Legislature(2003 - 2004)

02/23/2004 10:02 AM Senate FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                     SENATE FINANCE COMMITTEE                                                                                 
                         February 23, 2004                                                                                    
                             10:02 AM                                                                                         
SFC-04 # 18, Side A                                                                                                             
SFC 04 # 18, Side B                                                                                                             
CALL TO ORDER                                                                                                               
Co-Chair  Gary Wilken convened  the meeting  at approximately  10:02                                                            
Senator Lyda Green, Co-Chair                                                                                                    
Senator Gary Wilken, Co-Chair                                                                                                   
Senator Con Bunde, Vice Chair                                                                                                   
Senator Ben Stevens                                                                                                             
Also Attending:  JANE ALBERTS, Staff to Senator Con  Bunde and Aide,                                                          
Senate  Labor  & Commerce  Committee;  JACQEULING  TUPOU,  Staff  to                                                            
Senator Lyda  Green; JON SHERWOOD,  Department of Health  and Social                                                            
Services;  DAVE STANCLIFF,  Staff  to  Senator Gene  Therriault  and                                                            
Aide, Administrative  Regulation  Review Committee;  ANDY  HEMENWAY,                                                            
Hearing  Officer,  Procurement  &  Longevity  Bonus,  Department  of                                                            
Attending  via  Teleconference:   From  Anchorage:  JOHANNA   BALES,                                                          
Program  Manager,   Cigarette  and  Tobacco  Products   Excise  Tax,                                                            
Department  of Revenue;  From Ketchikan:  MIKE ELERDING,  President,                                                            
Northern  Sales  Company Alaska,  Inc.;  From  an Offnet  Site:  DAN                                                            
HOUGHTON, Representative, Alaska Regional Hospital                                                                              
SUMMARY INFORMATION                                                                                                         
SB 291-UNSTAMPED CIGARETTES                                                                                                     
The Committee heard from  the sponsor, the Department of Revenue and                                                            
the industry. The bill was reported from Committee.                                                                             
SB 285-MEDICAL ASSISTANCE COVERAGE                                                                                              
The Committee  heard from the sponsor  and the Department  of Health                                                            
and Social Services. The bill reported from Committee.                                                                          
SB 203-OFFICE OF ADMINISTRATIVE HEARINGS                                                                                        
The  Committee  heard testimony  from  the  sponsor,  Department  of                                                            
Administration,  and  took public  industry.  The bill  was held  in                                                            
     SENATE BILL NO. 291                                                                                                        
     "An Act extending the transition period for activities                                                                     
     involving unstamped cigarettes; and providing for an effective                                                             
This  was the first  hearing  for this  bill in  the Senate  Finance                                                            
Co-Chair Wilken  stated that the Senate  Labor & Commerce  Committee                                                            
is  the  sponsor   of  this  legislation  which  would   extend  the                                                            
transition period for the  sale of unstamped cigarettes that were in                                                            
the State prior to January  1, 2004, from March 31, 2004 to June 30,                                                            
2004.  He  noted that  this  extension  would  provide  dealers  and                                                            
distributors   an  additional  90  days  to  dispose   of  unstamped                                                            
JANE ALBERTS,  Staff to Senator Con  Bunde and Aide, Senate  Labor &                                                            
Commerce (L&C) Committee,  explained that this bill is the result of                                                            
an "unforeseen  and unexpected" situation  relating to the  adoption                                                            
of SB 168-CIGARETTE  SALE/DISTRIBUTION  during the 2003 Legislative                                                             
session that required cigarettes  for sale in the State to display a                                                            
tax stamp which  "would indicate that a tax had indeed  been paid on                                                            
the product."  She reminded that SB 168 specified  the date of March                                                            
31, 2004  as the  deadline by  which dealers  and distributors  must                                                            
have disposed of any unstamped  inventory purchased prior to January                                                            
1, 2004.  She  noted that,  at the  time SB  168  was adopted,  this                                                            
timeframe, based  on the recent enactment of similar  legislation in                                                            
Hawaii, had  been considered ample  time for disposal. However,  she                                                            
continued, the  tobacco companies' "once liberal"  and long-standing                                                            
supplier returned goods  policy was changed in the fall of 2003 to a                                                            
more restrictive  policy that  "makes it  almost impossible  for the                                                            
dealers  and  distributors  to  return  their  cigarettes  for  full                                                            
credit."  She noted  that,  had the  tobacco companies'  policy  not                                                            
changed,  the Department of  Revenue could  have issued credits  for                                                            
previously taxed cigarettes  and the retailers and wholesalers could                                                            
have repurchased  cigarettes bearing  the tax stamp. Therefore,  she                                                            
stated, this  legislation was developed  to allow for the  depletion                                                            
of the previously purchased  inventory. In addition, she shared that                                                            
the tobacco  industry  has been  unresponsive to  the Department  of                                                            
Revenue's request that their prior return policy be reinstated.                                                                 
Ms. Alberts  reminded  that SB  168 also prohibits  cigarettes  from                                                            
being "loss leader," or  reduced price, items. This restriction, she                                                            
