Legislature(2017 - 2018)HOUSE FINANCE 519

02/19/2018 01:30 PM FINANCE

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ HB 197 COMMUNITY SEED LIBRARIES TELECONFERENCED
Heard & Held
-- Public Testimony --
+ HB 216 TRANSFERS FROM DIVIDEND FUND; CRIMES TELECONFERENCED
Heard & Held
+= HB 79 OMNIBUS WORKERS' COMPENSATION TELECONFERENCED
Moved CSHB 79(FIN) Out of Committee
+ Bills Previously Heard/Scheduled TELECONFERENCED
HOUSE BILL NO. 79                                                                                                             
                                                                                                                                
     "An  Act relating  to workers'  compensation; repealing                                                                    
     the  second injury  fund upon  satisfaction of  claims;                                                                    
     relating to  service fees and  civil penalties  for the                                                                    
     workers' safety programs  and the workers' compensation                                                                    
     program;  relating   to  the  liability   of  specified                                                                    
     officers  and members  of  specified business  entities                                                                    
     for  payment  of  workers'  compensation  benefits  and                                                                    
     civil  penalties;  relating   to  civil  penalties  for                                                                    
     underinsuring or failing to  insure or provide security                                                                    
     for  workers'   compensation  liability;   relating  to                                                                    
     preauthorization   and  timely   payment  for   medical                                                                    
     treatment and  services provided to  injured employees;                                                                    
     relating  to incorporation  of  reference materials  in                                                                    
     workers'   compensation    regulations;   relating   to                                                                    
     proceedings  before  the Workers'  Compensation  Board;                                                                    
     providing   for  methods   of   payment  for   workers'                                                                    
     compensation   benefits;  relating   to  the   workers'                                                                    
     compensation benefits guaranty  fund authority to claim                                                                    
     a   lien;   excluding  independent   contractors   from                                                                    
     workers'   compensation   coverage;  establishing   the                                                                    
     circumstances    under   which    certain   nonemployee                                                                    
     executive  corporate officers  and  members of  limited                                                                    
     liability  companies may  obtain workers'  compensation                                                                    
     coverage; relating  to the duties of  injured employees                                                                    
     to    report    income    or    work;    relating    to                                                                    
     misclassification of  employees and  deceptive leasing;                                                                    
     defining   'employee';   relating   to   the   Workers'                                                                    
     Compensation  Board's approval  of attorney  fees in  a                                                                    
     settlement  agreement; and  providing for  an effective                                                                    
     date."                                                                                                                     
                                                                                                                                
1:38:59 PM                                                                                                                    
                                                                                                                                
Co-Chair Foster  noted the  committee had  adopted committee                                                                    
substitute  (CS)  version  R   and  two  amendments  at  the                                                                    
previous meeting.                                                                                                               
                                                                                                                                
MARIE  MARX, DIRECTOR,  DIVISION  OF WORKERS'  COMPENSATION,                                                                    
DEPARTMENT   OF  LABOR   AND   WORKFORCE  DEVELOPMENT,   was                                                                    
available for questions.                                                                                                        
                                                                                                                                
Co-Chair  Foster referenced  the two  fiscal notes  from the                                                                    
Department of Labor and Workforce Development (DLWD).                                                                           
                                                                                                                                
PALOMA   HARBOUR,  DIRECTOR,   DIVISION  OF   ADMINISTRATIVE                                                                    
SERVICES,  DEPARTMENT OF  LABOR  AND WORKFORCE  DEVELOPMENT,                                                                    
addressed the  first fiscal note:  OMB Component  Number 344                                                                    
for  the   Division  of   Worker'  Compensation.   The  note                                                                    
reflected  a  revenue  change for  the  department  of  $1.8                                                                    
million  from  general  funds to  the  Workers'  Safety  and                                                                    
Compensation Administration Account beginning  in FY 19. The                                                                    
note also reflected a savings  of $59,800 beginning in FY 20                                                                    
resulting from a switch to electronic filing.                                                                                   
                                                                                                                                
Representative  Wilson pointed  to  page two  of the  fiscal                                                                    
note  where  it  specified  the   state  would  mandate  the                                                                    
electronic filing  of documents. She asked  for verification                                                                    
that  mandate was  no  longer  required as  a  result of  an                                                                    
amendment that had been passed by the committee.                                                                                
                                                                                                                                
Ms. Harbour  believed the department  had the option  to set                                                                    
the method  for filing.  She believed the  division director                                                                    
could set the method as electronic filing.                                                                                      
                                                                                                                                
