Legislature(2017 - 2018)SENATE FINANCE 532

05/11/2018 10:00 AM FINANCE

Note: the audio and video recordings are distinct records and are obtained from different sources. As such there may be key differences between the two. The audio recordings are captured by our records offices as the official record of the meeting and will have more accurate timestamps. Use the icons to switch between them.

Download Mp3. <- Right click and save file as

* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Moved SCS CSHB 119(FIN) Out of Committee
Moved SCS CSHB 79(FIN) Out of Committee
+ Bills Previously Heard/Scheduled TELECONFERENCED
CS FOR HOUSE BILL NO. 79(FIN)                                                                                                 
     "An Act relating to  workers' compensation; relating to                                                                    
     the second  injury fund; relating  to service  fees and                                                                    
     civil penalties  for the  workers' safety  programs and                                                                    
     the  workers'  compensation  program; relating  to  the                                                                    
     liability of business entities  and certain persons 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 Alaska  Workers'  Compensation                                                                    
     Board; relating  to the  authorization of  the workers'                                                                    
     compensation benefits  guaranty fund  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  Alaska Workers'  Compensation Board's  approval of                                                                    
     attorney fees in a  settlement agreement; and providing                                                                    
     for an effective date."                                                                                                    
6:30:00 PM                                                                                                                    
Vice-Chair   Bishop  MOVED   to  ADOPT   proposed  committee                                                                    
substitute   for  CSHB   79(FIN),  Work   Draft  30-GH1789\E                                                                    
(Wallace, 5/11/18).                                                                                                             
Co-Chair MacKinnon OBJECTED for discussion.                                                                                     
JULI  LUCKY, STAFF,  SENATOR ANNA  MACKINNON, discussed  the                                                                    
changes to the bill. She  explained that most of the changes                                                                    
to the bill were removals.  She referenced an Explanation of                                                                    
Changes document  (copy on file),  and read sections  of the                                                                    
     The Senate Finance CS contains the sections of HB 79                                                                       
          ? Ensure Adequate Funding                                                                                             
          ? Reduce Administrative Costs                                                                                         
          ? Define Independent Contractors                                                                                      
     The   SCS   also   creates   a   Legislative   Workers'                                                                    
     Compensation  Working  Group  to   act  as  an  interim                                                                    
     committee to continue work  and develop new legislation                                                                    
     for   consideration  during   the  31st   Alaska  State                                                                    
Ms. Lucky noted  that the new Section 23 of  the bill, which                                                                    
formed the Legislative  Workers' Compensation Working Group,                                                                    
could be found on page 10,  Line 12 of the bill. She relayed                                                                    
that the committee had been  concerned about making sure the                                                                    
bill was balanced and ensuring  there was legislative intent                                                                    
to discuss  the issues over  the interim. The  working group                                                                    
would  be comprised  of six  members, with  three from  each                                                                    
body. The  members would consult with  stakeholders from the                                                                    
Department of  Commerce, Community and  Economic Development                                                                    
(DCCED); the  Department of Labor and  Workforce Development                                                                    
(DLWD);  the Medical  Services  Review Committee;  organized                                                                    
labor;  school   district  administrators;  and   the  state                                                                    
business community.                                                                                                             
Ms.  Lucky  continued  discussing  the  legislative  working                                                                    
group proposed in  the bill. The goal of the  group would be                                                                    
to recommend  improvements to the laws  relating to workers'                                                                    
compensation and put forth a report  that would be due on or                                                                    
before  December 1,  2018.  The intent  was  to ensure  that                                                                    
there   was  adequate   time  for   review  and   put  forth                                                                    
legislation  in front  of the  next  legislature. She  noted                                                                    
that  the  Explanation  of  Changes  document  showed  items                                                                    
removed  from   the  bill  with   a  strikethrough,   and  a                                                                    
renumbering of those items that would remain in the bill.                                                                       
Ms.  Lucky   relayed  that  she   had  conferred   with  the                                                                    
department and there was no change to the fiscal notes.                                                                         
Co-Chair MacKinnon  WITHDREW her  OBJECTION. There  being NO                                                                    
further  OBJECTION,  it was  so  ordered.  The CS  for  CSHB
79(FIN) was ADOPTED.                                                                                                            