stated, prevents  dealers and distributors  from being able  to sell                                                            
their unstamped  inventory more quickly. Therefore,  she noted, were                                                            
this  legislation  not  adopted,   the unsold   inventory  would  be                                                            
considered,  as  of March  31,  2004,  as contraband  and  would  be                                                            
subject to State seizure.  She stated that this legislation is being                                                            
presented,  at the recommendation  of the Department of Revenue,  in                                                            
order to extend  the deadline to June  30, 2004 in order  to provide                                                            
dealers  and distributors  time to  sell their  unstamped  cigarette                                                            
inventory.  She  pointed  out  that  the  Members'  packets  contain                                                            
numerous letters in support of the legislation.                                                                                 
JOHANNA  BALES,  Program Manager,  Cigarette  and  Tobacco  Products                                                            
Excise  Tax, Department  of Revenue,  testified  via teleconference                                                             
from Anchorage  and expressed  that the Department  has received  in                                                            
excess of 50 communications  from distributors and retailers voicing                                                            
concern regarding  this situation.  She relayed that as a  result of                                                            
the  Department's  efforts to  discuss  the situation  with  tobacco                                                            
manufacturers,  relief might be forthcoming  to assist distributors                                                             
with  the tax  stamp situation.  However,  she noted,  no remedy  to                                                            
address  the retailers' situation  has been  determined. She  stated                                                            
that the Department supports this legislation.                                                                                  
MIKE  ELERDING,  President,  Northern Sales  Company  Alaska,  Inc.,                                                            
testified  via  teleconference  from  Ketchikan  to voice  that  the                                                            
tobacco  industry unanimously  supports  this legislation.  He  also                                                            
noted that  he has submitted written  testimony, dated February  23,                                                            
2004, [copy on file] in support of this bill.                                                                                   
Co-Chair  Green  moved  to  report  the  bill  from  Committee  with                                                            
individual recommendations and accompanying fiscal note.                                                                        
Senator Bunde  stated that people like Mr. Elerding  had assisted in                                                            
the original  tax stamp legislation,  and he assured that  there was                                                            
no intent  to have people  like him "financially  inconvenienced  by                                                            
the process."  Continuing,  he requested  that the  passage of  this                                                            
bill be expedited.                                                                                                              
Co-Chair Wilken  concurred and noted that the current  situation was                                                            
"unintended" and were the result of "the rules" being changed.                                                                  
There being  no objection, SB 291  was REPORTED from Committee  with                                                            
zero fiscal note #1, dated  February 9, 2004, from the Department of                                                            
     SENATE BILL NO. 285                                                                                                        
     "An Act  relating to medical  assistance coverage for  targeted                                                            
     case  management  services  and  for  rehabilitative   services                                                            
     furnished  or  paid  for by  a  school district  on  behalf  of                                                            
      certain children; and providing for an effective date."                                                                   
This  was the first  hearing  for this  bill in  the Senate  Finance                                                            
Co-Chair  Wilken explained  that this legislation  would expand  the                                                            
definition  of  the  Department  of  Health   and Social   Services'                                                            
Targeted  Case  Management  services  as  they  relate  to  Medicaid                                                            
payments.  He noted  that the  proposed  changes could  result  in a                                                            
general funds savings of $270,000.                                                                                              
JACQUELINE TUPOU,  Staff to Senator Lyda Green, the  bill's sponsor,                                                            
specified that  this bill would address two things:  first, it would                                                            
expand   the  Department's   authority  to   expand  Targeted   Case                                                            
Management  Services beyond the currently  specified three  targeted                                                            
groups;  and  second,  it would  align  the  State's  definition  of                                                            
school-based  rehabilitative services  with the federal definition.                                                             
These changes, she continued  would allow the State to be reimbursed                                                            
for expenditures associated with those services.                                                                                
Co-Chair Green reminded  the Committee that separate legislation has                                                            
been  adopted  that  allowed  school  districts   to  be  registered                                                            
Medicaid  vendors. Continuing,  she  stated that  in the process  of                                                            
implementing that  legislation, the Department of  Health and Social                                                            
Services  was  informed  by the  federal  program  that one  of  its                                                            
definitions  "was  weak." This  legislation,  she  continued,  would                                                            
strengthen that [unspecified]  definition so that, in the future, "a                                                            
great deal  of income" could  be provided  to school districts  that                                                            
choose to participate.                                                                                                          
Co-Chair  Wilken   stated  that  this  legislation  could   generate                                                            
millions of dollars.                                                                                                            
Senator  Bunde  noted  that  a zero  fiscal  note  accompanies  this                                                            
legislation because the  savings were calculated with the previously                                                            
