Legislature(2005 - 2006)
05/04/2005 04:45 PM FIN
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* first hearing in first committee of referral
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CS FOR HOUSE BILL NO. 33(FIN) "An Act relating to required notification of the Department of Commerce, Community, and Economic Development, economic effect statements, and regulatory flexibility analyses regarding the adoption of regulations that may govern the conduct of small businesses; relating to a private cause of action, regulation invalidation, and judicial review related to required notification, economic effect statements, and regulatory flexibility analyses for the adoption of regulations that may govern the conduct of small businesses; and providing for an effective date." This was the first hearing for this bill in the Senate Finance Committee. MICHAEL PAWLOWSKI, Staff to Representative Kevin Meyer, the bill's sponsor, explained that the basis for this bill was the federal Regulatory Flexibility Act of 1980. That Act directed regulatory agencies to "first consider the economic effect" a regulation would incur on small businesses, and secondly "consider an alternative method of achieving the same statutory or regulatory goal". While this Act has been in effect for 25-years, President George Bush has furthered "the Small Business Regulatory Reform Act as a model for states to adopt to consider ways of lowering the burden of state regulations on small businesses." Mr. Pawlowski characterized this bill as being "loosely patterned after the model legislation that the Office of Small Business Administration made available for states". A "significant and detailed process" has been conducted "to bring it into alliance and to make it work for the State of Alaska". It would direct four designated state agencies "to consider the economic impact of their regulations on small business". Consideration should be given to such things as "the cost of compliance" and to determine other methods through which to accomplish such compliance. The Department of Commerce, Community and Economic Development would be asked to take the "lead advisory role, essentially a small business advocate position" in this endeavor "to provide a check in the regulatory process and a voice for the needs of small businesses". Mr. Pawlowski noted that Members' packets contain a letter of support from the Alaska State Chamber of Commerce, dated March 15, 2005 [copy on file] and addressed to Representative Meyer. Co-Chair Wilken voiced his support for the effort and intent of the legislation. However, he questioned the need to add a $100,000 a year position to coordinate the program, as reflected in the April 15, 2005 fiscal note #11 from the Department of Commerce, Community and Economic Development. He opined that the Department should be able to conduct this effort through its "normal course of everyday business". Mr. Pawlowski informed the Committee that several fiscal notes were added to the bill during its deliberations in the House of Representatives. One of those notes was as high as $217,000. Representative Meyer "was taken aback" at the agencies' position that "the expertise" that would be required to conduct this program was currently unavailable in the departments. While current department personnel "are really dedicated to achieving the statutory goals that are put on them, and, as the same time they come up with regulations …. the thought process of what that small business is going to have to go through to meet the demands of the regulations doesn't happen". The Governor's Office "felt very strongly that an adequately funded and very strong position to be that small business advocate would make this program successful given the experience in the current regulatory format". Mr. Pawlowski conveyed that utilizing small business license fees to fund this position had been discussed but not advanced, as not doing so would "demonstrate" to small businesses "that the State was giving back to small businesses from the fees that they were paying into the State". Representative Meyer supported that decision and believes that the position is necessary. Co-Chair Green asked for an example of how the program would work. 6:14:55 PM Mr. Pawlowski directed Members to a flowchart titled "Steps in the Regulation Adoption Process Under HB33" [copy on file], which depicts how the process would be conducted. The basis for the flowchart is the current "Drafting Manual for Administrative Regulations". The shaded portions on the chart indicate the steps that would be added to the process by the adoption of this bill. Mr. Pawlowski noted that the Department of Transportation and Public Facilities is not designated as one of the four agencies to which this legislation would apply as the manner in which that Department conducts its business is deemed as being "outside of the intent of the bill". A standard has been designated, as reflected in Sec. 1(i)(3) on page four lines 20-23 that would apply to "the regulations that govern the conduct of small businesses; that means the manner in which a small business conducts its business activities". The issue pertinent to the bill is exampled by a recent Department of Health and Social Services regulations pertaining to child care centers that describe such things as the size of the required trashcans; the size of the waste paper baskets that those trashcans must contain; and provisions requiring that a toy that has gone into the mouth of a child must be sanitized before it could be used by another child. The question is what how much money it would cost a childcare center, serving 30 children for example, to adhere to all the regulations. That is what governs the conduct standard "that would trigger when this review would be necessary". Mr. Pawlowski