SENATE LABOR AND COMMERCE COMMITTEE April 28, 1998 1:35 p.m. MEMBERS PRESENT Senator Loren Leman, Chairman Senator Jerry Mackie, Vice Chairman Senator Tim Kelly Senator Lyman Hoffman MEMBERS ABSENT Senator Mike Miller COMMITTEE CALENDAR CONFIRMATION HEARINGS: State Board of Registration for Architects, Engineers & Land Surveyors: Patricia Peirsol, Fairbanks Alaska Labor Relations Agency: Karen Mahurin, Kenai Occupational Safety and Health Review Board: Denis Davidson, Anchorage; and Carla Meek, Juneau Personnel Board: Charlie Parr, Fairbanks Board of Certified Real Estate Appraisers: Judy Kemplen, Anchorage Alaska Workers' Compensation Board: John Abshire, Anchorage; Valerie Baffone, Anchorage; and Shawn Pierre, Chugiak SENATE BILL NO. 353 "An Act relating to property exemptions; and providing for an effective date." - HEARD AND HELD SENATE BILL NO. 354 "An Act relating to wills, intestacy, nonprobate transfers, and trusts; and amending Rule 24, Alaska Rules of Civil Procedure." - MOVED SB 354 OUT OF COMMITTEE CS FOR HOUSE BILL NO. 411(FIN) "An Act relating to issuance of a winery license in a local option area." - MOVED CSHB 411(FIN) OUT OF COMMITTEE CS FOR HOUSE BILL NO. 451(JUD) "An Act relating to assistive technology devices and mobility aids for physically disabled persons." - MOVED CSHB 451(JUD) OUT OF COMMITTEE PREVIOUS SENATE COMMITTEE ACTION SB 353 - No previous action to record. SB 354 - No previous action to record. HB 411 - No previous action to record. HB 451 - No previous action to record. WITNESS REGISTER Representative Alan Austerman State Capitol Juneau, AK 99801-1182 POSITION STATEMENT: Prime Sponsor of HB 411 Doug Griffin, Director Alcohol Beverage Control Board 550 W. 7th Ave., Suite 350 Anchorage, AK 99501-3510 POSITION STATEMENT: ABC Board neutral on HB 411 Ms. Jennifer Adzima, Legislative Assistant Intern to Representative Joe Green State Capitol Juneau, AK 99801-1182 POSITION STATEMENT: Presented overview on HB 451 Patrick Reinhart, Director State Independent Living Council 1016 W. 6th Ave., #205 Anchorage, AK 99501 POSITION STATEMENT: Testified in support of HB 451 Ken Dean 1130 Slim Williams Way Juneau, AK 99801 POSITION STATEMENT: Testified in support of HB 451 Ms. Mel Krogseng, Staff to Senator Robin Taylor State Capitol Juneau, AK 99801-1182 POSITION STATEMENT: Presented overviews on SB 354 & SB 353 Stephen Noey P.O. Box 110018 Anchorage, AK 99511-0018 POSITION STATEMENT: Testified in support of SB 354 Douglas Blattmacher, President & CEO Alaska Trust Company 1029 W. 3rd Anchorage, AK 99501 POSITION STATEMENT: Testified in support of SB 354 Rich Hompesch 199 N. Cushman, Suite 400 Fairbanks, AK 99701 POSITION STATEMENT: Testified in support of SB 354 Steve Greer 4041 B St., #205 Anchorage, AK 99501 POSITION STATEMENT: Offered information on SB 353 Ms. Linda Hulbert P.O. Box 81402 Fairbanks, AK 99708 POSITION STATEMENT: Testified in support of SB 353 ACTION NARRATIVE TAPE 98-25, SIDE A Number 001 CHAIRMAN LEMAN called the Senate Labor and Commerce Committee meeting to order at 1:35 p.m. and noted the presence of Senators Kelly, Hoffman and Mackie. The first item on the agenda was a confirmation hearing on the appointment of Karen Mahurin of Kenai to the Alaska Labor Relations Agency. KAREN MAHURIN, testifying via teleconference from Kenai, stated she has served on the Alaska Labor Relations Agency Board for the past five years, as well as serving as president of a Local of support employees on the Kenai Peninsula for approximately eight years. The Alaska Labor Relations Agency has also sent her to Boston to attend the National Labor Relations Academy. MS. MAHURIN believes that the board provides a very orderly process to clarify unit disagreements and settle unfair labor practices. She also believes that only by having a balanced panel of labor management in a public seat can there be fairness to all parties. She expressed her desire to be reconfirmed to the Alaska Labor Relations Agency. SENATOR MACKIE moved that the name of Karen Mahurin to the Alaska Labor Relations Agency be forwarded to a joint session on confirmations, and that this was not an indication of the members' intent to vote for or against the nominee. Hearing no objection, the motion carried. Number 095 CHAIRMAN LEMAN opened the confirmation hearing on the appointment of Carla Meek to the Occupational Safety and Health Review Board. CARLA MEEK, the owner of a construction business in Juneau, said she serves in the