02/13/2018 01:30 PM House FINANCE

HOUSE BILL NO. 279                                                                                                            
                                                                                                                                
"An Act  extending the termination  date of the  Real Estate                                                                    
Commission; and providing for an effective date."                                                                               
                                                                                                                                
2:14:19 PM                                                                                                                    
                                                                                                                                
MEGAN   HOLLAND,  STAFF,   REPRESENTATIVE  ANDY   JOSEPHSON,                                                                    
briefly  explained  the  bill.   She  relayed  that  HB  279                                                                    
extended the termination date of  the Real Estate Commission                                                                    
until June 30th, 2026; a full  8 years as recommended by the                                                                    
Legislative   Audit   Division.  The   commission   oversees                                                                    
brokers,   associate  brokers,   and   sales  licenses.   In                                                                    
addition,   the   commission   regulated   supervisors   and                                                                    
licensees. The  current total of licensees  across the state                                                                    
was 567.                                                                                                                        
                                                                                                                                
Representative Wilson  noted that members'  packets included                                                                    
a letter of opposition  (Deborah Brollini, January 29, 2018)                                                                    
(copy on file). She asked  for details. Ms. Holland answered                                                                    
that the letter had been  addressed the previous week in the                                                                    
House Labor  and Commerce Committee.  Ms. Holland  had given                                                                    
the   letter  to   Tracy  Barickman,   Chair,  Real   Estate                                                                    
Commission,  who reviewed  the  letter  and discovered  that                                                                    
the complaint  had been  previously processed  and concluded                                                                    
that  the  substance of  the  complaint  was not  under  the                                                                    
commission's purview.                                                                                                           
                                                                                                                                
2:16:29 PM                                                                                                                    
                                                                                                                                
Representative Wilson  asked if any information  or response                                                                    
had been sent back to the  author of the letter. Ms. Holland                                                                    
deferred the question to the Real Estate Commission.                                                                            
                                                                                                                                
TRACY  BARICKMAN,   REAL  ESTATE  COMMISSION,   PALMER  (via                                                                    
teleconference),  answered  that   the  complaint  had  been                                                                    
addressed via  an investigative  process and  the individual                                                                    
had been notified of the findings.                                                                                              
                                                                                                                                
2:17:51 PM                                                                                                                    
                                                                                                                                
KRIS  CURTIS,   LEGISLATIVE  AUDITOR,  ALASKA   DIVISION  OF                                                                    
LEGISLATIVE  AUDIT, referenced  a copy  of the  audit report                                                                    
dated June  2017. She cited  the "Report  Conclusions" found                                                                    
on page 7 and read the following:                                                                                               
                                                                                                                                
          Overall,  the audit  concludes  the commission  is                                                                    
          serving  the  public's   interest  by  effectively                                                                    
          licensing  and  regulating real  estate  licensees                                                                    
          and  offices. The  commission monitored  licensees                                                                    
          and  worked to  ensure only  qualified individuals                                                                    
          practice  in Alaska.  Furthermore, the  commission                                                                    
          developed and  adopted regulations to  improve the                                                                    
          real  estate  industry   and  better  protect  the                                                                    
          public.                                                                                                               
                                                                                                                                
          In  accordance   with  AS   08.03.010(c)(19),  the                                                                    
          commission is  scheduled to terminate on  June 30,                                                                    
          2018.  We recommend  that  the legislature  extend                                                                    
          the  commission's  termination  date to  June  30,                                                                    
          2026.                                                                                                                 
                                                                                                                                
