HOUSE COMMITTEE ON RULES AND PUBLIC AFFAIRS

 

August 7, 2003   Hearing Room HR E

1:30 PM Tapes 112 - 115

 

MEMBERS PRESENT:            Rep. Dan Doyle, Chair

Rep. Linda Flores, Vice-Chair

Rep. Laurie Monnes Anderson, Vice-Chair

Rep. Vic Backlund

Rep. Phil Barnhart

Rep. Betsy Close

Rep. Joanne Verger

                                                                                                           

 

STAFF PRESENT:                  Cara Filsinger, Committee Administrator

                                                Ray Kelly, Janet Adkins, Administrator

David Peffley, Committee Assistant

 

MEASURES HEARD:                     SCR 7 – Public Hearing and Work Session

                                                SB 899 – Public Hearing

                                                SB 7A – Work Session

                                                SB 260 B – Public Hearing and Work Session

 

 

These minutes are in compliance with Senate and House Rules.  Only text enclosed in quotation marks reports a speaker’s exact words.  For complete contents, please refer to the tapes.

 

TAPE/#

Speaker

Comments

Tape 112, A

003

Chair Doyle

Calls the meeting to order at 1:39 p.m., announces the hearing schedule, and opens a work session on SB 260 B.

SCR 7 – PUBLIC HEARING

009

Sen. Gordly

SD 23, Northeast and Southeast Portland.  Introduces SCR 7, commemorating Charles Britton Maxey.  Offers a brief overview of  Mr. Maxey’s life, accomplishments, and impact. 

098

Rep. Verger

Adds further information regarding the life of Mr. Maxey and expresses support for SCR 7.

105

Rep. Backlund

Also expresses support for SCR 7, addressing the history of Mr. Maxey.

111

Sen. Gordly

Informs the committee of former Senator Mark Hatfield’s admiration of Mr. Maxey and his legacy.

114

Rep. Doyle

Closes the public hearing and opens a work session on SCR 7.

SCR 7 – WORK SESSION

116

Rep. Flores

MOTION:  Moves SCR 7 be sent to the floor with a BE ADOPTED recommendation.

124

 

VOTE:  7-0

AYE:            In a roll call vote, all members present vote Aye.

130

Chair Doyle

The motion CARRIES.

REP. MONNES ANDERSON will lead discussion on the floor.

132

Chair Doyle

Closes the work session on SCR 7 and opens a public hearing on        SB 899.

SB 899 – PUBLIC HEARING

134

Sen. Kate Brown

SD 21.  Testifies in favor of SB 899 in order to allow a Portland-based license plate manufacturing company to bid for Oregon license plate contracts.  

159

Rep. Diane Rosenbaum

Submits (EXHIBIT A) and testifies with support for SB 899 in order allow Oregon to compete for family-wage jobs.   

183

Rep. Tootie Smith

Offers background to SB 899, details the controversy regarding the bill, and explains how it got to this point.  Reaffirms that the legislation is very important in order to keep license plate manufacturing jobs in the state.

245

Rep. Close

References the -1 amendments (EXHIBIT B) and asks for clarification.

249

Rep. Brown

States that the amendments were drafted at her behest in order to gain the governor’s support.   Continues that as the Governor now supports the bill as written, urges adoption without the amendments.

272

Rep. Smith

Also speaks in opposition to the -1 amendments.

279

Rep. Close

Asks if the bill provides for an annual contract.

281

Rep. Smith

Acknowledges that it does and notes that it comes up for re-bid every year.

284

Grover Simmons

Pacific Printing and Imaging Association and Irwin-Hodson Company.  Submits (EXHIBIT C), affirms previous testimony and adds further background information.  In response to Rep. Close’s concern, affirms that the contract is for one year, but renewable. 

351

Chair Doyle

Asks if the loss of ten jobs is directly related to the loss of the license plate contract.

355

Simmons

Affirms that the loss is directly related.

359

Chair Doyle

Asks how many employees are employed by Irwin-Hodson.

362

Simmons

Replies that thirty people are employed by the metals division.

363

Chair Doyle

Asks for a rough estimate of the total number of employees by the company.

371

Simmons

Replies that the company employs about eighty-five workers.  Recommends asking TJ McDonald for more exact figures.  Asserts that Irwin-Hodson is one of only two North American companies who manufacture license plates and that good public policy would attempt to bring this business back to Oregon.

391

Rep. Monnes Anderson

Asks about the figures for the contract before it was awarded to Nova Scotia.

395

Simmons

States uncertainty.