field as a construction person so she is knowledgeable about the importance and the necessity for safety and health in the job environment. She believes that her experience of being the owner of a construction business, as well working in the field, will be an asset to the board. SENATOR MACKIE moved that the name of Carla Meek to the Occupational Safety and Health Review Board be forwarded to a joint session on confirmations, and that this was not an indication of the members' intent to vote for or against the nominee. Hearing no objection, the motion carried. Number 175 CHAIRMAN LEMAN opened the confirmation hearing on the appointment of Charlie Parr to the Personnel Board. CHARLIE PARR of Fairbanks said he has been a resident of the state of Alaska since 1961. He is a former faculty member of the University of Alaska Fairbanks and served in the Alaska State Legislature for eight years. He and his wife have been the owners and operators of a gift shop in Fairbanks since 1976. He has served on the Parole Board for almost five years, and he was appointed to the Personnel Board last September. He said he views the Personnel Board, since it is the last recourse in the Executive Branch for public employees who aren't covered by a bargaining agreement, as a place that requires both careful consideration and absolute integrity. CHAIRMAN LEMAN noted that concern was expressed last year about the potential for extreme partisanship by members of the board, and he asked Mr. Parr how he views his participation on this board. MR. PARR responded that he can honestly say that in the board's deliberations, he has never seen any indication of political partisanship, and he would not let his membership in a party influence his decisions. SENATOR MACKIE moved that the name of Charlie Parr to the Personnel Board be forwarded to a joint session on confirmations, and that this was not an indication of the members' intent to vote for or against the nominee. Hearing no objection, the motion carried. Number 235 CHAIRMAN LEMAN opened the confirmation hearing on the appointment of Judy Kemplen to the Board of Certified Real Estate Appraisers. JUDY KEMPLEN, testifying from Anchorage, related that she is vice president and manager of residential lending at National Bank of Alaska, overseeing statewide production of new mortgage loans. She said she has hands-on mortgage lending experience to bring to the board, and she has worked with appraisers statewide in her current position, as well as previous positions as loan officer, internal quality officer and underwriter. CHAIRMAN LEMAN asked Ms. Kemplen if she saw any conflict in her work on the board and her husband's serving in the House of Representatives. MS. KEMPLEN responded that she saw no conflict at all. SENATOR MACKIE moved that the name of Judy Kemplen to the Board of Certified Real Estate Appraisers be forwarded to a joint session on confirmations, and that this was not an indication of the members' intent to vote for or against the nominee. Hearing no objection, the motion carried. Number 265 CHAIRMAN LEMAN opened the confirmation hearing on the appointment of Shawn Pierre to the Alaska Workers' Compensation Board. SHAWN PIERRE, a teacher in the Anchorage School District, said he has served on the executive board of the Alaska Teamsters since 1996, and has found it very interesting and a learning experience. CHAIRMAN LEMAN asked Mr. Pierre what types of issues have been addressed since he has been on the board. MR. PIERRE replied they have addressed many different issues including a wide spectrum of work related injuries. SENATOR MACKIE moved that the name of Shawn Pierre to the Alaska Workers' Compensation Board be forwarded to a joint session on confirmations, and that this was not an indication of the members' intent to vote for or against the nominee. Hearing no objection, the motion carried. CHAIRMAN LEMAN opened the confirmation hearing on the appointment of Patricia Peirsol to the State Board of Registration for Architects, Engineers & Land Surveyors. PATRICIA PEIRSOL, the owner of an architectural firm in Fairbanks, said she realized several years ago that the Board of Registration was more than a place to send your money and receive your registration certificate. She realized that it was a very important board and the issues were very important, not only to herself, but to the general public as well. She believes that with her experience she can help with some of