Ms. Curtis  delineated that  the prior  sunset audit  was in                                                                    
July  2015 and  only  extended the  commission through  June                                                                    
2017. The prior audit concluded  that the commission was not                                                                    
serving the  public's interest because it  failed to procure                                                                    
a  master   errors  and  omissions  insurance   policy.  The                                                                    
commission had  been required  in statue  in 2008  to obtain                                                                    
the  master errors  and omissions  insurance policy  for the                                                                    
real estate  licensees and required the  licensees to obtain                                                                    
an  error   and  omissions   policy  either   through  their                                                                    
independent  policy or  through the  board's master  policy.                                                                    
However,  if the  board  was unable  to  provide the  master                                                                    
policy,  the  statute  absolved  the  licensees  from  their                                                                    
requirement to  obtain the  insurance. The  audit discovered                                                                    
that no  suitable reason had  been given by the  division or                                                                    
board why the  insurance was not procured.  During the prior                                                                    
sunset period statutes were  changed requiring all licensees                                                                    
to  carry   the  errors   and  omissions   insurance  policy                                                                    
regardless  whether  the  board   obtained  a  master  copy.                                                                    
However, the  division awarded the  contract for  the policy                                                                    
in June  2017, and the  current audit recommended  an 8-year                                                                    
extension. She moved to page  17 of the audit that contained                                                                    
Recommendation 1:                                                                                                               
                                                                                                                                
     DCBPL's chief investigator should continue to improve                                                                      
     oversight to ensure cases are actively investigated                                                                        
     and completed timely.                                                                                                      
                                                                                                                                
She explained that the recommendation  was a repeat from the                                                                    
prior  audit  that discovered  29  out  of 36  investigative                                                                    
cases  had unjustified  periods of  inactivity ranging  from                                                                    
124 days  to 4.5  years. The audit  found that  the division                                                                    
had made  progress in decreasing  the period  of inactivity.                                                                    
An  electronic dashboard  was created  to  monitor the  case                                                                    
resolution progress,  and internal benchmarks  were designed                                                                    
to   establish   timeliness   and  performance   goals   for                                                                    
investigators. The  current audit identified three  cases in                                                                    
a  judgmental   sample  of  seven  cases   with  periods  of                                                                    
inactivity  without justification,  ranging from  72 to  194                                                                    
days.  The testing  found  improvements  were still  needed.                                                                    
Therefore,   the   audit    recommended   that   the   chief                                                                    
investigator should continue to  improve oversight to ensure                                                                    
cases were actively investigated.  She reported that page 29                                                                    
included the department's response to  the audit and page 31                                                                    
contained the  board's response. The governor's  response to                                                                    
the audit was  on page 27. All the  responses concurred with                                                                    
the audit findings and recommendation.                                                                                          
                                                                                                                                
2:21:24 PM                                                                                                                    
                                                                                                                                
Representative  Kawasaki  had  a  question  about  the  fund                                                                    
balance surplus.  He noted  that the  balance was  over $600                                                                    
thousand.  He  wondered  how  the  board  would  reduce  the                                                                    
surplus.                                                                                                                        
                                                                                                                                
SARA  CHAMBERS, DEPUTY  DIRECTOR, DIVISION  OF CORPORATIONS,                                                                    
BUSINESS   AND   PROFESSIONAL   LICENSING,   DEPARTMENT   OF                                                                    
COMMERCE, COMMUNITY AND  ECONOMIC DEVELOPMENT, answered that                                                                    
the  board  had recently  completed  a  renewal period.  The                                                                    
division  and  board were  working  together  to ensure  the                                                                    
surplus did not remain.                                                                                                         
                                                                                                                                
Representative  Kawasaki asked  if Ms.  Chambers had  worked                                                                    
for the department  in 2011 when the fees  were doubled. Ms.                                                                    
Chambers   answered  in   the  affirmative.   Representative                                                                    
Kawasaki  surmised   that  the  commission  had   made  vast                                                                    
improvements. He  asked whether there was  reason to believe                                                                    
the fee spike would occur  again in the future. Ms. Chambers                                                                    
explained that  the reason  the fee  spike occurred  was the                                                                    
failure of  the division to adequately  communicate with the                                                                    
commission  and  licensees, which  came  as  a surprise.  In                                                                    
addition, the  division had made  major improvements  to the                                                                    
fee  analysis  that  was  used in  tandem  with  boards  and                                                                    
commissions. She  voiced that  it was  difficult to  use the                                                                    
past to  predict the future.  She related that  spikes could                                                                    
be  anticipated in  the future  because  there were  unknown                                                                    
quantities  that  needed to  be  factored  in for  statutory                                                                    
requirements. The primary  variables were investigations and                                                                    
appeals of  board decisions. At times,  investigations  cost                                                                    
upwards  of   $100  thousand.   A  similar   scenario  could                                                                    
unpredictably  swing the  fees  higher.  State law  required                                                                    
licensees  to cover  the costs;  the  division attempted  to                                                                    
provide a cushion but not one as large as the commissions.                                                                      
                                                                                                                                
