Legislature(1999 - 2000)
03/04/1999 08:06 AM House STA
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE STATE AFFAIRS STANDING COMMITTEE
March 4, 1999
8:06 a.m.
MEMBERS PRESENT
Representative Jeannette James, Chair
Representative John Coghill
Representative Scott Ogan
Representative Jim Whitaker
Representative Bill Hudson
Representative Beth Kerttula
Representative Harold Smalley
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
* HOUSE JOINT RESOLUTION 18
Proposing an amendment to the Constitution of the State of Alaska
relating to an office of administrative hearings.
- HEARD AND HELD
(* First public hearing)
PREVIOUS ACTION
BILL: HJR 18
SHORT TITLE: CONST. AM: ADMINISTRATIVE HEARINGS
SPONSOR(S): REPRESENTATIVES(S) OGAN, Foster
Jrn-Date Jrn-Page Action
2/24/99 300 (H) READ THE FIRST TIME - REFERRAL(S)
2/24/99 300 (H) STA, JUD, FIN
2/26/99 328 (H) COSPONSOR(S): FOSTER
3/04/99 (H) STA AT 8:00 AM CAPITOL 102
WITNESS REGISTER
REPRESENTATIVE SCOTT OGAN
Alaska State Legislature
Capitol Building, Room 128
Juneau, Alaska 99801
Telephone: (907) 465-3878
POSITION STATEMENT: Presented HJR 18.
DEBORAH VOGT, Deputy Commissioner
Department of Revenue
P.O. Box 110405
Juneau, Alaska 99811
Telephone: (907) 465-2300
POSITION STATEMENT: Testified in opposition to HJR 18.
ANDREW HEMENWAY, Hearing Officer
Procurement and Longevity Bonus
Department of Administration
P.O. 110200
Juneau, Alaska 99811
Telephone: (907) 465-1886
POSITION STATEMENT: Testified in opposition to HJR 18.
DIANE BARRANS, Executive Director
Postsecondary Education Commission
Department of Education
3030 Vintage Boulevard
Juneau, Alaska 99801
Telephone: (907) 465-6740
POSITION STATEMENT: Testified in opposition to HJR 18.
PAUL GROSSI, Director
Division of Workers' Compensation
Department of Labor
P.O. Box 25512
Juneau, Alaska 99802
Telephone: (907) 465-2790
POSITION STATEMENT: Testified in opposition to HJR 18.
KENNETH BOYD, Director
Division of Oil and Gas
Department of Natural Resources
3601 C Street, Suite 1380
Anchorage, Alaska 99503
Telephone: (907) 269-8800
POSITION STATEMENT: Testified in opposition to HJR 18.
BOB LOEFFLER, Director
Division of Mining and Water Management
Department of Natural Resources
3601 C Street, Suite 1380
Anchorage, Alaska 99503
Telephone: (907) 269-8800
POSITION STATEMENT: Testified in opposition to HJR 18.
TERESA WILLIAMS, Assistant Attorney General
Fair Business Practices Section
Civil Divisions
Department of Law
1031 West Fourth Avenue, Suite 200
Anchorage, Alaska 99501
Telephone: (907) 269-5100
POSITION STATEMENT: Testified in opposition to HJR 18.
ED HEIN, Hearing Officer
Office of Administrative Appeals
National Marine Fisheries Service
member, National Association of
Administrative Law Judges
3000 Blueberry Hill Road
Juneau, Alaska 99801
Telephone: (907) 586-7261
POSITION STATEMENT: Testified in support of HJR 18.
TAMARA COOK, Director
Legislative Legal and Research Services
Legislative Affairs
130 Seward Street, Suite 409
Juneau, Alaska 99801
Telephone: (907) 465-3867
POSITION STATEMENT: Provided information of HJR 18.
ACTION NARRATIVE
TAPE 99-11, SIDE A
Number 0001
CHAIR JEANNETTE JAMES called the House State Affairs Standing
Committee meeting to order at 8:06 a.m. Members present at the
call to order were Representatives James, Coghill, Ogan, Whitaker,
Hudson, Kerttula and Smalley.
HJR 18-CONST. AM: ADMINISTRATIVE HEARINGS
CHAIR JAMES announced HJR 18, Proposing an amendment to the
Constitution of the State of Alaska relating to an office of
administrative hearings is before the committee.
Number 0031
REPRESENTATIVE OGAN, sponsor of HJR 18, explained that it brings
due process and separation of powers back to state government,
which lacks separation between the executive and judiciary
branches. The legislature has delegated authority to the executive
branch to write laws by regulation and also to adjudicate that law.
REPRESENTATIVE OGAN remarked that people are supposed to be able to
go before a fair and independent tribunal when they break the laws.
For example, if a person creates a violation, the investigative
officer will cite them. Oftentimes, that investigator is involved
in writing that regulation. Then it's brought before someone with
quasi-judicial authority that answers to the commissioner.
Representative Ogan said, "This approach would separate all that
power out of the bureaucracy, it would keep it within the executive
branch, but it would set up independent hearing officers." A few
years ago oil royalty disputes were reviewed in that manner and
worked very well. "It was also applauded by the Administration,"
he added.
REPRESENTATIVE OGAN cited his personal experience on the "Big Game
Commercial Services Board," where he had the quasi-judicial
authority to pass judgment on folks who violated the regulations.
