Legislature(2003 - 2004)
01/30/2004 08:02 AM Senate JUD
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* first hearing in first committee of referral
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= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
SB 203-OFFICE OF ADMINISTRATIVE HEARINGS
SENATOR GENE THERRIAULT, sponsor, told members that the Senate
Judiciary Committee held a few hearings on this subject last
year. SB 203 is a complex piece of legislation. He has continued
to discuss with the Murkowski Administration how to fashion and
implement the legislation. He said his goal is to refresh
members' memories on the legislation and to prepare members to
consider another committee substitute (CS) in the next week.
SENATOR THERRIAULT explained that the concept of a panel of
administrative law judges has been in the legislative process
for a number of years. Senator Ogan worked on this issue for a
number of years. The purpose of SB 203 is to separate the
administrative adjudication process from the agencies that
promulgate and enforce regulations. Currently, an agency writes
regulations and that agency's in-house staff acts as the
enforcer, judge and jury over the enforcement of the
regulations. Quite often constituents have contacted legislators
complaining that they are not getting a legitimate opportunity
to question the fairness of regulations from the agency that
wrote those regulations.
SENATOR THERRIAULT pointed out the concept of SB 203 is to form
a centralized panel of hearing officers within the Department of
Administration (DOA) to provide an arm's length between the
agency and the person acting as judge and jury. The federal
government and a number of states use this approach with good
results. He said it is not his intent to create a centralized
pool and lose expertise. However, the staff with adjudicatory
functions in some agencies have extra time. His thought is to
have two or three hearing officers specialize in certain issues
and be assigned to a department. They would also be cross-
trained so that if they have extra time they could help out with
the caseload in another agency. He believes that will enable the
state to better utilize the staff it has and increase confidence
among Alaskans that they are getting a fair shake. In addition,
it should lead to better regulations because agencies will know
that the regulations they write will be adjudicated by a truly
independent person who is not pressured to back the department.
SENATOR THERRIAULT informed members that their packets contain a
CS that contains technical changes.
CHAIR SEEKINS clarified that version U was before the committee.
SENATOR THERRIAULT told members that a blank committee
substitute was brought before the committee last year but,
rather than propose one more [at this time], he is attempting to
incorporate input from the departments into one document. He
noted that the testimony the committee will hear today will
provide members with an overview and will not address any
particular version.
SENATOR OGAN told members that several years ago, he and staff
worked to move a hearing officer out of what he recalled to be
the Department of Revenue (DOR) because of the industry's
perception [of an unfair system]. He said the change worked
well.
CHAIR SEEKINS said he totally supports the concept and that his
questions are for the purpose of clarification. He then asked
Mr. Stancliff to testify.
MR. DAVID STANCLIFF, staff to the Administrative Regulation
Review Committee (ARRC), gave the following synopsis of the
measure.
Just to bring committee members back up to speed a
little bit and give you an idea of where we're at
after work over the interim, the version you had
before you was the State Affairs version. We had
discussed some amendments to that version but, as
Senator Therriault mentioned, it would probably be a
better use of the committee's time to now put those
together in a package of larger, more policy-oriented
amendments that have been discussed with us by the
administration.
As has happened in other states, this issue is really
not a partisan... [END OF SIDE B]
TAPE 04-1, SIDE B
MR. STANCLIFF continued:
... of how to make government operate better, save
money, and also deliver better adjudication to people
who may want to challenge government regulations. The
devil's in the details - you've heard that before and,
in this case, we have a very fragmented adjudication
system spread out all over the state. We have hearing
officers of every size and level of expertise located
in all sorts of places. We have many boards and
commissions that do a lot of hearings and what the
administration has asked us to do is to be sensitive
to the diverse situation we have and to try to amend
this legislation to have as seamless a transition as
possible.
Underlying the basis for that request are two things.
