Legislature(2003 - 2004)

02/26/2004 09:03 AM Senate FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                                                                                                                                
     CS FOR SENATE BILL NO. 203(JUD)                                                                                            
     "An  Act  relating  to  administrative   hearings,  to  hearing                                                            
     officers,  and to administrative  law judges; establishing  the                                                            
     office of administrative  hearings and relating to that office;                                                            
     and providing for an effective date."                                                                                      
                                                                                                                                
                                                                                                                                
This was  the second  hearing for  this bill in  the Senate  Finance                                                            
Committee.                                                                                                                      
                                                                                                                                
Co-Chair Wilken  communicated that this legislation  would create an                                                            
independent office  of hearing officers under the  administration of                                                            
a chief  administrative law  judge (ALJ),  within the Department  of                                                            
Administration.  The  bill's  sponsor  would  be  providing  further                                                            
information  in regards to  the office's  structure. An explanation                                                             
pertaining to the fiscal note would be forthcoming.                                                                             
                                                                                                                                
Co-Chair  Wilken  asked  whether  there  was any  objection  to  the                                                            
adoption  of the  Version 23-LS0903\Z  committee  substitute as  the                                                            
working document.                                                                                                               
                                                                                                                                
There being no objection, Version "Z" was ADOPTED.                                                                              
                                                                                                                                
[NOTE:  A  formal  request  to  adopt  the  Version   "Z"  committee                                                            
substitute was offered later in the hearing.]                                                                                   
                                                                                                                                
DAVE STANCLIFF,  Staff, Administrative Regulation  Review Committee,                                                            
Office  of Senate  President Gene  Therriault,  the bill's  sponsor,                                                            
explained  the  this committee  substitute  has  been  developed  to                                                            
address technical  issues  and to "clean  up" various components  of                                                            
the bill  as identified by  the Legislative  Legal Division  and the                                                            
Administration.  He referenced a handout provided  by the Regulation                                                            
Review committee titled,  "Changes Included in SB 203(FIN)" [copy on                                                            
file]  that  specifies  the  eight changes  made  in  the  committee                                                            
substitute. The  first substantive change is located  in Section 66,                                                            
line 30, page 31 of the bill and reads as follows.                                                                              
                                                                                                                                
     Sec. 66. AS 39.52.170 is amended by adding a new subsection to                                                             
     read:                                                                                                                      
          (d) A public employee who is in a permanent full-time                                                                 
     position  as a hearing officer or administrative  law judge may                                                            
     not  accept employment  as a  hearing officer  or enter  into a                                                            
     contract  to  act  as a  hearing  officer,  administrative  law                                                            
     judge, or judicial  officer for the federal government, another                                                            
     state, a municipality, or a Native tribe.                                                                                  
                                                                                                                                
Mr. Stancliff  stated that the municipal jurisdiction  specification                                                            
was added to the list to avoid possible conflicts of interest.                                                                  
                                                                                                                                
Senator  Olson understood  the  rationale  for this  section, as  it                                                            
would apply  to such large  communities as  Anchorage or  Fairbanks;                                                            
however,  he asked  how  Rural  locations  with limited  numbers  of                                                            
hearing officers would be affected.                                                                                             
                                                                                                                                
ANDY  HEMENWAY,  Hearing  Officer,  Department  of  Administration,                                                             
responded that  currently the State has 25 hearing  officers, all of                                                            
whom  are  located   in  Anchorage,  Fairbanks,  or  Juneau.   These                                                            
individuals   travel   to  other   locations  or   participate   via                                                            
teleconference  as required. Therefore,  this requirement  would not                                                            
affect smaller communities.                                                                                                     
                                                                                                                                
Senator Olson  continued to voice  discomfort with the inclusion  of                                                            
municipality employees in the list.                                                                                             
                                                                                                                                
Mr. Hemenway  stated that the purpose  of this language is  to avoid                                                            
any conflict of interest  that might arise regarding decision-making                                                            
on behalf  of  one sovereign  entity  verses another's  policies  or                                                            
interests.                                                                                                                      
                                                                                                                                
Senator Olson  questioned how a hearing  officer, whose role  is one                                                            
of neutrality, could have a conflict of interest.                                                                               
                                                                                                                                
Mr.  Hemenway  expressed  that the  intent  would  be to  avoid  any                                                            
"inherent" conflict of  interest. There might be a perception that a                                                            
hearing officer who works  on behalf of the State might tend to rule                                                            
in its favor in a situation  involving the State and a municipality,                                                            
for example.                                                                                                                    
                                                                                                                                
Senator  Olson  observed  "that it  sounds  like  we are  trying  to                                                            
protect ourselves from ourselves."                                                                                              
                                                                                                                                
