2187
REPRESENTATIVE ROKEBERG moved that the committee adopt Amendment
2, which read:
Page 4, line 31
Delete: "January 1, 2003"
Insert: "July 1, 2002"
REPRESENTATIVE ROKEBERG recalled Mr. Bell's testimony that, upon
passage, the department would perform a poll and attempt to
develop something. Therefore, the earlier effective date would
provide the department with six months to organize the program
and potentially be in place at the first of the year.
REPRESENTATIVE HAYES objected for the purpose of discussion. He
inquired as to why an immediate effective date wouldn't be used
because even an effective date of July 1, 2002, might be too
late due to when the legislation is actually signed.
REPRESENTATIVE ROKEBERG said that secondary [effective dates]
are usually at the first of the fiscal year which coincides with
the new fiscal year for the state.
REPRESENTATIVE HAYES expressed concern that the legislation
might not be signed until after July 1, 2002. Therefore, an
immediate effective date would seem to make more sense.
REPRESENTATIVE ROKEBERG said that he would consider an immediate
effective date as a friendly amendment to Amendment 2.
[Therefore, the Amendment 2 was changed such that "January 1,
2003" was replaced with an immediate effective date.]
There being no objection to Amendment 2 as amended, it was
adopted.
Number 2300
REPRESENTATIVE ROKEBERG moved that the committee adopt
conceptual Amendment 3, which read:
Page 3, line 16,
Delete "and"
Page 3
Delete lines 17-19
REPRESENTATIVE ROKEBERG explained that [conceptual Amendment 3]
would eliminate the confusion with regard to what an association
is and the distinction with regard to the number of [employees
required for an association for insurance purposes].
CHAIR MURKOWSKI objected for the purpose of discussion.
TAPE 02-62, SIDE B
CHAIR MURKOWSKI related her understanding that an "association"
is a nonprofit organization that has no limitation on the number
[of employees] while a business does. Furthermore, an
"association" is comprised of either a business or nonprofit or
both.
REPRESENTATIVE ROKEBERG agreed.
CHAIR MURKOWSKI asked if that would alleviate Ms. Bauman's
concern.
REPRESENTATIVE ROKEBERG replied no and explained that Ms.
Bauman, as an individual [owner and employer], would have to
[form an] association with someone else.
CHAIR MURKOWSKI asked if there is a concern that an association
could have 1,000 people and become problematic.
REPRESENTATIVE ROKEBERG said, "The more the merrier, it should
lower costs."
CHAIR MURKOWSKI removed her objection. There being no other
objection, conceptual Amendment 3 was adopted.
Number 2253
REPRESENTATIVE HALCRO expressed concern that by the division
absorbing a $132,000 fiscal note, the [legislature] is, again,
expecting state government to do something for free. Therefore,
he expressed the need for the legislation to include a mechanism
in which to recapture the $132,000.
REPRESENTATIVE ROKEBERG remarked that he tended to agree.
However, most of those [impacted by this legislation] are
nonprofits that are directly or indirectly impacted by the
state's various budgets, including the general fund budget.
Therefore, the case for a modest contribution up front could be
made. He indicated that [he would suggest that] the House
Finance Committee review recapturing the cost without having too
much negative impact.
REPRESENTATIVE HALCRO noted that his aforementioned concern
isn't enough for him to object to moving the legislation.
However, he recommended that the House Finance Committee review
the possibility of mitigating [the fiscal note].
REPRESENTATIVE MEYER mentioned that many of the individuals who
can't obtain insurance may have some serious health problems
that could have been avoided had these individuals been able to
see a physician earlier. People in such situations may now be
on Medicare. Therefore, the $96,000 a year that this will cost
the state isn't of too much concern because of his belief that
there should be a reduction in cost elsewhere. He characterized
the legislation as a good bill offering help to some people who
desperately need it. However, he hoped that the expectations of
these people are realistic.
REPRESENTATIVE ROKEBERG informed the committee that there are
still discussions with the Mental Health Trust [Fund] in order
to take on the [initial cost]. The ongoing $95,000 would be for
the administrative costs.
