Legislature(1997 - 1998)

04/09/1997 01:30 PM JUD

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= 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               
 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                 
 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            
  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              
 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                 
 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              

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