Legislature(2001 - 2002)
02/02/2001 09:00 AM Senate FIN
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
MINUTES
SENATE FINANCE COMMITTEE
February 02, 2001
9:00 AM
TAPES
SFC-01 # 7, SIDE A
CALL TO ORDER
Co-Chair Pete Kelly convened the meeting at approximately 9:00 a.m.
PRESENT
Senator Dave Donley, Co-Chair
Senator Pete Kelly, Co-Chair
Senator Jerry Ward, Vice Chair
Senator Lyda Green
Senator Gary Wilken
Senator Lyman Hoffman
Senator Donny Olson
Senator Loren Leman
Also Attending: SENATOR GENE THERRIAULT; HEATHER BRAKES, staff to
Senator Gene Therriault; CATHERINE REARDON, Director, Division of
Occupational Licensing, Department of Community and Economic
Development
Attending via Teleconference: From Anchorage: DWAYNE ADAMS,
American Society of Landscape Architects (ASLA); From Fairbanks:
PAT KALEN
SUMMARY INFORMATION
SB 9-BD OF ARCHITECTS, ENGINEERS, LAND SURV. ETC
The Committee heard from the sponsor, the Department of Community
and Economic Development and members of the public. The bill was
reported from Committee.
SB 21-FINES BY THE STATE MEDICAL BOARD
The Committee heard from the sponsor and the Department of Economic
Development. The bill was held in Committee.
SENATE BILL NO. 9
"An Act extending the termination date of the State Board of
Registration for Architects, Engineers, and Land Surveyors."
HEATHER BRAKES, staff to Senator Gene Therriault, stated that SB 9
proposes the extenuation of the State Board of Registration for
Architects, Engineers and Land Surveyors for additional 4 years out
to June 30,2005. She informed the Committee that there was a
committee substitute (CS) adopted in the Senate Labor and Commerce
Committee. She explained that the CS also extends the temporary
board member seat or landscape architect seat, which is a non-
voting seat on the board and was established by section 31, chapter
47, of SLA 1998. She noted that the temporary board member seat is
also set to expire on June 30, 2001 and SB 9 proposes the
extenuation of that with the board. She pointed out that in the
packet there are several letters of support, as well as, a
legislative audit that was released in December of 2000.
Mrs. Brakes further stated that the legislative audit found that
the board was operating in an efficient and effective manner and
that it should continue to regulate architects, engineers, land
surveyors and landscape architects. Further, it was found that the
board is safeguarding the public interest by insuring the
competence and integrity of those who hold themselves out as such.
She indicated that it was also found that the board serves a public
purpose and has demonstrated an ability to conduct its business in
a satisfactory manner. The board continues to propose changes to
regulations to improve the effectiveness of the regulatory
oversight provided by these professions. She pointed out that most
importantly it states that the existence of the board provides more
assurance that the various professionals it oversees are competent
and promote maintenance of the integrity of the professions
involved.
Mrs. Brakes referred to the three recommendations made in the
audit; first, bringing the board into parody with other
professional boards by requiring continuing education for the
professionals. She indicated that they spoke with several of the
professionals that are overseen by the board and as they all agree
that those requirements are coming there is still a lot of
controversy as to what those requirements should be. She added
that there was no support to attach that. The focus is simply to
extend the board at this point. Second, with regards to the
recommendations, it talks about replacing the mining engineer seat
with a landscape architect seat. She noted that again it was a
controversial issue that the professions felt should not be
attached to the bill. In fact, she added, that the landscape
architects are not recommending it either. She noted that it is a
fairly new profession and they are hoping to simply have the
temporary board seat extended out for the additional four years and
at that point if a need is felt to make it a permanent seat they
might do it at that time. She continued, saying that the third
recommendation spoke to statutory clarity for the licensing of
architects and the board has dealt with that through regulation.
Co-Chair Kelly asked about the fiscal note.