401

TJ McDonald

President, Irwin-Hodson.  Notes that the license plates did cost three dollars per pair and now they cost $2.60.   

410

Rep Monnes Anderson

Asks about the original figure of the contact bid.

419

Simmons

States the figures for the current bid as opposed to the bid launched by the Canadian firm. 

434

McDonald

States that the figures are misleading and offers more reasonable figures.

Tape 113, A

002

Chair Doyle

Asks about the competition from the Canadian company.

005

McDonald

States that prisons can also bid on the contract.

008

Chair Doyle

Expresses concern over a possible monopoly.

011

McDonald

States that the bill would allow anyone in Oregon to bid on the contract.

020

Chair Doyle

Reiterates his concern about price monopoly.

024

McDonald

Points out that in forty-one other states, prison labor produces license plates and if the price became too high, the same might happen in Oregon.  Highlights previously mentioned figures to illustrate that they conduct business equitably. Cites free-market economics.

036

Chair Doyle

Observes that Irwin-Hodson would be the only company in the industry, underscoring his previous concerns regarding monopoly.

040

McDonald

Denies that the price advantage is too minimal for a monopoly to take hold.

044

Chair Doyle

Asks about the timing of the layoffs of the ten people. 

046

McDonald

States that the layoffs were a result of the loss of work.  Asserts that they held the workers as long as possible.

053

Chair Doyle

Asks if Simmons’ assertion of eighty-five workers in the company is correct.

055

McDonald

Affirms that is correct.

059

Rep. Barnhart

Asks about economic impact and taxes as a percentage of the contract.

063

Simmons

References the Governor’s statement and talks about the governmental rule of thumb.  Addresses the value of the economic impact.

098

McDonald

Adds to the economic assessment.

105

Rep. Barnhart

References that those figures arose from the work group on ORS 297.

111

Chair Doyle

Asks if there are reciprocity issues with Oregon’s preference programs.

114

McDonald

States that the reaction varies from state to state

117

Chair Doyle

Asks what other states Irwin-Hodson has contracts with.

118

McDonald

Notes some of the other states.  States that the contract with Mississippi is the most significant.

124

Chair Doyle

Asks how the company was forced into layoffs with so much other business.

126

McDonald

Affirms that the decrease in volume forced the layoffs.

136

Harvey Mathews

Associated Oregon Industries (AOI).  Speaks in favor of SB 899 in order to save Oregon jobs.  Affirms prior testimony and opposes the          -1 amendments.

 

 

 

145

Tim Nesbitt

American Federation of Labor – Congress of Industrial Organizations (AFL-CIO).  Cites job creation as the key reason for supporting SB 899.  Asserts that this bill allows Oregon to provide more family-wage manufacturing jobs.

171

Rep. Close

Refers to Canadian subsidies in other industries and asks whether the present industry being discussed is subsidized.

174

Nesbitt

States uncertainty, but suspects that they might be.

184

Rep. Verger

Affirms support for the present legislation in order to provide more high-paying jobs.

196

Chair Doyle

Asks Nesbitt’s opinion of the likelihood and potential for a monopoly in this case and the possibility of prisons competing for contracts.

203

Nesbitt

States that he does not agree that this bill would eliminate competition. 

211

Chair Doyle

Restates his concern about monopoly.

214

Nesbitt

Reasserts that he is not concerned.

218

Chair Doyle

Asks about the issue of prison labor taking over.

221

Nesbitt

States that AFL-CIO wouldn’t encourage prison labor in this industry.

224

Tim Martinez

Waldale Manufacturing.  Speaks to the contract bidding history and affirms the impact of competition in the industry.  Expresses the concern on the transportation package if this bill passes.  

286

Rep. Close

Asks why the Canadian company didn’t have representation at the previous hearing.

297

Martinez

Points out that Waldale did not have representation in the building at the time.

301

Rep. Close

Asks about the old statutes referring to the use of Oregon labor being used whenever possible.

306

Martinez

States that his knowledge on this issue is limited and that question would fall outside the realm of his knowledge.

309

Rep Monnes Anderson

Asks  for confirmation about the location of raw materials used for the license plates.

311

Martinez

States that he doesn’t know, but that he will find out.

313

Rep. Monnes Anderson

Asks about the length of the contract.

314

Martinez

States that the contract is for one year, with four one-year renewals possible at the discretion of the state.

343

Rep. Monnes Anderson

Asks for clarification on potential litigation with the Canadian company.

349

Martinez

Gives his impression of the contract bidding process.

356

Rep. Verger

Notes the connection between the private and the public sector.

