Legislature(2015 - 2016)HOUSE FINANCE 519

03/19/2015 01:30 PM House FINANCE

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Heard & Held
Heard & Held
+ Bills Previously Heard/Scheduled TELECONFERENCED
HOUSE BILL NO. 116                                                                                                            
     "An  Act   extending  the   termination  date   of  the                                                                    
     Alcoholic Beverage Control Board;  and providing for an                                                                    
     effective date."                                                                                                           
1:32:04 PM                                                                                                                    
LAURA STIDOLPH, STAFF, REPRESENTATIVE KURT OLSON, reviewed                                                                      
the sponsor statement with the committee.                                                                                       
     HB  116  extended the  sunset  date  for the  Alcoholic                                                                    
     Beverage  Control (ABC)  Board to  June 30,  2018. Each                                                                    
     year the Division of  Legislative Audit reviewed boards                                                                    
     and  commissions   to  determine  if  they   should  be                                                                    
     reestablished in accordance with  Title 24 and Title 44                                                                    
     of  the Alaska  Statutes. The  Division of  Legislative                                                                    
     Audit   reviewed  the   activities  of   the  Alcoholic                                                                    
     Beverage Control  Board. The  purpose of the  audit was                                                                    
     to determine  whether there  was a  demonstrated public                                                                    
     need for  the board's  continued existence  and whether                                                                    
     it had been operating in an effective manner.                                                                              
     The  board  had addressed  all  issues  found in  prior                                                                    
     audits with two being  resolved and one being partially                                                                    
     resolved.  As the  members might  have  noted from  the                                                                    
     most  recent   audit  there  were  five   findings  and                                                                    
     recommendations.  First,  the board's  director  should                                                                    
     ensure that all board  meetings were properly published                                                                    
     on  the State's  Online Public  Notice System.  Second,                                                                    
     the  board  should  notify local  governing  bodies  of                                                                    
     applications for  new and  transfer licenses  within 10                                                                    
     days  of   receipt.  Third,  the  board   should  issue                                                                    
     catering   permits   in   accordance   with   statutory                                                                    
     requirements.   Fourth,   the    board   should   issue                                                                    
     recreational   site   licenses   in   accordance   with                                                                    
     statutory  requirements.  Finally,   the  board  should                                                                    
     implement   a  process   to  monitor   and  track   all                                                                    
     complaints  to ensure  they were  resolved in  a timely                                                                    
     As the  members noted in  their review of the  audit in                                                                    
     their packets  it was  the opinion  of the  Division of                                                                    
     Legislative  Audit that  the  board  be extended  three                                                                    
     years to June 30, 2018.  In the opinion of the auditors                                                                    
     the  board   was  serving  the  public's   interest  by                                                                    
     effectively licensing  and regulating  the manufacture,                                                                    
     barter, possession, and sale  of alcoholic beverages in                                                                    
     Alaska.  To  speak  to  the  recommendations  mentioned                                                                    
     earlier,  Kris  Curtis,   Legislative  Auditor,  Alaska                                                                    
     Division  of Legislative  Audit  and Cynthia  Franklin,                                                                    
     Director, Alaska Alcoholic  Beverage Control Board were                                                                    
     available online from Anchorage.                                                                                           
     In closing, the  ABC Board served an  important role in                                                                    
     guarding  the   health  and   safety  of   Alaskans  by                                                                    
     protecting  the general  public  through the  issuance,                                                                    
     renewal,  revocation,   and  suspension   of  alcoholic                                                                    
     beverage licenses.  The continuation  of the  board was                                                                    
     very important.                                                                                                            
Ms.  Stidolph thanked  committee members  for supporting  HB
Representative  Wilson  asked  about the  fiscal  note.  She                                                                    
noted  there was  money coming  from the  general fund.  She                                                                    
wondered  why the  fees collected  from serving  alcohol did                                                                    
not pay  for operating expenditures making  the program cost                                                                    
1:34:38 PM                                                                                                                    
CYNTHIA  FRANKLIN,  EXECUTIVE DIRECTOR,  ALCOHOLIC  BEVERAGE                                                                    
CONTROL  BOARD,   DEPARTMENT  OF  COMMERCE,   COMMUNITY  AND                                                                    
ECONOMIC   DEVELOPMENT   (via  teleconference),   spoke   to                                                                    
Representative Wilson's question. She  explained that if the                                                                    
licensed premise  was inside a municipality,  by statute the                                                                    
entire  fee  was  refunded  to   the  municipality  for  law                                                                    