CATHERINE REARDON, Director, Division of Occupational Licensing,
Department of Community and Economic Development, indicated that
the division provides the staff support for the Board of
Architects, Engineers and Land Surveyors. She explained that the
fiscal note is a $3,000 fiscal note in terms of new expenditure
authority; however, for the purposes of full disclosure they also
attached an explanation of what they actually spent on regulation
of the professions for the last two fiscal years. She pointed out
that if they decided to stop having the board and regulating the
professions that amount of the money could be removed from the
state budget. She noted that the reason for the 3,000 dollar
increase in their expenditure authority was the fact that under the
current law the non-voting landscape architect could not receive
money from the division for their travel to the board meetings; the
existing law states that all costs, with regards to their
participation in board meetings, has to be born by the board
member. She said that it did not seem like a fair system;
therefore, in addition to extending the non-voting landscape
architect member SB 9 allows that person to receive the normal per
diem for food and travel. She pointed out that the $3,000 would be
generated through license fees; therefore, it will not be
increasing any budget gap problems.
Senator Wilken referred to the second page of the fiscal note where
it states that in 1999 they spent $522,038.55 and collected
$131,325.92 and then in 2000 they proposed to spend 551,370.90 and
collect 1,095,757.18. He requested clarification.
Mrs. Reardon clarified that by law each profession must cover its
own costs through the fees generated by those professions. She
noted that since all of the licenses are issued for two-year
periods there is always a high revenue year and a low revenue year.
She explained that the high revenue year is when everyone renews
their licenses and the low year is when just new licensees are
coming in and exams are being conducted; therefore, the fact that
there is a high and a low is totally appropriate. She indicated
that they try to have the revenue from the two-year license period
and the expenses for the two-year license period equal. She noted
that another reason they may not be equal is that deficits and
surpluses from prior years roll forward.
PAT KALEN testified via teleconference from Fairbanks. He referred
to the recommendations for continuing education and indicated that
the board would be taking that issue up at the meeting in Juneau on
February 15 and 16. He noted that at the previous meeting they had
taken a stand in favor of having authority given to the board,
although he believes they will be discussing the continuing
education requirement a bit more. He referred to the budget and
audit review and advised the Committee that they may want to wait
until after the meeting in Juneau to move forward with SB 9.
DWAYNE ADAMS, American Society of Landscape Architects (ASLA),
testified via teleconference from Anchorage, indicated that he
could touch on specifics with regards to the Alaska Special Design
Council. He indicated that the ASLA, as well as, the Alaska
Special Design Council, support the bill as worded.
Senator Wilken wondered how many people this would cover.
Mrs. Reardon explained that there are approximately 5,000 people
regulated by the board.
Senator Leman informed the Committee that the board regulates him
and passage of the bill would cost him money; having said that, he
offered a motion to report from Committee, CS SB 9(L&C),
22-LS0242/F, with individual recommendations and the attached
fiscal note from the Department of Community and Economic
Development.
Senator Green wondered if the considerations brought up by the
board at the meeting in February would be talked about and possibly
offered as amendments to the bill before it goes through.
Senator Therriault responded that with regards to continuing
education the regulated community is split on that issue. He noted
that he had considered putting in permissible language allowing the
board, through a regulatory process, to bring that on. He
indicated that he heard quite a bit of testimony that they were not
quite ready to take that on yet; however, if the legislature wanted
to add that it has been dealt with through regulations that were
the findings of the auditors. He added that with regards to the
mining engineer seat they have been through that battle in the past
and would like to keep it the way it is. He commented that they
have not had a real problem finding someone to fill that seat.
Senator Green removed her objection.
Senator Therriault noted that the title is worded broadly enough
that those things can be considered anywhere along the process.
Senator Olson wondered what the consequences are if someone does
not keep up with their continuing education.
Senator Therriault pointed out that currently there is no
requirement, but if there were a requirement their license could be
suspended.
Senator Olson wondered if they could be fined as well.
Mrs. Reardon reiterated that there is currently no requirement for
continuing education. She said that she would imagine if they
create the requirement for continuing education at the time of
renewal they would be asking people to certify that they have done
their continuing education. If they certified that they had and a
random audit indicated that they had not told the truth then they
would be subject to the usual array of disciplinary action. On the
hand, she noted, that if they told the truth and indicated that
they did not do their continuing education then they would most
likely delay their renewal of their license until they came up with
the hours. She pointed out that they have not had to face that
situation, because members of the industry are not at the point
where they have unanimously agreed to have a continuing education
requirement.