First of all, I know it's Senator Therriault's desire
and I'm sure the committee's also, not to simply
disrupt the interest of the state in such a major
piece of reform. Maybe, more importantly, costs are
involved and so to keep costs minimal and this
transition as seamless as possible, we're now going
through approximately 25 suggestions that have been
given to us by this administration - we're still
discussing some of those.... We hope to have at your
next meeting, Mr. Chairman, those in the form of a CS
and we will go through each one for the committee
members to consider.
I want to state for the record that we have worked
with people both inside and outside the process. We've
worked with hearing officers, we've worked with other
rd
ALJs and, on February 3 ... there is an expert panel
assembled by the state Association of Administrative
Law Judges who are going to discuss this piece of
legislation. There's quite a bit of interest in it,
it's sort of a new model. And they're going to be
available on-line in the Terry Miller building from
noon to 2. It's not a legislatively convened meeting
but we're going to be able to listen to what they have
to say about, first of all, how their states
implemented and constructed their model, how it
compares to ours, and hopefully they'll warn us on
some of the things to avoid and some of the things to
try to do. So I want to make members and staff to
members aware of that meeting.
So we've had a lot of input from a lot of places. You
do have on-line this morning Mr. Dan Houghton who is a
chief financial officer for Alaska Regional Hospital.
His particular institution, I believe, has been kind
of in the centrifuge of the regulation process for
almost 10 years now and is still not out. He would
like to, if he could, speak to the committee and
unless there are questions you would want me to answer
at this time, I would defer to Mr. Houghton if he's
on-line.
CHAIR SEEKINS asked Mr. Houghton to proceed with his testimony.
MR. DAN HOUGHTON, Chief Financial Officer at Alaska Regional
Hospital, provided the following timeline of events that
correlate to the discussion on SB 203.
· During 1991 to 1993, the Alaska Regional Hospital felt
the Medicaid rates it was given were inadequate for
its costs.
· Alaska Regional Hospital filed a rate appeal in 1994.
· A series of events left the hearing officer position
vacant for approximately a two-year period so a
hearing officer did not hear the case until 1997. The
hearing lasted approximately three weeks.
· On May 26, 2000, the hearing officer who heard the
case issued her decision. The Alaska Regional Hospital
was seeking reimbursement of an additional $4 million
in costs.
· In June of 2000, the hearing officer's decision was
submitted to Commissioner Jay Livey.
· In April of 2001, Commissioner Livey issued a
decision. Most of his ruling reversed the hearing
officer's decision.
· The Alaska Regional Hospital filed an appeal in April
of 2001 in the Alaska Superior Court.
· The Superior Court ruled on the case on January 9,
2003. The Alaska Regional Hospital felt that ruling
was in its favor and the dollar impact at that time
was about $4.2 million.
· The Superior Court, as part of the administrative
ruling process, sent that ruling to the commissioner
for action on the ruling itself. In February or March
of 2003, Commissioner Gilbertson remanded the ruling
to the hearing officer for action.
· The current hearing officer set oral argument for
October of 2003 however, due to a change in maternity
leave plans, the hearing officer departed earlier than
planned. The Alaska Regional Hospital now hopes its
oral argument will be heard in March or April of 2004.
MR. HOUGHTON told members the Alaska Regional Hospital is
anxiously supporting this bill. The hospital [board]
believes had the new system been in place, the process the
hospital went through would have been much faster.
SENATOR OGAN asked for clarification of the Superior
Court's ruling and the remand to the hearing officer.
MR. HOUGHTON explained that his understanding is that when
the Superior Court ruled, it actually sent the case back to
the commissioner for action upon that ruling. The
commissioner has the ability to either make a decision upon
that ruling or remand it to the hearing officer for review
and a "ruling on the ruling." That was the process the
current commissioner chose.
SENATOR OGAN asked, "Is it the same - the fox is watching
the hen house that you had before?"
MR. HOUGHTON said his quick estimate is that four to five
different hearing officers dealt with this particular case
over the last 10 to 11 years.
SENATOR OGAN asked if he has calculated the time value of
money and how much that will be.