REPRESENTATIVE HAYES announced that he has a conflict of
interest because of his employment in the insurance industry.
Number 2101
REPRESENTATIVE MEYER moved to report CSSSHB 315, Version 22-
LS1177\B, Craver, 4/18/02, as amended out of committee with
individual recommendations and the accompanying fiscal notes.
There being no objection, CSSSHB 315(L&C) was reported from the
House Labor and Commerce Standing Committee.
HB 520 - BUSINESS LICENSE FEES/BUS DEVELOPMNT FUND
CHAIR MURKOWSKI announced that the final order of business would
be HOUSE BILL, "An Act relating to business licenses, business
license endorsements, and business license and license
endorsement fees, to a trade and business development fund, and
to the international trade and business endowment; and providing
for an effective date."
Number 2061
AMY ERICKSON, Staff to Representative Lisa Murkowski, Alaska
State Legislature, informed the committee that HB 520 was
actually brought to [the committee] by Representative Lancaster,
the Finance subcommittee chair for the Department of Community &
Economic Development. This legislation seeks to implement a
secure funding mechanism to pay for the administrative costs of
the business licensing program and the international, trade, and
economic development activities, including tourism development.
This legislation doubles the business licensing fees from $25 to
$50 per year, which will generate approximately $3.6 million
each year. She noted that the fees haven't been changed since
1949. This legislation also creates a new Trade and Business
Development Fund into which all the business licensing fees will
be deposited and from which the legislature can appropriate to
fund the administrative expenses of the business licensing
programs and operating the department's business development and
international trade activities. Ms. Erickson pointed out that
the fund would also allow the division to continue the Alaska
Economic Information System, which is a digital system that
brings together state, federal, and private data about the
state's economy, resources, and committees in order to promote
economic development by both public and private entities.
MR. ERICKSON highlighted that HB 520 repeals the International
Trade and Business Endowment Fund because funding for these
programs would now come from the new Trade and Business
Development Fund created by HB 520. The $5 million balance in
the [International Trade and Business Endowment Fund] will be
deposited in the general fund and will be available for
appropriation by the legislature July 1, 2002. Therefore, [HB
520] will ensure a steady funding source for economic
development in the state. Those benefiting from this service
will fund the program.
CHAIR MURKOWSKI related that Representative Lancaster has been
concerned that the licensing fees have remained unchanged since
pre-statehood days, which she indicated was probably the initial
[impetus] for HB 520.
Number 1933
JEFF BUSH, Deputy Commissioner, Office of the Commissioner,
Department of Community & Economic Development, informed the
committee that the department is supportive of HB 520 because it
would stabilize the funding source for the department's economic
development and trade activities. Several year's ago the
International Trade and Business Endowment was set up with a $5
million endowment from the "University Endowment," which was
supposed to fund some of the department's economic development
and trade activities. However, the difficulties with the stock
market and investments has left the Division of International
Trade with a huge hole in its funding. Although there was an
authorization for almost $500,000 from the [International Trade
and Business Endowment], the reality is that the amount
available for expenditures is much less. Therefore, the fiscal
note for HB 520 realizes that the $500,000 was never a realistic
number for the [International Trade and Business Endowment] and
thus the endowment earnings are replaced with $300,000 of
constant and predictable income through the business licensing
program. Mr. Bush said that HB 520 is particularly appealing
because it recognizes that businesses in the state can pay for
business support services. Furthermore, the amount paid for the
business license would support business support activities such
as for economic development and trade.
MR. BUSH turned to the fiscal notes. The fiscal note with the
BRU (Budget Reserve Unit) of the Division of Occupational
Licensing shows a change in revenue of $1.7 million, which would
be the additional funds that would be received by the increase
in the business license fee. Furthermore, the fiscal note shows
a reduction of general fund (GF) program receipts (PR) in the
amount of $554.7, which is replaced with the [International]
Trade and Business Endowment Fund; these are the funds necessary
to administer the business license program.