Senator Olsen wondered how available continuing education programs
are and if it would be difficult to travel during the wintertime.
Mrs. Reardon suspected that some of those concerns might be behind
members of the industry being reluctant to support a continuing
education requirement. She noted that since there is not a
continuing education requirement there might not be as much
systematic continuing education offered.
Senator Therriault that is the type of thing, he said, that if the
legislature decided to go to that level they could either spell
that out in statute or through the regulatory process by getting
input by the regulated community on what classes, how often and if
they would have to travel out-of-state to attend.
Senator Olson urged that when they start taking away people's
licenses it is a pretty serious infraction on someone's livelihood.
He also noted that when they start implementing more requirements
they are going to need more people to oversee those requirements,
which will entail more expenses. He said that he was hesitant to
apply the requirement until there was something more established.
Co-Chair Kelly pointed out that the objection was removed and that
there was still a motion before the Committee. Without further
objection CS SB 9 MOVED FROM COMMITTEE.
SENATE BILL NO. 21
"An Act increasing the maximum civil fine that may be imposed by
the State Medical Board as a disciplinary sanction."
SENATOR DONALD OLSON, sponsor of SB 21, stated that he introduced
SB 21 to increase the monetary sanction that the State Medical
Board may impose on a licensee upon a finding of professional or
ethical misconduct. He explained that the bill increases the
maximum penalty from the $10,000 limit that is currently in statute
to $25,000. He feels that the justification for SB 21 is twofold.
First, he believes that the maximum sanction of $10,000 does not
provide a sufficient monetary deterrent, given the economic status
of many licensees. Most often the severity of the penalty is in no
manner equivalent to the damage caused in extreme cases of
misconduct. Furthermore, the $10,000 limit has not been changed
since it was first enacted 14 years ago.
Senator Olson further explained that a second reason for SB 21 is
the increasing costs that the board is experiencing in its caseload
management of misconduct allegations. It is not unusual for the
costs of a misconduct determination to exceed the $10,000 penalty
limit. He indicated that since licensure fees wholly support the
activities of the board and fines increased costs of operation
usually translate into license fee increases. He pointed out that
SB 21 offers a second way to meet increasing caseload costs. It
expands the board's cost recovery ability through increased fines.
In practice then, he noted, the financial burden for this
regulatory activity may be shifted more from the general membership
to the wrongdoers themselves.
Senator Olson further stated that, currently, the board has 188
cases that are open for potential investigation and adjudication by
the Division of Occupational Licensing. During calendar year 2000,
130 new cases were opened and 133 closed. This effort resulted in
35 disciplinary actions against medical board licensees. He
pointed out that in fiscal year 2000, the costs of pursuing
misconduct charges exceeded $160,000.
Co-Chair Kelly wondered if there were enough cases currently to
cause fees for non-violating license holders to go up.
Senator Olson responded that he did not have the specific number.
Co-Chair Kelly clarified the question, saying that it is not
potential, but is actually happening.
Senator Olson indicated that it has happened that the fees for the
licensure between 1998 and the year 2000 have increased
significantly.
Senator Green said that it sounds like a really good idea and think
they should broaden the concept out in those areas of high dispute.
She wondered if the funds go directly into the medical board credit
account.
Senator Olson agreed that the burden should be shifted to the
wrongdoer regardless.
CATHERINE REARDON, Director, Division of Occupational Licensing,
Department of Community and Economic Development, said that they
consider fines received from a specific profession in the receipts
supported services category and technically part of the general
fund, but they are credited to the specific profession that they
come from. She affirmed that the amount they spend on
investigation and discipline of wrongdoers greatly exceeds the
amount of money they bring in, in fines, in any one-year. She
reported that they spent $160,000 last year just on legal bills and
expert witnesses for the medical board. She pointed out that there
is no way they took in anywhere close to $160,000 in fines for
medical professionals; therefore, she declared that this is a real
situation.