enforcement efforts to  do with Title 4  provisions. Many of                                                                    
the  licensing   fees  in  alcohol  were   returned  to  the                                                                    
individual communities  where the licensed  premise existed.                                                                    
In non-municipality  settings the  license fees  were placed                                                                    
into  the general  fund. Although  the  ABC Board  collected                                                                    
licensing fees its costs were  not technically cancelled out                                                                    
by the licenses because the  bulk of the funds received were                                                                    
returned to the municipalities by statute.                                                                                      
Representative  Wilson  asked  if  the  municipalities  were                                                                    
required to provide enforcement having  to do with ABC Board                                                                    
issues in their communities.  She wondered about enforcement                                                                    
outside of a municipality.                                                                                                      
Ms.  Franklin  responded  that the  refunds  were  based  on                                                                    
enforcement  of Title  4. Over  previous years  she reported                                                                    
there  had  been  different   definitions  of  the  statute.                                                                    
Currently, the  ABC Board required municipalities  to report                                                                    
their Title  4 activities annually. The  report included the                                                                    
number of Title  4 violations filed and  prosecuted in their                                                                    
jurisdiction.  Presently,   the  board  had   five  officers                                                                    
statewide  that were  employed by  the state  that conducted                                                                    
special  enforcement  efforts.  The Alcoholic  Beverage  and                                                                    
Control  Board  had  a  couple of  programs  that  were  law                                                                    
enforcement related centering  on preventing underage access                                                                    
to  alcohol. Officers  of the  ABC  Board performed  special                                                                    
enforcement  whereas  municipalities   focused  on  everyday                                                                    
enforcement  of  Title  4 laws  and  rules  around  alcohol.                                                                    
Typically  municipalities  had  their  own  conditional  use                                                                    
permits  or   zoning  requirements  for   alcohol  licenses.                                                                    
However, the responsibility  of renewing licenses, preparing                                                                    
for board meetings,  and other activities fell  on ABC Board                                                                    
1:37:44 PM                                                                                                                    
Representative   Wilson   asked   if  there   was   anything                                                                    
preventing the legislature from  changing the fee structure.                                                                    
She was  not opposed  to municipalities getting  monies back                                                                    
if they  were doing enforcement.  However, if the  state was                                                                    
also  doing some  of the  enforcement activity  she believed                                                                    
the cost  needed better distribution. She  wondered if there                                                                    
was a way to track the fees.                                                                                                    
Ms. Franklin  stated that there  was a desire and  an effort                                                                    
to see that  more of the licensing  receipts remained within                                                                    
the  agency  for the  purpose  of  funding the  ABC  Board's                                                                    
efforts. She  mentioned that  there was a  2.5 year  Title 4                                                                    
stakeholder process  that began  in May 2012  which resulted                                                                    
in  a Title  4 revision  package that  was currently  in the                                                                    
hands of the  legislature but not introduced  in the session                                                                    
in   progress.   In   the  course   of   the   stakeholder's                                                                    
(stakeholders   included   Department  of   Public   Safety,                                                                    
Department  of Health  and Social  Services, and  members of                                                                    
the public  sector) review the  board's licensing  fees were                                                                    
found to  be too  low and  had not  been raised  for several                                                                    
decades. She  reported that most  of the fees  were returned                                                                    
to the  municipalities. She elaborated that  the idea behind                                                                    
the rewrite was to raise  fees and to include in legislation                                                                    
an  outline of  where  the fees  were distributed  including                                                                    
dispersal to  the ABC Board  for licensing  and enforcement.                                                                    
The draft  bill had not  yet been introduced but  hoped that                                                                    
it would be in the current session.                                                                                             
Co-Chair Thompson  asked if the  bill would  have additional                                                                    
fiscal  impacts. Ms.  Franklin responded  affirmatively. She                                                                    
indicated  that  the  rewrite was  extensive  and  increased                                                                    
licensing fees. She  opined that the question  as to whether                                                                    
it added  money was  difficult to  answer because  there was                                                                    
nothing  in  the  language that  was  submitted  that  would                                                                    
direct  the money  anywhere.  The  legislation did  increase                                                                    
