Legislature(2015 - 2016)SENATE FINANCE 532
04/13/2016 05:00 PM Senate FINANCE
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Audio | Topic |
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Start | |
HB254 | |
HB314 | |
SB206 | |
SB130 | |
Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
+ | HB 254 | TELECONFERENCED | |
+ | HB 314 | TELECONFERENCED | |
+ | SB 206 | TELECONFERENCED | |
+= | SB 130 | TELECONFERENCED | |
+= | HB 247 | TELECONFERENCED | |
+ | TELECONFERENCED |
HOUSE BILL NO. 254 "An Act extending the termination date of the Big Game Commercial Services Board; and providing for an effective date." 5:10:31 PM REPRESENTATIVE LOUISE STUTES, SPONSOR, explained that the bill extended the sunset date of the Big Game Commercial Service Board (BGCSB) from June 30, 2016 to June 30, 2019. She turned to her staff to further detail the bill. REID HARRIS, STAFF, REPRESENTATIVE LOUISE STUTES, read from the prepared sponsor statement: The BGCSB is staffed by the Division of Corporations, Business and Professional Licensing. The BGCSB consists of two licensed Registered Guide two licensed Transporters, two private landholders, two public members, and one member from the Board of Game. Board members are appointed by the Governor and confirmed by the Legislature. The Board's regulated professions include Assistant Guide, Class Guide, Master Guide Guide Transporter. Mr. Harris read from a report prepared by the McDowell Group, Inc: "The Economic Impacts of Guided Hunting in Alaska" (copy on file): · Guided hunting in Alaska accounted for a total of 2,210 jobs and $35 million in total labor income in 2012, including all direct, indirect and induced impacts. · Guided hunting generated a total of $78 million in economic activity in Alaska in 2012. · Guided hunters purchased nearly $2 million in hunting license and game tags. Mr. Harris relayed that the board was essential to the safety of hunters, guides, and transporters, and to the management of the resource. He was happy to answer any questions. Representative Stutes shared that there were people available for questions. Co-Chair MacKinnon thanked Representative Stutes and invited Kris Curtis to the table. 5:13:07 PM KRIS CURTIS, LEGISLATIVE AUDITOR, ALASKA DIVISION OF LEGISLATIVE AUDIT, reported conducting a sunset review of the BGCSB to determine whether it was serving the public's interest and whether it should be extended. Overall, the auditors concluded that regulating and licensing qualified guide outfitters and transporters benefited the public safety and helped to safeguard the state's wildlife resources. The auditors made a conditional 3-year extension recommendation. The condition was for the board to demonstrate the ability to address its deficit during the legislative sunset review process. At the time the audit was done the board's debt was over $1 million. If the board failed to demonstrate the ability to address its deficit, the auditors recommended it be considered for termination. Ms. Curtis read the recommendations from the report by the Division of Legislative Audit (copy on file): 1. Recommendation 1: The Division of Corporations, Business and Professional Licensing's (DCBPL) director should ensure staff adhere to procedures designed to provide efficient and effective support to the board. Ms. Curtis indicated that it was a repeat finding from the 2011 sunset audit. The auditors found improved support but some deficiencies remained in the area of public noticing their exams and their board meetings. 2. Recommendation 2: The Division of Corporations, Business and Professional Licensing's (DCBPL) director should take steps to improve timeliness of investigations. Ms. Curtis explained that it was another repeat finding from the 2011 sunset audit where improvements had been made. However, the division continued to struggle with timely investigations. Auditors reviewed 25 investigative cases and found that 17 of them had periods of inactivity ranging from 4 months to more than 4.5 years. According to the lead investigator, the cause of the delays was a lack of resources to address the large case load. The auditors also found ineffective case monitoring. 3. Recommendation 3: The Division of Corporations, Business and Professional Licensing's (DCBPL) director, in combinations with the board, should increase licensing fees to address the board's operating deficit. Ms. Curtis relayed that it was the third time the auditors had the finding and recommendation. In the prior 2011 audit it was noted that the board had an operating deficit of $374 thousand as of June 30, 2011. The board was told that if licensing fees were not increased or expenditures decreased the deficit would grow. As of April 2015 the deficit exceeded $1 million. The deficit increased due to various factors including delaying an increase in licensing fees and a reduced number of license renewals. In 2012 the division changed its allocation