ALASKA STATE LEGISLATURE
SENATE STATE AFFAIRS STANDING COMMITTEE
February 26, 2015
9:02 a.m.
MEMBERS PRESENT
Senator Bill Stoltze, Chair
Senator John Coghill, Vice Chair
Senator Charlie Huggins
Senator Lesil McGuire
Senator Bill Wielechowski
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
CS FOR HOUSE JOINT RESOLUTION NO. 13(MLV)
Urging the United States Department of the Army to maintain and
strengthen the current level of its combat-capable structure in
the state and not to take structural realignment actions with
regard to Fort Wainwright and Joint Base Elmendorf- Richardson.
- MOVED SCS CSHJR 13(STA) OUT OF COMMITTEE
SENATE BILL NO. 9
"An Act repealing the authority to include certain material from
a political party in the election pamphlet."
- HEARD AND HELD
GOVERNOR APPOINTMENTS-CONFIRMATION HEARINGS
Commissioner - Department of Administration
Sheldon Fisher
- CONFIRMATION ADVANCED
CONTINUING DISCUSSION OF THE IMPLEMENTATION OF BALLOT MEASURE
NO. 2(13PSUM) - "AN ACT TO TAX AND REGULATE THE PRODUCTION,
SALE, AND USE OF MARIJUANA"
- HEARD
PREVIOUS COMMITTEE ACTION
BILL: HJR 13
SHORT TITLE: RETAIN ARMY FORCES IN ALASKA
SPONSOR(s): REPRESENTATIVE(s) REINBOLD
02/06/15 (H) READ THE FIRST TIME - REFERRALS
02/06/15 (H) MLV
02/10/15 (H) MLV AT 1:00 PM CAPITOL 120
02/10/15 (H) Moved CSHJR 13(MLV) Out of Committee
02/10/15 (H) MINUTE(MLV)
02/11/15 (H) MLV RPT CS(MLV) NT 7DP
02/11/15 (H) DP: HUGHES, LYNN, COLVER, LEDOUX,
GRUENBERG, TUCK, HERRON
02/13/15 (H) TRANSMITTED TO (S)
02/13/15 (H) VERSION: CSHJR 13(MLV)
02/18/15 (S) READ THE FIRST TIME - REFERRALS
02/18/15 (S) STA
02/24/15 (S) STA AT 9:00 AM BUTROVICH 205
02/24/15 (S) -- MEETING CANCELED --
02/26/15 (S) STA AT 9:00 AM BUTROVICH 205
BILL: SB 9
SHORT TITLE: ELECTION PAMPHLETS
SPONSOR(s): SENATOR(s) MICCICHE
01/21/15 (S) PREFILE RELEASED 1/9/15
01/21/15 (S) READ THE FIRST TIME - REFERRALS
01/21/15 (S) STA, FIN
02/26/15 (S) STA AT 9:00 AM BUTROVICH 205
See Senate State Affairs minutes from 1/22/15, 1/27/15, 1/29/15,
2/3/15 and 2/5/15.
WITNESS REGISTER
ELIJAH VERHAGEN, Staff
Representative Lora Reinbold
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Provided an overview of HJR 13.
MICHAEL O'HARE, Deputy Director
Division of Homeland Security
Department of Military and Veterans Affairs
Joint Base Elmendorf - Richardson, Alaska
POSITION STATEMENT: Testified in support of HJR 13.
SHELDON FISHER, Commissioner-designee
Department of Administration (DOA)
Juneau, Alaska
POSITION STATEMENT: Testified as appointee.
LORI WING-HEIR, Director
Division of Insurance
Department of Commerce, Community and Economic Development
(DCCED)
Anchorage, Alaska
POSITION STATEMENT: Explained the relationship of the division
as it relates to Ballot Measure 2.
KEVIN ANSELM, Director
Division of Banking & Securities
Department of Commerce, Community and Economic Development
(DCCED)
Anchorage, Alaska
POSITION STATEMENT: Presented information related to Ballot
Measure 2.
SENATOR PETER MICCICHE
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Sponsor of SB 9.