licensing  fees.  The  fiscal   note  before  the  committee                                                                    
reflected  the  fees currently  in  statute  under Title  4.                                                                    
There  was no  specific funding  mechanism that  related the                                                                    
licensing fees to the cost of the agency.                                                                                       
Co-Chair  Thompson recognized  Representative Pruitt  at the                                                                    
1:40:31 PM                                                                                                                    
Representative Wilson  wanted to better understand  the fees                                                                    
that were  currently in place.  She was unclear  why certain                                                                    
board funds  were placed  in the  general fund  versus other                                                                    
accounts.  She  wanted  to  be able  to  better  assess  fee                                                                    
increase  amounts. She  suggested the  legislature would  be                                                                    
asking for increases high enough  to cover expenses in order                                                                    
for each  board to  become self-sufficient. She  requested a                                                                    
copy of a stakeholder report if there was one.                                                                                  
Co-Chair Thompson noted  that his staff would try  to find a                                                                    
copy of the report and provide it to committee members.                                                                         
Representative Gattis  asked about the  three-year extension                                                                    
and  the   fiscal  note.  She  noticed   that  the  out-year                                                                    
estimates were predicted at a  flat rate. She wondered about                                                                    
raises   and  inflation   rates.  Ms.   Franklin  asked   if                                                                    
Representative   Gattis  was   referring  to   the  out-year                                                                    
Representative Gattis  responded that  she was  referring to                                                                    
the  three  years  including  the  out-years.  Ms.  Franklin                                                                    
stressed that  the out-years were very  difficult to predict                                                                    
due  to the  new  substance  assigned to  the  agency by  AS                                                                    
17.38.  She did  not  have  any idea  how  regulating a  new                                                                    
substance  was going  to affect  the agency  financially and                                                                    
whether  tax revenues  would be  directed to  the agency  to                                                                    
offset  costs.   She  added  that  in   other  states  where                                                                    
marijuana was  legal costs of  regulating the  substance had                                                                    
been  offset by  taxes received.  She was  not aware  of any                                                                    
place  in  statute that  offset  costs  with licensing  fees                                                                    
having  to do  with the  regulation of  alcohol. It  was her                                                                    
understanding that offsets did  not occur because of refunds                                                                    
to  municipalities. She  pointed out  that the  first refund                                                                    
check to the  municipalities for a six  month period totaled                                                                    
$660  thousand. The  entire budget  of the  agency prior  to                                                                    
adding marijuana was $1.75 million.  She continued that when                                                                    
discussing   $1.2   million   per   year   in   refunds   to                                                                    
municipalities  it came  close to  equaling the  ABC Board's                                                                    
entire budget. There was a large  sum of money going back to                                                                    
the municipalities.  She suggested that in  the future years                                                                    
until  certain   questions  were  answered   concerning  tax                                                                    
revenue and  how many positions  would be needed at  the ABC                                                                    
Board  to safely  regulate the  new substance  the out-years                                                                    
would be difficult to predict.                                                                                                  
1:44:58 PM                                                                                                                    
Representative Gattis  clarified that  she was  only looking                                                                    
at  FY 16,  FY  17,  and FY  18.  All  three years  appeared                                                                    
relatively flat  according to  the fiscal  note in  terms of                                                                    
raises or increases.  She wanted to know if  an awareness of                                                                    
the state's fiscal crunch was  reflected in the fiscal note.                                                                    
Ms.  Franklin responded  affirmatively. She  elaborated that                                                                    
the agency's decision  was a reflection of  not knowing what                                                                    
the  requirements  might  be  to  safely  regulate  the  new                                                                    
substance.   She  did   not   have   a  financial   estimate                                                                    
anticipating future  staff needs.  However, the  board, with                                                                    
all  other things  being equal,  anticipated trimming  costs                                                                    
along with all state agencies.                                                                                                  
Co-Chair Neuman referred to the  fiscal note. He opined that                                                                    
the fiscal note  should be more detailed.  He commented that                                                                    
the fiscal  notes for the  marijuana policy board  were much                                                                    
more  detailed. He  asked Co-Chair  Thompson  for a  revised                                                                    
fiscal note.                                                                                                                    
Co-Chair Thompson  responded that there would  be some major                                                                    