A hearing officer would present his or her case. The board members
were not allowed to ask questions, have conversations with the
accused, or testify on that person's behalf before the board. The
board simply looked at the recommendations of the hearing officer
and voted them up or down, which Representative Ogan indicated he
was uncomfortable with because judgment was passed without the
person facing his or her accusers and being able to answer
questions. The accused person's license was revoked, which created
financial ramifications.
Number 0180
DEBORAH VOGT, Deputy Commissioner, Department of Revenue, appeared
before the committee. She pointed out her basic concern with HJR
18 is that administrative hearings are not a one-size-fits-all
proposition. The Department of Revenue is responsible for
administrative procedures for the permanent fund dividend program
(PFD); child support enforcement; taxes which have been treated
differently since three years ago; charitable gaming; and the
Alcoholic Beverage Control Board.
MS. VOGT stated that obviously there's a big difference between a
PFD hearing versus a three- or four-month trial that might take
place in a several hundred million dollar tax case. It would be a
mistake for the legislature to tie its own hands by enacting a
constitutional provision that approaches all administrative
hearings the same.
MS. VOGT detailed some of the hearings the Department of Revenue
holds. In-house hearing officers, in the commissioner's office,
review denials of PFDs and review child support enforcement cases.
Charitable gaming matters also come before them. Procedurally, the
department can exercise control over that function. In 1995 there
were 4,663 matters pending at the division level and 1,556 matters
pending at formal hearings. After streamlining, as of last month,
the department has 76 matters pending at the division level and 154
at the formal hearing level. On the PFD side, in 1995 there were
more than 243 cases pending that were over six months old. There
are currently eight cases that are older than three weeks.
Substantively, hearing officers are used in those functions very
much as part of the program and are able to work with them on how
regulations are interpreted and how they should be changed. The
hearing officers can also bring problems to the department's
attention.
MS. VOGT pointed out that certain actions that a person takes are
inconsistent with a person's intent to remain an Alaskan, such as
getting a resident fishing license from another state; receiving
benefits based on a resident's tuition; and registering to vote,
because a person takes a solemn oath that he or she is a resident
of the state in which that person is registering.
Number 0272
MS. VOGT noted that many kids who are going away to school don't
read the fine print carefully and are found ineligible for PFD.
The regulations hold in statute that one must be a resident before
leaving Alaska on an allowable absence of six months. By working
with the hearing officers, the department was able to discover a
way to make the students eligible the following year without making
them quit school to come back and live in the state.
MS. VOGT stated that the legislature passed legislation three years
ago creating the Office of Tax Appeals in the Department of
Administration. Outside consultants were hired to review the
in-house hearing functions. She said Paul Frankel, a taxpayer
advocate, was on a nationwide mission to get all states to move
their tax appeals out of their tax departments. Mr. Frankel had
always testified that there are three elements to a good tax
review: (1) the taxpayer gets to have his day in court, (2) the tax
proceedings are not answerable to the commissioner, and (3) the tax
hearings are held by tax experts. Deputy Commissioner Vogt noted
that the third would be obligated by HJR 18. To amend the
constitution to address this issue is the wrong way to go. It
would also bind the hands of the legislature; flexibility needs to
be preserved.
MS. VOGT cited the Alcoholic Beverage Control Board as an example;
when they need to hold a hearing, they hire somebody by contract
from the private sector, generally an attorney. Deprivatizing that
function might create some savings because state employees aren't
paid as much as outside counsel who charge on an hourly basis.
However, no one agency has enough work to justify hiring somebody
on a full-time basis. She indicated the state should maintain the
flexibility to address different functions in different ways.
REPRESENTATIVE OGAN referred to the comment that the hearing
officer should be an expert in tax matters, that this
constitutional approach would not allow for experts to hear
particular cases; and that it also binds the hands of the
legislature to allow that to happen. He said Section 28, line 8,
"The jurisdiction of the office shall be prescribed by law," gives
the legislature the flexibility to specify who will hire what types
of people to adjudicate these regulatory matters.
MS. VOGT remarked that perhaps it does. Her concern is that in
other states that have created a centralized panel, the matters
rotate amongst them. And, Alaska might lose that specific focus.
Number 0341
REPRESENTATIVE OGAN asked whether judges are experts in areas in
which they hear cases.
MS. VOGT responded, "That's one of the issues that came up. In
fact, the opposite of that proposed bill that passed was
Representative Green's bill that the Governor supported, and it
originally started out as a bill to create a tax court in the
(indisc.--coughing) of superior court and eventually evolved into
a child of that, that was an administrative law judge outside the
Department of Revenue. That's one of the issues, that's why we
believe there needs to be a level of review of tax cases before
they go on appeal to the superior and then the supreme court, but
is heard by tax experts, and we would certainly oppose having tax
cases go straight to court to random assignments of judges, because
there is not a tax expertise. And the court system, I believe,
supported us on that."
REPRESENTATIVE OGAN said his point is that in our justice system,
superior court judges and magistrates alike are appointed
politically by the governor with no confirmation by the
legislature. For example, an environmental attorney, who was
recently appointed had never set foot in a court room as a trial
lawyer to his knowledge, is currently a superior court judge.
CHAIR JAMES referred to Ms. Vogt's comment about the hearing
officer who was hearing the cases for the students who registered
to vote outside of Alaska. She asked whether Ms. Vogt had said the
department worked with the hearing officer to change the
regulations.
MS. VOGT replied that what they did in that matter was not in the
context of any particular case but was a recurring question.
Department personnel met internally, with folks from the hearing
section, from the division, and from the commissioner's office.