367

Martinez

Concurs with Rep. Verger and points out the past history with regard to this issue.

371

Rep. Verger

Asserts that good conduct has to be managed.

381

Martinez

Notes that the DMV and DAS finds the Canadian company to be quite reputable.

396

Rep. Doyle

Addresses potential impact and asks for further information.

404

Martinez

Asserts that the DMV should address the issue.

421

Rep. Doyle

Asks Kelly Taylor to address transportation funding in relation to the current bill and to elaborate on the relationship with the Canadian firm currently under discussion.

426

Kelly Taylor

Oregon Department of Transportation (ODOT).  Addresses fees and discusses the dedication of funds to cities and counties. Notes the potential losses which would necessarily take that money away.  Speaks to the satisfaction with the firm’s delivery times over the past year.

TAPE 112, B

009

Chair Doyle

Asks if cause is needed to cease a contract.

019

Taylor

Affirms that cause is not necessary for bidding, although the issue has never arisen.

023

Chair Doyle

Asks who makes the decision.

027

Taylor

Notes that ODOT makes the decision.

029

Rep. Backlund

Asks if the quality of Irwin-Hodson’s plates was also satisfactory.

030

Taylor

Affirms that both companies put out a quality product.

036

Rep. Doyle

Closes the public hearing on SB 899 and opens a work session on      SB 7 A.

SB 7 A – WORK SESSION

045

Rep. Doyle

Introduces SB 7A, the State Foundation Fair Bill and addresses the       –A6 amendments (EXHIBIT D), establishing the emergency clause on top of the amendments already included in the bill.

052

Rep. Flores

MOTION:  Moves to ADOPT SB 7-A6 amendments dated 6/19/03.

055

 

VOTE:  6-0

EXCUSED:  1 - Close

057

Chair Doyle

Hearing no objection, declares the motion CARRIED.

061

Rep. Flores

MOTION:  Moves SB 7A to the floor with a DO PASS AS AMENDED recommendation.

065

Rep. Barnhart

Asks for a quick review of the history of SB 7A in the House Committee on Rules and Public Affairs.

066

Chair Doyle

Recaps the history in the Rules committee, including the adoption of the –A5 amendments in the previous hearing.

068

Rep. Barnhart

Asks for affirmation that the committee did not adopt the –A3 amendments.

079

 

VOTE:  7-0

AYE:            In a roll call vote, all members present vote Aye.

083

Chair Doyle

The motion CARRIES.

REP. VERGER will lead discussion on the floor.

085

Chair Doyle

Closes the work session on SB 7A and opens a public hearing on        SB 260B.

SB 260 B – PUBLIC HEARING

092

Chair Doyle

Recesses the hearing

093

Chair Doyle

Reconvenes the meeting.  Introduces the background to SB 260 B.

097

Joel Ario

Insurance Administrator, Department of Consumer and Business Services.  Introduces the concept of credit scoring as it relates to                 SB 260 B  Underscores the fact that credit scoring can not be the sole factor on an adverse effect on one’s insurance policy. 

144

Rep. Close

Addresses the fact that the present form of the bill is a fair compromise between many differing factors. 

147

Chair Doyle

Asks Ario to expand upon the rationale regarding limits on competition between companies to benefit the consumer.

163

Ario

Affirms that the bill will lead to the marketplace addressing these complaints.  Addresses the actuarial processes for review of statistical evidence for making decisions. Affirms that fairness is an important variable. 

258

Chair Doyle

Asks the basis for credit scoring between companies.

264

Ario

Affirms that different companies score differently, but that core variables are similar.

284

Chair Doyle

Asks if most complaints result from renewals.  Asks about letters explaining policy rate changes.

290

Ario

References the Federal Fair Credit Reporting Act regarding notice.  Affirms that the decision is reinforced by both federal and state requirements.  Addresses the broader issue of existing accounts versus new accounts. 

314

Rep. Close

References (EXHIBIT E) - Chart 4 regarding regression analysis from the Bureau of Business Research (BBR) report from the  University of Texas.  Asks Ario’s opinion of the study on regression analysis.

331

Ario

Addresses the correlation between a bad credit score and the likelihood of getting in an accident.  Addresses the deeper policy issue.

375

Rep. Close

Refers to the committee amendments dealing with appeals and asks if the changes go beyond the current rules.

387

Ario

Notes that there is a provision in the rules for correction of credit history mistakes.

391

Rep. Monnes Anderson

Asks how much weight an insurance company gives to a poor credit rating.

397

Ario

Notes that it is a factor, but not the primary factor.