questions regarding present legislation.                                                                                        
1:48:46 PM                                                                                                                    
Representative  Gara   noted  that  the   legislative  audit                                                                    
summarized  the  duties  of the  ABC  Board  which  included                                                                    
protecting the public's health and  safety. He was concerned                                                                    
about two  neighborhoods within his  district. He  wanted to                                                                    
know  more  about  what  was  being  done.  He  discussed  a                                                                    
particular assault in  Anchorage. He asked if  the board had                                                                    
the  power to  take proactive  steps  to work  with bars  on                                                                    
public safety matters or did  the ABC Board wait until after                                                                    
an  incident or  at the  time of  relicensing. Ms.  Franklin                                                                    
asked  if   Representative  Gara's  question   was  directed                                                                    
towards her.                                                                                                                    
Representative  Gara  responded affirmatively.  He  restated                                                                    
the question.  He wondered  if the board  had the  power and                                                                    
took proactive  steps to protect public  safety. He wondered                                                                    
if the board waited until  after a violation to respond. Ms.                                                                    
Franklin  answered that  the board  did both.  She explained                                                                    
that the board had  some proactive education-type activities                                                                    
that  it  engaged  in   including  attending  the  Anchorage                                                                    
Downtown Partnership  meetings. The  board did not  have the                                                                    
power  to  proactively take  a  license  without some  other                                                                    
occurrence.  She furthered  that a  municipality in  which a                                                                    
licensed premise was  located had the option  to protest the                                                                    
issuance, transference,  or renewal of a  license and could,                                                                    
mid-renewal  period, protest  the continued  operation of  a                                                                    
license.   The  board   worked  in   cooperation  with   the                                                                    
municipalities  and  local   governing  bodies  to  identify                                                                    
problem  operators  and  licensees.   There  could  be  some                                                                    
reliance on municipal governments  to identify the operators                                                                    
by their protest  tool. She reported the board  was aware of                                                                    
the  current  problems  in downtown  Anchorage  and  was  in                                                                    
communications  with individual  liquor  licensees and  with                                                                    
the  Anchorage Downtown  Partnership. However,  the statutes                                                                    
did not permit the board to  revoke a license in response to                                                                    
a violation of Title 4.                                                                                                         
Representative Gara wanted  to make sure that  the ABC Board                                                                    
was  taking  proactive safety  steps  in  working with  bars                                                                    
before incidents  occurred. He wanted to  reconfirm that she                                                                    
was responding  affirmatively to his question.  Ms. Franklin                                                                    
responded in  the affirmative. She furthered  that the board                                                                    
identified  a   bouncer  safety   course  and   had  started                                                                    
recommending  that  licensees   engage  in  the  educational                                                                    
course.  She  relayed  that all  of  the  board's  Anchorage                                                                    
enforcement   officers  attended   the  course,   which  was                                                                    
originally   offered  by   CHARR  [Alaska   Cabaret,  Hotel,                                                                    
Restaurant and  Retailers Association].  She added  that the                                                                    
course  information  was  also  listed on  the  ABC  Board's                                                                    
1:52:59 PM                                                                                                                    
Representative  Gara  asked  about another  neighborhood  at                                                                    
13th and Gamble  in Anchorage. He explained  that there were                                                                    
two liquor stores across the  street from each other and had                                                                    
one of  the highest  concentrations of  publicly intoxicated                                                                    
people in Anchorage. He wondered  if the board had the power                                                                    
to grant  two liquor  stores in such  a close  distance from                                                                    
one another. He wondered if  it was beyond the board's power                                                                    
to avoid issuing two licenses in the same area.                                                                                 
Ms.  Franklin explained  Title 4  was  structured such  that                                                                    
local governing  bodies were  responsible for  informing the                                                                    
board  about community  issues  concerning  the location  or                                                                    
zoning of a licensee. She  reported that the board was aware                                                                    
of the stores  Representative Gara was referring  to. As the                                                                    
Anchorage  municipal prosecutor  she  had  visited the  area                                                                    
several  times. The  board  was aware  that  there had  been                                                                    
controversy  regarding   the  licenses.  She   informed  the                                                                    