ACTION NARRATIVE
9:02:07 AM
CHAIR BILL STOLTZE called the Senate State Affairs Standing
Committee meeting to order at 9:02 a.m. Present at the call to
order were Senators Wielechowski, Coghill, Huggins, and Chair
Stoltze.
9:02:21 AM
CHAIR STOLTZE provided an agenda overview.
HJR 13-RETAIN ARMY FORCES IN ALASKA
9:03:10 AM
CHAIR STOLTZE announced that HJR 13 was before the committee.
9:03:39 AM
ELIJAH VERHAGEN, Staff, Representative Lora Reinbold, Alaska
State Legislature, provided an overview of HJR 13. He related
that HJR 13 supports maintaining and strengthening current
Alaska Army personnel levels at Fort Wainwright and Joint Base
Elmendorf-Richardson (JBER). The downsizing of military bases
across the U.S. is mandatory under the Budget Control Act of
2011. The Department of Army is looking at thirty military
installations and has four more to downsize. Both Wainwright and
JBER are on the list to be considered.
Under the Budget Control Act, the Army was required to have
listening sessions, which occurred Monday in Anchorage and
Tuesday in Fairbanks. The bases could lose up to 15,000 people
at each site. The resolution urges the Department of Defense to
not downsize, and, if possible, strengthen the bases because
Alaska is strategically located.
9:05:27 AM
CHAIR STOLTZE surmised that the military cutbacks are an attempt
to eliminate sequestration. He spoke in support of controlling
the federal budget and in support of the military.
MR. VERHAGEN did not know if the sponsor shared those concerns.
CHAIR STOLTZE asked if she is a fiscal conservative.
MR. VERHAGEN answered yes.
CHAIR STOLTZE reiterated his concern.
9:07:28 AM
MR. VERHAGEN maintained that the shutdown should not be for
Alaska's bases.
SENATOR MCGUIRE joined the committee meeting.
9:08:23 AM
MICHAEL O'HARE, Deputy Director, Division of Homeland Security,
Department of Military and Veterans Affairs, testified in
support of HJR 13. He spoke of the great responses in the
listening sessions.
CHAIR STOLTZE asked Mr. O'Hare to comment on sequestration.
MR. O'HARE said he has no comment on the topic.
SENATOR MCGUIRE related that she attended the Anchorage meeting
and noted a slide presentation there. She discussed a process
for submitting letters of support that included information
about military families, location, training, and more.
9:11:08 AM
MR. O'HARE agreed. The slide summarized what Alaska can do and
what it has done with world-class military training and
community support for the military.
SENATOR HUGGINS noted that there normally is a transition of
duties to the Alaska Army National Guard when a base shutdown
happens.
9:12:29 AM
MR. O'HARE offered to provide that information to the committee.
SENATOR HUGGINS implied that when active component units are
reduced, mission-creep into the Reserves increases.
CHAIR STOLTZE noted his appreciation for all of the community
support regarding the military.
9:14:20 AM
SENATOR COGHILL offered Amendment 1:
Page l, lines 2-3:
Delete "take structural realignment actions with
regard to"
Insert "reduce personnel at"
Page l, lines 6 - 7:
Delete "a structural realignment of"
Insert "structural reductions to"
Page 1, lines 8 - 9:
Delete "structural realignment actions not be taken
with regard to both"
Insert "no personnel reductions be made for"
Page4, line5:
Delete "take structural realignment actions with
regard to both"
Insert "reduce personnel at"
CHAIR STOLTZE objected for discussion.
SENATOR COGHILL explained Amendment 1 takes the "structural re-
alignment action" wording out and replaces it with "reduction in
personnel."
9:15:22 AM
CHAIR STOLTZE removed his objection. There being no further
objection, Amendment 1 was adopted.
CHAIR STOLTZE opened public testimony.
SENATOR COGHILL commented that the amendment is "official speak"
to back up what the public has been saying. He pointed out that
all the bases around America have patriotism; Alaska is
fortunate to also have strategic location and community support.
He agreed there is pressure in Alaska to undo federal
sequestration. He stressed that it is time to stand up for
national defense.
9:17:43 AM
CHAIR STOLTZE considered Alaskans the most patriotic, pro-
military state of all.