1:42:48 PM                                                                                                                    
                                                                                                                                
Representative   Wilson   stated   that  perhaps   she   had                                                                    
misunderstood   the  amendment.   She   asked  whether   the                                                                    
commissioner or someone in the  department could mandate the                                                                    
filing method.                                                                                                                  
                                                                                                                                
Ms.  Harbour answered  that it  was pertaining  to insurance                                                                    
companies  or  self-insured   employers  filing  reports  of                                                                    
injury. She recalled that Ms.  Marx had specified that if an                                                                    
individual working  through their  employer was  not getting                                                                    
their incident  report filed, the  division would  work with                                                                    
the individual to receive their  report in whatever way they                                                                    
could provide it.                                                                                                               
                                                                                                                                
Representative Wilson  stated that the money  had previously                                                                    
come from  general funds, which  the bill would change  to a                                                                    
designated  general  fund  (DGF)   account.  She  asked  for                                                                    
verification  that  no  savings  would occur  and  that  the                                                                    
switching  of  accounts  merely constituted  a  fund  source                                                                    
change.                                                                                                                         
                                                                                                                                
DAVID   TEAL,   DIRECTOR,  LEGISLATIVE   FINANCE   DIVISION,                                                                    
answered  that the  fiscal note  maintained the  2.7 percent                                                                    
premium tax;  employers would  not be  paying any  more than                                                                    
they had  been. He  elaborated that  a larger  percentage or                                                                    
$1.8  million of  the  2.7  percent tax  would  go into  the                                                                    
Workers'  Safety Fund.  There was  a loss  of GF  revenue of                                                                    
$1.8  million  because  of  the   fund  source  change.  The                                                                    
Legislative  Finance Division  (LFD)  questioned the  reason                                                                    
for the  change - it did  not see any spending  of the fund,                                                                    
only a change of revenue. He  questioned what good it did to                                                                    
merely put  revenue into a fund.  He asked where and  how it                                                                    
got spent.  He turned  to a  table on page  3 of  the fiscal                                                                    
note [OMB Component  Number 344] and referred  to the bottom                                                                    
row   "revenue  less   appropriations  (negative   indicates                                                                    
unsustainable   spending)."  He   pointed  out   there  were                                                                    
numerous  negative  numbers in  the  row,  which meant  that                                                                    
prior to FY 09 the Workers'  Safety Fund had been building a                                                                    
balance as high as  $11 million. Through higher expenditures                                                                    
than revenue,  the balance  had been spent  down and  it had                                                                    
fallen  to $3  million in  FY  18. Roughly  over a  ten-year                                                                    
period,  the  fund had  been  overspent  by $8  million.  He                                                                    
pointed out that by FY 20 there would be no balance.                                                                            
                                                                                                                                
Mr. Teal explained that although  there was no appropriation                                                                    
of the money, Workers'  Compensation would continue to spend                                                                    
at approximately  the current levels.  The tables on  page 3                                                                    
and 4  of the  fiscal note showed  a slightly  negative cash                                                                    
flow. He explained that LFD  had asked why only $1.8 million                                                                    
would   be  taken   because  it   looked   like  there   was                                                                    
overspending by  $2 [million] to $2.1  [million]. The answer                                                                    
from   DLWD  had   been  that   it  anticipated   additional                                                                    
efficiencies. He  noted that the only  efficiencies shown on                                                                    
the fiscal  note were  on page  1 in  the amount  of $59,800                                                                    
[annually) due to the elimination  of one staff position. He                                                                    
did not  know how  additional savings  would be  shown; they                                                                    
should  occur, but  they were  not  on the  fiscal note.  He                                                                    
explained  the division  was already  spending money  and it                                                                    
was an awkward fiscal note to prepare.                                                                                          
                                                                                                                                
Mr.   Teal   summarized   that    the   direct   answer   to                                                                    
Representative  Wilson's question  was  yes  - $1.8  million                                                                    
previously  classified  as GF  would  flow  to the  Workers'                                                                    
Safety Fund.                                                                                                                    
                                                                                                                                
1:47:27 PM                                                                                                                    
                                                                                                                                
Representative Wilson  referenced the  deficit shown  in the                                                                    
fiscal  note tables  and asked  if  committee members  could                                                                    
assume  that  undesignated  general  funds  (UGF)  would  be                                                                    
utilized. She reasoned that it  was not possible to spend in                                                                    
the negative;  therefore, she  wondered if  a growth  in UGF                                                                    
would occur to make up the difference.                                                                                          
                                                                                                                                