adopted legislation.  He declared  that the program could  result in                                                            
the receipt of several hundred million dollars.                                                                                 
Co-Chair  Wilken recalled  that the  amount would  be approximately                                                             
$4.5 million.  He asked for confirmation  that the federal  money in                                                            
question would  remain in the school districts' budgets  rather than                                                            
being provided to the State.                                                                                                    
Co-Chair Green stated that  the funds would result in a net increase                                                            
to  school  districts'   budgets.  She  specified   that  while  the                                                            
Department  of Health  and  Social Services  and  the Department  of                                                            
Education  and Early Development  would assist  school districts  in                                                            
the process,  this legislation  would strengthen  the targeted  case                                                            
management definition  so that districts' could receive  the federal                                                            
JON SHERWOOD,  Department of Health  and Social Services,  concurred                                                            
that  the   school-based  services   legislation  would   result  in                                                            
approximately  $4.5 million in new federal funding  once the program                                                            
is fully operational. This  legislation, he continued, would resolve                                                            
the problem  with  the Statute  definition involving  Targeted  Case                                                            
Management   to  include  additional   targeted  groups,   which  he                                                            
attested, would include groups already being served.                                                                            
Co-Chair  Wilken  asked when  the  corresponding  State regulations                                                             
would be completed  as, he pointed out, that is required  before the                                                            
school districts could move forward.                                                                                            
Mr. Sherwood understood  that the regulations should be available by                                                            
the start of  the upcoming school  year. However, he clarified  that                                                            
not all school districts  would be ready at that time as development                                                            
of  program  support  such  as  billing  systems,  could  take  some                                                            
districts additional  time. He also  noted that federal approval  of                                                            
the State plan is also required.                                                                                                
Co-Chair Wilken asked for examples of Targeted Case Management.                                                                 
Mr.  Sherwood  exampled  that,  in  addition  to  the  school  based                                                            
services,  other qualifying  services  include:  families  receiving                                                            
Family and  Preservation Services  through the Office of  Children's                                                            
Services;  some  of the  work  conducted  by public  health  nurses;                                                            
people in  the Infant Learning  Program; and  some of the people  in                                                            
Juvenile Justice who are  in community placement as opposed to being                                                            
housed  in a State  facility which  would make  them ineligible  for                                                            
Co-Chair  Green   moved  to  report  SB  285  from  Committee   with                                                            
individual recommendations and accompanying fiscal notes.                                                                       
There being  no objection, SB 285  was REPORTED from Committee  with                                                            
zero  fiscal notes  #1  and #2,  dated January  28,  2004, from  the                                                            
Department of Health and Social Services.                                                                                       
     CS FOR SENATE BILL NO. 203(JUD)                                                                                            
     "An  Act  relating  to  administrative   hearings,  to  hearing                                                            
     officers,  and to administrative  law judges; establishing  the                                                            
     office of administrative  hearings and relating to that office;                                                            
     and providing for an effective date."                                                                                      
This  was the first  hearing  for this  bill in  the Senate  Finance                                                            
Co-Chair  Wilken stated that  this bill, which  is sponsored  by the                                                            
Senate  Rules Committee  by  Request,  would create  an independent                                                             
office of hearing  officers, directed by a chief administrative  law                                                            
judge,  within  the  Department  of Administration.   Therefore,  he                                                            
continued, the administrative  hearing officer would be removed from                                                            
the affected  State agency  that writes,  promulgates, and  enforces                                                            
regulations.  He noted  that 25  other states  have created  similar                                                            
DAVE  STANCLIFF,   Staff  to  Senator  Gene  Therriault   and  Aide,                                                            
Administrative  Regulation  Review  Committee,  opined  that "it  is                                                            
infrequent"   that  issues   are   presented  that   are  good   for                                                            
constituents,  good for the  Government, good  for the Legislature,                                                             
and  good  for judicial   practice.  He stated  that  this  bill  is                                                            
"considered  a good  government  bill  and has  garnered  bipartisan                                                            
support throughout  the country and so far here in  the Alaska State                                                            
Legislature."  He noted that, to date, there has been  no opposition                                                            
to the measure.  He declared  that the premise  of the bill  is that                                                            
"the people who  challenge the laws and rules of government  deserve                                                            
to have fair, impartial,  and efficient and professionally conducted                                                            
hearings when  they do make those challenges." He  shared that these                                                            
challenges   could  originate  from   major  corporations   or  from                                                            
Mr. Stancliff pointed out  that the idea "is to rebalance the powers                                                            
of our  three branches of  government" as  presently, he noted,  the                                                            
