Legislature(2017 - 2018)HOUSE FINANCE 519

04/06/2017 09:00 AM FINANCE

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
-- Please Note Time Change --
Moved HB 114 Out of Committee
Moved HB 120 Out of Committee
Moved HB 121 Out of Committee
+ Bills Previously Heard/Scheduled TELECONFERENCED
HOUSE BILL NO. 121                                                                                                            
     "An Act relating to occupational safety and health                                                                         
     enforcement penalties; and providing for an effective                                                                      
9:16:26 AM                                                                                                                    
REPRESENTATIVE SAM  KITO, SPONSOR,  explained the  bill that                                                                    
would make  changes to the  state's occupational  safety and                                                                    
health  regulations in  order to  comply  with federal  law.                                                                    
Federal  law   recently  increased  the   minimum  penalties                                                                    
needing to be assessed. He  detailed that because Alaska was                                                                    
a   designated  jurisdiction,   meaning  it   had  its   own                                                                    
responsibility  for  its   occupational  safety  and  health                                                                    
program,  it  was necessary  for  the  state to  update  its                                                                    
program in order to comply  with federal law. The bill would                                                                    
allow  the department  to continue  to adopt  regulations as                                                                    
federal  law  changed  in  order to  ensure  the  state  was                                                                    
meeting the minimum standard. He  relayed that the burden on                                                                    
companies  was   not  increased  due  to   the  increase  in                                                                    
standard.   He  elaborated   there  were   existing  penalty                                                                    
requirements.  When penalties  were  assessed generally  the                                                                    
state assessed  about 10 percent  of the  allowable penalty,                                                                    
but  the  minimum  standards  were  necessary.  Without  the                                                                    
minimum standards  and without compliance with  federal law,                                                                    
the state  ran the  risk of losing  its designation  for the                                                                    
jurisdiction and  the program could  go back to  the federal                                                                    
government.  He explained  that  going back  to the  federal                                                                    
government would  mean that State of  Alaska employees would                                                                    
no  longer be  covered under  workers' compensation  and the                                                                    
Alaska  program  had  some specific  Alaska  components  for                                                                    
occupational  safety  and health,  which  would  be lost  by                                                                    
going to the federal program.                                                                                                   
9:19:08 AM                                                                                                                    
Representative Wilson  noted there  had been a  question and                                                                    
answer sheet that was not  included in members' packets. She                                                                    
read a question  that had been asked in  the House Judiciary                                                                    
Committee:  How  much  would  the  state  save  if  Alaska's                                                                    
occupational safety and health  jurisdiction was returned to                                                                    
federal  Occupational   Safety  and   Health  Administration                                                                    
(OSHA)?  She  noted  that  the  answer  had  been  $619,000;                                                                    
however, penalty  revenue would  go to the  federal treasury                                                                    
instead  of  the  state General  Fund  totaling  $1,031,000,                                                                    
which would result  in a net loss to the  state of $412,000.                                                                    
She   was  in   favor  of   keeping  programs   under  state                                                                    
jurisdiction, but she was concerned  about keeping a program                                                                    
because  the state  could collect  penalties on  businesses.                                                                    
She appreciated  the email the  committee had  received with                                                                    
more explanation.  She wondered if people  were breaking the                                                                    
laws. She asked where the $1 million came from.                                                                                 
DEBORAH  KELLY, DIRECTOR,  DIVISION OF  LABOR STANDARDS  AND                                                                    
SAFETY,  DEPARTMENT  OF  LABOR  AND  WORKFORCE  DEVELOPMENT,                                                                    
referred to  the fiscal note from  the department. Currently                                                                    
the   department   collected   approximately   $600,000   in                                                                    
penalties  per  fiscal  year.   With  the  approximately  78                                                                    
percent  increase, the  department estimated  the collection                                                                    
amount  would increase  by about  $435,000 per  year, for  a                                                                    
total of about  $1 million in penalties.  The penalties were                                                                    
not optional  - they were  either collected by the  state or                                                                    
eventually the  federal takeover  would come in  and collect                                                                    
the penalties. The  $619,000 was the savings  in state funds                                                                    
from the  elimination of  the positions  and the  travel and                                                                    
other  associated costs  for the  enforcement program.  When                                                                    
the savings  were subtracted  from the  loss of  the penalty                                                                    
amount  it resulted  in $412,000.  She  spoke to  collecting                                                                    
penalties  on businesses  in Alaska.  She relayed  that most                                                                    
businesses  tried  to do  the  right  thing. The  department                                                                    
conducted a  significant number  of inspections  every year.                                                                    
She relayed the department was  out in the community, across                                                                    
industries,  seeing businesses  every day.  Many times  when                                                                    
violations were found, the  penalties were reduced sometimes                                                                    
down  to zero  based on  small business  size or  good faith                                                                    
efforts on  the part  of the company.  She relayed  that the                                                                    
department  was not  generally  seeing numerous  violations,                                                                    
which was  the reason it  collected less than 10  percent of                                                                    
the maximum allowable penalties in the course of a year.                                                                        
Representative  Wilson  wondered  if  the  $596,000  was  an                                                                    
average or the figure from  the preceding year. She observed                                                                    
the figure  did not capture  the increase. She  hoped things                                                                    
were  improving as  the department  was  working to  educate                                                                    
9:23:02 AM                                                                                                                    