MR. BUSH moved on to the fiscal note with the Community &
Business Development component. This fiscal note shows
operating expenditures of $270,000 in contractual funds, which
is the amount necessary to run the Economic Information System
program discussed by Ms. Erickson. Furthermore, this fiscal
note shows that [the Economic Information System program]
reduces the GF by $1.275 and substitutes the funding for both of
the $270 of contractual and the $1.275 GF with the
[International] Trade and Business Endowment Fund.
MR. BUSH then addressed the fiscal note with the International
Trade & Market Development component. This fiscal note shows a
reduction in the contractual line in the amount of $196.4, which
is the difference between what is in the Trade Endowment down to
a $300,000 amount if HB 520 is passed. Furthermore, $1.2
million in GF is substituted plus a loss of $496.4 in the
[International] Trade and Business Endowment, and therefore that
endowment would go away. "And substitutes all of that with $1.5
million in the Trade and Business Development Fund," he pointed
out. Mr. Bush echoed Ms. Erickson's testimony that the $5
million [International] Trade [and Business] Endowment
disappears and is immediately deposited in the GF, which isn't
illustrated in any fiscal note.
Number 1648
CHAIR MURKOWSKI asked whether the business community is going to
cry out due to an increase in the business fees.
MR. BUSH answered that he didn't believe so. He informed the
committee that the department anticipates some loss of business
licenses because those people who have carried business licenses
for many years but have not used them may view [this increase in
fee] as a reason not to apply for a new business license. Mr.
Bush related his belief that there are witnesses via
teleconference that believe the increase in fee is quite
reasonable given the services one receives.
REPRESENTATIVE ROKEBERG asked if, when [proposing] eliminating
the [International Trade and Business] Endowment Fund, any
thought was given to returning the money to the businesses.
MR. BUSH replied no. Mr. Bush said, "We would be happy to find
a place to spend that money, but we didn't think that that was
really our place to do."
Number 1569
REPRESENTATIVE ROKEBERG inquired as to the original idea that
gave way to the Alaska business license fee.
MR. BUSH informed the committee that the Alaska business license
fee was created as part of the gross receipts tax program, which
was repealed in 1979 or 1980. He related his understanding that
the fee was essentially a registration for the gross receipts
tax that was used as an assessment/auditing tool by the
Department of Revenue in order that the department would know
which businesses should file [gross receipts] returns. Other
services were associated with the fee, which is still the case
today.
REPRESENTATIVE ROKEBERG pointed out that the business
registration is used in various ways. For example, this
registration is a way that the Department of Labor & Workforce
Development can track tax receipts for unemployment taxes
through business registration. Furthermore, entities such as
the Municipality of Anchorage use the business registration in
order to track down businesses that need to file for personal
and real property taxes. Representative Rokeberg inquired as to
the cost to administer and collect the license fee.
MR. BUSH answered about $550,000 annually. He confirmed that
the state would take about $3.6 million.
REPRESENTATIVE ROKEBERG recalled that the testimony before the
House Labor and Commerce Standing Committee in the past has been
that there is no known use of the funds, which go directly to
the GF. Therefore, this is really a GF tax.
MR. BUSH said that this is clearly a fee.
REPRESENTATIVE ROKEBERG asked whether, from an economic
definition, increasing the fee wouldn't be [considered] a tax.
He surmised that the department is trying to use an
unconstitutional semi-dedicated fund to finance a portion of the
department, although this activity is generally funded by the
GF.
MR. BUSH agreed that most of the [business licensing] functions
are paid for by the GF. Furthermore, the business license
receipts are all placed directly in the GF. Although some of
the receipts are accounted for as GF program receipts, the
remainder is deposited as GF revenue.
REPRESENTATIVE ROKEBERG surmised that would change under HB 520.
MR. BUSH clarified, "It would be deposited into this account
within the general fund, and accounted for separately within the
general fund."
REPRESENTATIVE MEYER explained that in his job outside the
legislature, he was assigned the task of obtaining a list of all
the businesses owned by minorities and women in the state. He
thought that would be an easy task because he thought business
owners probably marked whether they were owned by a minority.
However, it doesn't seem as if such information is solicited.
MR. BUSH responded that he didn't believe such information is
tracked.