methodology for its indirect costs. The division had made some changes to correct problems with its cost allocation methodology which resulted in an addition of more than $200 thousand to its deficit. In 2012 the division proposed an increase to the fees ranging from 61 percent to 68 percent. There was a great deal of pushback during the public process and the division did not end up increasing fees. Ms. Curtis continued that in FY 14 there was an increasing of fees: approximately 44 percent across license types. However, the increase in revenues was still not enough to cover operating costs resulting in the deficit continuing to grow. At the time of the last audit the division had proposed regulations including increasing licensing fees, and adding new fees for Federal Medical Assistance Percentages (FMAP) activity reports. At the time the auditors believed that the increased fees would be enough to address the deficit. The auditors took a look and concluded that with the number of licensees held it was reasonable to assume the deficit would be addressed. The auditors made a conditional recommendation that the board demonstrated that the regulations were final and addressed the deficit. 4. Recommendation 4: The Division of Corporations, Business and Professional Licensing's (DCBPL) director should ensure the transporter license renewal application form complies with statute. Ms. Harris explained that there was a statutory requirement that transporters signed an affidavit when they went to review their license that all of the activity reports had been filed with the department. Upon testing compliance there was no such affidavit. It was a systematic problem with an easy fix. 5:18:02 PM Vice-Chair Micciche queried who carried the balance of the growing $1 million deficit. Ms. Curtis responded that it was her understanding the deficit was covered with surplus monies from other boards. Ultimately, the cost of regulating a board was the responsibility of the board. Statutes required that fees be established at the necessary level to cover costs. Vice-Chair Micciche asked if there was an accounting shift or a leger to know how much needed to be paid back by BGCSB to other boards. He also queried about an administrative cost for the accounting. Ms. Curtis responded that the auditors had considered recommending to the board the institution of accounting structures to track revenues and expenditures. However, the cost of doing so might not justify the extra work. There was an accounting of each of the board's balances. The Big Game Commercial Service Board provided the revenues and expenditures and a table in the report. Co-Chair MacKinnon shared that she and Representative Hawker had been looking into different licensing across all professions for almost 4 or 6 years. For a period of time, when the BGCSB had ceased, the State of Alaska was responsible for collections. From the board's perspective, administrative costs were mostly associated with violations or investigations. She concluded that the board was not upholding the statutes because it was not collecting enough fees to be self-sustaining. She furthered that the board was challenged with extenuating circumstances and that other boards were also operating in the red. However, some of the other boards had a greater licensure. In her investigations over the 6 years there were different types of license holders facing a variety of challenges. The largest problem was trying to spread the costs over a small population. She asked Ms. Curtis if she was correct. Ms. Curtis agreed for the most part. She stated that the board had 1500 total licensees and thought the board could potentially climb out of its deficit with increasing fees. She mentioned a couple of other boards with less than 100 licensees. It was difficult to come out of a deficit with less licensees. Co-Chair MacKinnon asked if the BGCSB had a deficit of $1 million. Ms. Curtis replied that at the time of the audit the amount was over $1 million. Co-Chair MacKinnon suggested about $670 per applicant to cover the deficit. She thought it would be difficult to raise the fees that much in one year. Senator Hoffman pointed to the differences between FY 14 and FY 15. By the time the legislation expired there would possibly be an additional $200 thousand in debt. The current program ended in June 30, 2016. He supposed there could be an additional $250 thousand in the deficit figure. He wondered about including benchmarks which would automatically terminate the board if any target was not met. Ms. Curtis responded that the department could provide a current status of the debt. She had heard the regulations were passed and the current licensing fees had been increased. She reported 3 years as an adequate amount of time because of doing the audit the year prior to the sunset date. She suggested that less than 3 years would not provide the board enough time to address the problem. 