02/10/2004 03:30 PM Senate STA
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ALASKA STATE LEGISLATURE
SENATE STATE AFFAIRS STANDING COMMITTEE
February 10, 2004
3:30 p.m.
TAPE (S) 04-3&4
MEMBERS PRESENT
Senator Gary Stevens, Chair
Senator John Cowdery, Vice Chair
Senator Bert Stedman
MEMBERS ABSENT
Senator Gretchen Guess
Senator Lyman Hoffman
COMMITTEE CALENDAR
CSHJR 30(STA) - ELIMINATE SOCIAL SECURITY OFFSET am
Relating to supporting the repeal of the Government Pension
Offset and the Windfall Elimination Provisions from the Social
Security Act.
MOVED CSHJR 30(STA) am OUT OF COMMITTEE
SENATE BILL NO. 232
"An Act relating to federal requirements for governmental plan
and other qualifications for the teachers' retirement system,
the public employees' retirement system, and the judicial
retirement system; and providing for an effective date."
MOVED CSSB 232(STA) OUT OF COMMITTEE
SENATE BILL NO. 287
"An Act relating to review of regulations under the
Administrative Procedure Act by the Legislative Affairs Agency;
and providing for an effective date."
HEARD AND HELD
PREVIOUS ACTION
BILL: HJR 30
SHORT TITLE: ELIMINATE SOCIAL SECURITY OFFSET
REPRESENTATIVE(s): GATTO
05/19/03 (H) READ THE FIRST TIME - REFERRALS
05/19/03 (H) STA
01/22/04 (H) STA AT 8:00 AM CAPITOL 102
01/22/04 (H) Moved CSHJR 30(STA) Out of Committee
01/22/04 (H) MINUTE (STA)
01/23/04 (H) STA RPT CS (STA) 3DP 1NR
01/23/04 (H) DP: GRUENBERG, SEATON, LYNN;
01/23/04 (H) NR: WEYHRAUCH
01/28/04 (H) TRANSMITTED TO (S)
01/28/04 (H) VERSION: CSHJR 30(STA) AM
01/30/04 (S) READ THE FIRST TIME - REFERRALS
01/30/04 (S) STA, HES
02/10/04 (S) STA AT 3:30 PM BELTZ 211
BILL: SB 232
SHORT TITLE: RETIREMENT: TEACHERS/JUDGES/PUB EMPLOYEES
SENATOR(s): RULES BY REQUEST OF THE GOVERNOR
05/21/03 (S) READ THE FIRST TIME - REFERRALS
05/21/03 (S) STA, FIN
02/10/04 (S) STA AT 3:30 PM BELTZ 211
BILL: SB 287
SHORT TITLE: REGULATION REVIEW
SENATOR(s): THERRIAULT
01/30/04 (S) READ THE FIRST TIME - REFERRALS
01/30/04 (S) STA, FIN
02/10/04 (S) STA AT 3:30 PM BELTZ 211
WITNESS REGISTER
Representative Carl Gatto
Alaska State Capitol
Juneau, AK 99801-1182
POSITION STATEMENT: Sponsor of HJR 30
Jerry Patterson
NEA-Alaska Retired
No address provided
POSITION STATEMENT: Answered questions on HJR 30
Marie Darlin
National Association of Retired Federal Employees (NARFE)
Juneau, AK 99801
POSITION STATEMENT: Supported HJR 30
Sam Trivette, representative
Retired Public Employees of Alaska/APEA/AFT
Juneau, AK 99801
POSITION STATEMENT: Supported HJR 30
Anselm Stack, chief financial officer
Division of Retirement and Benefits
Department of Administration
PO Box 110200
Juneau, AK 99811-0200
POSITION STATEMENT: Testified on SB 232
Melanie Millhorn, director
Division of Retirement and Benefits
Department of Administration
PO Box 110200
Juneau, AK 99811-0200
POSITION STATEMENT: Testified on SB 232
Senator Gene Therriault
Alaska State Capitol
Juneau, AK 99801-1182
POSITION STATEMENT: Sponsor SB 287
ACTION NARRATIVE
TAPE 04-3, SIDE A
CHAIR GARY STEVENS called the Senate State Affairs Standing
Committee meeting to order at 3:30 p.m. Present were Senators
Stedman, Cowdery and Chair Gary Stevens. He announced the first
order of business to be HJR 30.
