Legislature(2005 - 2006)

05/04/2005 04:45 PM FIN

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
     CS FOR HOUSE BILL NO. 33(FIN)                                                                                              
     "An Act relating to required notification of the Department of                                                             
     Commerce, Community, and Economic Development, economic effect                                                             
     statements,  and regulatory flexibility analyses  regarding the                                                            
     adoption  of regulations that  may govern the conduct  of small                                                            
     businesses;  relating to a private cause of action,  regulation                                                            
     invalidation,   and   judicial  review   related  to   required                                                            
     notification,   economic  effect  statements,   and  regulatory                                                            
     flexibility  analyses for the adoption of regulations  that may                                                            
     govern  the conduct of small  businesses; and providing  for an                                                            
     effective date."                                                                                                           
This  was the first  hearing  for this  bill in  the Senate  Finance                                                            
MICHAEL PAWLOWSKI,  Staff to Representative Kevin  Meyer, the bill's                                                            
sponsor,  explained that  the basis  for this bill  was the  federal                                                            
Regulatory  Flexibility Act  of 1980. That  Act directed  regulatory                                                            
agencies to "first consider  the economic effect" a regulation would                                                            
incur on  small businesses,  and secondly  "consider an alternative                                                             
method of achieving  the same statutory  or regulatory goal".  While                                                            
this Act has been in effect  for 25-years, President George Bush has                                                            
furthered "the  Small Business Regulatory Reform Act  as a model for                                                            
states to  adopt to consider  ways of lowering  the burden  of state                                                            
regulations on small businesses."                                                                                               
Mr. Pawlowski  characterized this  bill as being "loosely  patterned                                                            
after  the model  legislation  that  the  Office of  Small  Business                                                            
Administration  made  available  for  states".  A  "significant  and                                                            
detailed process" has been  conducted "to bring it into alliance and                                                            
to make  it work  for the  State of  Alaska". It  would direct  four                                                            
designated state agencies  "to consider the economic impact of their                                                            
regulations  on small business".  Consideration  should be  given to                                                            
such  things as  "the cost  of compliance"  and  to determine  other                                                            
methods through which to  accomplish such compliance. The Department                                                            
of Commerce,  Community and Economic  Development would be  asked to                                                            
take the "lead advisory  role, essentially a small business advocate                                                            
position"  in this endeavor  "to provide a  check in the  regulatory                                                            
process and a voice for the needs of small businesses".                                                                         
Mr.  Pawlowski  noted that  Members'  packets  contain  a letter  of                                                            
support from the  Alaska State Chamber of Commerce,  dated March 15,                                                            
2005 [copy on file] and addressed to Representative Meyer.                                                                      
Co-Chair Wilken voiced  his support for the effort and intent of the                                                            
legislation.  However, he questioned  the need  to add a $100,000  a                                                            
year position  to coordinate the program, as reflected  in the April                                                            
15, 2005 fiscal note #11  from the Department of Commerce, Community                                                            
and Economic  Development. He opined  that the Department  should be                                                            
able to conduct  this effort through its "normal course  of everyday                                                            
Mr. Pawlowski informed  the Committee that several fiscal notes were                                                            
added  to  the  bill  during  its  deliberations  in  the  House  of                                                            
Representatives.  One  of  those  notes  was as  high  as  $217,000.                                                            
Representative  Meyer "was  taken aback" at  the agencies'  position                                                            
that "the expertise" that  would be required to conduct this program                                                            
was  currently  unavailable   in  the  departments.   While  current                                                            
department  personnel   "are  really  dedicated  to   achieving  the                                                            
statutory  goals that are  put on them, and,  as the same time  they                                                            
come up with regulations  …. the thought process of  what that small                                                            
business is going  to have to go through to meet the  demands of the                                                            
regulations  doesn't  happen".  The  Governor's  Office  "felt  very                                                            
strongly that  an adequately funded  and very strong position  to be                                                            
that small  business  advocate would  make this  program  successful                                                            
given the experience in the current regulatory format".                                                                         
Mr. Pawlowski  conveyed that utilizing  small business license  fees                                                            
to fund this  position had been discussed  but not advanced,  as not                                                            
doing so  would "demonstrate"  to small businesses  "that the  State                                                            
was giving  back to small  businesses from  the fees that they  were                                                            
paying  into  the  State".   Representative  Meyer  supported   that                                                            
decision and believes that the position is necessary.                                                                           