5:23:02 PM Senator Hoffman noted that the issue was about the extension to summer 2019 and time in which the board could generate additional deficits rather than solving their self-sufficiency problems. He thought benchmarks would incentivize addressing the debt. Otherwise, the state might end up with a $2 million deficit. As the chairman said, it would be quite impossible to cover all of the deficits in one year. Co-Chair MacKinnon thanked Ms. Curtis and noted the senate would be talking to the department. Co-Chair MacKinnon OPENED Public Testimony on HB 254. KELLY VREM, CHAIRMAN, CURRENT BIG GAME COMMUNITY SERVICES, SUTTON (via teleconference), testified in support of the legislation. He had been in the guide business since 1973 and had been around when there was a board and when there was not a board in place. He had attended the bulk of the BGCSB meetings and concluded that it was better to have a board. He was happy with the current board, as there was a wide variety of members. He thought the board had the ability to make some careful and considerate regulations. He also pointed out that the board was capable of controlling its spending. However, he asserted that investigations were out of control. Investigations were thrown off course without a board. He had tried to move investigation procedures in the direction of negotiated settlements using a point system rather than frequently issuing fines. He did not understand why the state paid attorneys and investigators without utilizing their services to their full extent. The board's purpose and the vast range of members ensured that no one special interest superseded the rest. If the board sunsetted it would not reduce costs but would fall again on the department. Currently, with new fees and the increased professional licensing fees he was confident that within 24 months the board's position would be remarkably different. He appreciated the possibility of additional time. He thanked the committee. Co-Chair MacKinnon wondered if the board was currently fully staffed. Mr. Vrem responded positively. He noted that the most recent turnover was a land owner member who termed out. He was excited about the replacement member. He also mentioned a game member turning over recently as well. He was confident the board was functioning on all cylinders. 5:28:43 PM THOR STACEY, DIRECTOR OF GOVERNMENTAL AFFAIRS, ALASKA PROFESSIONAL HUNTERS, JUNEAU, spoke in support of the legislation. He shared that the new fee structures were put in place in November and the deficit was down to about $800 thousand. He believed the board was on a path to fixing the deficit. He relayed that the Alaska Professional Hunters Association (APHA) was the only group that represented hunting guides in the state. The boards had a tremendous amount of importance to APHA as an organization that was conservation based. The group supported stewardship-based land management structures and high professional standards. The Big Game Commercial Services Board administered APHA's professional tests. There was no school, collage, or vocational program available to become a guide. Rather, a person became a guide starting as a packer, moving to an assistant guide, and learning from others. The path to entry into the historic profession in Alaska was housed within the program. Without a board guides would have to take a multiple choice test, drafted by an out-of-state contractor unfamiliar with Alaska's wildlife, wilderness, or professional standards. He asserted that having testing standards and a board were critical to preserving a vibrant industry that was operating within the greater interest of the public as a whole. His role was to work between the industry, the division, and the board helping with relationships and collaborating on things such as fee structures. His group was deeply embarrassed by the fact that the board ran a deficit. He relayed having a firm commitment to fixing the problem and to supporting necessary fee structures to pay off the board's deficits. He appreciated the committee's time and interest in the board. Senator Hoffman queried about potential resistance from the board about increasing fees. He asked for Mr. Stacey's perspective. Mr. Stacey replied that APHA was reconciled to the fact that there was no easy fix and that the deficit would be paid off currently. There was a significant amount of consternation and frustration around how the account practices of the board changed. There was $200 thousand in lost revenues and $300 thousand of deficit at the same time. During the prior sunset review the board was presented with three different financial reports in 2011. He believed that the group had confidence that it was receiving an accurate accounting of what it owed and was committed to paying it back. The pushback was no longer a factor. 