They first found a way to interpret the existing regulations to
permit them to pay folks the next year. The regulations have been
changed, so it is clear that folks only lose one dividend as long
as they maintain and continue to pay out-of-state tuition, and so
on.
Number 0428
CHAIR JAMES said that concerns her because the person who is
hearing a decision also helps to make it.
MS. VOGT reemphasized that they wouldn't do that in the context of
an ongoing case.
CHAIR JAMES added that judges aren't able to influence legislation
that may have messed up a case in front of them. The folks'
perception is that they are completely subject to the
administration by the hearing officer.
REPRESENTATIVE KERTTULA asked Deputy Commissioner Vogt for
clarification about administrative appeals.
MS. VOGT responded that when folks are dissatisfied with the
results, they can appeal to the superior court. The superior court
will hear that case as an appeal, not as a trial relying on the
record that was developed at the administrative level, and will not
substitute their judgment for factual findings unless they believe
that there was a clear error in the way the evidence was
interpreted, and so on. So, it is a much more deferential standard
of review, and that is one thing that leads to folks' wanting to
move agency review out of the "self-agency."
MS. VOGT said she recognizes that folks can perceive that the
agency's control over its own hearing in some way hurts them.
However, in her view, it lends strength to the program. The public
is the department's top priority, and she believes the department
can serve them better by holding hearings in-house.
REPRESENTATIVE OGAN asked if she anticipated any change on how
hearings are dealt with on the superior court level.
MS. VOGT replied that she is not sure. She said she is concerned
with Section 28, "The power to conduct administrative law hearings
and to render final decisions is vested in an office of
administrative hearings," and which seems to be an oxymoron because
the agency is the agency that has the program; for someone outside
the agency to render a final agency decision doesn't seem possible.
The final agency decision is going to be the final action that the
agency takes, and the outside hearing officers or administrative
law judges may modify it. That makes the judicial review different
because the reviewer will be looking at what the administrative law
judge and the agency did. She said it's not clear how that is all
going to line out.
Number 0502
ANDREW HEMENWAY, Hearing Officer, Procurement and Longevity Bonus,
Department of Administration, testified in opposition of HJR 18.
He noted the fiscal note was provided by the Division of Elections.
He stated, "We really don't know what the fiscal impacts would be
until we see the nature of the implemented legislation. ... First
is the type of jurisdiction that the new agency has, and other
elements that might be in the implementing legislation range over
such a wide variety that it's really impossible to predict what the
scope of the amount of work that that office might be doing and how
that's going to impact the various other agencies."
MR. HEMENWAY said, for example, two years ago legislation that was
introduced was relatively limited in terms of its impact; a few
agencies would have been affected. But other possible versions
would have substantially broadened it. Another reason why it's
difficult to predict the fiscal impact is because there is a lack
of knowledge about the present costs of the system. Legislative
Research prepared a review for Representative Ogan which is full of
precautionary notes about how soft their numbers are; there are
some elements in it that they included that are clearly not
adjudication costs, such as investigation costs and various other
things added up to approximately $6 million. However, if those
numbers were firmed up, the cost would be substantially lower.
[See Table 1, Expenditures for Administrative Adjudications, Fiscal
Years 1994-1996 and Table 2, Expenditures for Administrative
Adjudications.] Mr. Hemenway cited another study by the Office of
Management and Budget (OMB) (1983) that showed approximately $2
million for the adjudicated functions; he said obviously that's
going to be substantially higher. So, there's a lot of uncertainty
out there.
MR. HEMENWAY said there are two ways that it is going to have
fiscal impacts; one is on the deprivatization. The amount of
current contracting is unclear, but based on the information he
reviewed, it might be in the neighborhood of $500,000 to less than
$1 million. Secondly, there can be impacts on the economies of
scale and efficiencies in operation through larger case loads and
better case management, for example.
Number 0575
MR. HEMENWAY cautioned that some states have experienced,
particularly in a short run, an increase in costs when changing
over to this system. It must be done carefully. He cited for
example, when South Dakota passed its central panel legislation,
the cost- per-case basis doubled, and the state was forced to
repeal the legislation.
REPRESENTATIVE HUDSON asked Mr. Hemenway to provide information
that talked about where the hearing process exists within the
agencies, and what those expenses were.
MR. HEMENWAY replied he would provide that information.
REPRESENTATIVE HUDSON said when someone has a dispute with the
state on a bid, there is an appeals process. He implied the
government tends to function as a protection on behalf of the "deep
pockets", whereas separate agencies come out in favor of the
individual, over the deep pockets. He said, "I'm wondering whether
or not, when you set up sort of a separate hearing office, if they
don't become more like courts where there would be greater costs to
government because the decisions would render toward the
individuals against the deep pocket." He asked Mr. Hemenway if
there is any relationship to the costs of the awards, as well as
the timeliness of it, in other states where they have put this kind
of a process in place.
MR. HEMENWAY replied he is not aware of any studies in that regard.
REPRESENTATIVE HUDSON said he believes that is something the
committee would like to look at. When he was the commissioner of
the Department of Administration, things were done in a timely
manner, and doesn't know when this changed.
REPRESENTATIVE OGAN asked Mr. Hemenway if he has ever looked at how
many people fit in this and how much this would cost.
Number 0642
MR. HEMENWAY said he believes Legislative Research looked at it.
It's difficult to ask the right questions to get the right
information. He mentioned OMB's study in 1993 and noted they did
another quick survey last year and came up with a number on their
own. However, he believes there were some flaws in that, as well.