the decision-making process and that is why she is interested in being on the board. CHAIRMAN LEMAN noted that SB 110, which passed the Senate and was currently in the House, received criticism because it shifts costs to licensees from the new registrants, and he asked Ms. Peirsol if she had any comments on the bill. MS. PEIRSOL replied that she was in only one meeting where that issue was discussed, and she is not certain that she understands the thought that monies would be transferred from one group to the other. SENATOR MACKIE commented that the legislation provides for the licensing of landscape architects and being part of the board, and, as a result of that, all architects, engineers, land surveyors and landscape architects will pay the same amount of fees. Number 380 SENATOR MACKIE moved that the name of Patricia Peirsol to the State Board of Registration for Architects, Engineers & Land Surveyors, and that this was not an indication of the members' intent to vote for or against the nominee. Hearing no objection, the motion carried. Number 391 CSHB 411(FIN) - LOCAL OPTION FOR WINERY LICENSE CHAIRMAN LEMAN closed the confirmation hearing portion of the meeting and then brought HB 411 before the committee. REPRESENTATIVE ALAN AUSTERMAN, prime sponsor of HB 411, explained the legislation is a minor change to the statute to allow the possibility of a small winery business to be established, particularly in one of the villages on Kodiak Island, although it could apply to the rest of the state. Because of the way the ABC statutes are written, it was felt that the winery licensee portion had to be added to the exemption clauses which would then allow the local communities to have a vote to allow a winery to take place. SENATOR MACKIE asked if the statutes contain a definition of a winery. DOUG GRIFFIN, Director, Alcoholic Beverage Control Board, stated the ABC Board's position as being neutral and not having any objection to the legislation. He confirmed the change allows the ability to start a winery as part of one of the options that are available to local residents under the local option process. In response to Senator Mackie's question, MR. GRIFFIN clarified that the state of Alaska relies on the definition for wine that's provided by the federal government. The Bureau of Alcohol, Tobacco and Firearms is more involved in the manufacturing of a product. He said he didn't have the definition in front of him, but it basically would be a product that's fermented from grapes or other types of fruit. On Kodiak Island they are looking at a wildberry winery and it would be within a certain alcohol content. SENATOR MACKIE asked if a winery would be regulated in the same manner by the ABC Board as any other industry would. MR. GRIFFIN acknowledged that was correct. He stressed that there would have to be a local option election held before a winery could be established. CHAIRMAN LEMAN asked if the winery would be just exporting its product. MR. GRIFFIN replied that could be the case if that is the option it chooses, but a community could also allow for limited sale of the product as well. He noted there are communities in other parts of the country involved in the manufacturing of a product but they remain dry communities. There being no further testimony on HB 411, CHAIRMAN LEMAN asked for the pleasure of the committee. SENATOR MACKIE moved that CSHB 411(FIN) be passed out of committee with individual recommendations. Hearing no objection, it was so ordered. CSHB 451(JUD) - ASSISTIVE TECHNOLOGY & MOBILITY AIDS CHAIRMAN LEMAN brought CSHB 451(JUD) before the committee as the next order of business. JENNIFER ADZIMA, a legislative intern to Representative Joe Green who is the prime sponsor of HB 451, said the legislation establishes an express warranty for technologies which assist physically disabled persons. Assistive technologies and mobility aids for physically disabled are not covered by the lemon laws and the consumer protection statutes in Title 45. She noted 11 states have passed such laws, and two others, including Alaska, are considering doing so. Number 524 PATRICK REINHART, Director of the State Independent Living Council (SILC), testifying from Anchorage in support of HB 451, said the council's primary responsibility is the development of a state plan for independent living and the implementation of that plan. He related that SILC requested that the legislation be introduced. MR. REINHART said that even