Co-Chair Green  asked for an example of how the program  would work.                                                            
6:14:55 PM                                                                                                                    
Mr. Pawlowski  directed Members to a flowchart titled  "Steps in the                                                            
Regulation  Adoption  Process  Under  HB33" [copy  on  file],  which                                                            
depicts  how the  process  would be  conducted.  The  basis for  the                                                            
flowchart  is  the  current  "Drafting  Manual  for  Administrative                                                             
Regulations".  The shaded portions  on the chart indicate  the steps                                                            
that would be added to the process by the adoption of this bill.                                                                
Mr.  Pawlowski  noted that  the  Department  of  Transportation  and                                                            
Public Facilities  is not designated as one of the  four agencies to                                                            
which  this legislation  would  apply as  the manner  in which  that                                                            
Department conducts its  business is deemed as being "outside of the                                                            
intent of the  bill". A standard has  been designated, as  reflected                                                            
in Sec. 1(i)(3)  on page four lines  20-23 that would apply  to "the                                                            
regulations that govern  the conduct of small businesses; that means                                                            
the  manner  in  which  a  small  business  conducts   its  business                                                            
activities".  The  issue pertinent  to  the bill  is  exampled by  a                                                            
recent  Department   of  Health  and  Social  Services  regulations                                                             
pertaining  to child care centers  that describe such things  as the                                                            
size of the required trashcans;  the size of the waste paper baskets                                                            
that those trashcans  must contain; and provisions  requiring that a                                                            
toy  that has  gone into  the mouth  of a  child  must be  sanitized                                                            
before it could  be used by another child. The question  is what how                                                            
much money  it would cost  a childcare center,  serving 30  children                                                            
for example, to adhere  to all the regulations. That is what governs                                                            
the conduct standard  "that would trigger when this  review would be                                                            
Mr. Pawlowski  explained that this legislation would  incur a change                                                            
in the process  when the agency making the regulation  would consult                                                            
with the Department of  Law in that regard as reflected at Step 4 on                                                            
the aforementioned  flowchart. The  change would be that  the agency                                                            
must also notify  the person holding  the new position requested  in                                                            
fiscal  note #11,  in  the Department  of  Commerce,  Community  and                                                            
Economic Development,  who would then  assist and advise  throughout                                                            
the public comment process.  Then the agency, assisted by the person                                                            
from Department  of Commerce,  Community  and Economic Development,                                                             
would utilize  information obtained from the public  comment process                                                            
and other information  from their files to follow  the nine Economic                                                            
Effect Statement  criteria  added by this bill  and depicted  in the                                                            
large shaded area  on the flowchart. This criterion  is specified as                                                            
   Economic Effects Statement:                                                                                                  
     · Estimate of small businesses effected.                                                                                   
     · Proposed recordkeeping and admin. Costs.                                                                                 
     · Statement of economic effect.                                                                                            
     · Description of alternate methods.                                                                                        
   Regulatory Flexibility Analysis: (examine)                                                                                   
      · Less stringent compliance or reporting requirements.                                                                    
     · Less stringent compliance or reporting deadlines.                                                                        
     · Consolidation or simplification of compliance or reporting.                                                              
     · Establishment of performance standards to replace design or                                                              
        operational standards.                                                                                                  
     · Exemption of small businesses.                                                                                           
Mr. Pawlowski  stated that the alternative  methods included  in the                                                            
Economic Effect Statement  "would be achieved by working through the                                                            
Regulatory  Flexibility   Analysis",  whose  components   have  been                                                            
utilized for 25-years at  the federal level. The development of less                                                            
stringent compliance  or reporting  deadlines could be accomplished                                                             
by  simply  allowing  a  business  to report  annually,   quarterly,                                                            
monthly, or biannually depending on the size of the business.                                                                   
Mr.  Pawlowski  stated  that poorly  written  regulations  would  be                                                            
resubmitted  to the  Legislature for  further reworking.  "HB  33 is                                                            
about trying to do it right in the first place."                                                                                
6:20:05 PM                                                                                                                    
Co-Chair Wilken  recalled that Senator  Gene Therriault had,  in the                                                            
last  few  years,  submitted  legislation   that  had  inserted  the                                                            