CSHJR 30(STA)-ELIMINATE SOCIAL SECURITY OFFSET
REPRESENTATIVE CARL GATTO, resolution sponsor, stated that HJR
30 pertains to Social Security and asks Congress to repeal both
the Windfall Elimination Provision (WEP), and the Government
Pension Offset (GPO) provision from the Social Security Act.
In the early 1980s, the State of Alaska elected to opt out of
Social Security and to establish the Public Employees'
Retirement System (PERS) and the Teachers' Retirement System
(TRS). Sometime thereafter Social Security changed their rules
and imposed a penalty on most members that retired after 1985
and qualified for both Social Security and a public pension from
a job not covered by Social Security.
Few people, he warned, are aware of this penalty and are
devastated when they learn about it because it's too late to
make different career decisions. For instance, he began
receiving Social Security about a year ago after having paid
into the system for 50 quarters, which is ten quarters more than
required. He receives about $100 per month, which is
considerably less than the amount the personalized printouts
Social Security sent to him indicated.
A Social Security benefit can be reduced in one of two ways.
First, the Windfall Elimination Provision (WEP) modifies the
formula that is used to figure a Social Security benefit and
gives a reduced benefit for those individuals who qualify for
Social Security through their earnings record and have also been
an Alaska public employee (PERS) or teacher (TRS). The modified
benefit is used the first month you receive both a Social
Security benefit and the pension from work that didn't pay into
Social Security.
The other way the Social Security benefit can be reduced is the
Government Pension Offset (GPO). This applies if you receive a
pension from a federal, state, or local government that isn't
covered by Social Security and are eligible for Social Security
benefits as a spouse or widow(er). This affects both PERS and
TRS retirees.
REPRESENTATIVE GATTO gave a hypothetical example of what would
happen if he were to die before his wife. Assume he receives a
public pension of $3,000 per month and a Social Security payment
of $2,000 per month. As a survivor, his wife would receive just
the $3,000 pension because of the offset. Social Security would
offset two-thirds of his pension or $2,000 from his $2,000
Social Security benefit so his spouse would receive no spousal
Social Security benefit whatsoever.
HJR 30 asks the Alaska Congressional Delegation to join the 29
senators and 284 representatives who have signed as co-sponsors
to repeal the provisions.
CHAIR GARY STEVENS said he assumes this would apply to states
other than Alaska.
REPRESENTATIVE GATTO said there are 14 other states that opted
out of Social Security. He thought Alaska was right to opt out,
they just didn't know there would be a penalty applied.
CHAIR GARY STEVENS asked if all the other states opted out the
same way that Alaska did.
REPRESENTATIVE GATTO said that's what he thought, but he didn't
have that information.
SENATOR JOHN COWDERY asked what the other states are doing.
REPRESENTATIVE GATTO clarified the states that pay into the
Social Security system aren't affected. The provisions only
apply to the 15 states that opted out of Social Security.
SENATOR COWDERY asked a question about his personal situation.
REPRESENTATIVE GATTO replied he didn't believe the senator would
be affected. His concern is for the people that have made career
decisions based on what they have been led to believe they would
receive from Social Security when, in fact, they won't. He
predicted this would be a serious situation for more people than
you might guess.
SENATOR COWDERY said he has been receiving a PERS retirement
check since 1995 and he wondered how these provisions might
affect him.
JERRY PATTERSON, NEA-Alaska Retired, explained two ways to avoid
the penalty. First, individuals that paid Social Security and
PERS throughout their career aren't affected. Second, the
penalty is generational so people that were eligible and retired
from state service in 1985 avoided the penalty.
REPRESENTATIVE GATTO noted that the House Finance Committee met
with PERS and TRS retirement last night and learned a good deal
about what is needed to keep that system solvent.
CHAIR GARY STEVENS said the disincentive for retired troops to
become teachers in Alaska is shocking and asked for a comment.
REPRESENTATIVE GATTO replied there are two issues. First there
are people who might consider moving to Alaska to teach after
they retire and the other issue is those retirees who decide to
leave Alaska at some time before the start the eighth year of
teaching.
For instance, if a retired autoworker from Michigan is receiving
Social Security and he or she moves to Alaska and teaches for
seven years, everything looks fine. At the start of the eighth
year, the provision to reduce the Social Security benefit kicks
in. This makes it difficult for Alaska to recruit teachers who
have retired from a job outside Alaska and easy for retirees who
are teaching to leave Alaska after their seventh year.