6:34:06 PM                                                                                                                    
AT EASE                                                                                                                         
6:38:58 PM                                                                                                                    
Co-Chair  MacKinnon informed  that the  Committee Substitute                                                                    
(CS) for CSHB 79(FIN) was posted online.                                                                                        
Co-Chair MacKinnon thanked the  commissioner of DLWD for all                                                                    
of the  work that  had been  done on  the issue  of workers'                                                                    
compensation. She explained  that the CS was  a trimmed down                                                                    
version  of  the bill.  The  committee  had identified  many                                                                    
issues that  were important to  workers; and had  learned of                                                                    
issues to  balance for  employers before  accommodating some                                                                    
of the  administration's requests.  She understood  that the                                                                    
CS  was  not  the  complete   package  as  proposed  by  the                                                                    
6:40:58 PM                                                                                                                    
HEIDI   DRYGAS,  COMMISSIONER,   DEPARTMENT  OF   LABOR  AND                                                                    
WORKFORCE   DEVELOPMENT,    thanked   the    committee   for                                                                    
consideration  of the  bill. She  described the  bill as  an                                                                    
"efficiencies bill."  She mentioned  provisions kept  in the                                                                    
CS   including  funding   for  the   Division  of   Workers'                                                                    
Compensation,  electronic  filing,  and  the  definition  of                                                                    
independent contractor.  She stated that there  were several                                                                    
things left out of the CS  that would make the division work                                                                    
better  and  hoped  the  items would  be  addressed  by  the                                                                    
working group over the subsequent summer.                                                                                       
Commissioner Drygas  remarked that there had  been a lengthy                                                                    
conversation  between labor  and  industry about  addressing                                                                    
substantive  benefits  in  the   interim.  She  thought  the                                                                    
stakeholders  were   the  best   groups  (rather   than  the                                                                    
department) to address  the issues. She stated  that she was                                                                    
eager to see  how the working group came  together, and that                                                                    
the  department was  ready to  assist in  the endeavor.  She                                                                    
supported the  bill with the  understanding that  there were                                                                    
sections the department had not supported removing.                                                                             
Co-Chair MacKinnon  indicated that the  committee understood                                                                    
the  sentiments   of  the  department.  She   discussed  the                                                                    
challenge  of passing  legislation. She  considered that  if                                                                    
elected officials  could hear both  sides of  the proposals,                                                                    
progress  would   be  made.  She  referenced   the  work  of                                                                    
Representative   Josephson  in   his  proposed   legislation                                                                    
pertaining  to   damages  for  workers'   compensation.  She                                                                    
emphasized the importance of understanding  all sides of the                                                                    
6:44:30 PM                                                                                                                    
Senator Olson  referenced the working  group as  proposed in                                                                    
the  bill.  He  was   pessimistic  about  making  monumental                                                                    
changes in  age-old conflicts such as  workers' compensation                                                                    
and wondered how to make progress.                                                                                              
Commissioner Drygas  stated that  the bill language  did not                                                                    
come from the  department, but she had reviewed  it. She was                                                                    
aware that it  was an election year and  thought work during                                                                    
the  interim  might be  difficult.  She  referenced a  group                                                                    
called  The Workers  Compensation  Ad  Hoc Committee,  which                                                                    
included stakeholders  from organized labor and  industry to                                                                    
discuss   substantive  benefits   and  reform   to  workers'                                                                    
compensation. She  understood that the committee  had worked                                                                    
very  well  together for  many  years.  She hoped  that  the                                                                    
committee  could be  revived. She  qualified that  the group                                                                    
came from  the stakeholders rather from  the department. She                                                                    
noted that it  had been 18 years  since substantive benefits                                                                    
had been increased for workers.                                                                                                 
Co-Chair MacKinnon  stated that  the concept of  the working                                                                    
group had  come from  her office.  She referenced  a working                                                                    
group  on  reducing  sexual  assault   and  noted  that  the                                                                    