though the bill has a zero fiscal note, he believes it will end up saving the state money in the long run because it is often state agencies that are involved in helping people with disabilities with the purchase of some kinds of very expensive pieces of adaptive equipment. When there is no recourse, they often end up with pieces of equipment that lie idle and useless, so it will save the state money, as well as the individuals with disabilities. Number 542 SENATOR MACKIE expressed his appreciation to Mr. Reinhart for all of his hard work with Challenge Alaska, as well as his work as director of SILC. KEN DEAN of Juneau said he works for Southeast Alaska Independent Living (SAIL) and he was appearing before the committee to shed some light on the value of the legislation. MR. DEAN said he purchased his wheelchair six years ago at a cost of $13,500. However, before that, he had a wheelchair which was made by a different manufacturer, which he purchased at a cost of $9,500. He had problems with the wheelchair, but was told by the manufacturer that Alaska had no lemon law so he was basically out of luck. He said in working for an independent living agency, he runs across this type of problem continually because of manufacturers not honoring their nationwide warranties, mainly because the equipment is in Alaska. TAPE 98-25, SIDE B Number 585 There being no further testimony on HB 451, CHAIRMAN LEMAN asked for the pleasure of the committee. SENATOR HOFFMAN moved CSHB 451(JUD) be passed out of committee with individual recommendations. Hearing no objection, it was so ordered. SB 354 - WILLS, TRUSTS, & OTHER TRANSFERS CHAIRMAN LEMAN brought SB 354, sponsored by the Senate Judiciary Committee, before the committee as the next order of business. MEL KROGSENG, staff to Senator Robin Taylor, explained the legislation puts finishing touches on the Alaska Trust Act passed in 1997 by taking common law and codifying it into statute. In writing the trust document, people who write trusts for Alaska, will be able to include references to the statutes as opposed to having to individually list all the provisions in the trust document. SB 354 makes a number of important improvements to Alaska's estate and trust laws. Section 1-8, 18, and 19 of the bill change Alaska law to permit a person who is domiciled outside of Alaska to select Alaska as the jurisdiction for the probate of their estate. This provision should bring significant business to the state. Sections 9 and 10 of the bill allow a person to limit the liability of a trustee in their trust when more than one trustee is serving. The person could provide that only the trustee who exercises a power will be held liable for his actions and that the other trustee who did not participate in the exercise of the power would not be held liable. This provision will encourage trustees in Alaska to work with other trustees of the same trust. Portions of the Uniform Trusts Act draft 1997) which clarify many issues involving the administration of trusts in Alaska are included in Section 11 of the bill. Section 12 protects an Alaska trustee who in good faith defends an Alaska trust from the claims of a creditor who seeks to set the trust aside. If the trustee acts in good faith, then the trustee gets a first lien on all trust assets for payment of its fees, costs and attorneys' fees. Delaware has adopted a similar provision to protects its trustees. Section 13 allows a trustee who has the power to invade the corpus of a trust to appoint the assets of the trust to another trust for the beneficiaries to postpone estate and similar taxes. This provision would allow a trustee to move a trust to Alaska and to appoint the assets to an Alaska trust. Section 14 clarifies that a trust created in another state or country can be moved to Alaska even though the trust was settled before the Alaska Trust Act was passed last year. Alaska does not have a statutory provision that sets out the powers of a trustee. Sections of the Uniform Trustee's Powers Act (draft 1994-1997) are enacted in Section 16 of the bill. These statutory powers would supplement the powers set forth in a trust agreement. A number of miscellaneous provisions are included elsewhere in the bill. Section 15 allows a person to include a penalty clause in their trust. Section 17 clarifies the accounting of bond premiums and discounts. Section 20 amends AS 34.40.110(d) to be consistent with the Uniform Fraudulent Transfers Act. Section 