Legislature(1997 - 1998)
04/09/1997 01:30 PM Senate JUD
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SB 101 REGULATIONS: ADOPTION & JUDICIAL REVIEW
CHAIRMAN TAYLOR explained SB 101 makes fairly sweeping changes to
the current regulatory process. It requires that a cost-benefit
analysis be prepared before regulations are adopted, limits the
effective period of emergency regulations, and provides for
judicial review of the validity of regulations. He noted he
supports the concept but does not know whether it is enforceable.
JOHN LINDBACK , testifying on behalf of the Lieutenant Governor's
Office, the designated lead agency on legislation affecting the
regulatory process, gave the following overview of the history and
streamlining process that has occurred. Administrative Order 157
was issued in January of 1995. That order changed the way
regulations are promulgated by using plain English, making the
process more user friendly, and taking cost into account. Last
February agencies were required to submit a follow-up report on how
they are complying with Administrative Order 157. The report
shows that most agencies have set up a regular review of all
regulations; for some agencies the task is much more time consuming
than for others. Additionally, the Administration introduced SB
155 a week ago, which attempts to make the regulatory process more
public-friendly. It allows for an automatic update for
corporations, and more public friendly advertising of regulations.
The Administration plans to launch a regulations home-page on the
Internet which will allow the user to view all regulations in every
agency. He offered to provide committee members with more
comprehensive information on the current regulatory process and
anticipated changes.
Number 216
DEBORAH BEHR , Department of Law, testified that SB 101 makes
dramatic changes to the regulatory process. She made the following
comments on the bill.
Sections 5 and 6 deal with a cost benefit analysis on regulations.
This concept is not new; in 1995, Representative Kelly introduced
HB 130 which eventually became law. It was based on this same
concept and the fiscal notes were very high. State law was changed
to require state agencies to pay special attention to the costs to
private parties. During the public comment period, the agencies
are asked to actively solicit costs of compliance and every
newspaper ad asks for such information. DEC is now required, under
HB 130, to consider alternative means of accomplishing the same
goals.
Ms. Behr said that after reviewing SB 101, she has come to the
conclusion that the cost-benefit analysis is a very expensive
provision, especially to get the precision that is necessary to
stand up in court. She is concerned about battles with experts,
and the cost of hiring economists to defend regulations. In the
case of the timber sale contracts, the DOL attorney in charge
indicated it would be virtually impossible to get a timber sale
contract that would stand up to a court test. The benefit to the
public of leaving a tree standing or cutting it down would have to
be determined. The bill contains no definition of the word
"public." It could be the people in a community, the State of
Alaska, or the United States. The new welfare reform program will
require a lot of new regulations. It is difficult to determine
whether the costs should be based on the short or long term impact.
Regulations projects may require more than one financial analysis.
The Board of Fish deals with 900 regulations proposals each year.
The way SB 101 is written, it is not clear whether the cost-benefit
analysis is supposed to occur when the regulation is noticed up, or
at the time the Board adopts the regulation. If the Department of
Fish and Game had to do a cost-benefit analysis on 900 proposals,
the cost would be extremely prohibitive. Additionally, it might
change the way the Board of Fish operates. That Board has a very
democratic process and allows anyone to fill out a proposal book.
Each proposal is noticed up so that anyone can comment. It would
be very difficult to cost benefit some of these ideas. Printing
the summary in newspaper ads will be very expensive. The
Department of Fish and Game did a cost benefit analysis on a
regulation in the past and estimated it took over 1 1/2 years and
cost over $150,000.
Ms. Behr noted SB 101 is written to cover all administrative
agencies. The Department of Corrections does regulations on
discipline of prisoners. In order for DOC to adopt regulations it
will have to do a cost benefit analysis to the public on whether or
not the benefits of that prison disciplinary scheme outweigh the
cost of implementation. The potential for frivolous litigation in
that arena is high.
