Legislature(1995 - 1996)
03/16/1995 08:10 AM House STA
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HSTA - 03/16/95 HB 163 - COMPLIANCE COST ESTIMATES REQUIRED CHAIR JAMES announced the next bill on the agenda was HB 163. Number 650 ROD MOURANT, Administrative Assistant to Representative Pete Kott, expressed that apologies of Representative Kott for being unable to attend the meeting himself. He said that HB 163 takes the recommendations of the Alaska Mineral Commission, the National Federation of Independent Business, and excerpts from the Department of Law's drafting manual of 1993, and puts into statute the requirement that an agency prepare a cost of compliance estimate, when publishing notice to adopt or repeal a regulation. He added that the fiscal notes for the bill range from zero to $178,000, which seemed to be differing understandings from the agencies of what the bill required. He pointed out that the Department of Health and Social Services, who adopts an enormous amount of regulations and works closely with their constituencies, gave a fiscal note of zero, while the Department of Environmental Conservation estimated a fiscal impact of $178,700 with the hiring of three more full time employees. He stated the Department of Revenue cited reasons that precluded them from calculating a cost of compliance estimate, and felt that the legislature should pay this cost anyhow. He offered to answer any questions. Number 673 REPRESENTATIVE ROBINSON asked if he had seen the letter from Michelle O'Leary and whether he had any comments on it. MR. MOURANT informed her that he had seen the letter just recently and had heard her testimony on teleconference. He argued that most of her concerns about HB 163 were already present in existing law. He stated the only thing that this bill will do, is take the suggestion of the 1993 Department of Law drafting manual for regulations and put it into statute as a requirement. He commented that with regard to her second concern, regarding the additional cost to the agency for doing this calculation, is essentially a mute point. This is because the agencies should have no additional cost for complying with this bill, if they are following the suggestion in the drafting manual from the Department of Law. TAPE 95-28, SIDE A Number 000 CHAIR JAMES inquired whether Bonnie Williams wanted to testify on HB 163 via teleconference from Fairbanks. BONNIE WILLIAMS stated she had one comment regarding HB 163. Unlike HB 130, this bill clearly specifies that the cost of compliance happen before the public hearing. She thought the cost of compliance definition in this bill could also be interpreted to be a cost-benefit analysis as well, and said she had no problem with this bill. CHAIR JAMES asked if anyone else wished to testify on this bill. JACK KREINHEDER, Senior Policy Analyst, Office of Management and Budget, thought this bill raised some of the same concerns as HB 130. He said that simple changes that had a lot of common sense appeal, deserved to be well thought out. He reiterated the concerns of the Department of Law, that regulations lacking cost estimates or with insufficient cost estimates will be a substantial source of future litigation. He thought that even if a department makes a good faith effort to comply with calculating a cost of compliance analysis, they could still be challenged in court. He remarked the Administration had no problem with the concept of considering the impact of regulations on the public. He thought this was the intent of the language in the drafting manual, that wherever possible, the agencies should try to minimize those costs of compliance. He thought the problem with HB 163, as it is currently written, is that it creates an extra expense for the agencies in doing this calculation and can be exploited by anyone opposed to regulations. Number 110 CHAIR JAMES stated she was trying to visualize what happens now when a regulation is drafted and is interested in the recommendation for doing a cost of compliance analysis in the Department of Law's drafting manual. She thought the advantage of HB 163, in making that recommendation a requirement, is that this information would then be a matter of public record. This would then give the public the opportunity to dispute the calculations of the agency during the public hearing. She said she could understand the concern that this could lead to future litigation, as every time you add a layer to the process and further definition to the regulation, you give greater latitude and cause for a lawsuit. She thought that by leaving the regulation more open, you give less cause for lawsuit. She thought the fact still remained though, that under the current system, we are not providing any standard of how it should be done, just recommending that a calculation of cost compliance be done. Number 152 REPRESENTATIVE PORTER commented that he thought this bill just needed a provision that said if an agency makes a good faith effort at establishing the cost of compliance, they will not be held liable short of gross negligence for the results of that effort. This would take care of any concern of future litigation caused by this bill. MR. KREINHEDER stated he thought this was a good suggestion, but he would like to consult with the Department of Law. He thought there could be a problem with a statute that puts something off limits to legal challenge. REPRESENTATIVE PORTER pointed out that this would not put it off limits to legal challenge, but just set up parameters that would have to be met in any legal challenge. To challenge in court, an individual would simply have to establish gross negligence in their case. MR. KREINHEDER thought this might solve the legal issues, but would not solve the issue of additional cost to the agency. He found it impractical to assume the agencies could do a proper cost analysis for everyone who could possibly be affected by a regulation. He cited an example given by the Department of Fish and Game, where they could propose a regulation setting the size of fishing gill nets, and for them to follow the letter of the law, they would have to survey the fishermen to determine who owned that size net and who would have to purchase one, the total number of fishing vessels, etc. Thus, he was concerned that even with the allowance of a good faith effort by the agency, that the legislature not pass a law that would simply be a charade, or which agencies would have no choice but to give lip service to. He thought there were numerous examples to document that agencies could not possibly no all of the people, who would be affected by a given regulation. Additionally, many regulations do not prescribe what steps an individual must follow to be in compliance with the regulation. Number 229 CHAIR JAMES commented she had a different interpretation about what this cost of compliance analysis really meant. She felt that, to use his example of the fisherman's gill net, the agency would calculate the cost of a new gill net for the fisherman who needed to purchase one, and then any savings the fisherman would experience. In