SENATOR MCGUIRE noted the presence of Senator Wielechowski and
Senator Sullivan in attendance at the Anchorage meeting. She
said there were many quotes from General Mitchell who said, "He
who holds Alaska will hold the world." She drew attention to the
importance of the Arctic.
9:19:16 AM
SENATOR HUGGINS stated that it is important to consider the
history of how the military is perceived by the public, as
compared to today.
9:20:36 AM
CHAIR STOLTZE closed public testimony.
9:21:01 AM
SENATOR HUGGINS moved to report CSHJR 13, as amended, from
committee with individual recommendations. There being no
objection, SCS CSHJR 13(STA).
9:21:16 AM
At ease.
^CONFIRMATION HEARING: COMMISSIONER, DEPARTMENT OF
ADMINISTRATION
CONFIRMATION HEARING
COMMISSIONER, DEPARTMENT OF ADMINISTRATION
9:22:46 AM
CHAIR STOLTZE brought the meeting back to order. He said the
confirmation hearing would be next.
9:23:39 AM
SHELDON FISHER, Commissioner-designee, Department of
Administration (DOA), testified as appointee. He shared his
family history and educational background. He said he worked for
a law firm for a period and then in telecommunications.
9:27:27 AM
COMMISSIONER FISHER related that he enjoys the challenging work
at DOA. He said the challenge with the budget is the filter
through which decisions are made. He said he is pleased to be
part of the administration as the commissioner. He noted five
priorities for his administration which impact the department,
as well as span beyond the department to include the way
government is handled throughout the state. He said DOA is
responsible for the centralized portion of Human Resources,
including negotiating collective bargaining agreements. He said
it is critical that DOA improves the way it leverages and uses
employees. Another priority is to continue to reduce the cost of
health care in the state. Third, is to be more efficient and
effective in the way information technology services are
delivered. Fourth, is to save in the area of purchasing, and
finally, to better manage and utilize state facilities.
9:31:33 AM
CHAIR STOLTZE thanked Commissioner Fisher.
SENATOR HUGGINS opined that Commissioner Fisher is an impressive
candidate. He asked how the legislature could partner with DOA
in order to save money.
9:33:22 AM
COMMISSIONER FISHER replied that he welcomes the collaboration.
He hoped to share ideas and have conversations.
CHAIR STOLTZE asked if Commissioner Fisher reads the Alaska
Dispatch.
COMMISSIONER FISHER said yes.
CHAIR STOLTZE highlighted an article regarding labor wages.
COMMISSIONER FISHER replied that he will be careful when
speaking with ongoing labor negotiations. He opined that it is
critical that the salary and wage structure be fair to all
parties.
9:35:45 AM
CHAIR STOLTZE commented on the resolution regarding permanent
registration. He asked if there was a process for those who have
not yet registered.
COMMISSIONER FISHER said he would look into it.
SENATOR MCGUIRE noted Commissioner Fisher's outstanding
qualifications. She voiced concern about the organ and tissue
donor registration process and lack of access to all donors.
9:39:43 AM
COMMISSIONER FISHER stated that he would look into it.
SENATOR COGHILL noted his appreciation for Commissioner Fisher
and pointed out healthcare reform issues he would be facing, as
well as issues within the Justice System.
9:43:28 AM
CHAIR STOLTZE added that the Public Defender and the Public
Advocacy Office are significant parts of DOA's general fund
budget.
COMMISSIONER FISHER replied that their budgets and caseloads are
growing. He pointed out that he has already had many
conversations with Mr. Steiner. He said he appreciates the
committee's interest and is aware of his responsibilities.
SENATOR HUGGINS noted that Commissioner Fisher has communicated
with previous commissioners to seek information about DOA.
CHAIR STOLTZE asked what the commissioner's role is regarding
the Affordable Care Act and Medicaid expansion.
9:45:44 AM
COMMISSIONER FISHER said he does not have a direct role with
Medicaid expansion. He said the overlap is in strategies to
reduce health care costs. He said he is in conversation with
Commissioner Davidson regarding that.
CHAIR STOLTZE noted Commissioner Fisher's IT background. He
faulted the state in making poor IT decisions in the past.
