Legislature(1993 - 1994)
05/03/1994 08:00 AM STA
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
HOUSE STATE AFFAIRS STANDING COMMITTEE May 3, 1994 8:00 a.m. MEMBERS PRESENT Representative Al Vezey, Chairman Representative Pete Kott, Vice-Chairman Representative Bettye Davis Representative Gary Davis Representative Harley Olberg Representative Jerry Sanders MEMBERS ABSENT Representative Fran Ulmer COMMITTEE CALENDAR SB 190: "An Act relating to income withholding and other methods of enforcement for orders of support; relating to medical support orders; amending Alaska Rule of Civil Procedure 90.3(d); and providing for an effective date." HELD IN COMMITTEE SB 333 : "An Act relating to disclosure of close economic associations by certain state employees and to the prohibition against nepotism in the executive branch of state government; and providing for an effective date." HELD IN COMMITTEE WITNESS REGISTER PHILLIP PETRIE Child Support Enforcement Division Department of Revenue 550 W. 7th Ave. Anchorage, AK 99501 Phone: 269-6803 POSITION STATEMENT: Addressed CSSB 190(FIN)am RANDY WELKER, Legislative Auditor Legislative Audit P.O. Box 113300 Juneau, AK 99811-3300 Phone: 465-3830 POSITION STATEMENT: Addressed CSSB 333(FIN)am PREVIOUS ACTION BILL: SB 190 SHORT TITLE: ENFORCEMENT OF SUPPORT ORDERS SPONSOR(S): JUDICIARY BY REQUEST JRN-DATE JRN-PG ACTION 04/13/93 1336 (S) READ THE FIRST TIME/REFERRAL(S) 04/13/93 1336 (S) JUDICIARY, FINANCE 02/23/94 (S) JUD AT 1:30 PM BELTZ RM 211 02/28/94 2987 (S) JUD RPT CS 3DP SAME TITLE 02/28/94 2987 (S) FN TO SB & CS PUBLISHED (REV) 03/15/94 (S) FIN AT 08:30 AM SENATE FIN 518 03/15/94 (S) MINUTE(FIN) 03/15/94 (S) MINUTE(FIN) 03/17/94 (S) FIN AT 09:30 AM SENATE FIN 518 04/06/94 3463 (S) FIN RPT CS 1DP 3NR SAME TITLE 04/06/94 3463 (S) LETTER OF INTENT WITH FIN REPORT 04/06/94 3463 (S) FN TO CS PUBLISHED(REV, COURT) 04/06/94 (S) FIN AT 08:00 AM SENATE FIN 518 04/08/94 (S) RLS AT 00:00 AM FAHRENKAMP ROOM 203 04/08/94 (S) MINUTE(RLS) 04/11/94 3555 (S) RULES TO CALENDAR 4/11/94 04/11/94 3558 (S) READ THE SECOND TIME 04/11/94 3558 (S) FIN CS ADOPTED UNAN CONSENT 04/11/94 3558 (S) ADVANCED TO THIRD READING UNAN CONSENT 04/11/94 3558 (S) READ THE THIRD TIME CSSB 190(FIN) 04/11/94 3558 (S) (S) ADOPTED FIN LETTER OF INTENT 04/11/94 3559 (S) PASSED Y17 N3 04/11/94 3559 (S) EFFECTIVE DATE SAME AS PASSAGE 04/11/94 3559 (S) Adams NOTICE OF RECONSIDERATION 04/11/94 3567 (S) ZERO FN TO FIN CS PUBLISHED (COURT) 04/12/94 3589 (S) FN TO FIN CS PUBLISHED (REV) 04/12/94 3589 (S) RECON TAKEN UP/IN THIRD READING 04/12/94 3589 (S) HELD ON RECONSIDERATION TO 4/13 CALENDAR 04/13/94 3642 (S) HELD ON RECONSIDERATION TO 4/14 CALENDAR 04/14/94 3679 (S) RETURN TO SECOND FOR AM 1 UNAN CONSENT 04/14/94 3682 (S) AM NO 1 MOVED BY TAYLOR 04/14/94 3682 (S) AM NO 1 ADOPTED UNAN CONSENT 04/14/94 3682 (S) AUTOMATICALLY IN THIRD READING 04/14/94 3682 (S) MOTION TO RETURN TO 2ND FOR AM 2 04/14/94 3682 (S) RETURN TO 2ND FOR AM 2 UNAN CONSENT 04/14/94 3683 (S) AM NO 2 MOVED BY TAYLOR 04/14/94 3683 (S) AM NO 2 FAILED Y6 N13 E1 04/14/94 3684 (S) AUTOMATICALLY IN THIRD READING 04/14/94 3684 (S) MOTION TO RETURN TO 2ND FOR AM 3 04/14/94 3684 (S) RETURN TO 2ND FOR AM 3 Y12 N7 E1 04/14/94 3684 (S) AM NO 3 MOVED AND WITHDRAWN 04/14/94 3684 (S) AUTOMATICALLY IN THIRD READING 04/14/94 3685 (S) (S) ADOPTED FIN LETTER OF INTENT 04/14/94 3685 (S) PASSED ON RECONSIDERATION Y19 N- E1 04/14/94 3685 (S) EFFECTIVE DATE SAME AS PASSAGE 04/15/94 3732 (S) COURT RULE CHANGE VOTE SAME AS PASSAGE 04/15/94 3734 (S) TRANSMITTED TO (H) 04/18/94 3540 (H) READ THE FIRST TIME/REFERRAL(S) 04/18/94 3540 (H) STATE AFFAIRS,JUDICIARY,FINANCE 05/03/94 (H) STA AT 09:00 AM CAPITOL 102 BILL: SB 333 SHORT TITLE: DISCLOSURE OF EXEC.BR. CLOSE ASSOCIATIONS SPONSOR(S): RULES BY REQUEST OF LEGISLATIVE BUDGET AND AUDIT JRN-DATE JRN-PG ACTION 02/22/94 2912 (S) READ THE FIRST TIME/REFERRAL(S) 02/22/94 2912 (S) STA, JUD 03/16/94 (S) STA AT 9:00 AM BUTROVICH RM 205 03/16/94 (S) MINUTE(STA) 03/18/94 3266 (S) STA RPT 3NR 03/18/94 3266 (S) FISCAL NOTE PUBLISHED (ADM) 03/18/94 3266 (S) ZERO FNS PUBLISHED (LAW, GOV) 02/22/94 3522 (S) JUD RPT 5DP 04/06/94 (S) JUD AT 01:30 PM BELTZ ROOM 211 04/08/94 3523 (S) PREVIOUS FN (ADM) 