MR. PATTERSON said the troops-to-teachers program typically
targets retirees from the military who have Social Security
benefits so it's more advantageous to those retirees to go to a
state where the penalties don't apply. The head of the troops-
to-teachers program in Alaska is well aware of the penalties and
has expressed concern.
CHAIR GARY STEVENS asked him to explain the troop-to-teacher
penalties.
MR. PATTERSON explained that retired military personnel would
become vested as a teacher in Alaska at eight years. Upon
vesting, they would already be pegged for a Social Security
reduction starting at something less than 60 percent and going
down to zero.
SENATOR COWDERY asked which public positions are affected in
addition to teachers and state employees.
MR. PATTERSON replied police, firemen, and municipalities that
opted out of Social Security. Potentially, 7,000 people between
the ages of 65 and 75 are impacted and some 11,000 people
between 55 and 65 years old are due to be impacted.
CHAIR GARY STEVENS asked if he mentioned the University of
Alaska because they are affected.
MR. PATTERSON said he considers them to be TRS.
SENATOR BERT STEDMAN remarked he ran into this in his work
before he became a legislator. Some clients had no idea this
existed while others knew, but didn't understand the
implications. He stated he didn't think the current penalty and
offset structure is fair and he'd like to see them removed. The
state would benefit greatly if the teacher retention issue was
resolved and removing the penalties would be fair to everyone.
CHAIR GARY STEVENS asked about the situation in which a widow
receives a substantially reduced pension.
REPRESENTATIVE GATTO said he likes to use numbers because
they're more descriptive.
A $3,000 a month pension, you're entitled to $36,000
per year. If you are subject to the provisions of
Social Security here - if you also had a great amount
of Social Security benefit like $2,000 - well they
could take the entire $2,000 of your Social Security
benefit because of the two-thirds. Two-thirds of
$3,000 is $2,000. If your benefit was $2,000 in Social
Security, that's the amount that's removed. If your
benefit was $1,500 in Social Security, that's under
the $2,000 so they take 100 percent of it [the Social
Security benefit]. Therefore you're left with the
pension only, which wasn't part of your planning.
MR. PATTERSON pointed to the nationwide statistic that 9 out of
10 individuals lose the entire spouse survivor's benefit.
MARIE DARLIN, retired federal employees representative,
testified in support of HJR 30. She said the reason the retired
federal employees are concerned is because they paid into the
civil service retirement system and not the Social Security
system so the Social Security provisions adversely affect them.
Federal employees are now part of FERS [Federal Employees
Retirement System] that pays into Social Security, but it
doesn't help those who retired under the old system.
She read the following:
Alaska has over 6,600 annuitants in the state of which
1,336 are survivor annuitants. They bring about $12.5
million monthly into the economy of this state.
About 1,500 people are actually members of NARFE
(National Association of Retired Federal Employees)
and our Alaska federation has been active since 1987.
NARFE has been working for years to get Congress to
repeal these pension offsets since they began in 1982,
although they didn't become effective until about
1985. They were intended to reduce the Social Security
annuities of anyone who also received a government
annuity. By that they meant anybody who had not paid
into Social Security - as a city government, state
government, or the federal government never did.
We feel this is totally unfair because those Social
Security payments were made to Social Security and the
employers made their portion of the payments. And the
GPO reduces or eliminates the Social Security benefit
from the spouse Social Security. The other one, the
WEP, reduces a person's own earned benefit by using a
formula that can result in a loss of as much as 60
percent - or maybe even more - just because their
career or even a part of it was with a governmental
entity.
MS. DARLIN concluded the low-income widows are impacted the
most, but thousands are affected. She urged members to support
the resolution.
SAM TRIVETT, president of the Retired Public Employees
Association of Alaska (APEA/AFT), stated he represents the
retirees in the group that aren't teachers. They represent
people who have retired from state government as well as the
municipalities that participate in PERS. He said the association
supports the resolution strongly.
The association has become involved quite recently and he
acknowledged that is because they weren't aware of the
provisions before. He checked on his personal situation as a
retiree with a wife who is still working. If he dies before she
does, she will probably get no spousal Social Security.
Social Security sent him benefits statements regularly before he
retired and never informed him that his benefit would be reduced
because he was also a state employee. It wasn't until after he
retired and then signed up for Social Security that he learned
that his Social Security benefit would be reduced by about $500
per month. Multiply that by the number of months he expects to
live and that amounts to a considerable sum of money. There are
thousands of retirees in his same situation and it will have a
major impact on people's lives.