9:47:33 AM
COMMISSIONER FISHER agreed the resources could have been used
more effectively. He thought the direction would be commodity IT
services in order to consolidate, centralize, and drive down
costs. He maintained that unique IT applications should remain
within departments. He said the state spends about $220 million
in IT and has over 800 IT professionals. He opined that the
state can drive efficiency out of that environment and reinvest
some of those savings in additional services and capabilities
that will continue to enhance the IT environment.
9:49:50 AM
SENATOR MCGUIRE said there are over 80 procurement officers in
the state and suggested that Commissioner Fisher work on
streamlining the procurement process.
COMMISSIONER FISHER noted previous experience with that issue.
SENATOR WIELECHOWSKI suggested that jobs not be shipped outside
of Alaska.
9:52:49 AM
COMMISSIONER FISHER replied that there is not a plan to ship
jobs outside the state. The Governor has made it clear that he
wants to keep jobs in Alaska.
CHAIR STOLTZE commented on Commissioner Fisher's humble
background.
9:54:54 AM
At ease.
^"CONTINUING DISCUSSION OF THE IMPLEMENTATION OF BALLOT MEASURE
NO. 2(13PSUM)-AN ACT TO TAX AND REGULATE THE PRODUCTION, SALE,
AND USE OF MARIJUANA
"CONTINUING DISCUSSION OF THE IMPLEMENTATION OF BALLOT MEASURE
NO. 2(13PSUM)-AN ACT TO TAX AND REGULATE THE PRODUCTION, SALE,
AND USE OF MARIJUANA
9:55:43 AM
CHAIR STOLTZE brought the meeting back to order and announced an
update on the Marijuana ballot measure. He requested information
from Ms. Wing-Heir about banking and insurance issues related to
commercializing marijuana.
9:57:16 AM
LORI WING-HEIR, Director, Division of Insurance, Department of
Commerce, Community and Economic Development (DCCED), explained
the relationship of the division as it relates to Ballot Measure
2. The mission of the division is to regulate the insurance
industry to protect consumers. The division tries to encourage
insurers that come into the state to offer new products, they
cannot mandate that they provide any insurance for any
particular industry. She could not think of any regulation or
statute that requires an insurer to insure a particular
industry. Insurers are wary of insuring the marijuana industry
because marijuana remains a schedule 1 substance.
9:58:54 AM
MS. WING-HEIR specified that there are different kinds of
insurance. Medicinal marijuana is legal in Alaska, but it is a
controlled substance and will not be paid for by an insurer.
SENATOR MCGUIRE asked if Ms. Wing-Heir has seen SB 30.
MS. WING-HEIR answered no.
SENATOR MCGUIRE summarized that it is the de-criminalization
bill and takes a different approach. It takes marijuana out of
the controlled substance statute and regulates it like alcohol.
She asked if her prior statements would be accurate should SB 30
pass.
MS. WING-HEIR responded that marijuana would still have federal
issues as a schedule 1 drug and insurers would not cover it.
10:00:36 AM
MS. WING-HEIR discussed insurance coverage related to an injury
or condition caused by marijuana. She said insurance companies
would have to cover emergency room expenses, but rehabilitation
services would be subject to type of plan.
10:02:12 AM
MS. WING-HEIR turned to property and casualty insurance, for
which there is not much statistical data. There have been no
claims in this category to date. Workers' compensation cases
will end up in the assigned risk pool.
CHAIR STOLTZE asked what the assigned risk pool is.
MS. WING-HEIR explained that it is funded by all the insurers
doing business in the state. Every three years a bid is put out
by four servicing carriers and the cost is spread out amongst
all insurers in the state. The intent is that all employers are
able to get workers' compensation insurance. She concluded that,
at this point, marijuana businesses would be included in this
category, not in the standard market.
10:04:25 AM
CHAIR STOLTZE asked if that was because they would not know how
to assess risk or if it was unwillingness.
MS. WING-HEIR said a little of both.
SENATOR WIELECHOWSKI asked about federal issues regarding
workers' compensation for marijuana businesses.
MS. WING-HEIR replied that she is not aware of any since
workers' compensation is controlled at the state level.