04/08/94 3523 (S) PREVIOUS ZERO FN (LAW, GOV) 04/08/94 3523 (S) ADDITIONAL REFERRAL TO FIN 04/18/94 (S) FIN AT 09:00 AM SENATE FIN 518 04/19/94 (S) FIN AT 08:15 AM SENATE FIN 518 04/19/94 (S) RLS AT 12:30 PM FAHRENKAMP ROOM 203 04/19/94 3778 (S) FIN RPT CS 5DP 1NR SAME TITLE 04/20/94 3803 (S) FN TO CS PUBLISHED (ADM) 04/19/94 3778 (S) PREVIOUS ZERO FNS APPLY (GOV, LAW) 04/25/94 3971 (S) RULES TO CALENDAR 4/25/94 04/25/94 3973 (S) READ THE SECOND TIME 04/25/94 3973 (S) FIN CS ADOPTED UNAN CONSENT 04/25/94 3973 (S) ADVANCED TO THIRD READING UNAN CONSENT 04/25/94 3973 (S) READ THE THIRD TIME CSSB 333(FIN) 04/25/94 3974 (S) RETURN TO SECOND FOR AM 1 UNAN CONSENT 04/25/94 3974 (S) AM NO 1 MOVED BY LITTLE 04/25/94 3974 (S) AM NO 1 ADOPTED UNAN CONSENT 04/25/94 3974 (S) AUTOMATICALLY IN THIRD READING 04/25/94 3974 (S) PASSED Y19 N- A1 04/25/94 3975 (S) EFFECTIVE DATE SAME AS PASSAGE 04/25/94 3986 (S) TRANSMITTED TO (H) 04/27/94 3745 (H) READ THE FIRST TIME/REFERRAL(S) 04/27/94 3745 (H) STATE AFFAIRS 05/03/94 (H) STA AT 09:00 AM CAPITOL 102 ACTION NARRATIVE TAPE 94-52, SIDE A Number 000 CHAIRMAN AL VEZEY called the meeting to order at 9:00 a.m. Members present were REPRESENTATIVES G. DAVIS, SANDERS and OLBERG. CHAIRMAN VEZEY postponed the meeting to 9:00 a.m. due to a late session the previous night. A quorum was present. HCSCSSB 190(STA) - ENFORCEMENT OF SUPPORT ORDERS CHAIRMAN VEZEY opened CSSB 190(FIN)am for discussion. He recognized HCSCSSB 190(STA), version M, as a new committee substitute and asked if there was a motion to adopt it for the purpose of discussion. REPRESENTATIVE HARLEY OLBERG so moved. (REPRESENTATIVE B. DAVIS joined the meeting at 9:01 a.m.) CHAIRMAN VEZEY adopted HCSCSSB 190(STA) for discussion. He noted REPRESENTATIVE B. DAVIS's arrival. He pointed out the differences in the committee substitute. On page 6, beginning on line 11, wording was added that clarifies that withholding orders are not obligatory upon employers in perpetuity. Withholding orders are valid for three years, which is concurrent with an employer's record keeping requirements for taxes. He stated the rest of Section 11 is a slight rewording of existing statute for clarification. (REPRESENTATIVE KOTT joined the meeting at 9:03 a.m.) CHAIRMAN VEZEY noted REPRESENTATIVE KOTT's arrival. CHAIRMAN VEZEY pointed out the change under Section 30, page 14, line 7, whereby the words "or" and "intentionally" have been added to qualify what would trigger a civil fine against an employer for failure to honor an assignment of wages. CHAIRMAN VEZEY asked Phillip Petrie to join the table to give a sectional summary. He noted most of the sections are attempts to comply with federal law and some are inclusions by the Senate for improving Alaska's Child Support Enforcement Division laws. (REPRESENTATIVE KOTT left the meeting at 9:05 a.m.) Number 109 PHILLIP PETRIE, OPERATIONS MANAGER, CHILD SUPPORT ENFORCEMENT DIVISION (CSED) in Anchorage, addressed HCSCSSB 190(STA). He supported the passage of the committee substitute. He stated both the Department of Revenue and CSED fully support the bill and the changes made in HCSCSSB 190(STA). MR. PETRIE explained Section 1 adds to the duties and titles of CSED considered under paragraph 9, provisions for Indian health care for families, if it is available. Section 2 adds the same provision. Section 3 aligns the Alaska Court System with federal law and requirements for the state plan. Therefore, after January 1, 1995, the court system must issue a child support order with an immediate income withholding order in it. Section 4 addresses the court issue of the order. Number 135 CHAIRMAN VEZEY asked for a more detailed explanation of Section 3. MR. PETRIE referred to Section 3, page 3, beginning on line 16, "Except as provided in (m) of this section..." He explained the current change to the federal statute gives the court and the agency an opportunity to give an exception to immediate income withholding under limited circumstances. Section (m), found later in HCSCSSB 190(STA), addresses what those circumstances are and how an exception for an immediate income withholding is given. MR. PETRIE stated there are two kinds of withholdings in a child support case: 