committee  that  Title  4   allowed  protests  of  renewals,                                                                    
transfers, initial  applications for licensees  or potential                                                                    
licensees.  At any  time a  governing body  could protest  a                                                                    
licensee's  continued   operation  even  at   a  mid-renewal                                                                    
period.  Once  a protest  was  issued  the ABC  Board  would                                                                    
uphold  the  protest according  to  AS  4.11.480 unless  the                                                                    
board found that the protest  was arbitrary, capricious, and                                                                    
unreasonable. She  relayed that it  was up to  the Anchorage                                                                    
Assembly to file a protest against the particular stores.                                                                       
1:56:27 PM                                                                                                                    
Co-Chair   Thompson  suggested   that  Representative   Gara                                                                    
approach  his   municipality.  He  reported  a   problem  in                                                                    
Fairbanks where three liquor stores  had similar issues with                                                                    
public  intoxication.  The  municipality told  each  of  the                                                                    
stores that it  was going to protest  their license renewals                                                                    
unless they  did something. He  reported that they  were all                                                                    
working on reducing  their hours of operations  at the times                                                                    
in which problems were occurring.                                                                                               
Representative  Gara indicated  that the  local municipality                                                                    
was currently  working on the  issue. He had just  wanted to                                                                    
hear from the ABC Board.                                                                                                        
Vice-Chair   Saddler  asked   about   licenses  for   clubs,                                                                    
particularly patriotic  clubs. He mentioned a  previous bill                                                                    
that passed allowing spouses of  service members and certain                                                                    
under aged service members to  attend functions at patriotic                                                                    
clubs  without  drinking.  He  wanted   to  know  about  any                                                                    
problems to  do with  alcohol control  enforcement resulting                                                                    
from  the   legislation.  Ms.  Franklin  responded   in  the                                                                    
negative.  She relayed  that clubs  had  been very  orderly,                                                                    
quiet, and respectful of the rules.                                                                                             
1:58:13 PM                                                                                                                    
Vice-Chair  Saddler  indicated  that  some  ABC  enforcement                                                                    
agents wanted  to obtain access  cards to  certain patriotic                                                                    
clubs. He  wondered if  the effort  was still  underway. Ms.                                                                    
Franklin believed the  issue had been resolved.  She had not                                                                    
had the issue come up in the prior six months.                                                                                  
Vice-Chair Saddler said that the  administrative home of the                                                                    
board  had  changed  from Department  of  Public  Safety  to                                                                    
Department of Commerce,  Community and Economic Development.                                                                    
He  wanted to  know if  the  change had  diminished the  ABC                                                                    
Board's ability  to achieve  either its  commerce supporting                                                                    
role or its public safety enforcement role.                                                                                     
Ms. Franklin  relayed that she had  only been a part  of the                                                                    
agency since  it had  been under  the umbrella  of commerce.                                                                    
She  opined that  the board  was functioning  well following                                                                    
the change. She believed  that licensees were satisfied with                                                                    
the  board's  performance  in   meeting  its  public  safety                                                                    
mission  and  making   sure  licensees  understood  specific                                                                    
rules.  The tone  of the  agency and  its relationship  with                                                                    
DPS, DHSS,  and with licensees was  excellent. She suggested                                                                    
the  success  of the  board  was  due  to the  move  between                                                                    
departments as well as the  legislative audit. She discussed                                                                    
the stakeholders' workgroup in  which members were forced to                                                                    
talk through  some very difficult issues.  She reported that                                                                    
the   three  board   meetings  she   attended  had   focused                                                                    
significantly on public  safety. The ABC Board  took its job                                                                    
seriously and  had a  fresh perspective  with the  change to                                                                    
Vice-Chair  Saddler commented  that the  results of  the ABC                                                                    
Board's   survey  on   page  23   of  the   audit  indicated                                                                    
participants thought there  would be a need for  new laws or                                                                    
regulations.  He wondered  what type  of new  laws would  be                                                                    
Ms. Franklin  shared that some  of the details  were decided                                                                    
in the stakeholders  group. She did not know  what laws were                                                                    
indicated in the survey. Department  of Public Safety was at                                                                    