21 precludes an action by creditors of the grantor of the trust against those who assist in the creation of the trust. Concluding her overview on the legislation, MS. KROGSENG said this bill will improve estate and trust laws and will make Alaska's laws more favorable to its residents. In addition, the bill will make Alaska's laws more attractive to people outside of Alaska who are considering Alaska for the administration of their estates and trusts. Number 525 SENATOR LEMAN asked Ms. Krogseng if she was aware of any opposition to the legislation. MS. KROGSENG replied that she was not, and that correspondence in support of the legislation as been received from attorneys in Anchorage who work trusts. The attorneys have said it will make it easier for them in working with trusts and setting them up. STEVEN NOEY said one of the important things in the legislation is the ability to take a trust that has been created prior to Alaska Trust Act and have it moved to Alaska. The U.S. Treasury estimates that there are about a trillion dollars offshore in trusts, and a lot of them have gone offshore due to the fact that Alaska didn't have a self-settling trust where it was an asset protection trust. SB 354 is a housekeeping measure to make sure that there is no conflict if people do want to switch and move the trust to Alaska. DOUGLAS BLATTMACHER, President and CEO of the Alaska Trust Company (ATC), testifying via teleconference from Anchorage, stated ATC strongly supports SB 354. ATC thinks it will complement the Alaska Trust Act passed last year and will encourage more people to set up trusts, as well as generate additional job opportunities and business opportunities. RICH HOMPESCH, a Fairbanks attorney and a member of the Alaska Probate Rules Committee, said he helped draft portions of SB 354, and he agrees with the previous testimony on the bill. He thinks the bill will help Alaska remain competitive in the trust industry in the United States. There being no further testimony or discussion on SB 354, CHAIRMAN LEMAN requested a motion to move the bill out of committee. Number 487 SENATOR MACKIE moved SB 354 be passed out of committee with individual recommendations. Hearing no objection, it was so ordered. CHAIRMAN LEMAN opened the confirmation hearing on the appointment of Valerie Baffone to the Alaska Workers' Compensation Board. VALERIE BAFFONE, testifying via teleconference from Anchorage, stated she is currently the assistant business manager for Public Employees Local 71, and she is up for reconfirmation to the board as a labor representative. She enjoys the work she's been doing on the board, and she thinks it is a good functioning board. She believes it is important to have a board that can work well with both the employer representatives and the employees in resolving the issues that come before it. CHAIRMAN LEMAN commented that workers' comp costs appear to have come come down in recent years, and he asked Ms. Baffone if she thinks it is a reflection of some of the changes in law that the Legislature has made in the last five years. MS. BAFFONE replied that she thinks some of changes that have been made over the years have had an impact on reducing the costs for the workers' comp claims. SENATOR MACKIE moved that the name of Valerie Baffone to the Alaska Workers' Compensation Board be forwarded to a joint session on confirmation, and that this was not an indication of the members' intent to vote for or against the nominee. Hearing no objection, the motion carried. SB 353 - PROPERTY EXEMPTIONS CHAIRMAN LEMAN brought SB 353, sponsored by the Senate Judiciary Committee, before the committee as the final order of business. MEL KROGSENG, staff to Senator Robin Taylor, said SB 353 seeks to update the exemptions which are presently allowed Alaska residents for a family home and insurance. The legislation, although not granting an unlimited exemption for the family home, would at least put the family home on par with the new federal income tax capital gain exclusion. Given the growing popularity of trusts as estate planning tools, a section is added to give individuals who have their assets placed in the name of a trust, the same protection that would exist had the assets been in the individuals' own names. This would apply only to those trusts where the trust income is still taxable to the grantor. In addition, the bill adds three new exemptions: (1) for the reserves set aside for condominium associations; (2) a