1) An immediate withholding, which takes effect upon issuance of the order, or 2) an initiated withholding, which starts as soon as the agency receives it or as soon as the custodial parent serves it on an employer. He noted an exception is given, whereby no withholding is taking place, as long as they continue to pay in accordance with the court order. If payments fall behind, or the custodial parent goes on Aid for Families with Dependent Children (AFDC) initiated income withholding is triggered. The obligor must be notified and have an opportunity to appeal before the withholding is initiated. Number 181 REPRESENTATIVE JERRY SANDERS observed MR. PETRIE had been referring to "her" receiving support, and questioned if any men received support. MR. PETRIE apologized for the reference. He clarified the proper terms were "obligor" and "obligee." There is no gender basis. REPRESENTATIVE SANDERS inquired about the ratio between men and women receiving child support. MR. PETRIE answered of the cases, approximately 21 percent are paid by females and 79 percent are paid by males. CHAIRMAN VEZEY added changes in federal law are pushing states toward a program where it is mandated that child support payments flow through the state agency. It is not mandated at this time. REPRESENTATIVE SANDERS inquired what effect this would have on the money flowing through. Would CSED take a portion of the money. What is the purpose. CHAIRMAN VEZEY answered the employer has an option of charging $5 for each payment it deducts from a person's paycheck. This would not apply to those making voluntary payments. The obligor, under HCSCSSB 190(STA), could be held obligated for all court costs related to the court action. The state has to pay for the handling of the paper. REPRESENTATIVE SANDERS clarified the money received by the custodial parent does not decrease. CHAIRMAN VEZEY affirmed REPRESENTATIVE SANDERS. Number 228 MR. PETRIE continued his sectional summary. Section 4 requires the CSED to be sent a copy of the support order by the court, as it will serve for accounting and records maintenance. Section 5 sets up the provisions under which a person can have an exception. He noted the federal regulation states the state must set some standards for initiating. Those standards were already in existing statute and regulation; therefore, they were borrowed and put in this particular statute. Section 6 explains appeal processes and states income withholding under support does not require immediate income withholdings not satisfied. Under Section 7, "under this chapter" and "the relevant provisions of" were added as housekeeping measures. Section 7 provides for those who are not applying for CSED services or AFDC support, and for those who go strictly through the court. He expressed CSED functions only for record keeping and accounting for those people not under Title IV(d) of the Social Securities Act. Serving orders will now be served under first class mail, which the court prefers, rather than certified mail. However, if an employer does not respond to the notice by first class mail, a certified, registered notice will be sent out 30 days later. Under Section 7, existing statute which reads "14 days" is changed to read "14 working days." This will give the employer more time to respond. Currently, weekends or holidays are not counted. He pointed out at the bottom of Section 7, the paragraph added by the Senate which allows the employer to deduct $5 for every payment made to the CSED. Currently, there is no provision for an employer to deduct any money from a withholding to pay for their withholding. Number 228 CHAIRMAN VEZEY interjected he believed current statute allowed $1. (REPRESENTATIVE OLBERG left the meeting at 9:15 a.m.) MR. PETRIE clarified $1 was allowed only in the employer reporting program, relating to new hires only, from three years ago. The $5 which would be charged per HCSCSSB 190(FIN) is in line with federal statute and other states. He noted Missouri allows the employer to charge $6 a month. MR. PETRIE stated Section 8, 9 & 10 have a section to chapter word change. CHAIRMAN VEZEY noted he had explained Section 11 earlier. MR. PETRIE continued Section 12, inserted by the