legislature    had    since   implemented    every    single                                                                    
recommendation.    She    referenced    implementation    of                                                                    
recommendations from  an oil and  gas working group.  The CS                                                                    
proposed for the legislature  to bring together stakeholders                                                                    
to  share perspectives  and  subsequently elected  officials                                                                    
would  implement  the  recommendations. She  emphasized  the                                                                    
need for accord.                                                                                                                
Senator  Olson  understood that  the  ad  hoc committee  was                                                                    
frustrated after its recommendations were not taken.                                                                            
Commissioner  Drygas could  not recall  the past  actions of                                                                    
the  ad hoc  committee and  outcome of  its recommendations.                                                                    
She suspected that  the work of the ad  hoc committee halted                                                                    
because legislation  it worked on  was passed over  in favor                                                                    
of  legislation  that  did  not  include  stakeholders.  She                                                                    
reiterated  that  the events  in  question  took place  long                                                                    
before her tenure in the department.                                                                                            
6:49:24 PM                                                                                                                    
Vice-Chair Bishop  discussed the fiscal notes.  He addressed                                                                    
FN 5 from the Department  of Administration, a fiscal impact                                                                    
note that  showed a cost  of $40,000  in the first  year and                                                                    
$12,900 in the out years.  He read from the Analysis section                                                                    
on page 2 of the fiscal note:                                                                                                   
     This bill will have a  financial impact on the Division                                                                    
     of Risk Management (DRM).                                                                                                  
     This bill  will clarify, amend, add  and repeal several                                                                    
     statutes  within  workers' compensation.  Changes  that                                                                    
     will  impact  DRM  include  reporting  changes  to  the                                                                    
     Alaska Workers Compensation Board.  The Board will move                                                                    
     from  a  manual process  to  an  Electronic Data  Input                                                                    
     (EDI) process,  with changes  to the  appropriate forms                                                                    
     used for reporting.                                                                                                        
     DRM  anticipates a  first year  cost of  $40.0 for  the                                                                    
     initial  implementation,   including  changes   to  the                                                                    
     software  and costs  related  to  submitting forms  via                                                                    
     EDI. Costs are  estimated at $12.9 annually  in the out                                                                    
     years. Costs  will be absorbed by  agencies through the                                                                    
     annual rate process.                                                                                                       
Vice-Chair  Bishop addressed  FN 8  from DLWD,  which was  a                                                                    
fiscal impact note. There was  an in increase the percent of                                                                    
fees  deposited into  the Workers'  Safety and  Compensation                                                                    
Administrative Account (WSCAA). The  increase did not add to                                                                    
any premiums from any employers  but was built into what was                                                                    
collected by the Division of Insurance.                                                                                         
Vice-Chair Bishop addressed FN 7 from DLWD, which was a                                                                         
fiscal impact note. He read from the fiscal note Analysis                                                                       
on page 2:                                                                                                                      
     This  legislation will  sunset the  Second Injury  Fund                                                                    
     (AS  23.30.040). Future  claim  payments  will only  be                                                                    
     made on  those claims  accepted by the  effective date.                                                                    
     There will  be no reduction  in the near future  in the                                                                    
     staffing  required  to  process  these  claim  payments                                                                    
     because it  will likely  take decades  for the  Fund to                                                                    
     pay  these   ongoing  claim   obligations.  Ninety-five                                                                  
     percent of  these claims  are categorized  as permanent                                                                    
     total disability (PTD) benefits.  PTD benefits are paid                                                                    
     until disability ends or until death.                                                                                      
     The  reduced Fund  liability reflected  in this  fiscal                                                                    
     note  assumes  the  average  age  of  the  claimant  at                                                                    
     closure would  be 80 years  old and two to  three cases                                                                    
     would  be closed  per  year  due to  the  death of  the                                                                    
     claimants.  The  reduced   revenue  reflected  in  this                                                                    