Ms. Behr discussed the difficulties of doing cost benefit analyses
on the benefits of public safety, i.e. the benefits of requiring
sex offender registration. DPS would not be able to sign off on a
regulation unless it could prove that the benefits of registration
outweigh the costs.
In light of Alaska's constitutional right of privacy, Ms. Behr
pointed out that some of the cost information to private parties
will be inaccessible. She recently assisted the Board of Dentistry
in establishing a regulation pertaining to use of laser equipment
by dental hygienists, which the Board felt was inappropriate. In
order for the Board to establish the same regulation under SB 101,
cost benefit information from dentists regarding how much time each
dental employee has used laser equipment would be required. Many
dentists may consider that proprietary business information and
refuse to supply it. In addition, the issue of regulating mail or
telephone access for prisoners would be problematic.
Number 325
Ms. Behr said her opinion is that SB 101 is a good idea that may
have unintended consequences. During a time when the Legislature
is trying to downsize state government, anyone could challenge that
approach by suing anytime a regulation is promulgated on the basis
that the cost benefit analysis was insufficient. She again
referred to problems with the timber sale contracts. Promulgating
emergency regulations would also be problematic. In order for an
emergency regulation to become permanent, it can only be out for
120 days and an economic analysis that would stand up in court
cannot be completed in that time. SB 101 would severely stifle an
important part of the Procedures Act which is to respond to crises
when the Legislature is not in session.
Ms. Behr questioned how one would do a cost benefit analysis of a
fee regulation because the cost to an individual person and
benefits to the public would have to be determined.
Ms. Behr thought this approach might be productive if applied to
large projects only but not to regulations that have a minimal
impact, such as raising copying costs a few cents. She also
suggested exempting federal regulations and particular departments
from the requirements of SB 101. She noted the average business
person would only do a cost benefit analysis on large projects.
Ms. Behr discussed the next major change in SB 101; supplemental
notices for significant changes of regulations. If an agency
notices up a regulation for a fee increase from $50 to $100, and
then, after the first set of hearings determines a more appropriate
amount to be $75, the agency would have to solicit a whole new
round of public comments. Newspaper notices would be required, and
if a board or commission is involved, it would have to meet again
resulting in travel and per diem costs. The new public comment
could produce different results and the procedure would have to
occur again. She repeated her concern that in the attempt to
downsize state government and raise fees, anyone who wants to
challenge that approach could do so by challenging the cost benefit
analysis. She explained that after the Legislature adjourns in
May, state agencies will need to implement new regulations based on
changes in law, for example welfare reform. They will be required
to hold a public comment period and adopt regulations with a cost
benefit analysis by July 1.
The third major change in SB 101 is the standard of review used by
the court to review regulations. Section 7 contains the current
standard used by judges to invalidate regulations: for substantial
failure to comply with the APA; on constitutional grounds; or for
equal protection rights violations. SB 101 changes the standard of
review so that there will be a presumption of invalidity. To be
valid, a regulation will have to be the least intrusive to the
rights of persons or property affected by the regulations. There
are many areas where this standard will create problems, such as
with prison discipline regulations. A prisoner could sue on the
new standard based on the possibility that a lesser punishment
could be used. If the State could not defend the regulation based
on that standard, it would have to prove a compelling State
interest which would be virtually impossible to do.
Ms. Behr repeated her concerns that SB 101 will have unintended
consequences and may result in a lot of frivolous litigation. She
discussed a final change that could occur if SB 101 passes.
Significant changes to regulations can be tested in District Court
therefore, oil tax regulations could be brought before a District
Court judge at the same time the judge is hearing cases about a
child smoking underage or a driver who failed to remove studded
snow tires. Once the case goes to District Court, it could be
directly appealed to the Supreme Court. This will create a
dramatic policy change.
Ms. Behr noted two technical problems with SB 101. Section 4 does
not include all state agencies, and excludes the Office of the
Governor, which does regulations on telecommunications and
elections, and the University of Alaska which has procurement
regulations.