Number 1326
CATHERINE REARDON, Director, Division of Occupational Licensing,
Department of Community & Economic Development (DCED), explained
that businesses are tracked by a description of their activity
that's pulled from the North American Industrial Classification
System (NAICS). She related her belief that DOT [Department of
Transportation & Public Facilities] maintains the minority
business activity [list].
REPRESENTATIVE MEYER noted that the information from DOT was
very limited. He also noted that the federal government,
through the small business association, kept track when it was
provided with the information. He inquired as to why such
information couldn't be asked when a business applies for a
business license.
MS. REARDON answered that additional questions can be asked at
the time of licensure or renewal, if the legislature so
specifies. She said that she would want to know what meets the
definition. Furthermore, there is a limit to how many questions
she would advocate adding to this form because the [division]
likes the form to be simple for people to do.
REPRESENTATIVE MEYER asked if the passage of the minimum wage,
the unemployment compensation tax, and now an increase in the
business license, is too hard on commerce.
MR. BUSH responded that he didn't believe so. Furthermore, he
didn't believe that the current administration would feel that
any of the aforementioned is too harsh on commerce in Alaska.
However, he acknowledged that there is quite a bit of debate
regarding the minimum wage, which is probably the item with the
strongest impact. He said he didn't believe that $25 a year is
a significant amount of money for most businesses.
REPRESENTATIVE HAYES asked if, last year, legislation was passed
that increased the license [fee] for those folks who sell
cigarettes. He inquired as to how HB 520 will impact that
[increase in the license fee for those who sell cigarettes].
MR. BUSH explained that the tobacco endorsement is a program
that's operated by DCED and associated with the Business
Licensing Program. He said that businesses engaged in tobacco
activities will be required to pay more. However, that's not
impacted by HB 520. In fact, those fees charged for tobacco are
accounted for separately and dealt with as a completely
independent program.
REPRESENTATIVE HAYES recalled that with the increase in the fee
for a tobacco endorsement there was discussion that some people
would drop [the tobacco endorsement because of the increase].
Therefore, he questioned whether these people would now be
impacted by HB 520 as well.
CHAIR MURKOWSKI recalled that the endorsement procedure is
different than the business license procedure. Therefore,
although a business may have various endorsements for its
outlets, only one business license would be required per
business.
Number 1012
MS. REARDON, in response to Representative Rokeberg, confirmed
that the business licenses are biennial licenses, per AS 08.01.
Therefore, the $25 annual increase under HB 520 will mean that
for a two-year license one will pay $50 and when the increase to
$50 a year occurs, one will pay $100 for the two-year license.
REPRESENTATIVE ROKEBERG inquired as to why this statute isn't
fixed [to parallel the biennial licenses under AS 08.01].
Number 0930
BARBARA PROPES, Scan Home, testified via teleconference. Ms.
Propes related her belief that this is a reasonable increase.
She noted her intrigue with the notion of the fee going into a
Trade and Business Development Fund. She said she believes that
it's the state's responsibility to try to attract trade and
development in the state. Much of [the state's] revenue is
derived from international trade. She said she believes that
most businesses would be willing to pay this fee knowing the
need to continue to increase their client base. The state's
current office does fulfill an essential need and it's
frustrating to wait and see how much the office will be funded
each year. Ms. Propes viewed this as having a ripple affect
with regard to the job opportunities in the state.
REPRESENTATIVE ROKEBERG noted his concern with regard to the
constitutional prohibition against dedicated funds, which is
what this legislation is basically.
Number 0756
SCOTT McMURREN, McMurren & Goodman, testified via
teleconference. Mr. McMurren announced his support of HB 520.
He informed the committee that he has witnessed first hand what
DCED has done for seafood marketing, film development, tourism
development, and international trade. The consistent battle to
fund [the business license program] impedes his ability to do
business with [DCED] for about four months out of the year, he
noted. Mr. McMurren explained that [this program and the
department] is building incremental business and money for
Alaska.
REPRESENTATIVE ROKEBERG requested explanation as to why the
endowment fund was established.
Number 0519
MR. BUSH explained that Senator Drue Pearce was frustrated with
the endowment and the activities of the Center for International
Business at the university and wanted to see more business
advocacy with the aforementioned fund. Therefore, a portion of
the fund was taken to create an endowment, the proceeds from
which were used to partially fund international trade activities
by the department.
