Legislature(1997 - 1998)
04/09/1997 01:30 PM JUD
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
SB 101 REGULATIONS: ADOPTION & JUDICIAL REVIEW CHAIRMAN TAYLOR explained SB 101 makes fairly sweeping changes to the current regulatory process. It requires that a cost-benefit analysis be prepared before regulations are adopted, limits the effective period of emergency regulations, and provides for judicial review of the validity of regulations. He noted he supports the concept but does not know whether it is enforceable. JOHN LINDBACK , testifying on behalf of the Lieutenant Governor's Office, the designated lead agency on legislation affecting the regulatory process, gave the following overview of the history and streamlining process that has occurred. Administrative Order 157 was issued in January of 1995. That order changed the way regulations are promulgated by using plain English, making the process more user friendly, and taking cost into account. Last February agencies were required to submit a follow-up report on how they are complying with Administrative Order 157. The report shows that most agencies have set up a regular review of all regulations; for some agencies the task is much more time consuming than for others. Additionally, the Administration introduced SB 155 a week ago, which attempts to make the regulatory process more public-friendly. It allows for an automatic update for corporations, and more public friendly advertising of regulations. The Administration plans to launch a regulations home-page on the Internet which will allow the user to view all regulations in every agency. He offered to provide committee members with more comprehensive information on the current regulatory process and anticipated changes. Number 216 DEBORAH BEHR , Department of Law, testified that SB 101 makes dramatic changes to the regulatory process. She made the following comments on the bill. Sections 5 and 6 deal with a cost benefit analysis on regulations. This concept is not new; in 1995, Representative Kelly introduced HB 130 which eventually became law. It was based on this same concept and the fiscal notes were very high. State law was changed to require state agencies to pay special attention to the costs to private parties. During the public comment period, the agencies are asked to actively solicit costs of compliance and every newspaper ad asks for such information. DEC is now required, under HB 130, to consider alternative means of accomplishing the same goals. Ms. Behr said that after reviewing SB 101, she has come to the conclusion that the cost-benefit analysis is a very expensive provision, especially to get the precision that is necessary to stand up in court. She is concerned about battles with experts, and the cost of hiring economists to defend regulations. In the case of the timber sale contracts, the DOL attorney in charge indicated it would be virtually impossible to get a timber sale contract that would stand up to a court test. The benefit to the public of leaving a tree standing or cutting it down would have to be determined. The bill contains no definition of the word "public." It could be the people in a community, the State of Alaska, or the United States. The new welfare reform program will require a lot of new regulations. It is difficult to determine whether the costs should be based on the short or long term impact. Regulations projects may require more than one financial analysis. The Board of Fish deals with 900 regulations proposals each year. The way SB 101 is written, it is not clear whether the cost-benefit analysis is supposed to occur when the regulation is noticed up, or at the time the Board adopts the regulation. If the Department of Fish and Game had to do a cost-benefit analysis on 900 proposals, the cost would be extremely prohibitive. Additionally, it might change the way the Board of Fish operates. That Board has a very democratic process and allows anyone to fill out a proposal book. Each proposal is noticed up so that anyone can comment. It would be very difficult to cost benefit some of these ideas. Printing the summary in newspaper ads will be very expensive. The Department of Fish and Game did a cost benefit analysis on a regulation in the past and estimated it took over 1 1/2 years and cost over $150,000. Ms. Behr noted SB 101 is written to cover all administrative agencies. The Department of Corrections does regulations on discipline of prisoners. In order for DOC to adopt regulations it will have to do a cost benefit analysis to the public on whether or not the benefits of that prison disciplinary scheme outweigh the cost of implementation. The potential for frivolous litigation in that arena is high. Ms. Behr discussed the difficulties of doing cost benefit analyses on the benefits of public safety, i.e. the benefits of requiring sex offender registration. DPS would not be able to sign off on a regulation unless it could prove that the benefits of registration outweigh the costs. In light of Alaska's constitutional right of privacy, Ms. Behr pointed out that some of the cost information to private parties will be inaccessible. She recently assisted the Board of Dentistry in establishing a regulation pertaining to use of laser equipment by dental hygienists, which the Board felt was inappropriate. In order for the Board to establish the same regulation under SB 101, cost benefit information from dentists regarding how much time each dental employee has used laser equipment would be required. Many dentists may consider that proprietary business information and refuse to supply it. In addition, the issue of regulating mail or telephone access for prisoners would be problematic. Number 325 Ms. Behr said her opinion is that SB 101 is a good idea that may have unintended consequences. During a time when the Legislature is trying to downsize state government, anyone could challenge that approach by suing anytime a regulation is promulgated on the basis that the cost benefit analysis was insufficient. She again referred to problems with the timber sale contracts. Promulgating emergency regulations would also be problematic. In order for an emergency regulation to become permanent, it can only be out for 120 days and an economic analysis that would stand up in court cannot be completed in that time. SB 101 would severely stifle an important part of the Procedures Act which is to respond to crises when the Legislature is not in session. Ms. Behr questioned how one would do a cost benefit analysis of a fee regulation because the cost to an individual person and benefits to the public would have to be determined. Ms. Behr thought this approach might be productive if applied to large projects only but not to regulations that have a minimal impact, such as raising copying costs a few cents. She also suggested exempting federal regulations and particular departments from the requirements of SB 101. She noted the average business person would only do a cost benefit analysis on large projects. Ms. Behr discussed the next major change in SB 101; supplemental notices for significant changes of regulations. If an agency notices up a regulation for a fee increase from $50 to $100, and then, after the first set of hearings determines