Number 410
SENATOR DONLEY , sponsor of SB 101, explained SB 101 is an expansio
of legislation proposed in past years. He tried to exempt agencies
and areas in which additional restrictions would be inappropriate.
The Boards of Fish and Game are exempted on page 4, as well as
things that result from federal requirements. He acknowledged
there may be other areas, such as natural resources and the timber
sale contracts mentioned by Ms. Behr, that may be appropriate to
exempt. He also suggested removing the language on page 3, lines
5-7, because of problems identified by Ms. Behr. That deletion
would still require departments to use the procedure for
informational purposes, but not to use it as the standard for
adopting a regulation, thereby preventing that standard from being
used as the basis for a challenge in court. That would enable
departments to use procedures appropriate for the level of
seriousness of the regulation, such as raising the cost of copying
fees.
SENATOR DONLEY noted that he intended the section on notices on
page 4 to apply to all provisions of the bill.
SENATOR PARNELL noted he was also concerned about the language on
page 3, lines 5-7. CHAIRMAN TAYLOR suggested forming a
subcommittee of Senator Donley, department staff, and any
interested committee members to work on the legislation and bring
a committee substitute before the committee for further review.
Number 451
SENATOR DONLEY stated he has not found departments to be
cooperative regarding this bill. He discussed the problem of
notice in the regulatory process, and stated one has to balance the
value of having the Executive Branch do immediate regulations
without appropriate public input against the advantages of
providing for expeditious regulations when necessary. He stated he
believes it is clearly appropriate that the Executive Branch give
the public notice of its intentions.
SENATOR PARNELL asked Senator Donley why he chose to include
District Courts in addition to the Superior Court on page 6.
SENATOR DONLEY replied he would like to increase the public's
ability to challenge more regulations because such a wide scope of
regulations exist now. He thought the challenge of some
regulations would be appropriate for District Court, for others the
Superior Court. SENATOR PARNELL agreed but thought if the District
Court's jurisdiction is under $50,000, it is not appropriate for a
case involving millions of dollars in oil taxes to be resolved
there. SENATOR DONLEY agreed and suggested changing the way the
bill applies to revenue regulations.
Number 476
SENATOR ELLIS asked whether the District Court has any equitable
jurisdiction right now. CHAIRMAN TAYLOR answered it does not.
SENATOR ELLIS asked if the Legislature is seeking to change that.
SENATOR DONLEY replied it would be struck down on the basis of
fact.
CHAIRMAN TAYLOR thought that would fall under the equity
jurisdiction because it would require someone to do an act, as
opposed to pay money damages. That distinction limits one's
ability to get access to the bench. If the focus was on
jurisdiction limits, twice the number of judges would be available
for adoptions and juvenile matters and it would not take two or
three years to get on a court calendar.
SENATOR DONLEY said he would be satisfied if the bill required
agencies to provide subsequent public notices before adopting
things that were subsequently different.
CHAIRMAN TAYLOR commented he introduced a bill three years ago that
would require, that before an agency proposed a regulation or
before a federal regulation was adopted, the department to report
the cost of the federal mandate. That bill was vetoed by the
Governor.
Number 497
JACK KREINHEDER , Office of Management and Budget (OMB), summarized
the fiscal notes. The grand total of the fiscal notes is in excess
of $1.6 million with the largest impact being on the Departments of
Environmental Conservation, Natural Resources, Law and Commerce and
Economic Development. The amendment offered to the cost benefit
analysis provision may remove some court challenges, however even
if that is true, promulgating regulations correctly is a complex
process. He stated he is reluctant to advocate legislation with
the idea that departments are going to pay lip service to it and
provide a one-page cost benefit analysis that is not worth the
paper it is written on. He supported Ms. Behr's comments that the
benefit of any regulation should exceed the cost, but the effort
devoted toward determining dollar figures, for cost, compliance and
benefits should be devoted to making a better regulation.
CHAIRMAN TAYLOR asked Mr. Kreinheder to work with Senator Donley's
staff to improve the approach. He adjourned the meeting at 4:55
p.m.
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