REPRESENTATIVE ROKEBERG inquired as to why the endowment is
going to be destroyed, although the returns are down.
MR. BUSH said, "We don't really view it as a destruction of the
endowment as much as we see it as a method of creating a more
consistent funding source."
REPRESENTATIVE ROKEBERG pointed out that there is no connection
because the money is placed in the GF, where he was sure someone
would find a use for it. Representative Rokeberg turned to the
Alaska Economic Association, which he didn't recall being funded
in the budget. He asked if the Alaska Economic Association is
related to HB 520.
MR. BUSH answered that one of Representative Lancaster's
motivations with this bill was to find a way to fund the program
and Legislative Finance advised him that the business license
may be a method of funding for this program. Mr. Bush said that
this program was created through a lot of work of the past
several years and it still isn't operational on a statewide
basis. Although everyone who has viewed demos of the program or
has worked with program have received it well, it's impossible
to maintain without an ongoing funding source.
REPRESENTATIVE ROKEBERG surmised then that the endowment would
[generate] about $250,000 a year.
MR. BUSH confirmed that would be the case at 5 percent. In
further response to Representative Rokeberg, Mr. Bush said that
the program's budget was to be $496[,000].
Number 0255
REPRESENTATIVE HAYES recalled that the Senate proposed using the
$5 million currently in the endowment for tourism. Therefore,
this endowment isn't really protected.
MR. BUSH acknowledged that there is a proposal to use the
endowment's funds to pay for the emergency funding that the
tourism industry requested after the events of September 11,
2001.
CHAIR MURKOWSKI, upon determining there was no one else to
testify, closed public testimony.
REPRESENTATIVE HAYES remarked that it's sad when entities with
no vision take money and fill a void elsewhere rather than where
the money is necessary. He expressed the need [for legislators]
to be truthful with constituents with regard to the state of
Alaska's budget. He indicated his dislike of the "shell game"
with the budget. Therefore, he recommended that if the money in
the endowment is going to be used for something else, then it
should be laid on the table. Furthermore, in such a case the
endowment should be eliminated and a steady stream of money
should be created for the [programs] desired.
Number 0110
REPRESENTATIVE HAYES moved to report HB 520 out of committee
with individual recommendations and the accompanying fiscal
notes.
REPRESENTATIVE ROKEBERG objected.
TAPE 02-63, SIDE A
REPRESENTATIVE ROKEBERG commented that many [business owners]
don't like the business tax, although they know it's necessary
and serves a purpose. Therefore, the fees should reflect the
cost rather than be a source of revenue, he said. He expressed
the need to classify this for what it is. He related his belief
that [HB 520] sets up a bogus designated fund for designated
receipts, which is unconstitutional. He then noted his support
of the Alaska Economic Information System.
Number 0189
CHAIR MURKOWSKI remarked that she wasn't sure whether
Representative Rokeberg supported or opposed the HB 520.
REPRESENTATIVE ROKEBERG said that these things should just be
funded in the budget. "If you want to have a bill to raise the
license fee, let's talk about that but it shouldn't be hooked
something else," he stressed. He announced that he was opposed
to HB 520.
REPRESENTATIVE MEYER said he didn't think business is
overwhelmingly opposed to increasing the license fee or there
would have been testimony to indicate so. Furthermore, the
[Alaska Chamber of Commerce] usually puts out something for the
businesses.
REPRESENTATIVE ROKEBERG interjected that he had not heard of HB
520 until the folks from the department came to his office. He
related his belief that no one in the state knows this is
happening; small businesses are working.
REPRESENTATIVE MEYER indicated that businesses join the [Alaska
Chamber of Commerce] so that someone watches out for things such
as this.
Number 0336
REPRESENTATIVE HALCRO agreed that folks are tired of piece meal
approaches. "The fact is until such time as we get some
leadership in this building to ... chart a course for the future
and determine how we're going to pay for some of these programs
like the information services, we're left with this as our only
device," he charged. He pointed out that the prior legislation,
SSHB 315, that was reported from this committee had a $132,000
fiscal note. Therefore, he saw two options. One of which would
be to start asking people to pay their fair share now or stop
trying to solve the world's problems for nothing.