Senator Green wondered if it could be brought to a net zero.
Mrs. Reardon answered no, but it could improve the situation and
slightly improve licensees feeling of fairness that those who are
found to have done wrong would pay more. She also thinks, as the
sponsor mentioned, the fact that the maximum fine has not gone up
means inflation has also kept up with salary and the cost of
living.
Senator Green wondered if there was any assessment of legal costs
of the wrongdoer.
Senator Olson clarified that the question is whether the licensee
who has allegedly done wrong would bear some of the cost by the
state. He responded that it is his understanding that the
wrongdoer would bear no cost.
Senator Green wondered if it is appealable.
Mrs. Reardon responded yes. She explained that disciplinary
actions by the licensing board could be appealed directly to the
superior court and then on to the Supreme Court.
Senator Green said that she did not think it was enough.
Co-Chair Kelly asked Senator Green if she was entertaining an
amendment.
Senator Green indicated that she would not burden the Committee,
but feels that it is certainly something to think about in the
future. She pointed out that about two weeks prior the real-estate
licensees underwent a cataclysmic event when they had a series of
high cost things and then they are suddenly paying three or four
times what they had paid the year before. She noted that it seemed
punitive to the non-wrongdoers. She suggested that there might be
something in the bill that states that wrongdoers do bear a bigger
share of the burden. She referred to last year's legislation, SB
34, on the board of barbers and hairdressers regarding the addition
of the tattooing and body piercing occupations and declared that
eventually that is going to cost the barbers and hairdressers a lot
of money when there is litigation over the wrongdoing of the
license holder. She urged that they really should be looking at
all the boards to be sure that the wrongdoer bears a bigger share
of the cost.
Co-Chair Kelly referred to the 188 cases and wondered if those were
just general ethical complaints or complaints that were potentially
finable up to maximum.
Mrs. Reardon responded that all violations are potentially finable,
in that, the statute states that for a violation of the statutes
and regulations governing the profession the fine could be as high
as $10,000 and with this bill, $25,000. She noted that the way the
process works is that if the division's investigation finds
sufficient evidence in violation of the law then they file a
charging document and the person has the right to an administrative
hearing in front of a hearing officer who is an attorney. She
pointed out that the hearing officer acts as an administrative law
judge and would view the maximum penalty as the worse offence and
medium offences go in the middle and smaller ones go toward the
bottom; therefore, there is some protection there from everyone
being charged $25,000.
Co-Chair Kelly expressed concern that if they are not setting the
fines high enough for the most egregious offenses there might be a
danger that the people who commit the more minor offenses would
have higher fines to cover the administrative costs of the program.
Mrs. Reardon indicated that the fines are intended to be
disciplinary actions not cost-recovery actions. She noted that
they do have the effect of helping to offset costs, but they are
suppose to be like a reprimand or a suspension; something that is
matched to the grievousness of the offence not how much it costs to
catch the wrongdoer. She explained that there would not be a
process through which the division said, "Hey, we've got so much
disciplinary money to cover; therefore, we think this person with a
minor offense should have to pay $25,000," rather they have to come
in and argue that a bad act merits a certain amount of money. She
clarified that it is intended to be a sanction and not a cost
recovery.
Mrs. Reardon further stated that she looked at fines from the
medical programs for the last couple calendar years: in 2001 they
had four fines; worst case was a sexual misconduct case, which was
a $10,000 fine suspended down to $5,000 and the smaller fines were
for continuing education and tended to be at about $1,000; in 2000
there were fifteen fines and six of them were for $5,000, which was
half of the maximum; in 1999 there were four fines; in 1998 there
were fourteen. She explained that $1,000 is sort-of the baseline
for offenses such as lying on an application about continuing
education or something like that and then $10,000 would be for
pretty grievous offenses.
Co-Chair Kelly indicated that Senator Green brings up a good point,
"Is this enough?" He wondered if there was a problem with boosting
the $25,000 amount or if that number was chosen for a particular
reason.