Administrative  Branch  "has legislative  ability  in  its power  to                                                            
write rules  that become law." Furthermore,  he attested,  it has in                                                            
its power,  an ability "that is normally  reserved for the  Judicial                                                            
Branch of government in  that it has a form of captive judges within                                                            
the  State  administration"  who are  called  hearing  officers.  He                                                            
specified that  currently the State's hearing officer  functions are                                                            
scattered throughout the  State and are comprised of people who have                                                            
a variety  of backgrounds,  some with legal  training and some  with                                                            
none. In  addition, he noted  that some hearing  officers work  full                                                            
time, some part time, and  that a variety of pay ranges are offered,                                                            
But, he explained, what  makes this system "worthy of reform" is the                                                            
fact  that "they  work for  the agency  that signs  their  paycheck;                                                            
gather  at the  water cooler;  and play  golf on  the weekends."  He                                                            
stated that,  "it has been discovered  throughout the country"  that                                                            
it is disconcerting to  those challenging "a regulation or a rule of                                                            
law and discover that the  person who is going to sit in judgment of                                                            
their appeal  actually works for the  agency they are challenging."                                                             
Mr. Stancliff stated that,  in addition to being supported by Senate                                                            
President,  Senator Gene Therriault,  this legislation is  supported                                                            
by Governor  Frank Murkowski  and Mike Miller,  the Commissioner  of                                                            
the Department  of Administration.  Continuing, he asserted  that in                                                            
order  "to  work  for   Alaska,"  this  legislation  must   minimize                                                            
disruptions as the change occurs.                                                                                               
Mr. Stancliff  specified that  the major  change resulting  from the                                                            
legislation  would be the creation  of a central model, independent                                                             
hearing office,  in which  the hearing officers  would be  re-titled                                                            
Administrative  Law  Judges.  The Administrative  Law  Judges  would                                                            
report, he  continued, to  a Chief Administrative  Law Judge  (Chief                                                            
ALJ)  who would  establish  standards  of  conduct, similar  to  the                                                            
State's judicial  system code of conduct.  He stated that  the Chief                                                            
ALJ's standard  of conduct would have  as its "primary goals,"  good                                                            
due process, high  levels of adjudication, and an  efficient system.                                                            
Mr. Stancliff specified  "that once the upfront transition costs are                                                            
in place"  and the model  becomes operational,  government  agencies                                                            
could avail themselves  to it. Furthermore, he commented that rather                                                            
than hearing officers working  part time, the system would have full                                                            
time  hearing  officers,  and instead  of  having  hearing  officers                                                            
specializing  in one  field, the  hearing officers  would be  cross-                                                            
trained. These  changes, he opined,  would allow the hearing  office                                                            
to become a very efficient  unit of State government. He stated that                                                            
the fiscal  savings would  be better defined  once the fiscal  notes                                                            
are developed.                                                                                                                  
Mr. Stancliff  stated  that one of  the "residual"  effects of  this                                                            
reform would  be "that when you have  high levels of adjudication,"                                                             
the people  who conceive, write and  enforce the regulations  "start                                                            
doing their  job differently  because they  no longer have  in-house                                                            
hearing officers  inclined to protect what they write  and what they                                                            
enforce." He stated  therefore, that businesses that  have been tied                                                            
up in  the regulatory  process  for up to  ten years  or more  could                                                            
actually  get through  the  administrative  process  quicker, get  a                                                            
resolution,  "and decide  whether they  want to  take their case  to                                                            
court or not." Additionally,  he stated that the entire system, both                                                            
inside and outside  the model, would start "to behave  differently,"                                                            
because a new level of expertise would be required.                                                                             
Mr. Stancliff  explained  that the  new process  would create  a new                                                            
model  that would  absorb the  hearing officers  currently  existing                                                            
within agencies,  would serve to curb expense, would  keep the model                                                            
flexible   so  that   it   could  continue   to   work  with   other                                                            
Administrative  Procedure Act (APA) hearing functions  in the State;                                                            
and, "and most  importantly," would  provide the Chief ALJ  with the                                                            
ability to  have Statewide oversight  whenever there is a  complaint                                                            
filed or a  problem arises outside  the model. He informed  that the                                                            
Chief ALJ  would report to  the Legislature  on an annual basis  and                                                            
discuss issues  that must be addressed.  Furthermore, he  noted that                                                            
the Legislature would be  able to include individuals in the hearing                                                            
process if so desired.                                                                                                          
Mr. Stancliff  pointed out that some states have established  models                                                            
that "have "worked  well to an extent, but has been  problematic" in                                                            