REPRESENTATIVE OGAN referred to Attorney General Bruce Botelho's
letter addressed to Representative James, dated March 3, 1999,
regarding HJR 18, and read the following text:
AGENCIES THAT WOULD LOSE PRIMARY FUNCTION
Some agencies exist for the primary function of conducting
administrative hearings. Under HJR 18, they would no longer
have that function. Those agencies include: Alaska Workers'
Compensation Board, State Board of Parole, Occupational Safety
and Health Review Board, Fisherman's Fund Advisory and Appeals
Council, State Assessment Review Board, and Violent Crimes
Compensation Board. All of these agencies are boards and
commissions; most are comprised of citizen appointees.
REPRESENTATIVE OGAN stated that the Governor is on record saying
that he would like to see consolidation. Representative Ogan
remarked that he believes this may eliminate some functions and
would be a cost savings.
MR. HEMENWAY replied that he can't speak to the policy aspects of
it. He again mentioned bringing the work that is being done by
private attorneys inside the bureaucracy for a cost savings. Other
states have experienced a tremendous variety on how they implement
other cost savings.
CHAIR JAMES asked if it would be fair to assume that there would be
implementation costs before reaching any savings.
MR. HEMENWAY said that he understands that, generally there is a
short-term increase. If the wrong system is put into place, it can
cost more money in the long run, as well.
REPRESENTATIVE OGAN asked Mr. Hemenway if he is aware that there is
an administrative law judge association that has model legislation.
MR. HEMENWAY remarked the American Bar Association has a model act
which is supported by the national association.
Number 0693
DIANE BARRANS, Executive Director, Alaska Commission on
Postsecondary Education (ACPE), Department of Education appeared
before the committee to address what the legislation might do and
how it might impact the commission.
CHAIR JAMES noted that the committee isn't addressing the
implementation today. She said she would like to keep the
testimony focused on the constitutional amendment on allow this to
happen.
MS. BARRANS stated ACPE's primary roles, as an institutional
regulator and financial lending agency, it currently receives a
wide variety of requests for exemptions to statutory, regulatory
and procedural requirements. She read the following testimony for
the record:
Under its statutory mandate to regulate institutions and
administer the state's student financial aid programs, the
commission generally requests statutory authority, promulgates
regulations, and develops and implements policies designed
both to meet its fiduciary responsibility to the [Alaska]
Student Loan Corporation as well as to protect Alaskan
consumers. Staffs then follow these requirements by
administering the terms and conditions of the student loan and
by monitoring the regulated publics compliance with minimum
standards to operate postsecondary institutions in Alaska and
market their educational products to Alaskans.
TAPE 99-11, SIDE B
Number 0001
...Property rights of a citizen, which is a right to borrow
under the loan program, a right to their permanent fund
dividend that is being garnished, are handled in one way. The
other appeals that have to do with regulations, the terms and
conditions of the loan, are handled in another manner.
CHAIR JAMES asked if HJR 18 applies to boards and commissions.
REPRESENTATIVE OGAN affirmed that it does cover boards and
commissions.
MS. BARRANS continued:
The first type of appeal routes first to the staff level. If
the staff denied the request, it goes to the executive
director level. The executive director's level in certain
instances is the final administrative appeal and the matter
then can be appealed to the superior court. The types of
issues subject to this process are those technical ones
relating to terms and conditions of the loan as set in statute
and regulation. For example, request for deferment of loan
payments, loan settlement offers, denial of forgiveness
benefits, defaults, et cetera.
The second type is an appeal of default determination which
goes immediately to the executive director. Current statutes
require that a borrower appeal this determination with 30 days
of receiving a default notice, and the executive director's
determination is the final administrative or agency decision.
That too is appealable to the superior court.
The third process goes first to staff, then to the executive
director, and then to the full commission if the executive
director denies the appeal. The commission's decision is
final in those instances. The single issue that is subject to
that process is the denial of a student loan that goes all the
way to the commission.
CHAIR JAMES stated her understanding that that is not appealable to
the court.
MS. BARRANS replied they are all appealable to the superior court.
Number 0060
MS. BARRANS continued reading:
The next set is a staff determination that is denied, it goes
to the executive director, if the executive director's
decision is negative as well, then a hearing officer
appointment is requested. These types of issues are two,
actually just one - it's if we deny a request to cancel a loan
obligation due to a medical condition.
The last set is an appeal to staff that is denied that goes
directly to a hearing officer. The hearing officer issues a
recommended decision to the commission. The commission may
choose to accept, reject or amend the hearing officer's
decision. And, this appeal group is the garnishment of
permanent fund dividends for defaulted borrowers. If the
commission upholds a hearing officer's decision, which is
negative to the appellant, that too is appealable to the
superior court.
We've reviewed the activity that has occurred in these
different categories over the last two years. The commission
has had between 500 and 750 appeals each year in these
miscellaneous categories. Our contractual costs for hearings
have been significantly diminished due to the fact that only
two issues go to a hearing officer. The majority of those are
permanent fund dividend garnishments which, because they occur
en masse, it's once a year, they're treated as a group even
though they are individually reviewed, the hearing officer's
time is very efficiently used and we found that those costs
are less than $19,000 a year for the last two years. And,
they represent one-half of the total appeals that we receive.
Number 0109
If this process were to move to an administrative appeal
process, we are concerned about two issues. One is the
timeliness. Currently staff has an internal standard to turn
around appeal requests within ten working days. The executive
director has that same standard for appeals of that decision
- the staff decision. So, currently our customers do receive
very timely responses to their appeals. The only exception to
that are medical cancellation appeals which tend to be more in
depth, they require more documentation on the part of the
appellant and therefore, there are longer periods of time
involved there.