SENATOR WIELECHOWSKI thought there would be federal concerns. He
asked how Washington and Colorado are doing.
MS. WING-HEIR answered that Washington is a monopolistic state
for workers' compensation and Colorado is paying via the
assigned risk pool. Alaska will be similar to Colorado.
10:05:41 AM
MS. WING-HEIR addressed property insurance for the marijuana
industry. Due to the high value of the crop and the increased
risk for vandalism and theft, insurers in Alaska are going to be
reluctant to insure property.
CHAIR STOLTZE confirmed that to be true of the thirty insurers
he contacted.
MS. WING-HEIR addressed general liability, which she opined
would be the most difficult area to insure due to the
consumption aspect of marijuana. There is no data on market
control or distribution to date. Insurers are hesitant due to
the many unknown factors.
10:07:21 AM
MS. WING-HEIR stated that insurance is not jumping on board to
insure the cultivation, sale, and distribution of marijuana.
They would most likely insure shops or small operations. She
pointed out that there are non-admitted insurers who might step
up to the plate to insure the marijuana industry as they have in
other states, but they are expensive and may be limited in what
they covers.
10:09:07 AM
CHAIR STOLTZE asked if she thought it is an activity that should
have insurance or bonding requirements.
MS. WING-HEIR replied that she did not know.
CHAIR STOLTZE said he would ask the administration.
SENATOR WIELECHOWSKI asked if medical marijuana companies would
be able to purchase health insurance for their employees.
MS. WING-HEIR did not think patients could be denied.
SENATOR WIELECHOWSKI said he was referring to the companies.
MS. WING-HEIR said she would get back to the committee on that.
10:11:03 AM
SENATOR WIELECHOWSKI asked if Alaska companies would have to pay
federal taxes.
MS. WING-HEIR did not know. She offered to find answers to the
committee's questions.
CHAIR STOLTZE noted examples of industries that could not get
insurance.
SENATOR HUGGINS asked if Alaska is importing a significant
number of people from outside the state for ideas and
supervisors related to the marijuana industry. He wondered if
that was true for the insurance industry.
10:13:20 AM
MS. WING-HEIR she has seen no indication of that happening.
SENATOR WIELECHOWSKI noted his concern for an all-cash industry.
MS. WING-HEIR said that was part of her concern about property
insurance - the possibility of theft.
CHAIR STOLTZE commented on the ability of banks to participate.
He noted that the sponsors of the bill would have a chance to
testify.
10:15:18 AM
KEVIN ANSELM, Director, Division of Banking & Securities,
Department of Commerce, Community and Economic Development
(DCCED), presented information related to Ballot Measure 2. She
observed that the current options in the state, and federally,
for raising capital and banking services are slim. The
Securities and Exchange Commission will allow offerings related
to equity and debt securities. They have accepted several
offerings under certain exemptions under federal law because
they provide full disclosure and there is typically no general
solicitation for investors. She said they have not seen any
filings in Alaska yet, however, there are several exemptions
people can work under, so the Division would not even know if
there were securities offerings happening.
10:17:38 AM
MS. ANSELM turned to banking services, such as loans, deposits,
and money transmissions, which currently are provided by banks,
credit unions and money service businesses. She said there is
not much interest by financial institutions to become involved
with the marijuana industry. Federal insurers have indicated
that as long as financial institutions follow federal disclosure
requirements, there should be no compliance issues. She noted
filing procedures take time and incur costs.
She pointed out that financial institutions are also wary of
risk when it comes to the marijuana industry.
10:19:00 AM
MS. ANSELM addressed the fact that banks and credit unions are
independent service businesses that must answer to shareholders
and directors. They are not subject to government mandates,
other than insurance and regulations. They must determine
whether their decision-makers want to participate in the
marijuana industry. There are also reputational risks.
CHAIR STOLTZE shared a personal story.
MS. ANSELM continued to discuss additional costs related to
staff and physical location security due to the large amount of
cash. A large cost driver for banks is having a large amount of
cash and having cash with a marijuana odor. She questioned
whether financial institutions will have business needs and uses
for the cash.