a more appropriate amount to be $75, the agency would have to solicit a whole new round of public comments. Newspaper notices would be required, and if a board or commission is involved, it would have to meet again resulting in travel and per diem costs. The new public comment could produce different results and the procedure would have to occur again. She repeated her concern that in the attempt to downsize state government and raise fees, anyone who wants to challenge that approach could do so by challenging the cost benefit analysis. She explained that after the Legislature adjourns in May, state agencies will need to implement new regulations based on changes in law, for example welfare reform. They will be required to hold a public comment period and adopt regulations with a cost benefit analysis by July 1. The third major change in SB 101 is the standard of review used by the court to review regulations. Section 7 contains the current standard used by judges to invalidate regulations: for substantial failure to comply with the APA; on constitutional grounds; or for equal protection rights violations. SB 101 changes the standard of review so that there will be a presumption of invalidity. To be valid, a regulation will have to be the least intrusive to the rights of persons or property affected by the regulations. There are many areas where this standard will create problems, such as with prison discipline regulations. A prisoner could sue on the new standard based on the possibility that a lesser punishment could be used. If the State could not defend the regulation based on that standard, it would have to prove a compelling State interest which would be virtually impossible to do. Ms. Behr repeated her concerns that SB 101 will have unintended consequences and may result in a lot of frivolous litigation. She discussed a final change that could occur if SB 101 passes. Significant changes to regulations can be tested in District Court therefore, oil tax regulations could be brought before a District Court judge at the same time the judge is hearing cases about a child smoking underage or a driver who failed to remove studded snow tires. Once the case goes to District Court, it could be directly appealed to the Supreme Court. This will create a dramatic policy change. Ms. Behr noted two technical problems with SB 101. Section 4 does not include all state agencies, and excludes the Office of the Governor, which does regulations on telecommunications and elections, and the University of Alaska which has procurement regulations. Number 410 SENATOR DONLEY , sponsor of SB 101, explained SB 101 is an expansio of legislation proposed in past years. He tried to exempt agencies and areas in which additional restrictions would be inappropriate. The Boards of Fish and Game are exempted on page 4, as well as things that result from federal requirements. He acknowledged there may be other areas, such as natural resources and the timber sale contracts mentioned by Ms. Behr, that may be appropriate to exempt. He also suggested removing the language on page 3, lines 5-7, because of problems identified by Ms. Behr. That deletion would still require departments to use the procedure for informational purposes, but not to use it as the standard for adopting a regulation, thereby preventing that standard from being used as the basis for a challenge in court. That would enable departments to use procedures appropriate for the level of seriousness of the regulation, such as raising the cost of copying fees. SENATOR DONLEY noted that he intended the section on notices on page 4 to apply to all provisions of the bill. SENATOR PARNELL noted he was also concerned about the language on page 3, lines 5-7. CHAIRMAN TAYLOR suggested forming a subcommittee of Senator Donley, department staff, and any interested committee members to work on the legislation and bring a committee substitute before the committee for further review. Number 451 SENATOR DONLEY stated he has not found departments to be cooperative regarding this bill. He discussed the problem of notice in the regulatory process, and stated one has to balance the value of having the Executive Branch do immediate regulations without appropriate public input against the advantages of providing for expeditious regulations when necessary. He stated he believes it is clearly appropriate that the Executive Branch give the public notice of its intentions. SENATOR PARNELL asked Senator Donley why he chose to include District Courts in addition to the Superior Court on page 6. SENATOR DONLEY replied he would like to increase the public's ability to challenge more regulations because such a wide scope of regulations exist now. He thought the challenge of some regulations would be appropriate for District Court, for others the Superior Court. SENATOR PARNELL agreed but thought if the District Court's jurisdiction is under $50,000, it is not appropriate for a case involving millions of dollars in oil taxes to be resolved there. SENATOR DONLEY agreed and suggested changing the way the bill applies to revenue regulations. Number 476 SENATOR ELLIS asked whether the District Court has any equitable jurisdiction right now. CHAIRMAN TAYLOR answered it does not. SENATOR ELLIS asked if the Legislature is seeking to change that. SENATOR DONLEY replied it would be struck down on the basis of fact. CHAIRMAN TAYLOR thought that would fall under the equity jurisdiction because it would require someone to do an act, as opposed to pay money damages. That distinction limits one's ability to get access to the bench. If the focus was on jurisdiction limits, twice the number of judges would be available for adoptions and juvenile matters and it would not take two or three years to get on a court calendar. SENATOR DONLEY said he would be satisfied if the bill required agencies to provide subsequent public notices before adopting things that were subsequently different. CHAIRMAN TAYLOR commented he introduced a bill three years ago that would require, that before an agency proposed a regulation or before a federal regulation was adopted, the department to report the cost of the federal mandate. That bill was vetoed by the Governor. Number 497 JACK KREINHEDER , Office of Management and Budget (OMB), summarized the fiscal notes. The grand total of the fiscal notes is in excess of $1.6 million with the largest impact being on the Departments of Environmental Conservation, Natural Resources, Law and Commerce and Economic Development. The amendment offered to the cost benefit analysis provision may remove some court challenges, however even if that is true, promulgating regulations correctly is a complex process. He stated he is reluctant to advocate legislation with the idea that departments are going to pay lip service to it and provide a one-page cost benefit analysis that is not worth the paper it is written on. He supported Ms. Behr's comments that the benefit of any regulation should exceed the cost, but the effort devoted toward determining dollar figures, for cost, compliance and benefits should be devoted to making a better regulation. CHAIRMAN TAYLOR asked Mr. Kreinheder to work with Senator Donley's staff to improve the approach. He adjourned the meeting at 4:55 p.m.