Senator Olson indicated that a licensee would probably want a
system that is somewhat incremental and less than extreme, because
they are starting to deal with some large amounts of money. It was
his understanding that other states did not have a fine maximum
much higher than Alaska.
Co-Chair Kelly wondered if this was a number that the state medical
board recommended.
Mrs. Reardon responded that the state medical board does support it
and she suspected that the state medical board would probably
approve a higher number. She noted that if they get into the
$100,000 range they might be bringing in legal issues about whether
the size of the fine makes them no longer eligible for a civil
situation. She was not sure at what dollar amount that actually
happens, but they do have to watch for that.
Senator Wilken wondered what the state spends to process the cases.
Mrs. Reardon said that out of the division's budget, between the
investigator's salary, the money they pay to the Department of Law
and the money they pay to the expert witnesses that they are
probably talking about $2 million per year for all of their
professions. She knows that they pay $600,000 to the Department of
Law every year.
Senator Wilken wondered if that was just for these violations.
Mrs. Reardon clarified that it was for all of their professions.
Senator Wilken wondered if they were to move the $25,000 to some
other number what would the number be to recoup the average costs
spent over the last five years.
Mrs. Reardon responded that the amount of money they spend in
investigating a particular case that results in disciplinary
action-
Senator Wilken interjected and asked how much have they collected,
using the $10,000 limit, back from the violator.
Mrs. Reardon estimated that in a high year they might get $50,000
and in low year they might get $5,000.
Senator Wilken clarified that they are collecting $25,000 to
$30,000 per year and asked how much it is costing them to process
that money.
Mrs. Reardon responded that they have investigated a lot of people
that do not end up being disciplined; therefore, they do not want
to count their costs. She noted that the $160,000 was not
including investigator time or hearing officer time. That was just
the cost of paying for an attorney and expert witnesses, so the
number would actually be substantially higher. She pointed out
that a good portion of the $160,000 for last year went to a case
that has not resulted in a final action.
Senator Wilken wondered if it would be proper to suggest that in
rough numbers it costs them a half-million dollars a year to do
these things and they have recouped, under a $10,000 limit,
somewhere around $25,000; therefore if they multiple the $10,000 by
20 they would approach, perhaps, what it would take.
Mrs. Reardon said that she feels that she should go back and look
at her numbers, but she indicated that they would have to have a
very large maximum fine to have it pay for itself; larger than
people would probably be comfortable with.
Co-Chair Kelly noted that they have the added problem of crossing
from administrative to court actions.
Mrs. Reardon responded yes.
Senator Wilken requested that Mrs. Reardon go back and look at her
numbers, because it is important that they understand what is being
done.
Co-Chair Kelly agreed.
Senator Wilken wondered if the physicians are covered under the
Equal Employment Opportunity (EEO) policies when they are found
guilty of a wrongdoing and are fined.
Mrs. Reardon said that she did not know. She thinks that it varies
a lot. She explained that there is no state requirement that their
licensees have any malpractice or liability insurance; therefore,
she believes that a fair number do not. She said that they could
only guess by the amount of money being spent on the defense
whether or not licensee has some other source of money. She noted
that sometimes it appears that they do have some backup and other
times it does not.
Senator Olson commented that the main point of sponsoring SB 21 was
to provide the flavor of what goes on. He indicated that as long
as he remains a senator they could almost guarantee that there will
be this kind of incremental increase in some of the fines. As far
as the second question by Senator Wilken, he said that is his
understanding that most physicians pay it out of their own bank
accounts. He added that as far as he knows there is no third
party.
Senator Wilken wondered if it was just a hand slap, such a
continuing education $1,000 fine, if it would be under EEO.
Senator Olson responded that he did not think so.
Co-Chair Donley indicated that he had the same question and thought
that some sort of admissions and errors insurance would cover the
professional mistakes versus the more intentional mistakes. He
thought it would be good to find out. He pointed out that any time
they are dealing with a range of fines and set the higher fines the
question is whether they are pulling up the lower level fines that
are generally set by the board. He indicated that if it is not
their intent there is a pretty simple way of dealing with that and
that is by inserting a paragraph of legislative intent, which
states, "by raising the fine maximum the intent of the legislature
is to address the most grievous types of situations going on and
not necessarily to raise the fines for people who are doing simple
professional mistakes where there is not intent involved." He
added that he thought something like that would be well suited for
this situation if that is the sponsor's intent. He believes that
when they do get the more serious offenses that it would be
appropriate to add language saying, "for those people receiving the
maximum civil fine the board could also assess them for the cost to
the state of administrating them for the prosecution that led to
that fine."