that  the rulings  are  not  allowed  to be  challenged.  The  model                                                            
proposed  in  this legislation,  he  continued,  would  allow  State                                                            
commissioners  to overturn a decision  based upon sound rather  than                                                            
"arbitrary  reasons." He  expanded  that the  Commissioner would  be                                                            
required to review the  record and evidence "and put the reasons for                                                            
overturning the ruling into writing."                                                                                           
Mr. Stancliff  declared  that constituents  have  found the  current                                                            
administrative  hearing model  "very difficult  to exhaust"  in that                                                            
"it is almost impossible  to get beyond the administrative system in                                                            
the State of Alaska  if the administrative system  does not wish you                                                            
to  get  beyond  it." He  contended  therefore  that,  "it  is  very                                                            
difficult to get your case  before the courts." Continuing, he noted                                                            
that  "what  is  even  more  damaging  to  small  entrepreneurs  and                                                            
business people is that  the first time they confer with an attorney                                                            
or anyone who is familiar  with the State system, the advise is that                                                            
"unless  you have about  five years  of time and  a lot of money  to                                                            
invest," you  may want to consider  whether to challenge  the ruling                                                            
or regulation.  He  stated that  this situation,  combined with  the                                                            
desire  to rebalance  power,  has been  the driving  force for  this                                                            
legislation. He stated  "that a bundle of horror stories" could have                                                            
been presented relating to previous administrative actions.                                                                     
Mr. Stancliff contended  that the model being presented in this bill                                                            
is a model  that is being reviewed  by numerous other states,  as it                                                            
is a hybrid  of many models.  He requested  that further changes  to                                                            
this legislation  be made either in the form of amendments  or a new                                                            
committee substitute. He  noted that some of the accompanying fiscal                                                            
notes "aren't exactly correct  yet," as some of the departments have                                                            
developed fiscal  notes based on incorrect "assumptions"  about what                                                            
this legislation  would  or would  not do. Therefore,  he  requested                                                            
that the  fiscal notes  be reviewed  during future  hearings  on the                                                            
Co-Chair  Wilken  asked for  a review  of the  changes  made in  the                                                            
Judiciary Committee's version of the bill.                                                                                      
Mr. Stancliff  explained that  the Department  of Law had  requested                                                            
each department  affected by this legislation to determine  how this                                                            
bill would affect  current procedures and to identify  any area that                                                            
might be problematic. One  issue that was raised, he noted, involved                                                            
jurisdictional conflicts  between those hearings operating under APA                                                            
law  and  those  operating   separate  from  the  APA  requirement.                                                             
Therefore,  he continued, "the Judiciary  Committee addressed  those                                                            
mechanical changes that  would make this new model and the authority                                                            
within it  more user friendly  for this Administration  to  put into                                                            
affect."  Other  concerns  addressed   in the  Judiciary   Committee                                                            
version of the bill, he  continued, was how to provide the Chief ALJ                                                            
with  the ability  to allow  an agency  who  needs a  high level  of                                                            
expertise "to  come in and sit at the hearings," as  well as how "to                                                            
allow agencies  who are not swept  into the model" to use  the model                                                            
if  they  so  choose.  He pointed  out  that  a  component  that  is                                                            
garnering support  on the national level is the fact  that the State                                                            
has allowed  its commissioners to  voice their support of  using the                                                            
Central model,  and he continued,  the commissioners voiced  support                                                            
for  allowing  the  Central  model   ruling  be  final  rather  than                                                            
requiring   the  commissioners   to  weigh   in  on  the   decision.                                                            
Furthermore,  he noted, even  though the  Central Model's Chief  ALJ                                                            
might  have  jurisdiction   over  an  agency,  a  well-functioning,                                                             
existing hearing office  could be allowed, after review, to continue                                                            
what its been doing.                                                                                                            
Co-Chair  Wilken  agreed  with Mr.  Stancliff's  comments  that  the                                                            
fiscal notes should be  further reviewed as the fiscal notes "do not                                                            
jive" with the  legislation's intent of being a consolidating  bill.                                                            
Co-Chair  Wilken  inquired   as  to  whether  the  average  cost  of                                                            
conducting a hearing is $10,000 or $100,000.                                                                                    
Mr. Stancliff  responded that one  of the determining factors  would                                                            
be the  length  of time that  the Administration  "holds  on to  the                                                            
issue  before  it."  He informed  the  Committee  that  neither  the                                                            
hearing  expenses  nor the  affect  of the  hearings  on the  public                                                            
sector are tracked.  He stated that not only is the  State unable to                                                            
ascertain how  many contract hearing officers are  being used, it is                                                            
also unable  to ascertain  the length of time  required for  them to                                                            
conduct their  business. He  stated that  this information  is being                                                            