Mr. Teal  replied that  the table  on page  4 of  the fiscal                                                                    
note  showed   several  options  including   the  governor's                                                                    
budget. He pointed out that  the FY 23 beginning balance was                                                                    
highly  negative [$5.4  million],  which  was not  possible.                                                                    
Under  the  second  option  [column  2]  that  included  the                                                                    
governor's budget  with the Appeals Commission  (HB 69), the                                                                    
account  went negative  as well.  Under HB  79, the  balance                                                                    
would remain positive.  If both HB 69 and HB  79 passed, the                                                                    
balance  would hold  up well.  He anticipated  a $2  million                                                                    
request for GF if HB 79 did not pass.                                                                                           
                                                                                                                                
Representative Wilson surmised the  $2 million request would                                                                    
be the  same - instead  of putting the  money in the  GF, it                                                                    
would go to "what it's being paid on behalf of."                                                                                
                                                                                                                                
Mr.  Teal  answered in  the  affirmative.  He detailed  $1.8                                                                    
million would be  diverted from GF into  the Workers' Safety                                                                    
Fund,  which would  spend as  a designated  fund; or  the GF                                                                    
could be spent - it came out the same.                                                                                          
                                                                                                                                
1:49:24 PM                                                                                                                    
                                                                                                                                
Ms. Harbour addressed DLWD fiscal  note OMB Component Number                                                                    
2342 related to  the elimination of the  Second Injury Fund.                                                                    
The  note  reflected  savings   anticipated  in  the  future                                                                    
related to  eliminating the Second Injury  Fund program. She                                                                    
reported it would take time  to realize savings because many                                                                    
of  the  injuries   were  permanent,  partial  disabilities;                                                                    
therefore,  benefits to  individuals lasted  the recipient's                                                                    
lifetime. She  explained that the eventual  savings would be                                                                    
realized by employers - their  premium costs would decrease.                                                                    
Self-insured   employers  (e.g.   State  of   Alaska)  would                                                                    
experience savings as savings occur.                                                                                            
                                                                                                                                
Co-Chair  Foster  asked  to  hear  from  the  Department  of                                                                    
Administration  (DOA)  and the  Office  of  the Governor  in                                                                    
relation to their fiscal notes.                                                                                                 
                                                                                                                                
SCOTT  JORDAN,  DIRECTOR,  RISK  MANAGEMENT,  DEPARTMENT  OF                                                                    
ADMINISTRATION,   addressed  the   DOA   fiscal  note,   OMB                                                                    
Component Number  71. The  costs in  the note  reflected the                                                                    
requirement to  electronically file  reports of  injury. The                                                                    
cost in  FY 19  would be  $40,000 to  cover forms  that were                                                                    
billed out at  $1.25 by a third-party  administrator as well                                                                    
as the  programming for  the first  year. The  outyears were                                                                    
$12,900 that  would cover  $1.25 per  form -  the department                                                                    
anticipated  about 1,900  forms  per year  submitted to  the                                                                    
Division of Workers' Compensation.                                                                                              
                                                                                                                                
Representative  Wilson remarked  that the  electronic filing                                                                    
would cost more. She asked  if the electronic filing savings                                                                    
would be reflected on the  Division of Workers' Compensation                                                                    
fiscal notes.                                                                                                                   
                                                                                                                                
Mr. Jordan answered that he  could not comment on savings on                                                                    
the  Division  of  Workers'  Compensation  side.  Currently,                                                                    
doing the work manually was  not costing DOA any more. Doing                                                                    
the work electronically would cost  the department $1.25 per                                                                    
form to submit to the Division of Workers' Compensation                                                                         
                                                                                                                                
1:52:54 PM                                                                                                                    
                                                                                                                                
Representative Wilson  wondered if  it would cost  the state                                                                    
more money  to do  the process electronically.  She wondered                                                                    
if there would be savings as  the committee had been told in                                                                    
one of  the other  fiscal notes. She  surmised that  DOA was                                                                    
fast  at  the forms  and  could  do  them manually  just  as                                                                    
quickly as it could electronically.                                                                                             
                                                                                                                                
Mr.  Jordan answered  that the  process would  not cost  the                                                                    
department  any  more,  but  the  third-party  administrator                                                                    
submitting   the  forms   to   the   Division  of   Workers'                                                                    
Compensation charged  a $1.25  fee per  form. It  would cost                                                                    
DOA  more to  process the  forms, but  it would  not require                                                                    
additional personnel.                                                                                                           
                                                                                                                                
Representative  Wilson  asked   which  department  would  be                                                                    
paying interagency receipts.                                                                                                    
                                                                                                                                
Mr. Jordan deferred  to the Office of  Management and Budget                                                                    
(OMB).                                                                                                                          
                                                                                                                                
Co-Chair  Foster  asked  OMB  to  address  fiscal  note  OMB                                                                    
Component Number 0.                                                                                                             
                                                                                                                                