the table  in the  stakeholders group when  discussing large                                                                    
issues  regarding  Title 4.  She  relayed  that one  of  the                                                                    
public  safety  issues that  came  up  had  to do  with  dry                                                                    
villages and bootlegging penalties.  The perception from law                                                                    
enforcement was  that the penalties were  not effective. The                                                                    
way in which the group  addressed the problem was to rewrite                                                                    
the  penalties  so  that  the amount  of  alcohol  that  was                                                                    
brought into a dry  village resulted in increased penalties.                                                                    
In other words,  a fine structure was tied to  the amount of                                                                    
alcohol imported into a dry  village. This was an example of                                                                    
the issues addressed with the stakeholders' workgroup.                                                                          
2:02:24 PM                                                                                                                    
Representative  Wilson asked  that the  revised fiscal  note                                                                    
include a  list of categories,  a breakdown of  license fees                                                                    
collected  within  each category,  and  the  amount of  fees                                                                    
given  to municipalities.  She  felt  the information  would                                                                    
help  in  determining a  revised  fee  structure aiming  for                                                                    
Co-Chair  Thompson  directed  Ms. Franklin  to  provide  the                                                                    
information  to  his staff  to  distribute  to members.  Ms.                                                                    
Franklin would provide the information.                                                                                         
Representative Edgmon  asked about new areas  of regulation.                                                                    
He wondered about  powdered alcohol and whether  it would be                                                                    
included  in  the  rewrite  of  the  bill  that  was  coming                                                                    
forward. He  wanted to  know if  powdered alcohol  was under                                                                    
the  current jurisdiction  of the  ABC  Board. Ms.  Franklin                                                                    
reported  powdered alcohol  was already  illegal in  Alaska.                                                                    
She referred to AS 04.16.110  and conveyed that a person may                                                                    
not sell  alcoholic beverages in  powdered form  if intended                                                                    
for human consumption.  The law was enacted in  1995 and was                                                                    
a Class "A"  misdemeanor. The board was  very satisfied with                                                                    
the  powdered alcohol  prohibition and  had no  intention of                                                                    
revisiting  its  corresponding law.  She  was  aware of  its                                                                    
recent  publicity  but  felt  that  the  issue  was  already                                                                    
addressed in statute.                                                                                                           
2:04:02 PM                                                                                                                    
Representative Guttenberg asked  about the authorities being                                                                    
extended. He relayed  that her position had  moved over from                                                                    
public safety. He  suggested that the board  would have more                                                                    
to  do with  the  agricultural community  with the  growing,                                                                    
sale,  and   distribution  of   marijuana.  He   wanted  her                                                                    
perception  of  how the  board  was  handling the  marijuana                                                                    
Ms. Franklin  reported that the  ABC Board was  working very                                                                    
diligently  in  regards  to the  marijuana  initiative.  The                                                                    
board's  management  team  met   with  state  regulators  of                                                                    
Colorado.  State regulators  from Oregon  and Colorado  meet                                                                    
with the  Alaska team  to discuss  in detail  the challenges                                                                    
they  faced.   She  reported  that  marijuana   was  a  very                                                                    
different substance  from alcohol  and that  cultivation and                                                                    
growing were new  areas to the ABC Board.  She detailed that                                                                    
she and  her enforcement officer  spent time with  the owner                                                                    
of Bells Nursery in Anchorage  to better understanding about                                                                    
growing plants  indoors in  Alaska and  what type  of issues                                                                    
and challenges that might arise.  She also reported spending                                                                    
time   with   Department   of   Environmental   Conservation                                                                    
discussing  testing facilities,  labs, and  standards for  a                                                                    
plant  and   how  to  write   them  into   regulations.  She                                                                    
maintained  that  the  agency's  experienced  licensing  and                                                                    
enforcement staff could  be counted on to deal  with the new                                                                    
2:07:07 PM                                                                                                                    
Representative   Guttenberg   noted  the   federal   banking                                                                    
restrictions that  made it illegal for  marijuana businesses                                                                    
to do  their banking in  the United States. He  wondered how                                                                    
the   ABC  Board   was  addressing   a  change   in  banking                                                                    
regulations the marijuana community.                                                                                            
Ms. Franklin mentioned  that the ABC Board  was working with                                                                    