sought, and if it were  determined to be an accurate reflection, the                                                            
information would be supplied  to the Committee. He pointed out that                                                            
one thing that  could save the State  money is that the Legislature                                                             
would  be provided  an  annual  review  of the  model,  which  could                                                            
include a public survey.  He noted that because the Central Model is                                                            
funded  separately from  other agencies,  the  Legislature would  be                                                            
able to get  a good idea of what is  being provided by the  funding.                                                            
Mr. Stancliff shared knowledge  of a situation in which the existing                                                            
model addressed  a case for more than  five years and, as  a result,                                                            
caused  the affected  business to  go bankrupt.  In other cases,  he                                                            
shared,  delays  regarding  actions in  which  the State  was  found                                                            
liable for millions of  dollars have not only tied up State employee                                                            
time, but are accruing  liabilities which the State would eventually                                                            
be required  to pay, perhaps with  interest. He stressed  that it is                                                            
not  in the  best  interest  of the  State  "to stall"  through  the                                                            
administrative process.  In summary, he stated that he would attempt                                                            
to develop costs and time scenarios.                                                                                            
Senator  Bunde asked  whether  there are  any State  divisions  that                                                            
would be exempt from this bill.                                                                                                 
Mr.  Stancliff   responded   yes.  He  shared   that  the   original                                                            
jurisdiction  list was quite  extensive and  was projected  to incur                                                            
more expensive startup  costs than could be supported. Therefore, he                                                            
continued,  the   list  has  been  pared  down  on  three   separate                                                            
occasions.  He explained that as currently  proposed, approximately                                                             
15 percent of  hearing officers would be included  in the new model.                                                            
However, he stated,  all hearing officers would "be  affected by the                                                            
general reforms that occur in the bill."                                                                                        
Senator Bunde inquired  as to which of the plans in the "Independent                                                            
Administrative   Hearings   Through   a  Central   Panel,   Informal                                                            
Legislative  Brief" provided by Senator  Therriault, [copy  on file]                                                            
has been chosen for this legislation's Central Panel model.                                                                     
Mr. Stancliff  responded that the plan that is being  proposed would                                                            
involve  "the   building  of  a  small   model,  put  into   it  the                                                            
jurisdictions  that you could afford  to put in, give the  model the                                                            
ability to render  a decision that's final if the  Commissioner does                                                            
not  act within  30 days,  and if  it is  going to  be overturned,"                                                             
mandate that it be based  on good reasons. Continuing, he noted that                                                            
the  Chief  ALJ  must  be provided  the  ability  to  come  "to  the                                                            
Legislature and the Administration  and the attorney general and say                                                            
here's what's broken, here's  what needs to be fixed, here's how the                                                            
APA needs  to be amended  to resolve some  of the problems  that are                                                            
occurring with  hearing officers."  So, he concluded, that  the plan                                                            
being proposed  is a "hybrid" consisting of many plans,  without the                                                            
final authority,  and encompassing  in a select number of  people as                                                            
authorized by the Administration.                                                                                               
Senator Bunde  understood, therefore,  that a hybrid of the  various                                                            
plans  is   being  presented  rather   than  a  single  plan   being                                                            
Mr. Stancliff concurred.                                                                                                        
Senator B. Stevens  understood that while the bill  would affect all                                                            
State agencies,  not all of them would be under the  jurisdiction of                                                            
the new  Central  Panel hearing  procedure. However,  he  questioned                                                            
whether  the   bill's  language  in   Section  3,  Subsection   Sec.                                                            
44.21.550. Code  of hearing officer conduct. located  on page eight,                                                            
lines 6-10  indicates  otherwise as  it appears  to state that  "the                                                            
Chief Administrative  Law Judge has  maximum control over  all other                                                            
hearing officers,  even though they  are not under the jurisdiction                                                             
of the agency." This language reads as follows.                                                                                 
     …The code shall apply to the chief administrative law judge,                                                               
     administrative law judges of the office, and hearing officers                                                              
     of each other agency.                                                                                                      
Mr. Stancliff  stated that, "this has been the most  difficult point                                                            
to resolve." He  pondered how much authority should  be given to the                                                            
Chief ALJ  as were  that person  "given too much,  the agencies  get                                                            
very  nervous." He  noted that  language to  the affect  of "to  the                                                            
maximum  extent  possible,   without  conflicting  with   applicable                                                            
statutes" has  been included in the bill to raise  the comfort level                                                            
of agencies  and to  "sufficiently"  assure the  agencies that  were                                                            
they doing  their jobs  well, that  they could  continue to  do them                                                            