The state opted out of Social Security in 1980 and it wasn't
until six or seven years later that Congress passed the bill. No
one was notified of the change so they didn't have any idea they
should revisit their retirement decisions. The impact to the
state in terms of lost income will amount to millions of dollars
he warned.
A top official in the Social Security Administration admitted
they didn't send notification initially; they weren't sending
notification now and probably wouldn't start sending
notification for several years. When he was lobbying for the
repeal of these provisions he was asked why anyone should
support a repeal because Social Security can't afford it. His
response is that it is a penalty to those who continued to work
after the WEP and the GPO were passed. He and others paid the
full amount that was required into the system so that money is
in the system. "So the people that tell you the money is not
there are not right."
CHAIR GARY STEVENS asked if he understood correctly that anyone
who worked as a state employee, a teacher, or a university
employee before 1980 paid into Social Security.
MR. TRIVETTE said that is correct and noted he paid into Social
Security from the time he was in 9th grade until 1980 when the
state opted out.
There was no further testimony.
CHAIR GARY STEVENS asked for a motion.
SENATOR COWDERY made a motion to move CSHJR 30(STA) from
committee with individual recommendations and attached fiscal
note. There being no objection, it was so ordered.
SB 232-RETIREMENT:TEACHERS/JUDGES/PUB EMPLOYEES
CHAIR GARY STEVENS announced SB 232 to be up for consideration.
ANSELM STAACK, Department of Administration (DOA), said he is
the chief financial officer for the public employees' and the
teachers' retirement systems and any others that operate within
the Division of Retirement and Benefits including SBS and
deferred compensation.
He explained that the Internal Revenue Service (IRS) reviewed
the entire plan reviewed by the Internal Revenue Service (IRS)
and the process took three years. He noted that to remain a
qualified plan, the division must ensure that their plans
conform to tax law, which requires modifications whenever tax
laws change. More importantly, the division had to get a private
letter ruling from the IRS for employees to be able to pay
indebtedness to the system with pre tax dollars rather than with
post tax dollars.
For the public employees' retirement system (PERS), the
teachers' retirement system (TRS), the judicial retirement
system (JRS), and the supplemental benefits system (SBS) the
division sought a private letter ruling and a plan determination
letter. The latter is an IRS letter approving the plan. As long
as the established rules are followed, monies may be paid pre
tax and the plan is eligible for IRA rollovers.
The plan document or the rules for a tax-qualified plan for
PERS, TRS and JRS are in statute and therefore any changes
require legislative action. The original bill on this subject,
SB 245, addressed the first series of changes suggested by the
IRS. It was at that time that the Division of Retirement and
Benefits came to realize that the process was going to take
longer than initially anticipated
SBS has a separate plan document from PERS, TRS, and JRS and it
contains little statutory language. Therefore, when the IRS
mandates certain changes to the SBS plan, the division is able
to make those changes without legislative action. He assured
members that just the changes that the IRS required were made to
the SBS plan.
On April 30 2003, the division received the IRS positive plan
determination letters for the PERS, TRS, and JRS plans. Because
the positive determination was conditioned on making all the
suggested changes in statute within 210 days, the division asked
that SB 232 and HB 331 be introduced. They realized there wasn't
time to get the legislation passed before the end of the
session, but felt this showed a good faith effort.
In August 2003, the division received the positive private
letter rulings related to PERS, TRS, and JRS. At the same time
they received a negative letter ruling for including village
public safety officers (VPSO) in PERS. This means VPSOs must be
statutorily removed from PERS. In the first session of the 22nd
Legislature SB 145 placed VPSOs into PERS and required the
placement by March 2002.
Mr. Staack said the division, and he in particular, did not
implement the placement because IRS had not made a ruling and
there were indications that IRS would question the placement.
Placing VPSOs in PERS without a positive ruling from the IRS
would have exposed PERS to unqualified plan status. The risk was
too great to test.
MR. STAACK said he personally argued the VPSO case before the
IRS in Washington D.C. but the ruling was negative. He noted a
copy of the ruling was in member's packets.
CHAIR GARY STEVENS remarked that tax code reading is tedious.
MR. STAACK chuckled and admitted that he's one of the few people
that enjoy it.
CHAIR GARY STEVENS announced there was a work draft CS before
the committee and he asked for a motion to adopt it as the
working document.
SENATOR JOHN COWDERY made a motion to adopt CSSB 232 as the
working document. There being no objection, it was so ordered.