CAROLINE SCHULTZ,  OFFICE OF  MANAGEMENT AND  BUDGET, OFFICE                                                                    
OF THE GOVERNOR, relayed that  the interagency receipt funds                                                                    
that would go to the  Division of Risk Management would come                                                                    
from  all executive  branch agencies.  The Division  of Risk                                                                    
Management   was    the   state's    self-insured   workers'                                                                    
compensation  manager. The  division charged  rates for  all                                                                    
personal service  budgets for all  agencies. The  rates were                                                                    
calculated annually;  therefore, OMB had elected  to reflect                                                                    
the costs in an OMB various note.                                                                                               
                                                                                                                                
1:54:49 PM                                                                                                                    
                                                                                                                                
Co-Chair Seaton  asked if  overall, electronic  filing would                                                                    
cost the state more or less.                                                                                                    
                                                                                                                                
Mr. Teal answered that Risk  Management would be spending an                                                                    
additional $12,900 per  year to pay a  third-party to handle                                                                    
the forms.  The charge did  not go  only to the  Division of                                                                    
Workers'  Compensation  - it  went  to  every allocation  in                                                                    
every  agency.  The change  would  mean  a small  percentage                                                                    
increase in the working  reserve rate. The legislature could                                                                    
fund the  fiscal note (the money  would go to OMB  to spread                                                                    
out to various agencies). He  explained that the Division of                                                                    
Risk Management  would incur costs  that would be  passed to                                                                    
other  agencies  (it  reflected the  nature  of  interagency                                                                    
receipts). He  elaborated there had  to be cash  backing the                                                                    
payments to Risk Management -  each agency would pay a small                                                                    
portion. Even  if the  legislature did  not fund  the fiscal                                                                    
note  in FY  19,  the  rates would  be  built into  personal                                                                    
service costs  beginning in FY  20. The rates would  go into                                                                    
the adjusted base - the  committee really would not see them                                                                    
- it  would see  the transactions,  but the  committee would                                                                    
not discuss them because they  were automatically assumed to                                                                    
be approved and each agency  would receive a small amount of                                                                    
money  to pay  the costs.  He  reiterated it  would cost  an                                                                    
additional $12,900 to process the forms.                                                                                        
                                                                                                                                
Representative Wilson surmised that  the increase was due to                                                                    
the third-party. She thought the  purpose of the bill was to                                                                    
save money.  She was trying  to determine where  the savings                                                                    
would come  in. She wondered  why the bill should  be passed                                                                    
if there were no savings.                                                                                                       
                                                                                                                                
Mr. Teal believed the question  was probably better answered                                                                    
by   DLWD.  He   stated  that   the  Division   of  Workers'                                                                    
Compensation anticipated savings and  the elimination of one                                                                    
position. Based  on a  table attached  to DLWD  fiscal note,                                                                    
OMB Component  Number 344,  anticipated savings  were around                                                                    
$200,000 per  year. Additionally, there was  the elimination                                                                    
of the  Second Injury Fund,  which would save money  for all                                                                    
employers including  the state. Putting it  all together was                                                                    
more difficult than  one may think. He  explained that every                                                                    
fiscal note  was prepared by  a single allocation  and there                                                                    
had  been some  coordination  problems trying  to make  them                                                                    
match.                                                                                                                          
                                                                                                                                
1:59:19 PM                                                                                                                    
                                                                                                                                
Co-Chair  Seaton  MOVED  to  REPORT   CSHB  79(FIN)  out  of                                                                    
committee   with   individual    recommendations   and   the                                                                    
accompanying fiscal notes.                                                                                                      
                                                                                                                                
Representative  Wilson OBJECTED.  She supported  portions of                                                                    
the bill  that she  thought were  needed. She  was concerned                                                                    
about  the  representation of  the  person.  She stated  the                                                                    
representation  of who  it could  be was  based on  the same                                                                    
committee the  person would be  in front of. She  thought it                                                                    
was a  conflict of interest.  She thought it was  better but                                                                    
had  hoped  an  amendment  would  address  the  issue  in  a                                                                    
different way.                                                                                                                  
                                                                                                                                
Co-Chair Seaton clarified his motion  pertained to version R                                                                    
as amended.                                                                                                                     
                                                                                                                                
Representative Wilson MAINTAINED her OBJECTION.                                                                                 
                                                                                                                                
A roll call vote was taken on the motion.                                                                                       
                                                                                                                                
IN FAVOR: Grenn,   Guttenberg,   Ortiz,  Kawasaki,   Foster,                                                                    
Seaton                                                                                                                          
OPPOSED: Pruitt, Thompson, Tilton, Wilson                                                                                       
                                                                                                                                