without the  Chief ALJ saying "hey,  its my domain, I'm taking  over                                                            
now, step aside."                                                                                                               
Senator  B. Stevens  reiterated  that the  question  is whether  the                                                            
Chief ALJ would have jurisdiction  over agencies that are not listed                                                            
in Section 3 of the bill.                                                                                                       
Mr. Stancliff stated that the language "does say that."                                                                         
Senator  B.  Stevens  asked  the  reason  for  this  language  being                                                            
ANDY  HEMENWAY,  Hearing Officer,  Procurement  &  Longevity  Bonus,                                                            
Department  of Administration, noted  that Mr. Stancliff  might have                                                            
misspoken in regards to  this issue. He qualified that "the hearings                                                            
that  are mandatorially   within the  jurisdiction  of  the  Central                                                            
Panel, the  Chief Administrative  Law Judge  would be able  to issue                                                            
regulations  governing the conduct  of those hearings." Continuing,                                                             
he stated that this section  would not apply to "other agencies that                                                            
are not within the mandatory jurisdictions."                                                                                    
Senator B. Stevens clarified  therefore, that this section would not                                                            
apply to those not within the mandatory jurisdictions.                                                                          
Mr. Hemenway concurred.                                                                                                         
Mr. Hemenway  noted  that the  applicable  language in  the bill  is                                                            
located in  Sec. 3, subsection Sec.  44.21.560, on page seven,  line                                                            
31 through page eight, line 2 that reads as follows.                                                                            
     Sec.   44.21.560.  Procedure   for  hearings.  (a)   The  chief                                                            
     administrative   law  judge shall,  by  regulation,   establish                                                            
     procedures   for  administrative  hearings   conducted  by  the                                                            
Mr. Stancliff apologized as he had misunderstood the question.                                                                  
Mr. Hemenway continued  that the specific answer to  the question is                                                            
included in the aforementioned Section 44.21.560 as follows.                                                                    
     …However,  to the extent regulations  adopted by an  agency for                                                            
     the  conduct   of  an  administrative  hearing   conflict  with                                                            
     regulations  adopted  by  the chief  administrative  law  judge                                                            
     under  this subsection,  the  regulation adopted  by the  chief                                                            
     administrative   law  judge  control  to  the  maximum   extend                                                            
      possible without conflicting with applicable statures.                                                                    
In other words, Mr. Hemenway  continued, the Chief ALJ's regulations                                                            
would supercede regulations  of the hearings within the jurisdiction                                                            
of  the  agencies  that  the  Chief  ALJ  might   adopt  to  govern.                                                            
Continuing, he clarified  that the Chief ALJ's regulations would not                                                            
affect any agency's  on-going proceedings or hearing  functions that                                                            
are not  included in the  Central Panel. However,  he noted  that an                                                            
agency that is  not included in the Central Panel  could voluntarily                                                            
elect to  send a case  to the Central  Panel, and  that, as  part of                                                            
their request,  the agency or the  Chief ALJ could specify  that for                                                            
cases being referred, that agency's regulations would be used.                                                                  
Mr. Stancliff  added that  the Chief ALJ would  be able "to  receive                                                            
input from people  outside the process who might be  having problems                                                            
with people  outside  the process  and make  recommendations to  the                                                            
Administration  and to the  Legislature as  to how to resolve  those                                                            
problems." He  asserted that the Chief ALJ would be  "empowered with                                                            
a  great  deal  of  authority"  within  the  Central   Panel  model.                                                            
Furthermore, he  continued, the Central Panel's model'  would create                                                            
a new atmosphere  of how hearings are conducted and  held outside of                                                            
the model.  He stated  that this  point of balance  proved the  most                                                            
difficult to resolve within the Administration.                                                                                 
Senator  B. Stevens  asked  for confirmation  that  the Chief  ALJ's                                                            
procedures would  supercede administrative hearing  regulations that                                                            
an agency might currently have in place.                                                                                        
Mr. Stancliff  responded that this would be true for  those agencies                                                            
that are included  in the model. He  reiterated that those  agencies                                                            
not jurisdictionally  included in the model would  not be subject to                                                            
the Chief ALJ's new procedures  and regulations. He stated that this                                                            
was the compromise.                                                                                                             
Senator  B.  Stevens understood  therefore  that  the  agencies  not                                                            
specifically included  in the Central Panel would  not be subject to                                                            
the Chief ALJ's regulations and procedures.                                                                                     
Mr. Hemenway  stated that the list  of agencies included  in Sec. 3,                                                            
subsection  Sec. 44.21.530. Jurisdiction  of the office,  located on                                                            
page  four  and   five  of  the  bill,  would  be  subject   to  the                                                            
jurisdiction   of  the  Central  Panel   and  the  regulations   and                                                            
procedures as determined by the Chief ALJ.                                                                                      