CHAIR GARY STEVENS asked Mr. Staack to outline the changes
between the original bill and the CS.
A sectional analysis may be found in the bill file.
MR. STAACK noted the original bill had 19 sections and the CS
has 32 sections. He pointed to page 2, lines 6-9 and read, "No
amendment to this chapter provides any person with a vested
right to a benefit if the Internal Revenue Service determines
that the amendment will result in disqualification of the plan
under the Internal Revenue Code." That addition is to prevent
the general fund from being liable if a state law exists
allowing benefits that cannot be paid out of plan assets because
of an IRS determination.
Section 3 relates to changing any reference to "teacher(s)" to
the term "member(s)." That change occurs throughout the bill and
applies to PERS as well. The IRS determined that using terms
other than "members" could lead to confusion and a single
definition was preferable.
Sections 5 and 6 are conforming. Section 7 is to allow members
to purchase permissible service credits such as military time.
Section 10 adds additional sections to satisfy eligibility
requirements and use service history. Sections 11 and 12 are to
conform to the tax code in effect for 1980.
Section 13 was a hard fought and long negotiated addition. If a
member has any reduction from the 100 percent based benefit, the
actuarial factors that apply have to be specified in regulation.
The IRS originally wanted the factors outlined in statute rather
than regulation so to satisfy them, the division was required to
prove the basis for every actuarial factor in terms of the
mortality table. He emphasized there is good reason for this
because members should be able to find out how their benefit is
computed. He continued, "You have a right to know that yes, we
use the 1973 mortality table and we used a 2 percent interest
rate." That is in regulation and not the bill.
Section 14 speaks to the interchangeability between "teacher"
and "member." Section 15 defines the prescribed interest rate
used for the actuarial tables.
Sections 16 - 20 relate to the JRS. Section 18 says no one is
entitled to a benefit unless the code says they are. Section 20
is the actuarial assumption factors.
Sections 21 - 31 relate to PERS. Section 21 stipulates no
amendment can be made if it results in a disqualification.
Section 22 deletes VPSOs. Section 25 deletes a mistake in the
original HB 245 relating to forcing a member to cash out their
account.
Section 26 shows corrections for VPSOs for permissible service
credit. Sections 27 and 28 are conforming. Section 29 is for the
actuarial assumptions. Sections 30 and 31 are the last of the
VPSO removal.
Sections 32 - 35 are for redesignations of some systems and
outlines when certain parts are effective.
TAPE 04-3, SIDE B
4:24 pm
CHAIR GARY STEVENS thanked Mr. Staack then outlined the process
by which the state passes money to village nonprofits that pay
the VPSOs. He asked how that process is dissimilar to the state
funding school districts that use the money to pay teachers.
MR. STAACH replied there are two issues involved. When the state
gives money to a school district, the district employees may be
TRS members because they are employees of a governmental entity.
In contrast, VPSOs are not employees of a governmental entity;
they are employees of a 501(c) (3) nonprofit corporation.
He emphasized that the division tried very hard to include VPSO
and even argued that the state was leasing an employee of a
regional Native corporation for the purpose of doing public
safety services. The IRS didn't agree with that argument or any
other. Their point is that the state is asking the IRS to rule
that a small portion of the regional Native corporation,
specifically the VPSOs, are government employees and are working
for a government. At the same time, those employees will provide
services to villages that are members of PERS. IRS asked why the
village couldn't employ those individuals. IRS said asking them
to declare that part of the regional corporation is a
governmental entity raises the question of whether or not the
entire corporation is a governmental entity.
There is considerable tax law stating you can't be both a 501
(c)(3) nonprofit corporation and a governmental entity. If the
IRS were to rule that the regional corporation is a governmental
entity for purposes of the VPSOs, their nonprofit status would
be jeopardized.
CHAIR GARY STENVENS referred to page 4 of the IRS letter and
asked for clarification.
MR. STAACK replied the IRS letter provides background
information up to page 8. He read:
Thus, we conclude that the K Corporation(s) is not an
agency or instrumentality of the State or a political
subdivision thereof. Accordingly, as for the first
ruling requested, we find that the inclusion in Plan X
of Community Officers, who are employees of a K
Corporation which does not qualify as an agency...
He explained the following paragraph states that it is not legal
for the plan to take contributions from VPSOs and the employer
may not pick them up. He continued, "The only reason your SBS
money that you pay into the supplemental benefit system or the
pretax contributions you make into the Public Employees'
Retirement System is pretax is because a 'fiction' of the law
converts it to employer money for purposes of being picked up
and deposited in the plan." With regard to VPSOs, IRS is clear
in stating there is no authority to do that.