Senate, states any time CSED over collects they will return the money immediately or pay interest to the obligor. He felt this was fair even though it will cause the agency more work. Section 13, section m, outlines the exceptions for immediate income withholding for both the agency and the court. The agency has restrictions as to when it can issue exceptions; however, the court does not. He stated in conversations with the federal government they specifically said "that they were allowing a great deal more latitude for those cases that are not enforced by the agency." The judge can grant an exception based on his interpretation of what he believes is fair. CHAIRMAN VEZEY questioned if the court has considerably more leeway in dealing with the federal government. MR. PETRIE affirmed CHAIRMAN VEZEY. He referred to paragraph 3, Section 13, inserted as a Senate amendment, which is supposed to be considered as an exception for disability payments the children are receiving directly. He referred to section (n) which calculates the amount of child support and credits the obligor for medical and dental insurance, and educational payments. He explained this provision is already contained in Alaska Rule of Civil Procedure 90.3, however, he believed the intent was to put it in statute. MR. PETRIE explained Section 15 states, to the extent allowed by federal law, CSED is to deduct $5. CHAIRMAN VEZEY questioned what the Code of Federal Regulations (CFR) allowed in this case. MR. PETRIE answered the CFR allows fees to be charged to either party or split equally. An amount is not specified. He pointed out CSED is not allowed by CFR to deduct them from a custodial parent's payment, if that parent has assigned their rights to the state. In this case, the custodial parent would be on some form of public assistance (e.g., Medicaid, AFDC, etc.). CSED enforces on behalf of the public assistance agency. Number 378 CHAIRMAN VEZEY tried to recall the federal statute which he believed limited the deduction to $25 a year. MR. PETRIE corrected the limit was for a fee CSED may charge to maintain and enforce a case. Currently, the state does not opt to do this. He stated Alaska designated $1 in its state plan. He explained $1 is paid out of general funds for every case per year the CSED enforces. CHAIRMAN VEZEY asked what percentage of cases the $5 would apply to. MR. PETRIE responded CSED is estimating, based on information from the courts and vital statistics, of the average 1,600 cases per year of court child support orders, CSED is "picking up" 1,200. He explained 400-600 cases per year will be categorized as not being enforced by the agency and in the "non-IV(d)" program. CHAIRMAN VEZEY inquired how many cases CSED does per year. MR. PETRIE answered CSED has 24,000+ with orders and another 16,000 they are trying to get orders for. Number 412 MR. PETRIE continued with reference to Section 16 in which statute numbers were added. He explained Section 17 was a rewrite of the "notice of liability" statute. Under the new federal guidelines the state is supposed to have immediate income withholding, as opposed to noticing. The notice is given through the court proceedings or they receive a notice of findings and financial responsibility from the agency. He noted they have 30 days to appeal the notice by going to informal conference, formal hearing and judicial appeal. Due process rights are followed at the time the order is issued. Section 17 has been rewritten to cover initiated income withholding aspects. He pointed out the federal government gives the individual 15 days to notify CSED, 15 days for CSED to hold a hearing, and 15 days for CSED to issue the decision. He continued in Section 18, the misstatement of "130" was corrected to read "120." Section 19 adds a formal hearing for clarification and mentions posting bond of security due under financial responsibility, if a person requests that formal hearing. He explained currently, it is known that CSED is not establishing child support as fast as the federal government requires. The requirements, however, are constantly changing. CSED needs to cut down the time of a formal hearing process from the current 270 days, in regulation and statute, to