Senator  B. Stevens  asked for  confirmation that  the agencies  not                                                            
listed  in that  section  would not  be required  to  report to  the                                                            
Central Panel.                                                                                                                  
Mr. Hemenway concurred.                                                                                                         
Co-Chair Wilken  noted that Sec. 2, subsection (c),  on page 2, line                                                            
21 specifies  that the Chief  ALJ could not  serve in that  capacity                                                            
for more than three five-year terms.                                                                                            
Mr. Stancliff  commented that upon  review of several other  states'                                                            
models,  it  was  determined  that "institutionalizing   the  judges                                                            
within  the  Administrative   system"  might  not   serve  the  best                                                            
interests  of  the  model. Therefore,   he shared,  that  this  term                                                            
timeframe  was a compromise  "between  two schools  of thought,"  in                                                            
that some states  specified eight-year  terms and others  "forever."                                                            
Mr.  Stancliff pointed  out  that  "this new  model  is pretty  much                                                            
insulated  from Legislative"  and Administrative  influence,  and he                                                            
noted that this new model  is supported by people within the hearing                                                            
officer  community  as  well as  those  who have  retired  from  the                                                            
system,  as it is  felt that people  cannot perform  their job  well                                                            
when under  duress or threat. Therefore,  he continued, once  a code                                                            
is developed,  and the  hearing officers  are protected and  treated                                                            
"like true  judicialists,"  then high levels  of adjudication  would                                                            
Co-Chair Wilken  asked whether the  Chief ALJ could be re-appointed                                                             
after the specified 15-year term.                                                                                               
Mr.  Stancliff  responded  that  while   this  is not  specifically                                                             
addressed in the legislation, he understood the answer to be no.                                                                
Senator  Bunde  suspected  that,  in the  future,  the  model  would                                                            
expand, and that  agencies could be influenced by  it even were they                                                            
not directly controlled by it.                                                                                                  
Mr.  Stancliff responded  that  those agencies  not  desiring to  be                                                            
"sweep  into the  model  by the  Legislation  must do  a better  job                                                            
outside the  Model." In addition,  he noted, agencies might  come to                                                            
the realization that the  model "is working very well" and choose to                                                            
be included in it.                                                                                                              
DAN HOUGHTON,  Representative, Alaska  Regional Hospital,  testified                                                            
via teleconference  from an  offnet site  and shared the  hospital's                                                            
experience regarding  the hospital's appeal, in 1994,  pertaining to                                                            
the official  rate settings  established for  the years 1991,  1992,                                                            
and 1993  year-ends.  He noted  that due  to a  number of  different                                                            
issues,  a hearing  officer was  unavailable  for approximately  two                                                            
years, and  the appeal was not heard  until March 1997. Continuing,                                                             
he stated that, in May  2000, the hearing officer issued a favorable                                                            
decision in favor  of the hospital that involved approximately  four                                                            
million dollars.  He continued that  in June 2000, the decision  was                                                            
turned over  to the Department  of Health  and Social Services,  and                                                            
the Commissioner  at the time, issued  a decision that reversed  the                                                            
majority of the hearing  officer's decision. At the point, he noted,                                                            
the hospital appealed in  April 2001, to the State's Superior Court,                                                            
issued its decision in January 2003.                                                                                            
SFC 04 # 18, Side B 10:50 AM                                                                                                    
Mr. Houghton stated  that the Superior Court ruling  in favor of the                                                            
hospital  was then  submitted  to Department  of  Health and  Social                                                            
Services  Commissioner,   Joel  Gilbertson,  for   action,  and,  he                                                            
continued, in  March 2003, he re-manned the Superior  Court decision                                                            
back  to  the  hearing   officer  for  further  ruling   or  action.                                                            
Unfortunately, he continued,  the hearing officer who had previously                                                            
worked  on the issue  was unavailable  for health  reasons, and  the                                                            
oral arguments  were  again postponed  and have,  to date, not  been                                                            
heard. Therefore,  he summarized that eight years  after the initial                                                            
hearing,   the   hospital   is   still   "battling"   through   this                                                            
administrative process.                                                                                                         
Mr.  Houghton  voiced   support  for  SB  203,  as  the   hospital's                                                            
experience  attests  to the  fact  that "a  larger pool  of  hearing                                                            
officers"   should  be  available   to  address  the  multitude   of                                                            
professional  issues that  might arise  rather  than hearings  being                                                            
delayed as the result of  one hearing officer being familiar with an                                                            
Co-Chair Wilken stated that the bill would be HELD in Committee to                                                              
allow for further review and development of fiscal notes.                                                                       
Co-Chair Gary Wilken adjourned the meeting at 10:53 AM                                                                          

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