MR. HOUGHTON said he has calculated about $2 million to
$2.5 million in interest. He repeated his support of the
legislation, as the hospital board believes it will aid the
process that the Alaska Regional Hospital and other
facilities have experienced. He maintained that a
centralized hearing officer panel will provide efficiency
found in a group. The larger body will allow the
proceedings to continue regardless of personal issues that
may arise with individual hearing officers.
MR. STANCLIFF asked members to consider the following
matters. No matter how one sides in Alaska politics, it is
never in the best interest of government to do something it
ultimately fails in and is costly. Under today's system, it
may be impossible to get out of the regulatory centrifuge,
unless the agency wants to release that party. He told
members that the Alaska Regional Hospital case is one of
many that he has heard of in which a party petitions for
relief and the decision goes to the commissioner, is
remanded to the hearing officer, and back and forth, on and
on. More importantly, a 2001 National Law Judge Foundation
paper and an examination by a law professor at UCLA provide
the genesis of why this issue is before the committee
today. Those papers are premised on the fact that when the
courts give deference to agency decisions, many people
suppose that deference is given because of all of the work
the hearing officer may or may not have done - collecting
evidence and taking testimony. However, that simply is not
the case. The courts actually give deference to the last
decision and the highest power in that decision making
process, the commissioner. The courts do not even have to
look at what the hearing officer did. He also asked members
to keep in mind the rule of necessity, which has developed
over the years within the judicial system. That rule allows
a judge to hear a case even if the judge is biased when
there is no other way to deal with the case. His research
shows that more frequently, over time, the courts have
allowed those decisions to stand. As a result, the states
have said:
Look, if we're going to have this expertise
argument constantly before us that the agencies
put up, and we're going to have commissioners who
have perhaps ex parte contact making our
decisions, and we're going to have courts
upholding those decisions based on the rule of
necessity, the only avenue for our citizenry and
the people who represent them to have a fair and
impartial hearing, is through a more impartial
adjudicator. That, as much as anything, has
driven the reform in other states.
MR. STANCLIFF said he is not intimately familiar with the
Alaska Regional Hospital case so he does not know if that
case is tinged with that problem. He asked members to
consider that those problems are being factored into the
discussion to change to independent adjudicators and create
time limits on the process for seeking additional relief.
CHAIR SEEKINS said his impression is that it should be the
state's responsibility, or the responsibility of the
hearing officers, to reach a fair and just decision. Many
times the perception of the outside party, when that party
is aware of a personal relationship between the hearing
officer and the prosecutor, is that the party will not get
a fair hearing. He applauded Senator Therriault's effort to
address this issue. He asked if SB 203 contains a provision
that allows the panel to contract with an outside source if
it does not have anyone available with an appropriate level
of expertise.
MR. STANCLIFF said one of the amendments he is working on
would allow the chief hearing officer to provide expertise
at the hearing or allow the agency to conduct the hearing.
The beauty of this model is that the chief hearing officer
will be monitoring what is going on so the agencies will be
aware of that oversight. He believes the amendment will
address the expertise issue but not tilt it so far as to be
used as an excuse to do away with due processes.
CHAIR SEEKINS said his concern is to be able to expand the
pool beyond the panel on a case-by-case basis when
necessary.
SENATOR OGAN asked Mr. Stancliff to recount for committee
members the meeting between a hearing officer and a
constituent when Senator Ogan employed him.
9:08 a.m.
MR. STANCLIFF told members when a constituent first came to
then Representative Ogan's office, as staff he would
explain that if an issue is in some form of adjudication or
under legal proceedings, it is not always best or proper
for Senator Ogan to get involved. In this case, the
constituent asked Mr. Stancliff to attend a meeting with
agency staff to verify whether the horror stories he
described are true.