Ms. Kelly replied  that the $596,000 was the  amount from FY                                                                    
16.  The numbers  fluctuated from  year-to-year, but  not so                                                                    
significantly for  the department  to calculate  an average.                                                                    
The  department was  targeting its  consultation efforts  to                                                                    
try  to  reduce  the  number  of  violations  and  hopefully                                                                    
Vice-Chair  Gara  understood  that  under  federal  law  the                                                                    
penalties had  to be adjusted  for inflation;  however, they                                                                    
had  not  been  adjusted  for inflation  since  1990,  which                                                                    
resulted in the penalty change.                                                                                                 
Ms. Kelly answered in the affirmative.                                                                                          
Vice-Chair Gara  agreed that most  businesses did  the right                                                                    
thing. In the past he  had represented an individual who had                                                                    
been killed  due to an  unsafe work environment  and another                                                                    
individual who had almost been  killed due to an unsafe work                                                                    
Representative  Guttenberg asked  for verification  that the                                                                    
bill would  allow the department  to make  adjustments based                                                                    
on the  federal specifications without  requiring additional                                                                    
legislative  action in  the future.  He spoke  to giving  an                                                                    
agency authority  that was  legislative authority  and asked                                                                    
if it was an issue with the topic at hand.                                                                                      
Ms. Kelly  replied that the  department would be  allowed to                                                                    
make   adjustments  in   accordance  with   federal  penalty                                                                    
amounts. In order  to address that the  department was being                                                                    
given regulatory authority, the  bill included language that                                                                    
the  department  would  be   limited  to  the  corresponding                                                                    
federal  penalty  amounts  for   each  violation  type.  The                                                                    
department was not being given  the authority to decide what                                                                    
penalty amount it wanted - it  could not go above and beyond                                                                    
the corresponding federal penalty.                                                                                              
9:25:53 AM                                                                                                                    
Representative  Guttenberg  remarked   that  Ms.  Kelly  had                                                                    
identified  the $596,000  as fairly  standard. He  asked the                                                                    
department  whether it  had  looked at  the  number of  OSHA                                                                    
inspectors it  had, how many  penalties there had  been, and                                                                    
whether the number of penalties  had changed with the number                                                                    
of  employees the  department had  doing the  work. He  knew                                                                    
that  the department  had lost  numerous employees  over the                                                                    
years and that General Fund dollars had become tighter.                                                                         
Ms. Kelly  responded she  would have to  follow up  with the                                                                    
numbers. There  had been some  small personnel  changes over                                                                    
the years, but it had been relatively steady.                                                                                   
Representative Tilton  referred to  the inspections  done by                                                                    
the   department.  She   asked  if   the  $596,000   was  an                                                                    
accumulation of mostly small fines or larger ones.                                                                              
Ms. Kelly  answered she  would have to  follow up  to answer                                                                    
the  question  in an  exact  sense.  There were  many  small                                                                    
penalties  assessed   over  the   course  of  a   year.  The                                                                    
department did roughly  400 enforcement inspections annually                                                                    
and each one  of the inspections may or may  not result in a                                                                    
penalty. Penalties were generally  small, the exception came                                                                    
when a  particularly egregious violator was  identified such                                                                    
as the  trench collapse that had  been in the news  a couple                                                                    
of  years  earlier. She  detailed  that  there had  been  an                                                                    
attempt to dig  a young man out with  heavy equipment, which                                                                    
had resulted in a substantial penalty.                                                                                          
Co-Chair Foster OPENED and CLOSED public testimony.                                                                             
Vice-Chair  Gara  addressed the  one  fiscal  note from  the                                                                    
Department  of  Labor  and  Workforce  Development.  It  was                                                                    
anticipated  increase  of $217,500  in  FY  18 and  $435,000                                                                    
annually thereafter in penalty revenue to the state.                                                                            
Representative  Wilson  clarified  that  the  revenue  would                                                                    
occur only if  the penalties were fined.  She explained that                                                                    
the  figure in  the fiscal  note was  an estimate  only. She                                                                    
surmised  the amount  was unknown  and hoped  the department                                                                    
would not be writing  numerous citations because things were                                                                    
going well in the business community.                                                                                           
Co-Chair  Seaton MOVED  to REPORT  HB 121  out of  committee                                                                    
with individual recommendations  and the accompanying fiscal                                                                    
There  being  NO  OBJECTION,  HB 121  was  REPORTED  out  of                                                                    
committee  with  a "do  pass"  recommendation  and with  one                                                                    
previously published fiscal impact note: FN1 (LWF).                                                                             
9:30:49 AM                                                                                                                    
AT EASE                                                                                                                         
9:32:35 AM                                                                                                                    

Document Name Date/Time Subjects
HB120 summary statement (03.31.17).pdf HFIN 4/6/2017 9:00:00 AM
HB 120
HB 120 - Presentation for House Finance (04.06.17).pdf HFIN 4/6/2017 9:00:00 AM
HB 120
HB114 Sectional Analysis 3.6.17.pdf HFIN 4/6/2017 9:00:00 AM
HB 114
HB114 Sponsor Statement 3.6.17.pdf HFIN 4/6/2017 9:00:00 AM
HB 114
HB121 Sectional Analysis 3.6.17.pdf HFIN 4/6/2017 9:00:00 AM
HB 121
HB121 Sponsor Statement 3.6.17.pdf HFIN 4/6/2017 9:00:00 AM
HB 121
HB121 Support Document - Federal memo to state plans 02.23.17.pdf HFIN 4/6/2017 9:00:00 AM
HB 121
HB141 - Supporting Testimony - Maniilaq Association.PDF HFIN 4/6/2017 9:00:00 AM
HB 141
HB121 Additional Document-Sponsor's Reply to House Judiciary Committee Questions 3.10.17.pdf HFIN 4/6/2017 9:00:00 AM
HB 121