Legislature(1995 - 1996)

03/16/1995 08:10 AM House STA

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
txt
 HSTA - 03/16/95                                                               
 HB 163 - COMPLIANCE COST ESTIMATES REQUIRED                                 
 CHAIR JAMES announced the next bill on the agenda was HB 163.                 
                                                                               
 Number 650                                                                    
                                                                               
 ROD MOURANT, Administrative Assistant to Representative Pete Kott,            
 expressed that apologies of Representative Kott for being unable to           
 attend the meeting himself.  He said that HB 163 takes the                    
 recommendations of the Alaska Mineral Commission, the National                
 Federation of Independent Business, and excerpts from the                     
 Department of Law's drafting manual of 1993, and puts into statute            
 the requirement that an agency prepare a cost of compliance                   
 estimate, when publishing notice to adopt or repeal a regulation.             
 He added that the fiscal notes for the bill range from zero to                
 $178,000, which seemed to be differing understandings from the                
 agencies of what the bill required.  He pointed out that the                  
 Department of Health and Social Services, who adopts an enormous              
 amount of regulations and works closely with their constituencies,            
 gave a fiscal note of zero, while the Department of Environmental             
 Conservation estimated a fiscal impact of $178,700 with the hiring            
 of three more full time employees.  He stated the Department of               
 Revenue cited reasons that precluded them from calculating a cost             
 of compliance estimate, and felt that the legislature should pay              
 this cost anyhow.  He offered to answer any questions.                        
                                                                               
 Number 673                                                                    
                                                                               
 REPRESENTATIVE ROBINSON asked if he had seen the letter from                  
 Michelle O'Leary and whether he had any comments on it.                       
                                                                               
 MR. MOURANT informed her that he had seen the letter just recently            
 and had heard her testimony on teleconference.  He argued that most           
 of her concerns about HB 163 were already present in existing law.            
 He stated the only thing that this bill will do, is take the                  
 suggestion of the 1993 Department of Law drafting manual for                  
 regulations and put it into statute as a requirement.  He commented           
 that with regard to her second concern, regarding the additional              
 cost to the agency for doing this calculation, is essentially a               
 mute point.  This is because the agencies should have no additional           
 cost for complying with this bill, if they are following the                  
 suggestion in the drafting manual from the Department of Law.                 
                                                                               
 TAPE 95-28, SIDE A                                                            
 Number 000                                                                    
                                                                               
 CHAIR JAMES inquired whether Bonnie Williams wanted to testify on             
 HB 163 via teleconference from Fairbanks.                                     
                                                                               
 BONNIE WILLIAMS stated she had one comment regarding HB 163.                  
 Unlike HB 130, this bill clearly specifies that the cost of                   
 compliance happen before the public hearing.  She thought the cost            
 of compliance definition in this bill could also be interpreted to            
 be a cost-benefit analysis as well, and said she had no problem               
 with this bill.                                                               
                                                                               
 CHAIR JAMES asked if anyone else wished to testify on this bill.              
                                                                               
 JACK KREINHEDER, Senior Policy Analyst, Office of Management and              
 Budget, thought this bill raised some of the same concerns as HB
 130.  He said that simple changes that had a lot of common sense              
 appeal, deserved to be well thought out.  He reiterated the                   
 concerns of the Department of Law, that regulations lacking cost              
 estimates or with insufficient cost estimates will be a substantial           
 source of future litigation.  He thought that even if a department            
 makes a good faith effort to comply with calculating a cost of                
 compliance analysis, they could still be challenged in court.  He             
 remarked the Administration had no problem with the concept of                
 considering the impact of regulations on the public.  He thought              
 this was the intent of the language in the drafting manual, that              
 wherever possible, the agencies should try to minimize those costs            
 of compliance.  He thought the problem with HB 163, as it is                  
 currently written, is that it creates an extra expense for the                
 agencies in doing this calculation and can be exploited by anyone             
 opposed to regulations.                                                       
                                                                               
 Number 110                                                                    
                                                                               
 CHAIR JAMES stated she was trying to visualize what happens now               
 when a regulation is drafted and is interested in the                         
 recommendation for doing a cost of compliance analysis in the                 
 Department of Law's drafting manual.  She thought the advantage of            
 HB 163, in making that recommendation a requirement, is that this             
 information would then be a matter of public record.  This would              
 then give the public the opportunity to dispute the calculations of           
 the agency during the public hearing.  She said she could                     
 understand the concern that this could lead to future litigation,             
 as every time you add a layer to the process and further definition           
 to the regulation, you give greater latitude and cause for a                  
 lawsuit.  She thought that by leaving the regulation more open, you           
 give less cause for lawsuit.  She thought the fact still remained             
 though, that under the current system, we are not providing any               
 standard of how it should be done, just recommending that a                   
 calculation of cost compliance be done.                                       
                                                                              