CHAIR GARY STEVENS remarked it's unfortunate that this is
occurring at the same time that the Department of Public Safety
is encouraging the regional Native corporations to assume
responsibility for the VPSO program. In this time of budget cuts
it makes it difficult for the Native corporations to continue
the program.
MR. STAACK verified that all parties tried very hard to find a
solution and even the tribal section of the IRS was involved.
SENATOR BERT STEDMAN questioned whether the division is actually
using mortality tables from the 1970s.
MR. STAACK replied the table that is used depends on when the
member was first hired in the system. Some would use those
tables, but in 2000 the division switched from the 1983 tables
to the 1994 mortality tables for the purposes of calculating
liabilities in PERS and TRS.
SENATOR STEDMAN observed the two options are to bring the plan
into compliance or not. If the latter choice is made then the
entire plan becomes noncompliant thereby triggering tax
consequences.
MR. STAACK replied if a plan is determined non-qualified, the
pretax contributions stop immediately. It's also possible that
the money that is already in the plan would become immediately
taxable. The legal liability associated with an unqualified plan
is tremendous.
SENATOR STEDMAN asked if changes could be expected every so
often as the IRS evolves their rulings.
MR. STAACK assured him that any time the tax law changes the
division is automatically required to become compliant.
SENATOR STEDMAN asked how the 457 (B) plan is handled.
MR. STAACK said the 457(B) plans are deferred compensation plans
for governments and other nontaxable entities and are called
eligible retirement plans. The PERS, TRS, JRS, teacher 403(B)s
and the supplemental benefits system, which is a defined
contribution plan are all qualified plans. For the most part,
the rules for both are now identical to all other retirement
plans. Previously they were not the same, but there is no need
to make a change in this legislation, he said. However, just to
be on the safe side, they adopted any changes that applied to
SBS to deferred compensation.
CHAIR GARY STEVENS asked for the pleasure of the committee.
SENATOR JOHN COWDERY made a motion to move CSSB 232(STA) to the
next committee of referral with individual recommendations and
the attached fiscal note. There being no objection, it was so
ordered.
SB 287-REGULATION REVIEW
CHAIR GARY STEVENS announced SB 287 to be up for consideration.
He stated the committee was hearing the bill at the sponsor's
request, but he didn't intend to take action that day. He asked
Senator Therriault to step forward.
SENATOR GENE THERRIAULT, sponsor of SB 287, explained he
introduced this bill as a result of his work on a different
piece of legislation relating to regulations formation and the
public's perception of the regulatory process. That bit of
legislation deals with the standards citizens are held to when
they appeal a decision made under regulation. It's the end of
the process when the regulation is being implemented and is
having consequences for constituents, he said.
Because of that work, he began to look at how the Legislature
interacts with regulations as they are formed. He referred
members to the flow chart, "Steps in the Regulation Adoption
Process," and pointed out that sometimes there is a
misinterpretation of the legislative intent when an agency works
with legislators then proposes a regulation. It's upsetting for
constituents to work on legislation only to find that the
regulation has taken an unexpected turn. At that point, the
Legislature has the choice of working to change the direction
the regulation is headed through the public comment period or
pass another piece of legislation.
He and his staff began to explore formalizing the role of the
Legislature for input or notification. This is not to control
the process, he quickly insisted, because regulations are an
administrative function and with the separation of powers, the
Legislature has no constitutional power to control the
regulatory process. However, he would like to explore the early
input option so that if the body that passed the underlying
statute believed there was some misinterpretation, they could
take corrective steps early in the process.
SB 287 would insert legislative legal attorneys into the process
between step 4 and 5 in the flow chart. In step 4 the Department
of Law opens the file and in step 5 the agency publishes and
distributes public notice, additional notice information, and
regulations.
He admitted that Lt. Governor Leman and his staff have some
concerns with the separation of powers issue, but he
reemphasized it isn't his intent to insert the Legislature in
any controlling manner. It's an opportunity to work
cooperatively with the administration to avoid difficulties.
Legitimate concerns relate to the Board of Game and the Board of
Fish. If citizen groups are suggesting changes to regulations
the boards oversee, the board reviews and selects the proposals
they want to move forward. He clarified, "It certainly would not
be in my intent that our legislative legal attorneys review all
of those proposed regulations that are brought to the boards."