2:24:50 PM                                                                                                                    
                                                                                                                                
Representative Kawasaki mentioned the  fiscal note costs. He                                                                    
noted that  the fiscal  note for a  7 member  commission was                                                                    
the  same  as the  previous  fiscal  notes  for a  5  member                                                                    
commission.  He  wondered  why. Ms.  Chambers  believed  the                                                                    
fiscal note  contained an  error and  would address  it with                                                                    
the division  director. She stated  that all the  boards and                                                                    
the  real  estate  commission specifically,  were  doing  an                                                                    
excellent   job   in   cutting   costs   using   video   and                                                                    
teleconferencing for meetings.                                                                                                  
                                                                                                                                
Representative Guttenberg spoke  to periods of investigative                                                                    
inactivity in  cases referenced in  the audit. He  noted the                                                                    
improvement but wondered what the  expectation should be. He                                                                    
thought  that the  current period  of  inactivity was  still                                                                    
long. He wondered  if there was a conflict  between the full                                                                    
extension  and the  recommendation. Ms.  Curtis answered  it                                                                    
was  a   division  function  and   not  a   board  function.                                                                    
Therefore, the auditors  did not weigh the  issue heavily in                                                                    
the   audit   recommendation   pertaining  to   the   sunset                                                                    
extension.                                                                                                                      
                                                                                                                                
2:27:01 PM                                                                                                                    
                                                                                                                                
Representative Thompson  spoke to the fiscal  note error and                                                                    
deduced that  the fiscal note  missed two members.  He asked                                                                    
if it was  necessary to fix the fiscal note  before the bill                                                                    
moved out of committee.                                                                                                         
                                                                                                                                
Co-Chair Seaton  asked whether the committee  could count on                                                                    
a  revised fiscal  note. Ms.  Chambers replied  that it  was                                                                    
necessary to discuss the matter with the division director.                                                                     
                                                                                                                                
2:27:57 PM                                                                                                                    
AT EASE                                                                                                                         
                                                                                                                                
2:28:24 PM                                                                                                                    
RECONVENED                                                                                                                      
                                                                                                                                
Co-Chair  Foster asked  Ms. Chambers  to address  the fiscal                                                                    
note.                                                                                                                           
                                                                                                                                
Ms.  Chambers  explained   that  commission  was  structured                                                                    
similarly to  other boards and commissions.  The fiscal note                                                                    
FN1 (CED),  represented the  additional expenses  to operate                                                                    
the  commission.  The  fiscal  note  provided  the  spending                                                                    
authority of $21  thousand for board members  to attend four                                                                    
meetings  per year,  travel, advertising  of public  notice,                                                                    
per diem, and training and conference fees.                                                                                     
                                                                                                                                
2:29:29 PM                                                                                                                    
                                                                                                                                
Co-Chair Foster OPENED public testimony.                                                                                        
                                                                                                                                
Co-Chair Foster CLOSED public testimony.                                                                                        
                                                                                                                                
2:30:06 PM                                                                                                                    
AT EASE                                                                                                                         
                                                                                                                                
2:30:38 PM                                                                                                                    
RECONVENED                                                                                                                      
                                                                                                                                
Co-Chair Foster relayed the bill would be held.                                                                                 
                                                                                                                                
HB  279  was  HEARD  and   HELD  in  committee  for  further                                                                    
consideration.