Legislature into the flow chart process.                                                                                        
Co-Chair Green  asked whether that legislation had  pertained to the                                                            
Administrative Regulation Review process.                                                                                       
Co-Chair  Wilken could  not recall  the exact bill  number, but  did                                                            
recall that  it had allowed  the Legislature  to be included  in the                                                            
process  by the  inclusion  of a Regulations  Review  Committee.  He                                                            
questioned  the  reason  that  that  recently  added  step  was  not                                                            
reflected in the flowchart.                                                                                                     
Mr.   Pawlowski   affirmed   that   legislation   establishing   the                                                            
Administrative  Regulation  Review  process  was adopted  two  years                                                            
prior.  Further clarification  of  its inclusion  was conducted  the                                                            
previous Session.  That step is reflected  on the chart at  Step 11.                                                            
He noted  that  the bill's  sponsor feels  that HB  33 is  necessary                                                            
because,  rather  than  taking  "the  word"  of  the Administrative                                                             
Regulation Review Committee,  this legislation would provide written                                                            
documentation  based on the nine aforementioned guidelines  that the                                                            
regulations pertaining  to small businesses would be analyzed to the                                                            
benefit of small businesses.                                                                                                    
Co-Chair Wilken acknowledged.                                                                                                   
6:22:49 PM                                                                                                                    
STEVE WEAVER, Assistant  Attorney General, Legislation & Regulations                                                            
Section, Office  of the Attorney General, Department  of Law, shared                                                            
that the Governor Frank  Murkowski Administration supports the bill.                                                            
The  impact  of  regulations  on  small   businesses  "has  been  an                                                            
important issue" to the  Governor for quite a while. The legislation                                                            
has, as a result  of its Legislative  hearings, evolved into  a very                                                            
workable bill  for the State. The  Small Business Advocate  position                                                            
that would  be created in the Department  of Community and  Economic                                                            
Development  "would  be very  helpful in  the process"  as it  would                                                            
assist  the  agencies  "to  put  considerations  of  small  business                                                            
impacts into the  process in a consistent fashion;  to provide a one                                                            
stop shopping source for  that, and to avoid more costly alternative                                                            
processes such  as hiring outside  consultants which agencies  might                                                            
need to do otherwise.  The emphasis was on making  this bill as cost                                                            
effective as possible for the Administration."                                                                                  
6:24:20 PM                                                                                                                    
Co-Chair  Green voiced  acceptance  of the Small  Business  Advocacy                                                            
position. However,  she noted that legislative mandates  such as the                                                            
requirement  that businesses must  have insurance coverage,  impacts                                                            
businesses  across  the state,  regardless  of their  size.  Another                                                            
broad size requirement is exampled by licensing fees.                                                                           
6:25:30 PM                                                                                                                    
Co-Chair  Green  inquired  as  to  whether  the  emphasis  on  small                                                            
businesses  is  due to  the  fact that  there  is a  Small  Business                                                            
Mr. Pawlowski replied that  the emphasis on small business, which is                                                            
defined as a business with  100 or less employees, would affect more                                                            
than 170,000 people  in the State. "That's over half  of the State's                                                            
workforce." The  emphasis is due to the fact that  "small businesses                                                            
typically  do  not  have  the  resources   to  be  involved  in  the                                                            
regulatory process. They  don't have the ability or attention to pay                                                            
or the  time to pay; their  workforce is  spread relatively  thin. A                                                            
large business would have the time to devote to it."                                                                            
Mr. Pawlowski  noted  that such  things as  user fees  would not  be                                                            
affected  by  this  legislation.   Continuing,  he  noted  that  the                                                            
Medicaid and  Medicare cost reimbursement  regulations are  excluded                                                            
from the legislation,  for "when the  Legislature directs  something                                                            
as a cost containment  provision"  to, for instance, the  Department                                                            
of Health  and Social  Services, it  might "save  up to $15  million                                                            
dollars  a year",  and  a one-day  delay in  the issuance  of  those                                                            
regulations  could cost the State  between $40,000 and $57,000.  The                                                            
cost benefits to a business would not be that extreme.                                                                          
6:26:34 PM                                                                                                                    
Co-Chair Green voiced appreciation for the explanation.                                                                         
The bill was ordered HELD in Committee.                                                                                         

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