summary, she felt a cost of compliance calculation was the cost to an individual involved in a particular industry, not the cost to the industry as a whole. Thinking in terms of a cost benefit analysis, the cost of compliance to the individual would be weighed against the benefit to the state as a whole, which would give direction to the state as to how to act in a given situation. She said it was the measurement of the cost of compliance verses the benefit to the state, and whether we were willing to accept that cost for that benefit. REPRESENTATIVE PORTER said he was of the opinion that the Administrative Procedures Act had acted properly and withstood challenge with regards to notice and putting those that will be affected on notice about a proposed regulation. Thus, he did not feel there would be the type of problem where the agency would have to ask every fisherman whether they had a particular size of gill net. He argued the agency would have to make the same type of notification that was required now, and with a good faith effort to listen to the testimony and then use logic to determine the cost of implementation or compliance. He did not think it was that hard. He thought that an agency listening to public testimony was good for everyone. If everyone tried to make it work, there is a way to do it. Number 295 REPRESENTATIVE IVAN questioned whether these regulations could be made flexible to allow the small businesses adjust to the costs of the first year of implementation. MR. KREINHEDER explained that he was reading the language of the bill differently, as implying that the agency would have to calculate the cost of compliance for the whole industry, not just for an individual involved in that industry. CHAIR JAMES agreed, saying she thought this was the cost of compliance for the individual, and she felt the language was prohibitive for anyone to interpret it differently, except as an individual person who will be regulated by the proposed regulation. That is the relative cost to determining whether a regulation will put a person out of business or not. She asked if anyone else would like to testify. Number 336 PAM NEAL, President of the Alaska State Chamber of Commerce, stated the chamber was very much in support of the legislation. It was a prime concern of the chamber and they felt quite basic. No business decision is made without a cost-benefit analysis. She added that no one questioned the benefit of proposed legislation being accompanied by a fiscal note, before being voted upon. It seemed very basic that an agency proposing a new regulation should do an analysis of the cost of compliance. Thus, they were very much in support of HB 163. REPRESENTATIVE ROBINSON asked how this bill would help her as a business person in Alaska. She argued that even if she knew the cost of a particular regulation, she would still have to comply. Therefore, she failed to see the benefit of this bill. Number 370 REPRESENTATIVE PORTER thought the benefit of this bill would be in the agency having to justify the cost of their regulation showing there would not be a more efficient way to comply. CHAIR JAMES agreed, saying that by making this calculation a requirement, it would allow the public the opportunity to comment if the they feel the cost benefit ratio is out of sync. She felt the agencies should give the public all of the information available to be able to make a decision of whether they supported the regulation or not. MS. NEAL concurred, saying if the cost were not known to the business community, they could not adequately make a decision about a particular regulation. She felt this bill was extremely basic, and failed to see why it had not been done before. Number 414 REPRESENTATIVE PORTER agreed with the intent of this bill, but felt the reason this has not been done before is the concern over litigation. He thought this could be fixed easily, and requests the sponsor to amend HB 163 with the previously suggested wording regarding gross negligence. CHAIR JAMES asked the bill sponsor if they would be willing to draft an amendment to HB 163, as suggested, and bring the amended draft to the committee for consideration in a future meeting. Number 429 MR. MOURANT said the sponsor would have no problem with drafting an amendment, but would prefer the committee not hold the bill from passing to the next committee. REPRESENTATIVE PORTER thought that in fairness, because the committee had held HB 130, they should also hold HB 163 as they dealt with similar issues. MR. MOURANT thought he should reiterate the complaint of the previous bill sponsor, that there had been former committee meetings and a work session, where these bills were discussed and no one from the Department of Law had expressed their concerns. Thus, he to felt this could be intended to stall the passage of these bills, and so was not sure how much cooperation he would receive in getting this information from the Department of Law. Additionally, he argued that no one from the Department of Law and the Office of Management and Budget had contacted Representative Kott or his office to express their concerns in advance. Thus, he stated that bureaucrats have a way of holding up and killing any bill that they desire. REPRESENTATIVE ROBINSON thought they had testified earlier at a former committee meeting about their concerns. CHAIR JAMES said she did not recall if they had or not. She would have to review the record. REPRESENTATIVE ROBINSON stated she would like to see not just a calculation of the costs of compliance, but some type of relief for extraordinarily large costs. She could understand if this bill were not the proper vehicle for achieving this, but she would like to see it accomplished. MR. MOURANT agreed this bill does not provide relief by itself, but said it does provide the opportunity for the private sector to express their concerns while the regulation is still being drafted. Number 482 REPRESENTATIVE PORTER thought that maybe the committee could work to adopt wording in this bill, that would insure that it was understood the agencies were not required contact everyone who could be possibly regulated, but just a sample cross section of those effected. CHAIR JAMES asked how the committee wished to handle this bill. REPRESENTATIVE PORTER suggested the committee hold this bill until corrected, as they had previously done with HB 130. CHAIR JAMES agreed, and asked Representative Porter if he would be willing to assist in drafting the suggested language. REPRESENTATIVE PORTER said he would help to draft the needed language. Number 498 CHAIR JAMES asked if there were any other comments from the committee. She mentioned she was concerned about the large fiscal notes on this bill. She did not think the fiscal notes were a proper reflection of the costs of this bill. REPRESENTATIVE PORTER thought the fiscal notes could be a result of the agencies misunderstanding what the bill required of them. Maybe by clarifying the language of bill, they could get fiscal notes that more properly reflected the costs of the bill.
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