Potentially delays aside, the costs, if all these appeals were
to go to the hearing officer, we estimate it would increase to
about $125 thousand per year. We're assuming those costs
would be billable to the agency, and therefore our other
customers would be expected to incur those costs as a program
expense.
Number 0135
MS. BARRANS stated that, "As the responsible fiduciary for the
[Alaska] Student Loan Corporation, we would have a concern along
the lines, of that raised by Representative Hudson, that if these
decisions were to be made by an independent authority that viewed
the corporation as having deep pockets there may be a tendency to
lean in the appellant's favor rather than consider the corporate
good and the fact that the corporation is funded by other consumers
in Alaska as well."
CHAIR JAMES said that she also doesn't agree with Representative
Hudson's comments because she would like to believe the decisions
are fair.
CHAIR JAMES further stated that it doesn't seem final agency
decisions in HJR 18, it would include boards and commissions
because they work on different matters. If a board's or
commission's decision was appealed to a commissioner, it seems that
is when it would go to an administrative law clerk.
MS. BARRANS replied that she asked that of the Assistant Attorney
General, Teresa Williams. Ms. Williams advised that, under HJR 18,
the ACPE would be subject to this process.
CHAIR JAMES said she didn't think the ACPE would be violating this
constitutional amendment.
REPRESENTATIVE HUDSON asked how many appeals have gone to court.
MS. BARRANS replied that approximately five went to court.
REPRESENTATIVE HUDSON asked if there is one particular topic that
falls within those five.
MS. BARRANS responded that there were miscellaneous issues; there
wasn't a trend.
Number 0201
REPRESENTATIVE OGAN asked if the ACPE writes and adjudicates the
regulations.
MS. BARRANS replied that the regulations are passed by the
commission board.
REPRESENTATIVE OGAN asked if the commission adjudicates the
regulations as well.
MS. BARRANS replied yes they do write the regulations and
administer compliance under them. She pointed out that certain
decisions are set in regulation and the administrative decision
ends with the executive director. However, others go as far as the
commission, so they act as the adjudicatory boards.
Number 0276
PAUL GROSSI, Director, Division of Workers' Compensation,
Department of Labor, appeared before the committee. He said the
Department of Labor and the Division of Workers' Compensation have
concerns with HJR 18 because the division is one of the earliest
quasi-judicial agencies. The Division of Workers' Compensation was
in the forum of tort reform around the turn of the century, which
involved an agreement between labor and industry to take
work-related injuries out of the workplace and put them in an
administrative agency so that they could be dealt with by a
formula.
MR. GROSSI pointed out that industry or management benefited
because they had protection from lawsuits in the courts. Employees
also benefited because they had a no-fault system for compensation
of work-related injuries. He stressed that the department is
concerned because HJR 18 moves away from that concept.
MR. GROSSI added that Alaska developed the Workers' Compensation
Board and the panel usually consists of a labor representative
which is a member of the Labor Union, an industry-seat member which
is an owner of a company, and an employer or an upper management
person. The commissioner is designated as a legal expert in
workers' compensation.
MR. GROSSI noted that workers' compensation is a specialized field
and requires a certain expertise. In addition to the commission's
designee, in a hearing they also have that input from the private
sector that keeps it not just from being a decision rendered by a
professional legal expert. It is balanced objectivity with an
employee representative and an employer representative. Mr. Grossi
expressed concern that this will take away from that. He referred
to the "Larson's Workers' Compensation Law" for case laws and
analysis.
Number 0345
MR. GROSSI indicated that case law is expansive on workers'
compensation. In some years there are as many as 10 supreme court
cases and approximately 70 cases a year are appealed. He noted
that the record of the Division of Workers' Compensation is good as
far as getting affirmed by the courts because of the legal
expertise and the ability to make this decision objectively.
MR. GROSSI stated that he was looking at the decisions from the
superior court for January and February. Out of the 12 decisions,
2 were reversed and 10 were affirmed. He said he believes that
their numbers are better than they were historically.
MR. GROSSI reiterated concern that the balanced approach that has
developed over a long period of time will be lost by the change in
this resolution.
MR. GROSSI pointed out that the Fishermen's Fund Advisory and
Appeals Council within his division has the same concept; that it
is a board that consists of five fishermen and a commissioner
designee and decides cases on medical benefits for fishing-related
injuries.
MR. GROSSI stated that the Alaska Labor Relations Board the
Division of Employment Security (which determines cases on
unemployment) and the Occupational Safety and Health Review Board
may also be negatively impacted.
REPRESENTATIVE OGAN referred to a handout and read that Colorado
reduced its workers' compensation premiums by 22 percent prior to
establishing the division the state had 40 hearing officers
including full-time, part-time, and contract personnel. After
consolidation, there were 12 and backlogs were reduced by 95
percent with hearing times of 88 days instead of 263 days.
CHAIR JAMES commented that that will be addressed later and called
on the next witness.
Number 0415
KENNETH BOYD, Director, Division of Oil and Gas, Department of
Natural Resources, testified via teleconference from Anchorage. He
said that Title 38 says what the commissioner and directors shall
do in which they make a lot of decisions that impact what will
happen in the future.