 Number 152                                                                    
                                                                               
 REPRESENTATIVE PORTER commented that he thought this bill just                
 needed a provision that said if an agency makes a good faith effort           
 at establishing the cost of compliance, they will not be held                 
 liable short of gross negligence for the results of that effort.              
 This would take care of any concern of future litigation caused by            
 this bill.                                                                    
                                                                               
 MR. KREINHEDER stated he thought this was a good suggestion, but he           
 would like to consult with the Department of Law.  He thought there           
 could be a problem with a statute that puts something off limits to           
 legal challenge.                                                              
                                                                               
 REPRESENTATIVE PORTER pointed out that this would not put it off              
 limits to legal challenge, but just set up parameters that would              
 have to be met in any legal challenge.  To challenge in court, an             
 individual would simply have to establish gross negligence in their           
 case.                                                                         
                                                                               
 MR. KREINHEDER thought this might solve the legal issues, but would           
 not solve the issue of additional cost to the agency.  He found it            
 impractical to assume the agencies could do a proper cost analysis            
 for everyone who could possibly be affected by a regulation.  He              
 cited an example given by the Department of Fish and Game, where              
 they could propose a regulation setting the size of fishing gill              
 nets, and for them to follow the letter of the law, they would have           
 to survey the fishermen to determine who owned that size net and              
 who would have to purchase one, the total number of fishing                   
 vessels, etc.  Thus, he was concerned that even with the allowance            
 of a good faith effort by the agency, that the legislature not pass           
 a law that would simply be a charade, or which agencies would have            
 no choice but to give lip service to.  He thought there were                  
 numerous examples to document that agencies could not possibly no             
 all of the people, who would be affected by a given regulation.               
 Additionally, many regulations do not prescribe what steps an                 
 individual must follow to be in compliance with the regulation.               
                                                                               
 Number 229                                                                    
                                                                               
 CHAIR JAMES commented she had a different interpretation about what           
 this cost of compliance analysis really meant.  She felt that, to             
 use his example of the fisherman's gill net, the agency would                 
 calculate the cost of a new gill net for the fisherman who needed             
 to purchase one, and then any savings the fisherman would                     
 experience.  In summary, she felt a cost of compliance calculation            
 was the cost to an individual involved in a particular industry,              
 not the cost to the industry as a whole.  Thinking in terms of a              
 cost benefit analysis, the cost of compliance to the individual               
 would be weighed against the benefit to the state as a whole, which           
 would give direction to the state as to how to act in a given                 
 situation.  She said it was the measurement of the cost of                    
 compliance verses the benefit to the state, and whether we were               
 willing to accept that cost for that benefit.                                 
                                                                               
 REPRESENTATIVE PORTER said he was of the opinion that the                     
 Administrative Procedures Act had acted properly and withstood                
 challenge with regards to notice and putting those that will be               
 affected on notice about a proposed regulation.  Thus, he did not             
 feel there would be the type of problem where the agency would have           
 to ask every fisherman whether they had a particular size of gill             
 net.  He argued the agency would have to make the same type of                
 notification that was required now, and with a good faith effort to           
 listen to the testimony and then use logic to determine the cost of           
 implementation or compliance.  He did not think it was that hard.             
 He thought that an agency listening to public testimony was good              
 for everyone.  If everyone tried to make it work, there is a way to           
 do it.                                                                        
                                                                               
 Number 295                                                                    
                                                                               
 REPRESENTATIVE IVAN  questioned whether these regulations could be            
 made flexible to allow the small businesses adjust to the costs of            
 the first year of implementation.                                             
                                                                               
 MR. KREINHEDER explained that he was reading the language of the              
 bill differently, as implying that the agency would have to                   
 calculate the cost of compliance for the whole industry, not just             
 for an individual involved in that industry.                                  
                                                                               
 CHAIR JAMES agreed, saying she thought this was the cost of                   
 compliance for the individual, and she felt the language was                  
 prohibitive for anyone to interpret it differently, except as an              
 individual person who will be regulated by the proposed regulation.           
 That is the relative cost to determining whether a regulation will            
 put a person out of business or not.  She asked if anyone else                
 would like to testify.                                                        
                                                                               
 Number 336                                                                    
                                                                               
 PAM NEAL, President of the Alaska State Chamber of Commerce, stated           
 the chamber was very much in support of the legislation.  It was a            
 prime concern of the chamber and they felt quite basic.  No                   
 business decision is made without a cost-benefit analysis.  She               
 added that no one questioned the benefit of proposed legislation              
 being accompanied by a fiscal note, before being voted upon.  It              
 seemed very basic that an agency proposing a new regulation should            
 do an analysis of the cost of compliance.  Thus, they were very               
 much in support of HB 163.                                                    
                                                                               