Ms.  Kevin   Anselm,  Director,  Division  of   Banking  and                                                                    
Securities, Department  of Commerce, Community  and Economic                                                                    
Development,  regarding associated  issues. She  pointed out                                                                    
that Ms.  Anselm attended a  conference in the fall  of 2014                                                                    
with  other  banking  regulators  from  legalized  marijuana                                                                    
states  and   would  have   an  answer   for  Representative                                                                    
Guttenberg's questions.  She assured the committee  that the                                                                    
banking   experts   at   state   agencies   were   involved,                                                                    
interested,  and  engaged  in   figuring  how  to  bank  the                                                                    
marijuana industry.                                                                                                             
Representative  Wilson  made   some  calculations  from  the                                                                    
information  on the  fiscal note  and pointed  out that  the                                                                    
operation cost of the ABC  Board totaled $279,208 per month.                                                                    
She  wondered  if  it  would   be  more  cost  effective  to                                                                    
subcontract the board's duties  more affordably. She thought                                                                    
the figure  was high.  Ms. Franklin asked  if Representative                                                                    
Wilson  was  referring  to the  fiscal  note  that  included                                                                    
Representative  Wilson  responded affirmatively.  She  added                                                                    
that she was  unable to tell how much of  the amount applied                                                                    
to  marijuana and  how much  applied to  the ABC  Board. Ms.                                                                    
Franklin  informed the  committee that  the previous  year's                                                                    
budget for  the board  was $1.75  million. She  believed the                                                                    
work  of the  board's relatively  small staff  could not  be                                                                    
contracted out  more economically.  There were  10 statewide                                                                    
employees and  herself, the director.  She clarified  in the                                                                    
fiscal  note the  board had  to include  marijuana with  the                                                                    
passing  of  legislation.  The budget  in  the  fiscal  note                                                                    
reflected  six  additional  employees  to  handle  marijuana                                                                    
issues  for the  period of  FY 15  and FY  16. She  reviewed                                                                    
there were  16 employees statewide to  enforce marijuana and                                                                    
alcohol  regulations in  statute. In  comparing Alaska's  16                                                                    
employees to the  number of regulators in  other states such                                                                    
as  Colorado and  Washington and  adjusting for  population,                                                                    
she concluded that  the state was getting the  best bang for                                                                    
its buck  with the  current employees  in the  division. She                                                                    
did not think a private  company could carry out duties more                                                                    
efficiently.  She pointed  out  that ABC  Board shared  many                                                                    
resources with  the rest of  DCCED and across  agencies. She                                                                    
did not believe it was possible  to scrape any closer to the                                                                    
bone in the agency's budget.                                                                                                    
2:10:48 PM                                                                                                                    
Representative Wilson  clarified that  her question  was not                                                                    
intended  to imply  that agency  employees were  not working                                                                    
diligently.   She  believed   that  $279   thousand  was   a                                                                    
significant  amount of  money per  month. She  surmised that                                                                    
perhaps the  costs reflected what the  legislature had asked                                                                    
the  agency  to do  based  on  statute. She  asked  Co-Chair                                                                    
Thompson  about  whether  it was  appropriate  to  have  the                                                                    
fiscal  note  detail  the  costs   for  both  marijuana  and                                                                    
alcohol.  She  was wondering  if  the  information would  be                                                                    
provided  in lieu  of or  additionally in  another piece  of                                                                    
legislation. She highlighted that the  cost to the state was                                                                    
$136  thousand per  month to  regulate and  monitor alcohol.                                                                    
She was unclear about potential duplication.                                                                                    
Co-Chair Thompson relayed that the  bill would not be passed                                                                    
out of  committee because of  so many  unanswered questions.                                                                    
He relayed that  his office would try to get  a breakdown of                                                                    
costs  associated  with  alcohol   and  with  marijuana.  He                                                                    
reiterated that  the new bills could  influence the policies                                                                    
around marijuana.                                                                                                               
2:12:15 PM                                                                                                                    
Co-Chair Thompson asked about  the five recommendations from                                                                    
the legislative  audit report. He wondered  about the status                                                                    
of  addressing each  of the  issues. Ms.  Franklin indicated                                                                    
that all  five issues had  been addressed. A couple  of them                                                                    