5:33:13 PM Senator Olson referred to Mr. Vrem's statement concerning having the deficit taken care of within 24 months. He wondered if Mr. Stacey agreed with the timeline. Mr. Stacey replied he thought the timeline would be closer to 36 months. He added that with the new fee structures there was pushback from the transporter industry. There was the potential that the division would adjust the new fee structures. He reiterated that the APHA intended to pay the deficit back. Senator Olson expressed concern about the deficit continuing to grow and potentially compromising other boards' abilities to continue with their investigations. He relayed his experience sitting on a board where there were ongoing investigations. He indicated that it would be very difficult to work under such constraints. Mr. Stacey's pessimism would not be taken lightly. Mr. Stacey replied that his pessimism had to do with the timeline and nothing to do with the ability to pay off the debt. Vice-Chair Micciche was a huge supporter of the big game industry. He highlighted the fiscal note showing no expectation of revenues but emphasized travel. He expressed his concerns and referred to page 14 of the auditor's report. He highlighted the fluctuation of revenues and expenses from year-to-year. He mentioned $500 thousand deficits every-other-year. He asked Mr. Stacey to explain the fluctuation biannually. Mr. Stacey shared that there was a biannual license renewal which accounted for the spike in income versus expenses every-other-year. Vice-Chair Micciche wanted to see a formal plan for a way forward. He suggested there was a lack of business sophistication regarding a plan to move ahead. The problem had been ongoing for the previous 4 years or more. He did not feel the issue was getting better. Mr. Stacey replied that the board had an interesting role in cost control. He elaborated that some things were well outside of the control of the board such as the costs that were charged back to the licensing program. One of the primary functions of the board in reducing the deficit was to act as gatekeeper regarding which investigations went forward and which ones did not. The main cost driver for the deficit was investigative costs. There was a new chief investigator, Angela Burt. She had made a tremendous effort to reach out to the board. She had been using the board as wise council regarding which investigations were worth advancing. The use of the board as the gatekeeper of investigations would be the absolute number one cost controller of the board moving forward. He reported that in 2011 the gatekeeping role was not being utilized by the division or the investigative side. As a result there was no fee increase and a variety of investigations moved forward that should not have costing the licensing program a significant amount of money. 5:38:23 PM AT EASE 5:38:51 PM RECONVENED 5:38:57 PM Vice-Chair Micciche assumed the investigatory costs were the indirect expenses in the table. Mr. Stacey thought that they were reflected in indirect expenses and contractual expenses under direct expenses. He added that the board has done some things to cut back on costs such as not retaining legal counsel during its meetings and minimizing travel. The main cost driver for the deficit were investigative expenses. The industry was unique with a complex set of laws and statues that governed the use of the resource and the protection of the general public. The program was not cheap to administer. As a whole, the industry was positive for the state and suggested keeping it in perspective. He concluded that APHA maintained its commitment to paying off the deficit whether or not all of the costs could be controlled. Co-Chair MacKinnon directed members to send questions to her office for testifiers. She relayed she had asked Sara Chambers to hold off on her testimony. EDDIE GRASSER, SAFARI CLUB INTERNATIONAL, ALASKA CHAPTER, Palmer, spoke in support of the legislation. He shared that the main concern of the chapter was that there was a professional standards board in place to ensure the people providing service were qualified and professional. Operating in the wilds of Alaska was a highly risky business in some cases. There were a number of activities such as flying and boating that could lead to life- threatening situations. He disclosed he had been a professional hunter for 35 years and retired in 1997. As a hunter he wanted to be assured that the person he was hiring was qualified. He stressed the need for the board and supported the legislation. Senator Bishop remarked that investigations were driving a large portion of the costs. Mr. Grasser agreed. Senator Bishop shared some of his personal experience as a hunter growing up in Alaska. He compared a professional guide to a big league ball player. Guides needed to be professional and ethical. He suggested that there needed to be more discussion amongst the guides about imploring the standard of the guiding industry in order to drive the investigations down. Co-Chair MacKinnon CLOSED public testimony. Co-Chair MacKinnon invited Ms. Chambers to share her perspective on what had been shared about an extension for the BGCSB. 