approximately 75 days in order to ever reach compliance. Since 1986, he noted, there has been a requirement for posting a bond in regulation and Alaska has never passed that statute. The auditors from the 1992 audit strongly suggested that requirement be put into statute in 1994 as part of SB 190. He further stated the 1986 state plan stated Alaska already had this provision. Number 459 CHAIRMAN VEZEY clarified Section 19 brings Alaska into compliance with a federal requirement of ten years ago. MR. PETRIE answered the basic requirements dealing with SB 190 were passed in the federal Family Support Recovery Act of 1988 (FSRA), with a final implementation date of January 1, 1994, for the court ordered income withholding. CSED has been required to do income withholding since October 1, 1990, and has done so. Section 19 brings the court system into compliance and is the last aspect of the FSRA. He said the bonding provision was passed as amendments to the Social Security Act of 1984 with an implementation date of 1985. In 1986, the CSED director certified to the federal government that Alaska had this bonding statute in place. He expressed CSED will write regulations for implementation. Public hearings will occur. MR. PETRIE continued his sectional analysis with Section 20. Section 20 is a "clean up of the number." Section 21 & 22 have small wording changes and statute number changes. Section 23 deals with the service notice of findings of financial responsibility and when CSED can insert a lien. He noted ".062 changes" are added. MR. PETRIE explained he added Section 24 to SB 190 through consultation with Bruce Twomley, Chairman, Commercial Fisheries Entry Commission. He gave an example of a controversy CSED had with the Internal Revenue Service regarding the seizure of moneys from commercial fishers with CSED liens against them. CSED files every place an obligor resides; however, the IRS interpretation of state statute concluded that for the lien to be valid it had to be filed wherever the individual fished. He expressed IRS's complaints that no place in the statute did it state that a lien filed at Commercial Fisheries Entry Commission had any validity. Section 24 provides this validity and gives CSED leverage against the IRS. He noted the bureaucracy to find out where everyone fished would be cumbersome. Number 514 MR. PETRIE continued with Section 25. Section 25 gets CSED down to the 15 days required for the initiated income withholding. He noted the 30 days included in the section is for the notice of finding of financial responsibility order. Section 26 is an amendment inserted by the Senate which is in line with Civil Rule 90.3(d). He emphasized Section 26 does no harm to the statute. Section 27 has minor wording changes. Section 28 reasserts the authority of an employer to deduct from other wages and salary owed to the obligor. Section 29 is required language, by the federal government, that states CSED will not take more than what is required under the Consumer Credit Protection Act, a sliding scale between 50-65 percent. CSED does not often ask for more than 50 percent. There is a small wording change on service of process, whereby CSED will serve penalties by certified mail rather than by first class mail. Section 31 is a provision requested by the court system and inserted by the Senate. CHAIRMAN VEZEY interjected it is therefore not required by federal law. MR. PETRIE answered it is not. Federal law requires if an employer fails to respond to a withholding order that the state have a mechanism to enforce it with penalties established. He stated currently, when CSED uses the enforcement process the money does not go to the child support case. The money is a fine and penalty going to the general fund. The employer does not pay the obligor's child support if they fail to honor the withholding order. The courts felt it was unfair if CSED was not enforcing the withholding order, but an individual was through private parties. They wanted an obligee, who had served the withholding order themselves, could exercise the penalty aspects, thereby making it payable to them, not the state. He did not foresee anyone allowing or attempting to exercise "both