Co-Chair Kelly wondered if they do something like that if they
would then take all the cases out of the realm of the board and
everyone would begin to appeal to the court system, because they
have so much at stake.
Co-Chair Donley responded that they are certainly not going to take
on all of the cases, for instance, all the small cases would not be
affected by the changes, rather they would be protected by those
changes. He indicated that the only cases that somebody might be
inclined to appeal are ones with a maximum fine.
Co-Chair Kelly pointed out that they would probably go through
court system.
Co-Chair Donley agreed.
Senator Olson said that Senator Donley brought up a good point. He
added that it is his intention to do things in a step-wise manner
and this is the first step. He said that it is his intent to
proceed cautiously.
Co-Chair Kelly requested that Senator Olson get together with other
members of the Committee, rewrite the bill and come up with a
Committee Substitute.
Senator Green wondered if there is a wall between what the medical
board does and the court.
Mrs. Reardon explained that they are unrelated, but information may
go back and forth. For example, when the division has the medical
board investigate a complaint and there is a malpractice judgement
and a case out there that has come to completion-
SFC - #7, SIDE B
Mrs. Reardon continued that they certainly would try and get the
evidence that has already been considered and use it in their case.
She noted that there is a requirement under state law that
physicians who make payments in malpractice cases, either through
settlements or being found in the wrong, have to report that to the
medical board. She explained that there is information
transferred, but the two processes and the two punishments are
separate.
Senator Green wondered if her constituents then go to the Alaska
Medical Board and say, "I want to know what happened in the life of
Doctor 'so-and-so'." She wondered if there would be free and
unfettered information provided to that person.
Mrs. Reardon responded that it is not free and unfettered. She
explained that the malpractice cases that have been reported to the
division are public information. She added that the accusations
that are filed and the disciplinary decisions that the medical
board has reached is also public information. She said that
ongoing open investigations are considered to be confidential.
Once an investigation is closed, either through disciplinary action
or through deciding that there is not sufficient evidence to
proceed, then the Public Records Act dominates the answer to the
question; when someone asks the division for information about a
license holder they go through a process of looking through the
files, categorizing all of the documents and talking to the
Department of Law. She explained that a person might get 99
percent of the information or much less, because it depends on the
legal analysis of the Public Records Act. She noted that medical
records are an exception to the Public Records Act, so the division
does not give out records that they have obtained during an
investigation. There is a balance between the constitutional right
to privacy and the Public Records Act. She indicated that
sometimes it depends on who is asking.
Senator Green wondered Mrs. Reardon meant by that.
Mrs. Reardon said that the easy example would be medical records,
which are clearly excluded by the Public Records Act. She also
noted that if someone is engaged in litigation with the state
rather than requesting information from the division they would
request information through the discovery process.
Senator Green wondered what she means by litigation with the state.
Mrs. Reardon said that it could be the physician or the unhappy
consumer.
Senator Green clarified that if a person goes to the various
information agencies about the records of a physician and the
decisions were decided on or agreed to before they reached the
final stage of a court settlement then none of that information
would be public. If a physician before court settlement none of
that information is available. She said that she finds it very
difficult to explain to someone that they do not have access to
th
that information, because they settled at the 11 hour. She
suggested that they need to have free exchange and people need to
be able to find out about their physician. She said that she is
not sure whom they are protecting, but it does not seem to be the
consumer.
Co-Chair Kelly asked Senator Olson to possibly come up with new
language and Mrs. Reardon if she would supply the Committee with
information regarding civil actions and court actions. He ordered
the bill HELD in Committee.
ADJOURNMENT
Co-Chair Kelly adjourned the Senate Finance Committee meeting at
9:56 a.m.
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