5:44:08 PM SARA CHAMBERS, ADMINISTRATIVE OPERATIONS MANAGER, DIVISION OF CORPORATIONS, BUSINESS AND PROFESSIONAL LICENSING, DEPARTMENT OF COMMERCE, COMMUNITY AND ECONOMIC DEVELOPMENT, shared that there was a fairly sophisticated system within statute regarding professional licensing fees and how they were set. She confirmed that they were on a biennial licensing cycle. There was one 3-month window during a 2- year period to recuperate revenues that might be in deficit and to collect any revenues that might be due for the following 2 years for operating expenses. She added that for programs in deficit fees needed to be quite high in order to look back as well as to look forward. It meant that the fee setting was a fairly strong estimate but could not take into consideration some of the areas that neither the division nor the board could control such as complaints coming in from the outside and investigations. The division could not control the volume or complexity of the investigations because the division did not know what they were when setting fees. It was the division's responsibility to set fees and to do so in concert and collaboration with the board. The division and the board agreed to set fees, increasing them in 2013 and again in 2015. The division was on a trajectory of increasing fees and had instituted 3 new fees in the current year. As a result, the burden was placed on the contracting guides and transporters rather than assistant guides and class "A" guides who were not contracting at the lower level tier. Ms. Chambers continued that the program had a high level of investigations. She made clear that the board was in control of the investigative process. Investigations moved forward with a reviewing board member's approval. If a board member objected to moving an investigation forward it would not move forward. Over the previous year and a half, since the new chief investigator was hired, the board and division had developed a very strong relationship and a very clear protocol to control the outcome the board needed per its statutory authority. She noted that the fluctuating flow of revenues once every 2 years often placed a board into a deficit position because of cash flow. There were no general fund appropriations involved, but rather program expenses. She added that there was no mixing or mingling of funds since the appropriation of authority was at the division level and not at the program level. The cash flow issue was covered by boards in surplus. There was 100 percent accountability in tracking of every dollar that came in and out of each program. She closed by saying that the division had very proactively worked to respond to the audit recommendations. The investigation process had been improved significantly beginning in 2014. The division and board were working together to actively increase fees. The additional findings of the renewal application and public noticing had already been addressed. Senator Hoffman queried the possibility of staggering the fees to spread the revenue more evenly. Ms. Chambers replied that it could be structured the way he suggested. However, there was a concern about taking a license away for non-payment from someone that had already been issued a license. Urging delinquent license holders to pay on a volunteer basis in the middle of a 2-year cycle would likely increase administrative costs. It was something the division could certainly look into. 5:49:50 PM Co-Chair MacKinnon suggested only renewing a license for 1 year for some entities until a smoothing of revenues was reached. She thought that was the point Senator Hoffmann was suggesting. Vice-Chair Micciche would not apply the definition of a cash flow problem to the growing deficits since 2011. He asked about the fee. Ms. Chambers reported that the Assistant and Class A guides were paying $410 for a 2 year period. The registered master guides and transporters were paying $850 for a 2-year period, an increase over prior years. Vice-Chair Micciche provided an example of what it would take to erase the deficit. He suggested that it would take an average of $790 for every 2 years as well as another $333 to pay back the debt service. The price would total $1123 for 2 years and then revert back to $790 after the debt was paid off. Co-Chair MacKinnon set aside HB 254. HB 254 was HEARD and HELD in committee for further consideration. Co-Chair MacKinnon suggested that if Senator Hoffmann or Senator Micciche had ideas for a reauthorization to get them to her office by noon the following day. She would work with the legislative auditor regarding a status report. She suggested shortening the length of the extension in order for the legislature to know that the board was responding to the satisfaction of the finance committee.