     fiscal note  is because employer and  insurance carrier                                                                    
     contribution  rates  will  decline  over  time  as  the                                                                    
     Fund's   liability  is   exhausted  as   prescribed  in                                                                    
     Revenue to the  Second Injury Fund (SIF)  comes from an                                                                    
     annual  assessment on  Workers' Compensation  insurance                                                                    
     providers   and   self-insured  employers   through   a                                                                  
     contribution  rate that  changes  every  year based  on                                                                    
     statute designed to ensure  sufficient revenue to cover                                                                    
     expenses.  Insurance companies  are able  to pass  this                                                                    
     assessment  on to  employers through  premiums. As  SIF                                                                    
     claims  decline   costs  to  insurance   providers  and                                                                    
     self-insured  employers  will  decline,  including  the                                                                  
     State   of    Alaska   through   the    Department   of                                                                    
     Administration's Risk Management division.                                                                                 
     In FY2017,  the State of Alaska  comprised 11.5 percent                                                                    
     of  total SIF  revenue  ($343,150  of $2,984,507).  The                                                                    
     State of  Alaska could  save as much  as $46,000  if it                                                                    
     represented  11.5   percent  of  the   projected  total                                                                    
     savings of  $400,000 starting FY2020, and  this savings                                                                    
     would grow  incrementally in the following  years. This                                                                    
     cost savings  will be passed  on to all  state agencies                                                                    
     through decreased  personal services benefit  costs and                                                                    
     included  in  future  year budget  salary  and  benefit                                                                    
Vice-Chair  Bishop noted  that  the reason  that the  Second                                                                    
Injury Fund would sunset was due  to the fact that it was no                                                                    
longer legal to ask an employee if they had a disability.                                                                       
6:54:31 PM                                                                                                                    
AT EASE                                                                                                                         
6:54:57 PM                                                                                                                    
Vice-Chair Bishop  MOVED to report  SCS CSHB 79(FIN)  out of                                                                    
Committee   with   individual    recommendations   and   the                                                                    
accompanying fiscal notes. There  being NO OBJECTION, it was                                                                    
so ordered.                                                                                                                     
SCS CSHB  79(FIN) was REPORTED  out of committee with  a "do                                                                    
pass"  recommendation and  with  three previously  published                                                                    
fiscal impact notes: FN5(ADM), FN7(LWF), and FN8(LWF).                                                                          
6:55:36 PM                                                                                                                    
AT EASE                                                                                                                         
6:58:04 PM                                                                                                                    

Document Name Date/Time Subjects
HB 119 Differences - SB 57.pdf SFIN 5/11/2018 10:00:00 AM
HB 119
SB 57
HB 119 - Letters of Support.pdf SFIN 5/11/2018 10:00:00 AM
HB 119
HB 119 AIDEA slides.pdf SFIN 5/11/2018 10:00:00 AM
HB 119
HB 119 Scheduling Request.pdf SFIN 5/11/2018 10:00:00 AM
HB 119
HB 119 Sectional Analysis ver J.pdf SFIN 5/11/2018 10:00:00 AM
HB 119
HB 119 Summary of Changes ver A to ver J.pdf SFIN 5/11/2018 10:00:00 AM
HB 119
HB119 Additional Backup - Property Tax Exemptions.pdf SFIN 5/11/2018 10:00:00 AM
HB 119
HB119 Transmittal Letter 2.15.17.pdf SFIN 5/11/2018 10:00:00 AM
HB 119
HB119-SB57 Backup AIDEA GASB Examples.pdf SFIN 5/11/2018 10:00:00 AM
HB 119
SB 57
HB 119 Ketchikan Shipyard Letter.pdf SFIN 5/11/2018 10:00:00 AM
HB 119
HB 119 RR Private Property Support Taylor.pdf SFIN 5/11/2018 10:00:00 AM
HB 119
HB 79 SCS FIN v. E Explanation.pdf SFIN 5/11/2018 10:00:00 AM
HB 79
HB 79 SCS FIN work draft version E.pdf SFIN 5/11/2018 10:00:00 AM
HB 79
HB 119 - SB86 Punlic Testimony Ashlock.pdf SFIN 5/11/2018 10:00:00 AM
HB 119
SB 86
HB 119 - SB 86 Public Testimony Brewer.pdf SFIN 5/11/2018 10:00:00 AM
HB 119
SB 86
HB 119 - SB 86 Public Testimony Rosenberg.pdf SFIN 5/11/2018 10:00:00 AM
HB 119
SB 86
HB 119 and SB 86 Public Testimony Brown - Language.pdf SFIN 5/11/2018 10:00:00 AM
HB 119
SB 86
HB 119 - SB86 Public Testimony Federico.pdf SFIN 5/11/2018 10:00:00 AM
HB 119
SB 86
HB 119 Public Testimony Gastrock Input on Amendment to HB 119.pdf SFIN 5/11/2018 10:00:00 AM
HB 119
HB 119 - SB 86 Public Testimony Elam.pdf SFIN 5/11/2018 10:00:00 AM
HB 119
SB 86
HB 119 - SB86 Public Testimony Gambill.pdf SFIN 5/11/2018 10:00:00 AM
HB 119
SB 86
HB 119 Public Testimony Mooter.pdf SFIN 5/11/2018 10:00:00 AM
HB 119
HB 119 Public Testimony Magowan.pdf SFIN 5/11/2018 10:00:00 AM
HB 119
HB 119 - SB 86 Tallee Public Testimony.pdf SFIN 5/11/2018 10:00:00 AM
HB 119
SB 86
HB 119 - SB 86 French - Please maintain Alaskan's property rights language in HB119..pdf SFIN 5/11/2018 10:00:00 AM
HB 119
SB 86
HB 119 - SB 86 Bradley Public Testimony.pdf SFIN 5/11/2018 10:00:00 AM
HB 119
SB 86
HB 119 - SB 86 Webb Input on Amendment to HB 119.pdf SFIN 5/11/2018 10:00:00 AM
HB 119
SB 86
HB 119 - SB 86 Anderson Public Testimony.pdf SFIN 5/11/2018 10:00:00 AM
HB 119
SB 86
HB119 - SB86 Campbell Public Testimony.pdf SFIN 5/11/2018 10:00:00 AM
HB 119
SB 86
HB 119 - SB 89 Spurlin Public Testimony.pdf SFIN 5/11/2018 10:00:00 AM
HB 119
SB 89
HB 119 - SB 86 Springen Public Testimony.pdf SFIN 5/11/2018 10:00:00 AM
HB 119
SB 86
HB 119 - SB 86 Moore Public Testimony.pdf SFIN 5/11/2018 10:00:00 AM
HB 119
SB 86
HB119 SCS FIN v. U Explanation.pdf SFIN 5/11/2018 10:00:00 AM
HB 119
HB 119 SCS Work Draft version U.pdf SFIN 5/11/2018 10:00:00 AM
HB 119
HB 119 April 16, 2018 Don Young Letter.pdf SFIN 5/11/2018 10:00:00 AM
HB 119