428

Rep. Monnes Anderson

Asks about the selection formula.

431

Ario

Details the underwriting process.

450

Rep. Backlund

Asks about benefits incurred by removing the credit scoring system.

TAPE 113, B

002

Ario

Notes that winners would outpace the losers.  

011

Rep. Backlund

Cites a hypothetical example and asks who would apply credit scoring.

018

Ario

Affirms that credit scoring would be employed for new drivers into the state. 

021

Rep. Backlund

Expresses concern that the system might lead to good drivers paying higher premiums.

024

Ario

Restates that there will be both winners and losers, but under the compromise agreement, the system should work to the benefit of most applicants.

042

Rep. Close

Points to the correlation between actions and penalty.

047

Rep. Flores

Asks about actuarial evidence in correlation to credit rating and home owner insurance.

049

Ario

Asserts that home owner insurance invites slightly stronger correlation than auto insurance.

053

Rep. Backlund

Notes that the testimony has been helpful.

058

Steve Dixon

OSPIRG.  Submits (EXHIBIT F).  Testifies to inconsistencies in the practice of credit scoring and the arbitrary nature of the practice.  Notes that good credit does not necessarily correlate to a good score.  Cites a Freddy Mac study which states that this system is biased against specific groups of people.  Asserts that the bill lapses in protection for those who need it most.   

203

Rep. Close

Asks Dixon’s opinion on the appeals process in the amending of the bill.

212

Dixon

States that the appeal process is easier for the consumers to understand.

227

Rep. Close

Asks Dixon if he believes that all companies will be using the same criteria in selecting customers and charging rates.  

243

Dixon

Reaffirms his concern with the arbitrary nature of credit scoring.

256

Rep. Barnhart

Asks Dixon to address the BBR report.

258

Dixon

Addresses the possible correlation in the report.

270

Rep. Barnhart

Asks if Dixon agrees with the statistical relationship between credit history and losses.

290

Dixon

Speaks to methodology and expresses skepticism about the research methodology.

313

Rep. Barnhart

Asks if the BBR study addresses race and income.

314

Dixon

Affirms that it does not, nor does it relate to other factors.

318

Chair Doyle

Asks Dixon if he has tangible evidence of racial discrepancies with regard to credit scores.

327

Dixon

Notes that race is only one of the problems with credit scoring.  Affirms that there have been studies done, including one by Bernie Birmbaum, however he doesn’t have any tangible references at hand.

334

Chair Doyle

States that he would need to see documentation to take race assertions seriously.  Asks what yardstick Dixon would use to measure success and failure of the program.

366

Dixon

References an Alaska study on race.

371

Chair Doyle

States that without documentation he can not consider the evidence.

 

 

 

 

 

 

380

Rep. Barnhart

Concurs with Chair Doyle in his assessment of credit history in relation to behaviour.  References Page 15, Section 4 of the bill in order to address where the legislation has attempted to improve credit rating. 

424

Chair Doyle

Asks Dixon how he would assess success or failure of the program.

426

Dixon

States that it would depend on many factors, including fewer customer complaints.  Also notes that the current bill is an improvement upon the current rules.

Tape 114, A

003

Rep. Doyle

Asks Dixon how he would quantify good versus poor work on this bill in the future.

007

Dixon

States that he has not engaged in that discussion, although such a discussion would need to be addressed.

019

John Powell

State Farm Insurance Companies, North Pacific Insurance Company.  Offers the testimony plan for himself and Shawn Miller, speaking on behalf of the bill.

030

Shawn Miller

National Association of Independent Insurers (NAII).  Submits the previously referred to BBR report (EXHIBIT E) and discusses background to the bill and statistical correlation. 

058

Rep. Backlund

Asks the size of the sample for the University of Texas BBR study.

060

Miller

Replies that 150,000 insurance policies were sampled.  Continues testimony by referring to the way insurance rating works.  Addresses market disruption.  Speaks the compromise which the insurance industry has made.  Discredits race discrimination in the insurance industry.

161

Rep. Barnhart

Asks for further clarification.

163

Miller

States that this bill would put Oregon in the Top 10 in regulation and that the insurance industry will accept that level of regulation.  Recommends moving the B-engrossed version of the bill. 

193

Powell

Testifies in lieu of Lana Butterfield in support of SB 260 B.  Submits Butterfield’s written testimony (EXHIBIT G), that of Ronn Passmore (EXHIBIT H), and that of Kelsey Wood (EXHIBIT I).