Mr.  Stancliff  commented  that  the second  change  is  located  in                                                            
Section  65  on  page  31 of  the  bill.  While  the  bill  provides                                                            
protection  to the  ALJ from  inappropriately  contact or  influence                                                            
from  agencies or  Legislative  agencies,  it did  not provide  that                                                            
protection to hearing officers. This is addressed in Section 65.                                                                
                                                                                                                                
Mr. Stancliff stated that  recently enacted legislation incorporated                                                            
new  processes at  the  request of  Associated  General Contractors                                                             
(AGC)  in regard  to  dispute resolution.  In  order  to allow  that                                                            
process to  develop, those  processes has  been eliminated  from the                                                            
jurisdiction of the legislation.                                                                                                
                                                                                                                                
Mr. Stancliff  continued that the Administration has  requested that                                                            
hearing  officers be  provided  the same  type of  code as  judicial                                                            
officers  have in that a  person could request  a different  hearing                                                            
officer  preside over  the  hearing. This  language  is included  in                                                            
Section 3,  Subsection 44.21.570(c)  on page ten, beginning  on line                                                            
eleven.                                                                                                                         
                                                                                                                                
Mr.  Stancliff  stated  that the  definition  of  an administrative                                                             
hearing is expanded  in language in Section 3, Subsection  44.21.599                                                            
(1) on page 11. This section reads as follows.                                                                                  
                                                                                                                                
     (1)  "administrative  hearing" means  a quasi-judicial  hearing                                                            
     before an  agency, but does not include an informal  conference                                                            
     or review held by  an agency before a final decision is issued.                                                            
                                                                                                                                
Mr.  Stancliff,   addressing  Senator  Olson's  concern   about  the                                                            
prohibition  of hearing officers working  for the State and  another                                                            
jurisdiction  specifically  in regards  to how this  might affect  a                                                            
small Rural area,  stated that this language would  serve to address                                                            
the concern.  Highly contested  cases would  be heard at the  higher                                                            
administrative level.                                                                                                           
                                                                                                                                
Mr.  Stancliff  stated that  Number  Six  on the  Regulation  Review                                                            
Committee  list   would  address  some  conflicts  the  legislation                                                             
incurred with  agency's "cease and desist" authority.  This language                                                            
is located in Section 8, on page 13, beginning on line 16.                                                                      
                                                                                                                                
Mr. Hemenway  explained that this  language would primarily  address                                                            
the bill's  conflict with the Department  of Community and  Economic                                                            
Development's  crease and desist orders  for regulated professions.                                                             
                                                                                                                                
Mr. Stancliff  stated that a technical  change incorporated  in this                                                            
committee  substitute is that  the clarification  of the duties  and                                                            
responsibilities of ALJs  and hearing officers is clearly defined in                                                            
the bill.                                                                                                                       
                                                                                                                                
Senator  Bunde  mentioned  that  separate  legislation  relating  to                                                            
worker's compensation  would incorporate a panel of  ALJs. Therefore                                                            
he asked how these two pieces of legislation would interact.                                                                    
                                                                                                                                
Mr. Stancliff  replied that this is  an unknown, as the integration                                                             
stage of the procedure  has not been conducted. However, this should                                                            
be addressed as the processes advance.                                                                                          
                                                                                                                                
Senator Bunde  stated that the bill in question is  SB 311-INSURANCE                                                            
& WORKERS' COMPENSATION SYSTEM.                                                                                                 
                                                                                                                                
Mr. Stancliff acknowledged.                                                                                                     
                                                                                                                                
                                                                                                                                
SFC 04 # 22, Side A 10:40 AM                                                                                                    
                                                                                                                                
                                                                                                                                
Senator  Hoffman asked  whether the  possible  conflict of  interest                                                            
issue that  might arise  by a hearing  officer  being employed  in a                                                            
second job is addressed in this committee substitute.                                                                           
                                                                                                                                
Mr. Stancliff responded  that substantial discussion has occurred in                                                            
this  regard,  specifically  whether   hearing  officers  should  be                                                            
allowed to practice  law outside of their public employee  position.                                                            
This bill is restrictive in regards to possible conflicts.                                                                      
                                                                                                                                
Mr.  Hemenway   noted  that  language   in  Section  3,   Subsection                                                            
44.21.540(c) on page six,  lines 24 through 27 addresses the concern                                                            
regarding a second  job. However, while this bill  contains language                                                            
in this regard, it does  not expressly prohibit work in a second job                                                            
outside of their employment with the State.                                                                                     
                                                                                                                                
     (c)  An administrative  law judge employed  by the office  must                                                            
     devote full  time to the duties of the office  unless appointed                                                            
     to a position  that is less than  full-time. An administrative                                                             
     law  judge  employed  by  the office  may  not  perform  duties                                                            
     inconsistent   with  the duties   and  responsibilities  of  an                                                            
     administrative law judge.                                                                                                  
                                                                                                                                