 REPRESENTATIVE ROBINSON asked how this bill would help her as a               
 business person in Alaska.  She argued that even if she knew the              
 cost of a particular regulation, she would still have to comply.              
 Therefore, she failed to see the benefit of this bill.                        
                                                                               
 Number 370                                                                    
                                                                               
 REPRESENTATIVE PORTER thought the benefit of this bill would be in            
 the agency having to justify the cost of their regulation showing             
 there would not be a more efficient way to comply.                            
                                                                               
 CHAIR JAMES agreed, saying that by making this calculation a                  
 requirement, it would allow the public the opportunity to comment             
 if the they feel the cost benefit ratio is out of sync.  She felt             
 the agencies should give the public all of the information                    
 available to be able to make a decision of whether they supported             
 the regulation or not.                                                        
                                                                               
 MS. NEAL concurred, saying if the cost were not known to the                  
 business community, they could not adequately make a decision about           
 a particular regulation.  She felt this bill was extremely basic,             
 and failed to see why it had not been done before.                            
                                                                               
 Number 414                                                                    
                                                                               
 REPRESENTATIVE PORTER agreed with the intent of this bill, but felt           
 the reason this has not been done before is the concern over                  
 litigation.  He thought this could be fixed easily, and requests              
 the sponsor to amend HB 163 with the previously suggested wording             
 regarding gross negligence.                                                   
                                                                               
 CHAIR JAMES asked the bill sponsor if they would be willing to                
 draft an amendment to HB 163, as suggested, and bring the amended             
 draft to the committee for consideration in a future meeting.                 
                                                                               
 Number 429                                                                    
                                                                               
 MR. MOURANT said the sponsor would have no problem with drafting an           
 amendment, but would prefer the committee not hold the bill from              
 passing to the next committee.                                                
                                                                               
 REPRESENTATIVE PORTER thought that in fairness, because the                   
 committee had held HB 130, they should also hold HB 163 as they               
 dealt with similar issues.                                                    
                                                                               
 MR. MOURANT thought he should reiterate the complaint of the                  
 previous bill sponsor, that there had been former committee                   
 meetings and a work session, where these bills were discussed and             
 no one from the Department of Law had expressed their concerns.               
 Thus, he to felt this could be intended to stall the passage of               
 these bills, and so was not sure how much cooperation he would                
 receive in getting this information from the Department of Law.               
 Additionally, he argued that no one from the Department of Law and            
 the Office of Management and Budget had contacted Representative              
 Kott or his office to express their concerns in advance.  Thus, he            
 stated that bureaucrats have a way of holding up and killing any              
 bill that they desire.                                                        
                                                                               
 REPRESENTATIVE ROBINSON thought they had testified earlier at a               
 former committee meeting about their concerns.                                
                                                                               
 CHAIR JAMES said she did not recall if they had or not.  She would            
 have to review the record.                                                    
                                                                               
 REPRESENTATIVE ROBINSON stated she would like to see not just a               
 calculation of the costs of compliance, but some type of relief for           
 extraordinarily large costs.  She could understand if this bill               
 were not the proper vehicle for achieving this, but she would like            
 to see it accomplished.                                                       
                                                                               
 MR. MOURANT agreed this bill does not provide relief by itself, but           
 said it does provide the opportunity for the private sector to                
 express their concerns while the regulation is still being drafted.           
                                                                               
 Number 482                                                                    
                                                                               
 REPRESENTATIVE PORTER thought that maybe the committee could work             
 to adopt wording in this bill, that would insure that it was                  
 understood the agencies were not required contact everyone who                
 could be possibly regulated, but just a sample cross section of               
 those effected.                                                               
                                                                               
 CHAIR JAMES asked how the committee wished to handle this bill.               
                                                                               
 REPRESENTATIVE PORTER suggested the committee hold this bill until            
 corrected, as they had previously done with HB 130.                           
                                                                               
 CHAIR JAMES agreed, and asked Representative Porter if he would be            
 willing to assist in drafting the suggested language.                         
                                                                               
 REPRESENTATIVE PORTER said he would help to draft the needed                  
 language.                                                                     
                                                                               
 Number 498                                                                    
                                                                               
 CHAIR JAMES asked if there were any other comments from the                   
 committee.  She mentioned she was concerned about the large fiscal            
 notes on this bill.  She did not think the fiscal notes were a                
 proper reflection of the costs of this bill.                                  
                                                                               
 REPRESENTATIVE PORTER thought the fiscal notes could be a result of           
 the agencies misunderstanding what the bill required of them.                 
 Maybe by clarifying the language of bill, they could get fiscal               
 notes that more properly reflected the costs of the bill.                     

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