MR. STANCLIFF said he attended the meeting and the
constituent asked questions that he thought Mr. Stancliff
should hear the answers to. At one point, an agency
representative warned him to be careful or the agency would
be looking into other matters. He was speechless. That
demonstrated to him the agency's level of impunity. The
constituent's goal was to get out of the regulation process
and get to court. That did ultimately happen but it took
years. The agency called the constituent's bonding agent
and caused him to lose his bond. The constituent spent
millions to get through the administrative process to get
to court to get a decision.
SENATOR THERRIAULT told members that agencies reviewed this
legislation over the interim. Some of their comments and
concerns were unfounded. He and staff worked with agency
personnel to sift through which concerns were valid and
drafted amendments to address them. One example is that the
agencies noted that the appeal process is actually dictated
by federal law in some areas, particularly when an agency
uses federal funds. Those suggestions are being
incorporated into a new CS.
SENATOR FRENCH asked, regarding the Alaska Regional
Hospital's case, if the appeal process involved the hearing
officer first, then the commissioner, then the Superior
Court.
MR. STANCLIFF said in that case he believes the case went
back and forth between the hearing officer and the
commissioner and then went to the Superior Court.
SENATOR FRENCH asked if SB 203 changes that process or
whether the commissioner will still be involved. He then
expressed concern about the interplay between a complex
dispute and the time constraints.
MR. STANCLIFF replied at this point, the time limit is not
flexible enough. He has been working with the
administration to make them flexible enough to consider and
integrate the Administrative Procedures Act, complex
matters, and federal requirements. He noted that there has
been discussion about whether or not the courts should give
deference to decisions of commissioners versus decisions of
hearing officers versus decisions of hearing officers
within the central panel. He told committee members they
may want to consider whether the way the courts give
deference based on the record and expertise versus the
commissioner's ability to summarily overturn a decision
should be changed. He pointed out that some commissioners
have petitioned to continue to have that authority. SB 203
splits the difference down the middle: the commissioners
would still have the ability to overturn, but the decision
must be based on the record, factual and evidential, not
simply on opinion. He suggested the committee might want to
look at changing the deference if that language is removed.
SENATOR FRENCH asked what standard of review the Superior
Court uses when it gets a commissioner's decision.
MR. STANCLIFF deferred to Mr. Hemenway.
MR. ANDY HEMENWAY, Hearing Officer, Department of
Administration (DOA), said he believes the standard of
review for a decision that goes up to the Superior Court on
factual matters is the same as that for a case on appeal
from Superior Court to the Supreme Court: substantial
evidence. On questions of law, the Superior Court defers to
the agency on matters within the agency's expertise,
depending on the nature of the statute.
SENATOR FRENCH asked if the standard of review is set out
in statute.
MR. HEMENWAY said he does not believe it is. He said it
could be in the Administrative Procedures Act but he
believes the decisions on appeal are a matter of case law.
SENATOR FRENCH asked if SB 203 changes the standards.
MR. STANCLIFF replied:
From the standpoint of the commissioner's ability
to overturn a decision, I guess there's a change
in the overall look at things but it does not
change specifically what you just spoke to Mr.
Hemenway about.
SENATOR FRENCH questioned, "So there is nothing in the act
that tells a Superior Court judge how to analyze decisions
of hearing officers or commissioners? You would maintain
the same standards as set now?"
MR. HEMENWAY said that is correct.
9:17 a.m.
SENATOR THERRIAULT said as a result of conversations with
the Department of Law, he believes the CS will say the
commissioner still has the power to overrule, but only on a
certain basis, and the commissioner will have to produce a
written finding. The Department of Law supports that
approach because when the commissioner overturns a hearing
officer and no written finding exists, the Department of
Law has to support the commissioner's action in court with
no paper trail.
CHAIR SEEKINS announced that the committee would hold SB
203 and await the new CS.
SENATOR THERRIAULT informed members that Mr. Stancliff
would spend time with individual members as soon as the new
CS is prepared. He pointed out that the bill is complex and
dry but makes big changes and that he has been working with
the administration on the successful implementation of this
bill.
With no further testimony, CHAIR SEEKINS adjourned the
meeting at 9:19 a.m.
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