211

Powell

Submits an actuarial study on the Relationship of Credit-Based Insurance Scores to Private Passenger Automobile Insurance Loss Propensity (EXHIBIT J), and testifies in favor of SB 260 B. Corrects previous points of testimony in explaining the credit rating system and credit history in determining insurance coverage.  Addresses concessions made by the insurance industry.

399

Rep. Barnhart

Asks for clarification of the meaning of the words “attributes” and “factors” in Section 5, Page 15, Lines 43-Line 2 on Page 16.

407

Powell

Clarifies the meaning.

416

Rep. Barnhart

Asks what the two words include.

418

Powell

Clarifies the meaning.

422

Rep. Close

Asks about information disclosure.

424

Powell

Affirms that the information is proprietary information.

429

Rep. Verger

References Page 14, Line 14 and asks for clarification.

437

Powell

Clarifies on the reasons for an adverse underwriting decision.

TAPE 115, A

007

Rep. Verger

Asks about a hypothetical situation and asks how it is to be written. 

010

Powell

Replies with the differences between insurance scoring and mortgage scoring.

029

Rep. Verger

Responds that business and processes have become much more complicated.

035

Rep. Flores

Asks about the dissemination of knowledge and how the common consumer would go about obtaining credit checks. 

040

Miller

States that it can be done on the internet.

050

Rep. Flores

Speaks to the common citizen with relation to this process.

056

Powell

Refers to Page 14, Line 6 and notes that a notice will be sent out explaining how to get a free credit report and that this notice will give the necessary information to the consumer.

072

Rep. Close

Asks Ario to confirm what the bill says about the algorithm on the last page of the bill.

085

Ario

Clarifies for Rep. Close.

102

Rep. Barnhart

Asks how this algorithm can be properly used.

110

Ario

Explains the variables and models.

118

Rep. Barnhart

Asks if they are actually tested to see if they are reasonable.

120

Ario

Notes that there is an actuarial assessment.

128

Rep. Barnhart

Asks what would happen in the case that they didn’t like the information found.

131

Ario

Replies that the legislature would need to address that.

139

Rep. Barnhart

States that he meant to ask about statistical correlations.

141

Ario

Notes that discussions ensue in such a case.

147

Chair Doyle

Closes the public hearing and opens a work session on SB 260 B.

SB 260 B - WORK SESSION

152

Rep. Flores

MOTION:  Moves SB 260B to the floor with a DO PASS recommendation.

156

Rep. Barnhart

Notes his own previous skepticism with regard to the BBR study, but that seeing the entire report has caused him to reconsider, thus making him more comfortable with the legislation.

171

Rep. Monnes Anderson

Notes her previous concerns with credit scoring, but asserts that this legislation might help the majority of rate-payers, thus despite concerns, she will vote aye. 

194

Rep. Close

Affirms that she will vote aye on this bill. 

202

Rep. Flores

States that she will give a courtesy aye vote, citing the persuasive testimony.  Notes that she still has concerns over the bill.

213

Rep. Verger

Expresses concern with overregulation.  States that she will go along with the compromise, but is undecided on how she will vote on the floor.  States that she must have talks with her constituents.

245

Rep. Backlund

Asserts that this bill provided an effective compromise.   Praises the work done on the bill. 

261

Rep. Barnhart

Concurs with Rep. Backlund with regard to the correlation and notes that he will vote aye. 

290

Rep. Doyle

Commends the committee on the work executed on this bill.  Refers to the need of the industry to know their new customers.  Believes that the insurance industry did a great job coming to compromise on SB 260 B.

364

 

VOTE:  7-0

AYE:            In a roll call vote, all members present vote Aye.

367

Chair Doyle

The motion CARRIES.

REP. CLOSE will lead discussion on the floor.

368

Chair Doyle

Closes the work session on SB 260 B and adjourns the meeting at          4:37 p.m.

 

 

EXHIBIT SUMMARY

 

A – SB 899, written testimony, Representative Diane Rosenbaum, 1 p.

B – SB 899, -1 amendments, staff, 1 p.

C – SB 899, written testimony, Grover Simmons, 2 pp.

D – SB 7A, -A6 amendments, staff, 1 p.

E – SB 260 B, written testimony, Shawn Miller, 16 pp.

F – SB 260 B, written testimony, Steve Dixon, 2 pp.

G – SB 260 B, written testimony, Lana Butterfield, 1 p.

H – SB 260 B, written testimony, Ronn Passmore, 1 p.

I – SB 260 B, written testimony, Kelsey Wood, 1 p.

J – SB 260 B, written testimony, John Powell, 44 pp.