MR. BOYD said, "My concern with the bill is this really strips any
decision-making ability out of Title 38 and puts [it] in the hands
of the hearing officer. ... However, most of our decisions don't
involve hearing officers. It's me, or the commissioner, or us
jointly making decisions on things like resales - best-interest
findings. A best-interest finding is a complex document that is a
whole series of decisions bound into a file decision that is
determined to be in the best interest of the state. And it
certainly does have a flavor of the person who is working on it,
and to say that flavor persists into the future is a true
statement, and maybe it should."
MR. BOYD further expressed a concern that is like taking the
decision-making out of the hands of people that make decisions
every day, which lead to a timeliness problem. His technical
concern is about the aspects of how to make decisions. He pointed
out that most of the department's decisions do not need a hearing
officer; in his eight years with the agency, there have been three
decisions that used hearing officers. This will also lead into the
technical aspect. For example, he was the hearing officer on a
dispute between two companies that wanted to expand a
"participating area" in Prudhoe Bay. It involved a very detailed
discussion on seismic data and was confidential. Mr. Boyd noted
that a normal person who walked into that room would have thought
he or she was hearing a foreign language.
Number 0459
BOB LOEFFLER, Director, Division of Mining and Water Management,
Department of Natural Resources, also testified from Anchorage. He
said Division of Mining and Water Management has three concerns
regarding the effect on the division and the mining industry:
First is the standard of review for most of their decisions, second
is the level of technical expertise necessary, and third is an
increase in time and money that may be required.
MR. LOEFFLER pointed out that the standard of review is what is in
the best interest of the state and is legislatively delegated to
the commissioner, who further delegates it to staff. It is not a
technical or legal standard and it is adjudicated by a hearing
officer or the court. Mr. Loeffler cited an example of leasing an
area for coal.
MR. LOEFFLER said the Department of Natural Resources makes
technical decisions. For example, the department just approved
advanced exploration permits for a mine; one complex question the
public brought up involved a geochemistry in acid rock drainage.
That question was reviewed for a couple months. Mr. Loeffler said
that he didn't try to explain geochemistry to an administrative law
judge. This is one reason why judicial agencies review only
procedural aspects of an agency decision.
MR. LOEFFLER stated the amount of time and money it would require
to take appeals and decisions that are currently quickly made
within the division and move them to outside the division. It
would be an expensive and time-consuming process to educate someone
who isn't familiar with the issue.
Number 0514
TERESA WILLIAMS, Assistant Attorney General, Fair Business
Practices Section, Civil Division, Department of Law, testified via
teleconference from Anchorage. She said that HJR 18 is written in
powerful language and that the same language is used in this
amendment is used to develop the executive branch, the judiciary
and the legislature. Basically, the stature of the office of
administrative hearings would be equivalent to a fourth branch of
government.
MS. WILLIAMS said "agency" has been defined to include any aspect,
any entity of the executive branch, the judicial branch and the
legislative branch, and that there is no exemption for boards and
commissions. "Agency" includes any branch of state government and
any sub-branch of state government.
MS. WILLIAMS stated that "administrative law hearing" includes
traditional reviews and paper reviews where documents are presented
by both sides which is a hearing for the purpose of administrative
law. She said the decision that is being discussed, which is being
made by personnel in an agency rather than a hearing officer, is an
administrative law hearing and would be subject to this
constitutional amendment [HR 18].
MS. WILLIAMS indicated that the amendment only created an idea and
that the legislature could exempt agencies and the legislature
attempted to take away the power to hear certain sentence appeals
by the supreme court, but the supreme court held that the
legislature could not take away that appellate authority. The
jurisdiction that could be prescribed by law could decide perhaps
whether something was reviewed at one level rather than another.
However, the ultimate judicial authority, having been vested in the
supreme court, could not be taken away because that was a
constitutional power.
Number 0549
MS. WILLIAMS reiterated, "Similarly here, once the power to conduct
administration law hearings would be vested in the office of
administrative hearing, the legislature would not have the power to
exempt agencies." This would be voted by the people and it would
be a document that would have precedence over any legislative
action.
MS. WILLIAMS explained that the administrative law hearing is any
dispute over facts, or any dispute over the application of
(indisc.--paper shuffling). Any of these disputes, for example,
providing welfare benefits, student loans, licensing of bars, or
certifying whether a doctor should remain in practice, would be
made by this single office. It would be making policy on every
aspect in which people have a contact with the state and would
become the most powerful entity in state government. Ms. Williams
stated that all of these functions would be transferred to the
central office and that there would be a level of review which
would be more expensive than the present level of reviews, by
persons who were not trained in that field.
Number 0581
MS. WILLIAMS noted that other states do have a centralized hearing
office for some purposes; however, no state has a centralized
hearing office for all purposes. It's rare to give the final
decision-making power to the centralized offices. Final
decision-making power is delegated because the issue is not
technical and it doesn't involve central policy-making types of
decisions.
MS. WILLIAMS said that if a hearing officer had final determination
that person would have the power to determine essential policy such
as whether or not a foster care facility should keep its license or
whether an applicant is fit to practice medicine in the state.
Those decisions would be taken away from the bodies that currently
have that decision-making authority and expertise in that area.
MS. WILLIAMS referred to Representative Ogan's past experience with
the Big Game Commercial Service Board. She said it appears the
board wasn't given clear information on its powers and that any
board under the Administrative Procedure Act has the power to call
for the record, to talk to the witnesses, and to talk to the
parties to make its own independent decision. If the board decides
only to review what has come before it by the hearing officer,
that's an important function. For example, if a hearing officer
decided to revoke a license, the board can say that the sanction
was too severe and that this person can continue to practice under
certain restrictions. Ms. Williams stressed that that is a very
important role that a board or commission plays. The ultimate
question is what serves the public interests.