10:21:37 AM
SENATOR HUGGINS asked whether banks will fall into the category
of not being able to deny services to users of marijuana.
MS. ANSELM did not know. However, she said the bank is allowed
to ask a customer what their business entails.
CHAIR STOLTZE asked if Ms. Anselm anticipates any federal
challenges.
MS. ANSELM pointed out that there are state charters, but the
monetary system is federally governed and there is a federal
criminal law. She said SB 30 has no impact at the federal level.
SENATOR COGHILL noted a question he gets asked when he crosses a
border about whether he has $10,000 or more in his possession.
He asked if that information applies to the Suspicious Activity
Report and other laws.
MS. ANSELM answered yes.
SENATOR COGHILL asked if large bank deposits would also initiate
suspicious activity concerns.
10:24:55 AM
MS. ANSELM noted a memo in members' packets that relates to a
financial crimes network. It serves as guidance to financial
institutions and specifies three types of suspicious activity
filings. The marijuana limited filing relates to financial
institutions that are providing services to marijuana-related
businesses.
SENATOR COGHILL noted that is the responsibility of the bank to
file reports at an added cost.
10:26:44 AM
MS. ANSELM agreed. She added that it is a two-way street because
the customer has to be open to the bank and the bank has the
responsibility to know the customer.
She listed the two other types of suspicious activity filings.
SENATOR COGHILL asked about the potential for a bank to issue a
debit card system to minimize the cash input.
MS. ANSELM answered that the problem is that the cash has to get
into the banking system.
10:28:35 AM
CHAIR STOLTZE spoke of on-line gaming problems.
MS. ANSELM noted that there are alternative money systems, such
as virtual currencies.
MS. ANSELM turned to what is happening in other states. In
Washington and Colorado there are some credit unions and banks
that are working with the marijuana industry, accepting cash and
providing loans for property and equipment. There are a number
of new businesses springing up in the Lower 48 that help banks
with knowing their customers.
10:31:13 AM
MS. ANSELM addressed new ideas for Alaska. One is for Alaska to
have its own bank, similar to the Other Bank of North Dakota.
Another is to encourage new banks and credit unions who are
willing to take on the risk to come to Alaska. There have been
no new banks in Alaska since 1990, but many consolidations.
Another idea is to open Alaska to banks that are domiciled
outside of Alaska, such as the Oregon bank that banks through
firms in Colorado.
She stated that now, the only way an out-of-state bank can come
into the state is if they buy an existing branch, as stated in
banking statutes under Title 6.
10:33:06 AM
MS. ANSELM concluded that Alaska is open for business and would
welcome new entities.
SENATOR COGHILL noted his expectation is that there will be
capital confusion. He asked what the ripple effect would be if
the state makes an exception for an outside bank to come into
the state without having to buy a branch of an existing bank.
10:34:51 AM
MS. ANSELM answered that she did not know and recommended
Senator Coghill ask the Alaska Bankers Association.
SENATOR COGHILL commented the he is trying to determine what
questions to ask.
CHAIR STOLTZE thanked the speakers.
SB 9-ELECTION PAMPHLETS
10:36:01 AM
CHAIR STOLTZE announced that the consideration of SB 9.
SENATOR PETER MICCICHE, Alaska State Legislature, sponsor of SB
9, related that SB 9 repeals the authority to include ads in the
election pamphlet. It amends Title 15, speaking to election
pamphlets, and repeals the authority to include advertising from
a political party. He used an example from 2014 when the
election pamphlet contained an ad. He noted a similar bill in
the other body. He stated that SB 9 is bi-partisan and not
politically motivated.
CHAIR STOLTZE suggested the Judicial Council also not advertise
at state expense.
10:38:32 AM
SENATOR HUGGINS agreed, but did not think it fit under Title 6.
CHAIR STOLTZE thought it was a similar issue.
SENATOR MICCICHE said he would think about it. He thanked the
committee for hearing SB 9.
10:39:28 AM
CHAIR STOLTZE held SB 9 in committee.
10:39:41 AM
There being no further business to come before the committee,
Chair Stoltze adjourned the Senate State Affairs Standing
Committee hearing at 10:39 a.m.