REPRESENTATIVE CRAWFORD noted his agreement with Representative
Rokeberg in that HB 520 is a tax. He pointed out that he voted
against HB 3 and would vote against HB 225 and anything else
that doesn't come as part of a [long-term fiscal] plan.
REPRESENTATIVE ROKEBERG, with regard to SSHB 315, assured
Representative Halcro that he is having discussions with AMTAR
(ph) and hopefully [the fiscal impact] will be addressed.
Furthermore, HB 4 has been stripped in order to have a zero
fiscal note.
Number 0569
REPRESENTATIVE HAYES restated his motion to report HB 520 out of
committee with individual recommendations and the accompanying
fiscal note(s).
REPRESENTATIVE ROKEBERG withdrew his objection.
There being no objection, HB 520 was reported from House Labor
and Commerce Standing Committee.
HJR 49 - STATE-FEDERAL JOINT RESEARCH PLAN
CHAIR MURKOWSKI announced that the final order of business would
be HOUSE JOINT RESOLUTION 49, Relating to preparation of a joint
state-federal research and development plan.
AMY ERICKSON, Staff to Representative Lisa Murkowski, informed
the committee that this legislation, sponsored by the House
Labor and Commerce Standing Committee, was brought to the
committee by Mead Treadwell, Artic Research Commission. She
provided the following testimony:
This [resolution] acknowledges the importance of
research and development as a means to drive and
diversify Alaska's economy. It further recognizes
that Alaska's economy is heavily dependent on the
research and development activities of public,
private, and academic sectors to attract investment,
jobs, and revenue to the state. This resolution
requests that state and federal agencies work in
tandem to develop a joint research and development
plan to help expand and diversify Alaska's economy,
strengthen and maintain its research institutions, and
protect the health of Alaskans and Alaska's
environment, and request the plan be presented to the
legislature in 2003 to identify areas of high economic
potential from resource development and tourism on
state and federal lands.
MS. ERICKSON noted that the companion bill in the Senate to
which there were two amendments in Senate committees. She
pointed out that the acronym WAMI was used and is incorrect
because it's now WWAMI (Washington, Wyoming, Alaska, Montana,
Idaho Medical Education Program). Furthermore, she wasn't sure
how well known the program is to merely use the acronym.
MS. ERICKSON, in response to Chair Murkowski, explained that one
of the amendments in the Senate deleted "and the Conservation
and Reinvestment Act" on page 2, line 8, after "Oil Spill
Recovery Institute". She indicated that there was confusion
regarding whether that is actually in law. Furthermore, on page
2, line 30, the language "in the state" was replaced with
"waters and the air space of Alaska".
Number 0785
REPRESENTATIVE HAYES noted his support of HJR 49. However, he
conveyed his fear that the Senate is looking at doing things
that will hurt or even make the Alaska Science & Technology
Foundation disappear.
CHAIR MURKOWSKI indicated that the committee must do what it can
with the knowledge it has at the time.
Number 0863
REPRESENTATIVE ROKEBERG moved conceptual Amendment 1, as
follows: page 1, line 13, spell out the name of WWAMI. There
being no objection, it was so ordered.
REPRESENTATIVE ROKEBERG moved [conceptual Amendment 2], as
follows:
Page 2, line 8,
Delete "the Conservation and Reinvestment Act"
There being no objection, it was so ordered.
REPRESENTATIVE ROKEBERG moved conceptual Amendment 3, as
follows:
Page 2, line 30,
Delete "in the state"
Insert ", water and the air space of Alaska"
There being no objection, it was so ordered.
Number 0938
REPRESENTATIVE HAYES moved to report HJR 49 as amended out of
committee with individual recommendations and the accompanying
zero fiscal note. There being no objection, CSHJR 49(L&C) was
reported from the House Labor and Commerce Standing Committee.
ADJOURNMENT
There being no further business before the committee, the House
Labor and Commerce Standing Committee meeting was adjourned at
5:15 p.m.