paragraphs" concurrently. MR. PETRIE stated Section 32 was inserted by the Senate and he believed it appeared to be doing something for the Department of Corrections (DOC). CHAIRMAN VEZEY clarified HCSCSSB 190(STA) jumped from Alaska Statute Title 25 to Title 33. He noted the only change in existing Title 33 is found on page 15, line 6, whereby "AS 25.27.062" is deleted and the whole chapter "AS 25.27" is added. MR. PETRIE expressed he had no objections to the change. He stated CSED sends withholding orders to DOC for any prisoner in custody, thereby receiving a portion of whatever the facility pays them while incarcerated. Section 33 amends Civil Rule 90.3(d), considering the Indian Health Service provision. He noted the federal government does not want to recognize medical services provided by the Indian Health Service as "adequate medical insurance." CSED could not get them to solidify their opinion, therefore a year-and-a-half ago CSED made it policy to recognize the Indian Health Service. He pointed out this was a specific concern of Senator Al Adams. He emphasized military personnel are not required to find another insurance policy if their dependents have military medical care. He continued with Section 34 which deletes two provisions in existing statute that are in contravention with current withholding statutes and the process to get a withholding order lifted. He pointed out sections 2 & 5, Chapter 75, SLA 1991, regarding the employer reporting program, are repealed. He strongly urged the reporting program be left in statute even though it is not a federal requirement. The employer must have 20+ employees and must be designated by CSED. He estimated 190 employers in the state are now designated. CHAIRMAN VEZEY interjected the committee is familiar with those sections. Number 641 MR. PETRIE continued with Section 35, a transitional provision, which the court subsystem wanted to insert to give them the opportunity to "work in" all orders they had issued between January 1 and when HCSCSSB 190(STA) becomes effective. He urged the committee to pass HCSCSSB 190(STA) from committee. CHAIRMAN VEZEY called for an at ease at 9:42 a.m. so as the committee could review their paperwork. He resumed the meeting at 9:47 a.m. REPRESENTATIVE G. DAVIS, in reading the letters from the Federal Department of Health and Human Services, questioned their threat of withholding certain funds from the state should the state not come into compliance. What would the fiscal ramifications be. MR. PETRIE answered "in round numbers" $10 million of direct funding from the federal government to CSED, essentially all of their operating money and incentives and federal matching funds will be forfeited. The federal government will also take an appropriate penalty against an approximate $70 million a year in AFDC money. He noted the worst case would be a loss of $80 million and the very least would be $10 million. The loss would be almost immediately because they gave Alaska almost two years leeway to get this legislation passed. Number 667 REPRESENTATIVE BETTYE DAVIS stated she wanted to move HCSCSSB 190(STA). CHAIRMAN VEZEY responded he would like to hold on the motion. He recognized two fiscal notes for HCSCSSB 190(STA). He prepared a new fiscal note for the CSED which now read zero. The other zero fiscal note dated 4-11-94, was from the Alaska Court System. He moved to adopt these two accompanying fiscal notes. CHAIRMAN VEZEY, hearing no objection, adopted the new fiscal notes. He stated he wanted to hold HCSCSSB 190(STA) in committee for further review. REPRESENTATIVE B. DAVIS asked to find out if the committee had a need to further review the bill. She expressed concern that it pertained to a federal mandate. CHAIRMAN VEZEY responded he wanted to hold the bill in committee. (REPRESENTATIVE B. DAVIS left the meeting at 9:52 a.m.) CSSB 333(FIN)am - DISCLOSURE OF EXECUTIVE BRANCH CLOSE ASSOCIATIONS CHAIRMAN VEZEY opened CSSB 333, by request of Legislative Budget & Audit, for discussion. TAPE 94-52, SIDE B Number 016 RANDY WELKER, LEGISLATIVE AUDITOR, addressed CSSB 333. He began CSSB 333 was introduced as a result of an audit Legislative Budget & Audit (LB&A) conducted on the Division of Fish & Wildlife (F&W), Department of Public Safety. He noted a couple years ago the legislature passed legislation, as a result of a prior audit, that prohibited F&W protection officers from being employed also as assistant guides. LB&A felt this was a direct conflict of interest and the legislature agreed. MR. WELKER explained CSSB 333 is focused on the aspect of close economic association between people who regulate industries and have the ability to exercise discretion, over people whom they may have economic associations with. He commented in the F&W audit they found officers, or spouses of officers, who held commercial fishing licenses or owned commercial fishing vessels. They found indications of significant property transactions between F&W protection officers and the industry they regulate. Presently, there is nothing in law requiring those associations to be disclosed to anyone. MR. WELKER emphasized this problem does not only relate to F&W. He gave a hypothetical example, whereby there is nothing in law that requires an alcoholic beverage control board inspector to inform anyone if he/she has an interest in a liquor license. The intent of CSSB 333, he stated, is to put a disclosure requirement in law, in the executive branch ethics act, similar to that which exists in the legislative ethics act. They are required to refrain from taking a withholding action that may be questioned because of their economic association. CSSB 333 further provides the supervisor "can or should" either reassign functions, or direct the divestiture of the interest if it is in the best interest of the state. MR. WELKER commented the other section of CSSB 333 is an expansion of the nepotism prohibition in statute. Currently, the only relationship prohibited by state law is an employee cannot be related to the commissioner of the department in which they work. LB&A does not believe it is appropriate for there to be any supervisor/subordinate relationships in state employment. The amendment prohibits relationships of a supervisor position for anyone in the employee's immediate family. This problem was noticed by the LB&A in an audit of the Alaska Psychiatric Institute where they found a supervisor had provided for the promotion and salary advancement of a member in their immediate family. The addition of this section, he believed, would improve public perception and remove any possible direct conflicts that might exist. (REPRESENTATIVE KOTT entered the meeting at 9:55 a.m.) CHAIRMAN VEZEY observed the current nepotism statute has been in place without amendment since 1959. He believed regulations also existed within agencies regarding nepotism. MR. WELKER replied there are some nepotism regulations in place, however, he was not sure they were solidly based in statute. He felt the reading of the nepotism statute was very clear as to what it covered. CHAIRMAN VEZEY interjected it read "department or agency," therefore the definition was a little broader. MR. WELKER further stated if there are any regulations that try to prohibit lower level relationships they "may be suspect." CHAIRMAN VEZEY replied they may be suspect in terms of their impact of law, but they are policy. He noted the problem of nepotism arises particularly in rural areas. Hiring of local people is often limited because of nepotism restrictions. MR. WELKER clarified the intent of LB&A is to place it permanently is statute so it applies equally to all departments and agencies. Number 164 CHAIRMAN VEZEY commented CSSB 333 may be wise for Anchorage and Fairbanks, but he questioned the impact on rural areas where the populations are significantly smaller. He inquired to what degree CSSB 333 went. MR. WELKER answered spouse, parent, children, grandparent, and regular members of the person's household. Number 190 CHAIRMAN VEZEY stated he did not intend to move CSSB 333 at this meeting, however, it was an interesting subject. He was surprised to see the nepotism statute had not been amended since 1959 considering the changes in the ethics which took place in the 1970s and 1980s. CHAIRMAN VEZEY held CSSB 333 in committee. ADJOURNMENT CHAIRMAN VEZEY, having no more business before the committee, adjourned the meeting at 10:00 a.m.