Specifically, he said, he was interested in addressing new
legislation that is implemented through the passage of
regulations. This is when the legislative attorneys would be
involved.
With regard to the fiscal impact of the bill as currently
structured, he said he expected to receive the same advice from
the Finance Committee co-chair that he used to dispense. That
is, "Great idea, cost's too much. Come back when you get the
cost down."
SENATOR THERRIAULT admitted that controlling costs might involve
a blend of the current system with the Administrative Regulation
Review Panel and early notification or solicitation of input
into the process.
SENATOR JOHN COWDERY questioned whether legislative legal has
sufficient staff to handle the additional workload or is extra
staff included in the fiscal note.
SENATOR THERRIAULT replied the expense of additional positions
is something that needs evaluation. He noted that the
legislative legal staff has slack time during the interim and
perhaps this function could be performed then.
SENATOR COWDERY asked how long it would take to review the
regulations and give the public time to comment.
SENATOR THERRIAULT opined the legal review could be completed in
a week or two. He pointed to the practice of one department
holding another hostage and stated with certainty that the
Legislature doesn't have the constitutional power to hold up the
process in that fashion. Ideally, the same attorney that worked
with legislators in drafting the bill would look at the
regulations and give an opinion as to whether they were backing
up the stated legislative intent in the new law that was passed.
Although it's not necessary, it's not uncommon for legislators
to solicit opinions from the Attorney General's Office (AG).
There's no requirement for legislators to follow that advice,
but they certainly do take it into consideration because it
doesn't make sense to take steps that would lead to certain
legal challenge. If the regulation writers got a memo from our
legislative legal shop saying, "You're missing the boat here."
They would listen in the hope that it would save headaches down
the line. It could avoid backlash from the public that thought
they knew what to expect when they supported a piece of
legislation, but the regulation went in a different direction.
SENATOR COWDERY asked how many regulations are established in a
year.
SENATOR THERRIAULT replied Mr. Stancliff could probably answer
that question.
DAVE STANCLIFF, staff to the Regulation Review Committee,
reported that Senator Therriault tasked him with finding a way
to bring about positive changes in the process through the
regulatory reform process. A good process works well for any
political persuasion and deals with the balance of power between
the Executive Branch of government and the Legislative Branch of
government.
MR. STANCLIFF reported that the regulatory process that Colorado
employs is one of cooperation. Their legal services aren't
adversarial with the Attorney General's Office and that's the
model in SB 287.
He suggested that the system in Alaska doesn't have the same
level of balance that other states have with regulatory review.
First, it's not uncommon to hear that an agency regulator told a
disgruntled citizen that if they didn't like a regulation they
should speak to their legislator because that's who passed the
bill that made the department establish the regulation. He
admitted that is sometimes valid, but many times it's not
because the regulation that's causing the heartburn has little
to do with the statute that was passed.
The other imbalance is that the Attorney General's Office isn't
involved until after the public comment period. Currently the
public is given an opportunity to comment on an agency's
proposed regulation after which it is sent to the Attorney
General's Office for review. If that office finds fault with the
regulation, it is remanded back to the agency for repair. After
the repair, the commissioner decides whether or not to send the
proposed regulation back through the public comment period.
Often the decision is to skip additional public comment so the
regulation continues through the process and becomes law. The
result is that the public sees a regulation that is different
than the one they commented on.
In response to Senator Cowdery's questions, he said the fiscal
note calls for three full time attorneys, which would be very
costly if you weren't sure of a good return. He estimated that
the number of regulations per year is well over 1,000.
In Colorado, regulation writers realized their work was going to
be screened by the Legislative Branch. Regulations were written
more carefully, there weren't as many. The process saved money
from the start to the end because they didn't send as many back,
they weren't adjudicated the same way because they were better
quality regulations. The investment climate in Colorado changed
significantly.
Using the fishing industry as an example he noted how much
impact one regulation can have in a sensitive and multimillion
dollar industry. Clearly, it's important to get it right the
first time.
With regard to costs he thought that they would come down
significantly if fish and game were left out. "I think you might
eliminate one of those positions," he said
DEBORAH BEHR, regulations attorney with the Department of Law,
said she and Annette Kreitzer were there to talk about
regulatory reform and better interactions with the Executive
Branch. She stated agreement with Senator Therriault's premise
that it's necessary to cooperate for regulations to be better
developed and more responsive to the public.
