Legislature(2003 - 2004)
04/09/2003 03:29 PM L&C
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
HB 224-CIGARETTE SALES REQUIREMENTS Number 0450 REPRESENTATIVE ROKEBERG, acting chair, announced that the final order of business would be HOUSE BILL NO. 224, "An Act relating to a tobacco product manufacturer's compliance with certain statutory requirements regarding cigarette sales; and providing for an effective date." MIKE BARNHILL, Assistant Attorney General, Commercial Section, Civil Division (Juneau), Department of Law, testified on behalf of the administration, presenting HB 224. He explained that the bill helps the state protect its revenues derived under the Master Settlement Agreement (MSA). Alaska and 45 other states entered into the MSA with the tobacco manufacturers in 1998. MR. BARNHILL explained that under the settlement agreement, Alaska's revenues are reduced in certain circumstances. To avoid those reductions, Alaska enacted an NPM (non-participating manufacturers) statute, AS 45.53, in 1999, and actively enforces the statute. Unfortunately, he stated, it's difficult to enforce the statute because the tobacco manufacturer that is failing to comply may be a small manufacturer located in a far- flung jurisdiction, such as India or the Philippines. Alaska has, on occasion, filed suit against a tobacco manufacturer in India, hiring a process server to serve the summons and complaint in India, and has ultimately obtained a default judgment. But that's the difficult way of [enforcing the statute], he said. Number 0575 MR. BARNHILL stated that in 2001, Alaska enacted AS 45.53.145 [Notification of noncompliance; confiscation of noncomplying cigarettes], and other states followed suit. Last summer, the National Association of Attorneys General set up a working group to design uniform legislation that all states could enact, and House Bill 224 is the product of that [model legislation]. MR. BARNHILL stated that HB 224 creates a directory of [tobacco manufacturing] companies that have complied, either by signing onto the Master Settlement Agreement or by depositing the required amounts of escrow under AS 45.53. If the tobacco manufacturers certify that they have [deposited the required escrow], they get on the list; companies need to certify annually. Their cigarettes can then be sold in Alaska. House Bill 224 also provides for penalties for noncompliance. It provides a process by which the Department of Law can serve a summons and complaint against a tobacco manufacturer that has failed to comply, not by hiring a process server and serving in India, as Alaska has done in the past, but by serving the complaint on the commissioner of the Department of Community and Economic Development. Number 0685 REPRESENTATIVE DAHLSTROM asked how much is the escrow from a [nonparticipating manufacturer] tobacco company. MR. BARNHILL replied that it changes every year, but in 2001, the escrow was approximately 1.5 cents per cigarette. Number 0703 REPRESENTATIVE ROKEBERG asked what he knew about the ability of Altria Group [the parent company of Philip Morris] to pay [money owed under the Master Settlement Agreement]. He also asked the ramifications to Alaska's budget if Philip Morris does not pay. MR. BARNHILL said he hasn't seen the confidential financial data about Altria Group's ability to pay. He said Alaska is expecting a [tobacco settlement] payment next week of $17.6 million, of which Philip Morris would pay 50 percent. Because the State of Alaska securitized 80 percent of these revenues, the ultimate impact to the general fund would be a loss of $1.7 million if Altria Group does not pay. Number 0797 JOHANNA BALES, Revenue Auditor, Department of Revenue, explained that she currently runs the tobacco tax program. She also enforces certain provisions of the Master Settlement Agreement. She said HB 224 will definitely be helpful in enforcement responsibilities, especially with foreign manufacturers that are very difficult to track down. This legislation is extremely important, and she stated that the department supports it. Number 0884 REPRESENTATIVE ROKEBERG, noting no additional witnesses, closed the public hearing on HB 224. Number 0888 REPRESENTATIVE DAHLSTROM moved to report HB 224 out of committee with individual recommendations and the two accompanying zero fiscal notes. There being no objection, HB 224 was reported from the House Labor and Commerce Standing Committee.