Number 0626
MS. WILLIAMS referred to a list of state agencies that would be
affected by HJR 18. She said that there are a number of state
agencies that were set up for the sole purpose of conducting
administrative hearings and that they would be abolished in a sense
because they would have nothing left to do.
MS. WILLIAMS stated that once the constitutional amendment went
into place, the power to conduct an administrative law hearing,
which is broadly interpreted, would be removed from the
administrative agencies and there would be a delay while the office
of administrative hearing was established.
MS. WILLIAMS concluded that there would also be an increase in
appellant review because currently the judiciary, in reviewing
decisions made by the executive branch, gives (indisc.) to the fact
that the executive branch is making policy about matters within
their scope of expertise. The court system would not give that
same level of (indisc.) - decision made by the office of
administrative hearing; therefore, the cost of litigation for both
parties would increase at the court level. The number of appeals
may also increase because there would be a greater chance of
reversing the hearing officer's decision on appeals.
REPRESENTATIVE OGAN stated, "You said that this panel would end up
making policy, and I'm a little bit perplexed by what you meant by
that. It seems to me that the agency that writes the regulations
makes the policy, and adjudicated functions are simply to pass
judgment on whether or not that person accused of violating that
policy is guilty or not. And they also act as somewhat of an
independent, and that's the whole idea of the judiciary, right?
It's a safeguard between - to correctly interpret between the
people that enforce regulations or policy and between the people
that write them and correctly interpret whether or not the person
has violated that policy in a fair manner. Isn't that a fair
description of what any (indisc.) a judiciary function is supposed
to be?"
MS. WILLIAMS replied that the legislature is taking away the
enforcement ability from the agencies that have expertise and
vesting it in the administrative hearing office.
Number 0676
REPRESENTATIVE OGAN asked Ms. Williams if it is appropriate to give
enforcement ability to the legislature.
MS. WILLIAMS explained that the executive branch is unique in that
it has all three branches of government within it; the
quasi-legislative function of writing regulations, the enforcement
ability and the quasi-judicial aspects have been historically
noted. The U.S. Supreme Court decision stated that it assumed
agencies will look at the public interest, keeping that in mind as
their foremost concern, and will apply their expertise in resolving
factual disputes and disputes about applications of law.
REPRESENTATIVE OGAN asked if the constitutional amendment breaks up
the lack of separation of powers.
MS. WILLIAMS noted that there is a separation of powers in the
state. As far as she knows, every state has the same system. The
courts have reviewed this over the decades and have always found
that this is an appropriate separation of power because the
executive branch is limited on both sides. The legislature can
change the law and, in turn, the regulations would need to be
changed to reflect the new legislation. The judiciary can also
overturn the decision through the executive branch to ensure that
there are checks and balances on both sides. The functions that
are conducted within the executive branch are necessary for it to
carry out the functions that have been delegated by the
legislature.
REPRESENTATIVE OGAN again asked, whether this would clearly break
up that power within the executive branch.
MS. WILLIAMS said that she believes that it would break up the
power in a different way. It would take away all policy making
ability by the executive branch; therefore, it would eliminate it
from that tripartite system.
Number 0712
ED HEIN, Hearing Officer, Office of Administrative Appeals,
National Marine Fisheries Service, and a member of National
Association of Administrative Law Judges, appeared before the
committee.
TAPE 99-12, SIDE A
Number 0001
MR. HEIN stated that 24 states currently have central
administrative law judge panels and that three models are used to
organize those panels. Many agencies still have their own hearing
officers, but others have a central agency that makes
recommendations or makes final decisions; the agencies still have
the review power to finalize those decisions. The third model is
more like an administrative court in which the central hearing
office appeals agency as an intermediary between the agency and the
judicial branch.
MR. HEIN explained that HJR 18 is not intended to remove executive
agencies, including boards and commissions, all of their policy
making authority and all of the decisions which they make, t is to
move the hearing officers within the executive branch and their
functions to a centralized office is intended to deal with
contested cases with adjudications.
MR. HEIN said that the focus is on improving impartiality of
decision-making, the professionalism or the core of judges for
hearing officers, and the efficiency of having full-time people
doing this job rather than a maze of different, sometimes
part-time, hearing officers throughout the executive branch. He
agreed that there would be a disruption of agencies in the
transitional period.
MR. HEIN asked how should these cases be decided and why this is a
constitutional amendment rather than a bill, noting that a bill to
create a central office has been before the legislature more than
once but gets bogged down in a million details because many
agencies are affected by it.
MR. HEIN pointed out that this resolution would put before the
public the basic concept of centralizing the adjudicatory functions
and would give the legislature the role of deciding what
jurisdiction this office would have, what agencies would be
included, what agency's decisions would be decided by that office,
and what kinds of decisions would be decided by the central hearing
office.
Number 0089
MR. HEIN stated that if this were approved by the public in
November, 2000, the legislature would need to give itself time to
implement the legislation which would be the appropriate time to
decide what agencies should be exempted and to define exactly what
jurisdiction this agency would have.
MR. HEIN said there are basic questions on the legislation to
address, including whether this decision-making should be exclusive
to the central office and whether these would only be final agency
decisions.
MR. HEIN remarked every branch of government makes policy one way
or another but the courts decide policy through cases and
administrative judges and hearing officers make policy by
adjudication. This has always been the case and will continue to
be the case and it is not the intent of HJR 18 to take away from
the executive branch all the authority that they currently have to
make policies.