explained that this legislation would incur a change in the process when the agency making the regulation would consult with the Department of Law in that regard as reflected at Step 4 on the aforementioned flowchart. The change would be that the agency must also notify the person holding the new position requested in fiscal note #11, in the Department of Commerce, Community and Economic Development, who would then assist and advise throughout the public comment process. Then the agency, assisted by the person from Department of Commerce, Community and Economic Development, would utilize information obtained from the public comment process and other information from their files to follow the nine Economic Effect Statement criteria added by this bill and depicted in the large shaded area on the flowchart. This criterion is specified as follows. Economic Effects Statement: · Estimate of small businesses effected. · Proposed recordkeeping and admin. Costs. · Statement of economic effect. · Description of alternate methods. Regulatory Flexibility Analysis: (examine) · Less stringent compliance or reporting requirements. · Less stringent compliance or reporting deadlines. · Consolidation or simplification of compliance or reporting. · Establishment of performance standards to replace design or operational standards. · Exemption of small businesses. Mr. Pawlowski stated that the alternative methods included in the Economic Effect Statement "would be achieved by working through the Regulatory Flexibility Analysis", whose components have been utilized for 25-years at the federal level. The development of less stringent compliance or reporting deadlines could be accomplished by simply allowing a business to report annually, quarterly, monthly, or biannually depending on the size of the business. Mr. Pawlowski stated that poorly written regulations would be resubmitted to the Legislature for further reworking. "HB 33 is about trying to do it right in the first place." 6:20:05 PM Co-Chair Wilken recalled that Senator Gene Therriault had, in the last few years, submitted legislation that had inserted the Legislature into the flow chart process. Co-Chair Green asked whether that legislation had pertained to the Administrative Regulation Review process. Co-Chair Wilken could not recall the exact bill number, but did recall that it had allowed the Legislature to be included in the process by the inclusion of a Regulations Review Committee. He questioned the reason that that recently added step was not reflected in the flowchart. Mr. Pawlowski affirmed that legislation establishing the Administrative Regulation Review process was adopted two years prior. Further clarification of its inclusion was conducted the previous Session. That step is reflected on the chart at Step 11. He noted that the bill's sponsor feels that HB 33 is necessary because, rather than taking "the word" of the Administrative Regulation Review Committee, this legislation would provide written documentation based on the nine aforementioned guidelines that the regulations pertaining to small businesses would be analyzed to the benefit of small businesses. Co-Chair Wilken acknowledged. 6:22:49 PM STEVE WEAVER, Assistant Attorney General, Legislation & Regulations Section, Office of the Attorney General, Department of Law, shared that the Governor Frank Murkowski Administration supports the bill. The impact of regulations on small businesses "has been an important issue" to the Governor for quite a while. The legislation has, as a result of its Legislative hearings, evolved into a very workable bill for the State. The Small Business Advocate position that would be created in the Department of Community and Economic Development "would be very helpful in the process" as it would assist the agencies "to put considerations of small business impacts into the process in a consistent fashion; to provide a one stop shopping source for that, and to avoid more costly alternative processes such as hiring outside consultants which agencies might need to do otherwise. The emphasis was on making this bill as cost effective as possible for the Administration." 6:24:20 PM Co-Chair Green voiced acceptance of the Small Business Advocacy position. However, she noted that legislative mandates such as the requirement that businesses must have insurance coverage, impacts businesses across the state, regardless of their size. Another broad size requirement is exampled by licensing fees. 6:25:30 PM Co-Chair Green inquired as to whether the emphasis on small businesses is due to the fact that there is a Small Business Administration. Mr. Pawlowski replied that the emphasis on small business, which is defined as a business with 100 or less employees, would affect more than 170,000 people in the State. "That's over half of the State's workforce." The emphasis is due to the fact that "small businesses typically do not have the resources to be involved in the regulatory process. They don't have the ability or attention to pay or the time to pay; their workforce is spread relatively thin. A large business would have the time to devote to it." Mr. Pawlowski noted that such things as user fees would not be affected by this legislation. Continuing, he noted that the Medicaid and Medicare cost reimbursement regulations are excluded from the legislation, for "when the Legislature directs something as a cost containment provision" to, for instance, the Department of Health and Social Services, it might "save up to $15 million dollars a year", and a one-day delay in the issuance of those regulations could cost the State between $40,000 and $57,000. The cost benefits to a business would not be that extreme. 6:26:34 PM Co-Chair Green voiced appreciation for the explanation. The bill was ordered HELD in Committee.