Mr. Hemenway  understood the  intent of this  language to be  that a                                                            
person employed as an ALJ  should "not also hold a second job within                                                            
the  Administration,"  such  as being  a  Deputy  Commissioner,  for                                                            
example.                                                                                                                        
                                                                                                                                
Senator Hoffman  stated that  rather than  being concerned  about an                                                            
individual's ability  to hold a second job, his primary  concern was                                                            
their ability to privately practice law.                                                                                        
                                                                                                                                
Mr. Stancliff  responded that while this concern was  addressed, the                                                            
decision   was  made  not   to  include   it.  However,  the   Chief                                                            
Administrative  Law  Judge  would  be developing  a  judicial  canon                                                            
similar to  that currently in place  for the State Judicial  Branch.                                                            
New regulations  governing ALJS would  also be developed  that might                                                            
address this issue. It is not, however, required, in Statute.                                                                   
                                                                                                                                
Senator Hoffman asked whether  the independent practice of law would                                                            
present a conflict of interest for hearing officers.                                                                            
                                                                                                                                
Mr.  Hemenway shared  that  this issue  is  a primary  concern.  The                                                            
Judicial  Canon  does  prohibit  judges  from  practicing  law.  The                                                            
essential   question  is   whether   this  should   also  apply   to                                                            
administrative hearing officers. This is worth considering.                                                                     
                                                                                                                                
Responding  to Senator  Hoffman's  question, Mr.  Hemenway  declared                                                            
that there is  certainly the potential for conflicts  of interest in                                                            
this area.  The question is whether  it should be addressed  through                                                            
regulation or Statute.                                                                                                          
                                                                                                                                
Senator  Hoffman  declared  that  if  there  is  the  potential  for                                                            
conflict of interest, it should be included.                                                                                    
                                                                                                                                
Mr.  Stancliff stated  that  the State  currently  contracts with  a                                                            
number of  hearing officers  and this process  would be continuing.                                                             
Therefore, consideration must be given to this situation.                                                                       
                                                                                                                                
Mr. Stancliff  stated that the final change in the  bill pertains to                                                            
Section 46(b) on page 26  of the bill and regards the amount of time                                                            
that  hearing  officers might  spent  in  regard to  insurance  rate                                                            
setting.  Currently,  the  Director  of the  Division  of  Insurance                                                            
currently  spends more  that 1,000  hours in this  regard. Were  the                                                            
rate setting  responsibility  to shift  over to  the ALJs, it  would                                                            
significantly  increase the fiscal note. There are  some Division of                                                            
Insurance duties  however, that could be transferred  to the Central                                                            
Panel without much impact.                                                                                                      
                                                                                                                                
Mr. Hemenway  voiced that rate setting  responsibilities  should not                                                            
be conducted by the Central Panel.                                                                                              
                                                                                                                                
Mr. Stancliff concurred  and stated that were those responsibilities                                                            
to become  the  responsibility  of the  Central Hearing  Panel,  the                                                            
fiscal note would be cost prohibitive and the bill would falter.                                                                
                                                                                                                                
Co-Chair Wilken  asked regarding the  validity of the University  of                                                            
Alaska's two-page brief  [copy on file] requesting an exclusion from                                                            
the jurisdiction of the bill.                                                                                                   
                                                                                                                                
Mr. Stancliff  commented that  the brief  might have some  validity.                                                            
The  determination   regarding  the  University  is   under  review.                                                            
However, he voiced, "that  no State hearing officer should be exempt                                                            
from the protections  and higher standards"  being developed  in the                                                            
bill. The  University  has a high  quality process  and meets  those                                                            
standards.                                                                                                                      
                                                                                                                                
Co-Chair  Wilken  asked  how  the  University's   request  would  be                                                            
addressed.                                                                                                                      
                                                                                                                                
Mr.  Stancliff  replied that  an  amendment  would be  developed  to                                                            
address their exemption.                                                                                                        
                                                                                                                                
Co-Chair  Green moved  to adopt  the Version  23-LS0903\Z  committee                                                            
substitute as the working document.                                                                                             
                                                                                                                                
There being no  objection, the Version "Z" committee  substitute was                                                            
formally ADOPTED as the working document.                                                                                       
                                                                                                                                
Co-Chair Wilken  stated that the fiscal note discussion  would occur                                                            
during the next hearing on the bill.                                                                                            
                                                                                                                                
Senator  Hoffman  asked  whether  there  is a  shortage  of  hearing                                                            
officer applicants in the State.                                                                                                
                                                                                                                                
Mr. Hemenway  responded that in his  perception, as positions  open,                                                            
there are a number of good applicants.                                                                                          
                                                                                                                                
Co-Chair Wilken noted that the bill would be HELD in Committee.                                                                 
                                                                                                                                

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