limited exemption for annuities; and (3) for the new Roth IRA. The exemption provided for condominium reserves is meant to protect the many individuals who reside in condominiums in Alaska. The bill assures them that the money which they have paid in the form of monthly dues will continue to be used for the purposes for which they were intended, i.e., ongoing maintenance and repairs. MS. KROGSENG said the bill would protect insurance policies and their related cousin, annuities (up to $100,000) from unforeseen financial disasters. She noted that the states of Alabama, New York, Florida, California, Missouri, New Mexico, North Carolina, Oregon, and Texas have seen fit to give its citizens an unlimited exemption for insurance policies. Number 385 CHAIRMAN LEMAN inquired as to the current value of the homestead exemption. STEVE GREER, an Anchorage attorney who has worked on the legislation, said with respect to the indexing of the homestead exemption, it is now $62,100. CHAIRMAN LEMAN said he could understand the reason for increasing a homestead exemption, but he questioned why the big jump to $250,000 for an individual and $500,000 for a couple. MR. GREER pointed out that a lot of states allow unlimited homestead exemptions. This legislation was meant to try put to Alaska, not at the top of ladder, but at least higher than where it is right now, and it was felt that the previous amount in the law was exceptionally low. He noted that with respect to the homestead exemption, banks are still going to request in their deed of trust language that the individual who gets a loan waive that right to that homestead exemption, so the banks' interests are still going to be protected. It was felt that this legislation would be of great benefit to the majority of Alaskans. CHAIRMAN LEMAN asked if other people besides the banks can ask that the homestead exemption be waived when they set up loan agreements. MR. GREER acknowledged that was correct. He added that what this bill is really meant to protect against is the unforeseen financial disaster that might occur such as a huge medical bill, a lawsuit, etc. MR. GREER spoke to the importance of the exemption for the reserves set aside for condominium associations, as well as Section 11, relating to the treatment of certain trusts, which is meant to assure the fact that if an individual retitles his asset in the name of his revokable trust, that the same type of exemption protection is going to be given to that individual as if he had just kept the asset in his own individual name. CHAIRMAN LEMAN said recent studies have indicated that the CPI overstates inflation, and he asked Mr. Greer if in using that it is creating limits that are higher than what we really want to create. MR. GREER replied that the present $54,000 puts Alaska in the lower half of the states that protect its citizens against claims, and Alaska is one of the more expensive states in the union, where, if anything, the protection should be higher and not lower. CHAIRMAN LEMAN commented there are two sides to that because it may protect the citizens against claims, but raising those limits would not protect the person making the claim. Number 234 LINDA HULBERT, a licensed insurance agent living in Fairbanks, voiced her strong support for the provision in the bill that would protect insurance policies from unforeseen financial disasters. Many times life insurance is the only asset there to protect the spouses and children. She said she represents a lot of life insurers in the state and, with those agents, works with hundreds and hundreds of people every year who in good faith get a permanent policy to protect their families. Number 192 CHAIRMAN LEMAN stated it was his intent to hold the legislation over, but he wanted to get a sense of the committee regarding the amounts proposed in the legislation. SENATOR HOFFMAN said he would like to see the amounts for the homestead exemption and the insurance policy protection as close as possible so that it is not protecting one group of people at a higher level, because many families might only have life insurance as their asset. There being no further testimony on SB 353, CHAIRMAN LEMAN said the legislation would be worked on for the next couple of days to see if a consensus could be reached on the limits in the bill and to craft something that everyone could support. There being no further business to come before the committee, the meeting adjourned at 3:07 p.m.