MR. HEIN remarked nor is it the intent to eliminate expertise of
the existing agencies. He said, "I would assume that the
legislature would provide in its implementing legislation that
these people are not just going to be dismissed and go away, that
these people will most likely be transferred over to the central
office. There is nothing in this resolution which prevents this
central office from having substantial expertise in a wide range of
areas."
Number 0174
MR. HEIN stated that the focus is on having a more professional
group of hearing officers that establish uniform rules so that all
agencies adjudications are governed by the same rules, so that the
attorneys treat them in the same fashion regardless of the agency.
He said that there may be exceptions because of the nature of some
hearings. For example, the Alaska Public Utilities Commission
would be approached differently than a professional licensing
hearing would.
MR. HEIN indicated that of the half of the states which have
adopted this policy, none of them have abandoned this concept. He
said the state could have fewer court cases because there would be
a well-established administrative record to take to court.
MR. HEIN said that the state could also build in alternative
dispute resolution procedures which could be used where appropriate
across the board and there are a number of benefits to it.
REPRESENTATIVE OGAN asked Mr. Hein to address the conflicts of
interest that a hearing officer would have versus the impartiality
of the administrative panels.
MR. HEIN mentioned that he talked to state administrative judges
from around the country and that he continually hears horror
stories about people who are pressed by their own agencies and
supervisors to cite cases a certain way. He said he thinks the
state needs people who can have a fresh look at these issues.
Number 0274
TAMARA COOK, Director, Legislative Legal and Research Services
Division, Legislative Affairs Agency, appeared before the
committee.
CHAIR JAMES asked Ms. Cook to address the boards and commissions.
MS. COOK said that she believes the Department of Law is correct
and that boards and commissions can be "little tiny things," or
they can be "horrifically important powerful things." Designating
something as a board, or a commission, or an agency does not
identify the magnitude of the power that it exercises or its
responsibilities.
MS. COOK stated, "So I'm not sure that it is even, from a policy
point of view, logical to make a distinction based on whether we
call something a board or commission, or whether it's a hearing
that's conducted within one of the principal departments. But the
word 'agency' is used by the courts depending on the context,
either broadly or narrowly. Most often broadly, it means more than
the principal department. If it is the desire of the legislature
to have this apply only to the principal department, even the
boards and commissions are generally placed (indisc.)
Administrative (indisc.) within a principal department. Then we
would need to be much more refined in the language that the
resolution uses."
Number 0299
CHAIR JAMES asked that when we write legislation to implement this,
could we specifically indicate those functions which are just part
of their jobs?
CHAIR JAMES stated that loan officers make decisions on loans, it
is their job, and if there is a question on a particular loan, it
may be assigned to the supervisor for a decision. She said it
doesn't seem to rise to the level of an administrative hearing
officer unless there is a valid dispute; then it would have to go
to the supervisor and next to a hearing officer.
MS. COOK responded that that is essentially correct. If, for
example, the state were going to apply this resolution to a
particular agency, board or commission, it would be critical to
designate the point, after an appeal has been made, that it goes to
this board. There also would be the need of being precise that a
decision of the commissioner may be appealed to this board. Ms.
Cook stated that obviously there is a decision that is made
initially with respect to the loan example on whether or not to
grant a loan application. She referred to the student loan
examples and she said at what point the applicant formally invokes
the appellate aspect would probably need to be spelled out and it
would be at that point that the matter is then transferred to a
central hearing.
CHAIR JAMES noted that there may be a point where there is
satisfaction, in which case it would not have to go to a hearing.
MS. COOK responded that it true right now in statute. Most of the
statutes we have that set up the system that included
administrative appeals do that right now. We have a decision that
is made, a first decision, and the individual involved must decide
whether to appeal that further, and sometimes there is a step - an
informal meeting that is less than a formal appeal. But
eventually, depending on the statute, the opportunity to appeal an
agency decision becomes formal in nature and it needs to be invoked
by the person who is receiving the effect of the adverse decision.
Mr. Hein was correct in pointing out the enabling legislation could
potentially be very complicated and filled with numerous policy
choices at what point this thing needs to be to go to a central
agency, what types of situations are going to be granted this level
of appeal and so forth. Those decisions have been made already in
statute. The process of making decisions regarding the levels of
appeal is not a new concept. We've done that over and over.
Deciding what of that to retain, and what of that to transfer, is
obviously a horrifically important decision but it is not anything
that is not going on right now when the state sets up a board or
commission.
REPRESENTATIVE OGAN said the amendment says the jurisdiction of
this office shall be prescribed by law. He asked how much latitude
that gives the legislature.
Number 0379
MS. COOK replied that she doesn't know. She stated that HJR 18 is
drafted very broadly and there has been testimony to that effect.
Like any constitutional amendment, we don't know what the court is
going to decide about the freedom that the legislature may have to
set up a separate board and commission, for example, the Alaska
Workers' Compensation Board, and say, "None of your decisions go
through this agency." Ms. Cook said she is not sure that the court
would decide that the legislature has that type of power; however,
it might because the legislature also has the power to set up
quasi-judicial agencies in the constitution, in another provision.
So the balance between those two is not clear to her and she
doesn't know how it would be implemented.
[HJR 18 was held for further consideration.]
ADJOURNMENT
Number 0392
There being no further business before the committee, the House
State Affairs Standing Committee was adjourned at 10:03 a.m.
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