had been  address prior to  her recent tenure  in September.                                                                    
The first  addressed notifications to  municipalities. There                                                                    
was a  staff change  and with  the changeover  corrected the                                                                    
notification  procedure  so  that the  10-day  deadline  was                                                                    
currently  being  met.  All   of  the  recommendations  were                                                                    
accepted  by   the  agency  and  had   been  corrected.  She                                                                    
addressed the  issue of multiple  fiscal notes  and multiple                                                                    
marijuana  bills,  it  was her  understanding  that  it  was                                                                    
required that the agency had  a fiscal note attached to each                                                                    
bill  because it  was unknown  whether  any individual  bill                                                                    
would pass.  She explained  that it might  be that  in other                                                                    
bills  regarding marijuana  a fiscal  note for  the staffing                                                                    
and board  to effectively  regulate the substance.  A fiscal                                                                    
note was in each bill.                                                                                                          
Representative  Gara commented  that the  board was  roughly                                                                    
$1.5  million short  of  the  fees the  agency  took in  and                                                                    
expenditures. He asked Ms. Franklin  if he was accurate. Ms.                                                                    
Franklin responded positively.                                                                                                  
Representative  Gara  asked if  all  of  the fees  that  the                                                                    
agency took in were from  liquor license sales or from other                                                                    
fees. Ms.  Franklin answered  the fees  that were  taking in                                                                    
were from  liquor license fees.  The reason the  amount fell                                                                    
short was  because the agency  did have a fee  structure for                                                                    
marijuana at  present. She indicated  that the  agency would                                                                    
not  be able  to  determine the  quantity  of licenses  that                                                                    
would  be issued  or for  what  dollar amount  prior to  the                                                                    
industry  start-up.  The fiscal  note  that  was before  the                                                                    
committee reflected financial outlays  for the regulation of                                                                    
marijuana without  any revenue  currently. She spoke  of the                                                                    
City of  Denver with  650 thousand  people, 100  less people                                                                    
than  in  Alaska,  had issued  approximately  900  marijuana                                                                    
licenses. In 2014 Denver took  in $15.9 million in taxes and                                                                    
added 37.5  fulltime employees solely for  the regulation of                                                                    
marijuana. The  employees' costs  were fully covered  by the                                                                    
tax revenues collected.                                                                                                         
Representative  Gara  asked  if   the  ABC  Board  would  be                                                                    
breaking even without the  marijuana component. Ms. Franklin                                                                    
responded approximately.                                                                                                        
Representative  Gara asked  if  there was  any  way for  the                                                                    
state to  benefit from the  sales of liquor  licenses rather                                                                    
than any  windfall going to  a bar owner. He  purported that                                                                    
what  happened  was  that  there was  a  limited  number  of                                                                    
licenses that people  sold them for a  significant amount of                                                                    
money. Was there any way  to restructure the transferring of                                                                    
a  license  and if  so,  would  it  have  to be  changed  in                                                                    
Ms.  Franklin  agreed that  the  secondary  market value  of                                                                    
liquor licenses  came from a  combination of  the population                                                                    
limits on licenses creating a  limited availability. She was                                                                    
unaware  of   any  other  way   to  correct  the   issue  of                                                                    
transferability for  alcohol licenses except to  rewrite the                                                                    
statute.  She was  advocating for  non-transferable licenses                                                                    
without population limits for marijuana.                                                                                        
Co-Chair Thompson  invited Ms. Franklin to  make any closing                                                                    
comments. Ms.  Franklin thanked committee members  for their                                                                    
2:17:50 PM                                                                                                                    
Co-Chair  Thompson reiterated  that  the bill  would be  set                                                                    
HB  116  was  HEARD  and   HELD  in  committee  for  further                                                                    

Document Name Date/Time Subjects
HB049 Explanation of changes_H to E.pdf HFIN 3/19/2015 1:30:00 PM
HB 49
HB049 Sectional Analysis Ver E.pdf HFIN 3/19/2015 1:30:00 PM
HB 49
HB049 Sponsor Statement.pdf HFIN 3/19/2015 1:30:00 PM
HB 49
HB049 Supporting Document-2015 Legal FAQS-B Lab.pdf HFIN 3/19/2015 1:30:00 PM
HB 49
HB049 Supporting Document-2015 Sampling of Benefit Corporations.pdf HFIN 3/19/2015 1:30:00 PM
HB 49
HB049 Supporting Document-2015 States with Benefit Corporations.pdf HFIN 3/19/2015 1:30:00 PM
HB 49
HB049 Supporting Document-Letter Diane E. Hughes 2-4-2014.pdf HFIN 3/19/2015 1:30:00 PM
HB 49
HB049 Supporting Document-Letter Grodon Blue 2-2-2015.pdf HFIN 3/19/2015 1:30:00 PM
HB 49
HB116 Supporting Documents - Legislative Audit 05-30-14.pdf HFIN 3/19/2015 1:30:00 PM
HB 116
HB116 Sponsor Statement.pdf HFIN 3/19/2015 1:30:00 PM
HB 116
HB 49 New FN DCCED.pdf HFIN 3/19/2015 1:30:00 PM
HB 49
HB 49 Support Letter.pdf HFIN 3/19/2015 1:30:00 PM
HB 49