Vice-Chair Gara was absent from the vote.                                                                                       
                                                                                                                                
The MOTION PASSED (6/4).                                                                                                        
                                                                                                                                
There being NO further  OBJECTION, CSHB 79(FIN) was REPORTED                                                                    
out of  committee with three  "do pass," two "do  not pass,"                                                                    
three "no recommendation,"  and two "amend" recommendations;                                                                    
and with two new fiscal  impact notes from the Department of                                                                    
Labor and Workforce Development;  one new fiscal impact note                                                                    
from the Office  of the Governor; and one  new fiscal impact                                                                    
note from the Department of Administration.                                                                                     
                                                                                                                                
2:01:51 PM                                                                                                                    
AT EASE                                                                                                                         
                                                                                                                                
2:03:21 PM                                                                                                                    
RECONVENED                                                                                                                      
                                                                                                                                

Document Name Date/Time Subjects
HB 197 Sponsor Statement 4.10.2017.pdf HFIN 2/19/2018 1:30:00 PM
HB 197
HB197 Opposition Document - Letter of Opposition 4.27.2017.pdf HFIN 2/19/2018 1:30:00 PM
HB 197
HB197 Sectional Analysis ver CSHB 197(RES) 1.22.2018.pdf HFIN 2/19/2018 1:30:00 PM
HB 197
HB197 Summary of Changes 1.22.2018.pdf HFIN 2/19/2018 1:30:00 PM
HB 197
HB197 Supporting Document - Article Seed Bill 4.9.2017.pdf HFIN 2/19/2018 1:30:00 PM
HB 197
HB197 Supporting Document - Letter of Support 5.1.2017.pdf HFIN 2/19/2018 1:30:00 PM
HB 197
HB216 Additional Documents Criminal Fund Use Over the Years With Percentages 2.13.2018.pdf HFIN 2/19/2018 1:30:00 PM
HB 216
HB216 Additional Documents Difference Bertween Restitution and Compensation 2.13.2018.pdf HFIN 2/19/2018 1:30:00 PM
HB 216
HB 216 Support Documents APOA 2.13.2018.pdf HFIN 2/19/2018 1:30:00 PM
HB 216
HB216 Additional Documents FY14 Felons Memo 2.13.2018.pdf HFIN 2/19/2018 1:30:00 PM
HB 216
HB216 Additional Documents FY15 Felons Memo 2.13.2018.pdf HFIN 2/19/2018 1:30:00 PM
HB 216
HB216 Additional Documents FY16 Felons Memo 2.13.2018.pdf HFIN 2/19/2018 1:30:00 PM
HB 216
HB216 Additional Documents FY17 Felons Memo 2.13.2018.pdf HFIN 2/19/2018 1:30:00 PM
HB 216
HB216 Additional Documents FY18 Felons Memo 2.13.2018.pdf HFIN 2/19/2018 1:30:00 PM
HB 216
HB216 Additional Documents HB245 from 1988 2.13.2018.pdf HFIN 2/19/2018 1:30:00 PM
HB 216
HB216 Additional Documents Victim Restitution Reform in Other States Research 2.13.2018.pdf HFIN 2/19/2018 1:30:00 PM
HB 216
HB216 Victim Restitution Funds Update Research 1.19.2018.pdf HFIN 2/19/2018 1:30:00 PM
HB 216
HB216 Support Document Letter from VCCB 2.13.2018.pdf HFIN 2/19/2018 1:30:00 PM
HB 216
HB216 CSSB Sponsor Statement 2.13.2018.pdf HFIN 2/19/2018 1:30:00 PM
HB 216
HB216 Additional Materials Restitution Statistics from ACS 2.13.2018.pdf HFIN 2/19/2018 1:30:00 PM
HB 216
HB216 Additional Materials LRS Report from 2013 Research 2.13.2018.pdf HFIN 2/19/2018 1:30:00 PM
HB 216
HB 216 CS version M 2.16.18.pdf HFIN 2/19/2018 1:30:00 PM
HB 216
HB216 Additional Documents PowerPoint Presentation 2.18.2018.pdf HFIN 2/19/2018 1:30:00 PM
HB 216
HB216 Restitution Sectional 2.19.2018.pdf HFIN 2/19/2018 1:30:00 PM
HB 216
HB216 Summary of Changes 2.19.2018.pdf HFIN 2/19/2018 1:30:00 PM
HB 216
HB 216 Legal Opinion on Approriations Per Priority 18-057mlp 2.19..pdf HFIN 2/19/2018 1:30:00 PM
HB 216