She expressed the opinion that everything that's in the bill
could be done without a statute and she firmly believes that if
a new statute isn't need, you shouldn't put a new one on the
books.
She said she would be working with Senator Therriault's staff to
determine whether they were looking for a policy review or a
lawyer's review. She has reviewed legislation and found it to be
perfectly legal, but then had to ask the commissioner which
policy direction he or she wanted to take. At that point, the
commissioner talks to policy experts who are usually not lawyers
and selects the policy direction.
MS. BEHR suggested that the committee decide whether they want
to invest expensive lawyer dollars in looking at all the
regulations in the state. Certainly, she asserted, there are
regulations such as local hire and complex tax regulations that
would require a lawyer, but some sort of prescreening by
legislative staff or other non-lawyers would make better use of
your legal services dollars.
She said she would talk to staff about the standards legislative
legal is supposed to be using as compared to the standards that
the Department of Law is supposed to use because they don't
mesh. For example, legislative legal doesn't look at compliance
with drafting legal styles.
Another concern is what happens when legislative legal is busy
and the provision is for a mandatory review and they don't have
the staff to conduct the review in a timely fashion. An
unintended consequence might be that a third party would charge
that the regulations are somehow flawed because the statute says
legislative legal shall review the regulations.
MS. BEHR noted that several agencies have expressed concern
about regulation delays so discussions should take place to
decide what to include. Certainly there's a difference in new
legislation and legislation that is for cost containment and
right now most of the bills she is reviewing deal with trying to
get the state statutes to match a pared down budget. She said,
I don't want to have the department waiting to hear
from legislative legal and then missing time - a month
or two - in implementing a policy call the Legislature
made to pare down a budget. This is of particular
concern in the understaffed areas of health and social
services. If you miss a month in Medicaid, you're
talking about millions of dollars.
She advised that the Department of Law has a budget request in
for a lawyer. It's much easier for the Executive Branch to
garner federal dollars for legal resources than it is for the
Legislative Branch. "So if you believe there is a need for more
legal resources, that certainly is a possibility and at any time
you found a regulation you were troubled with and wanted a legal
opinion, certainly the Department of Law is the resource for
you."
She then brought up a technical concern related to public
records. Because the attorneys at legislative legal aren't part
of the Executive Branch, there isn't a clear attorney-client
privilege. It isn't entirely clear that an opinion written by
legislative legal wouldn't be a discoverable document, which
could be very problematic on a complex oil regulation.
Next she brought up the applicability of regulations in process
pointing out that several industries are waiting for regulations
and there isn't a section in the bill to address that.
She concluded her remarks saying that it is important that the
Legislature wants to better interface with the Executive Branch
and she reemphasized that comments legislators make on
regulations are considered strongly and evaluated seriously.
ANNETTE KREITZER, chief of staff to Lt. Governor Leman, stated
that the Lt. Governor appreciates Senator Therriault's interest
in reviewing how regulations are promulgated and when and how
legislators have an impact on the process. That being said, she
admitted that she's a bit baffled when her office doesn't hear
from legislators during the public comment period because the
public includes legislators. The departments would absolutely
take those comments very seriously, she said.
She showed members a regulation packet and said it lists all the
legislators that got the notice about the regulations being
proposed in response to HB 271, which was passed last session.
There was ample opportunity to comment yet there is nothing in
the packet reflecting that a single legislator had a comment.
The Lt. Governor has assured Senator Therriault that if there is
something about the process that doesn't work, such as more
training for staff or new legislators, they're very willing to
work with him to accomplish his desire to ensure that
legislators are involved early on.
TAPE 04-4, SIDE A
5:00 pm
CHAIR GARY STEVENS asked Ms. Behr about her concern about delays
and whether she had considered what options might be available
to address the delay.
MS. BEHR clearly stated that this bill doesn't stop anyone from
going forward with a project while legislative legal is
reviewing. However, she said if she were commissioner of Revenue
and she knew that legislative legal was looking at regulations,
she'd probably wait for that legal review before proceeding.
She repeated that a screening process would help address the
issue of how quickly a review could be completed. Legislative
legal attorneys should neither spend time looking at minor
regulations that don't require an attorney's expertise nor spend
time doing legal research that the Department of Law isn't going
to use.
CHAIR GARY STEVENS thanked everyone for their comments and
announced SB 287 would be heard again in the future. With
nothing further to come before the committee, he adjourned the
meeting at 5:15 pm.
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