CS FOR SENATE BILL NO. 24(JUD) "An Act relating to regulations; relating to administrative adjudications; amending Rule 65, Alaska Rules of Civil Procedure; and providing for an effective date." This was the fourth hearing for this bill. Co-Chair John Torgerson's intention was to address the fiscal notes during this meeting. Senator Dave Donley moved for adoption of CS SB 24 Version "X", which incorporated amendments the committee made to Version "W" at its last hearing. There was no objection and it was adopted. Co-Chair John Torgerson noted the committee had received three fiscal notes to this version of the bill. These were from the Department of Fish and Game, Division of Habitat and Restoration, the Department of Environmental Conservation and the Department of Law, Civil Division. GERON BRUCE, Legislative Liaison, Department of Fish and Game, testified to the latest fiscal note from his department. He explained there were three elements to the fiscal note. One element was for $30,000 to be used to contract for economic developing services to cover the costs of the cost benefit analysis or to determine that an analysis would not be required. Second was an RSA to the Department of Law for assistance in preparing the regulations under the new provisions. The third was for additional part-time staff to carry out the new requirements. Co-Chair John Torgerson asked how many regulations did the Division of Habitat and Restoration do each year. Geron Bruce answered the department did very few. This system assumed that the division would not necessary do regulations every year and would apply to the special critical habitat or game refuge areas designated by the Legislature. Regulations also governed the permitting process. He detailed the process of when regulations were adopted. Co-Chair John Torgerson tried to distinguish between the comment Mr. Bruce made that they did not do very many regulations and the request for additional staff and contract out work to do the regulations. Geron Bruce responded that they had to estimate how many regulations they might do. He noted that amendments to the special area plans were often at the result of public request and interest. Therefore, they could not anticipate how many regulations would be done each year, but he estimated one or two per year. Co-Chair John Torgerson asked if the division didn't currently go through a public testimony process on those regulations? Geron Bruce replied that they generally did. However, as a result of budget cuts, dedicated staff who developed the management plans for the special areas was no longer with the department. Other staff would have to be added to comply with the new legislation. Co-Chair John Torgerson so two regulations would cost the Department of Law $26,000 each to adopt. Geron Bruce deferred to the Department of Law. Co-Chair John Torgerson questioned the need for 1.2 staff for two regulations. Geron Bruce responded that was their minimum estimate and they could need more. He stressed that the department could not guess how many regulation changes there would be. He noted the positions were viewed as temporary positions to be used only as needed. Co-Chair John Torgerson asked if the department had identified the cost of supplemental notices separately in their calculations. Geron Bruce answered those costs were included in the functions the addition staff would perform. He detailed how it would relate to the cost benefit analysis. Co-Chair John Torgerson lastly asked what equipment needed to be purchased to implement the regulations under the new provisions. Geron Bruce responded that computer and telephone equipment would need to be purchased. Senator Loren Leman asked about the support language on the fiscal note and read it into the record. It in part stated that the bill would require costly and redundant public notices for even non-subtenant regulation changes. He asked what in the bill gave the department that impression. Geron Bruce replied it was the department's interpretation of Section 10. Senator Loren Leman said it wasn't his intent for that to happen and suggested the language be made clear or the committee's intent be expressed into the record. He deferred to the sponsor to clarify. Senator Dave Donley emphasized that the Department of Fish and Game's statement was not true. It was an exaggeration not based on the actual language of the bill. The bill clearly gave the department more than sufficient leeway not to have to do that. He surmised that the department knew that and it was obvious they did not like the limitations on their current powers. They could make a judgement call as to whether or not a regulation created significant changes. Senator Dave Donley asked about Administrative Order 157 issued by Governor Knowles. Geron Bruce was unfamiliar with the order. Senator Dave Donley said Item 10 in that order directed the department to submit a plan to the Governor on how the department would consider the cost to the regulated public regarding a proposed regulation versus the state's interest in the benefit from the particular regulation. He asked if Mr. Bruce had seen the plan. Geron Bruce had not. Senator Dave Donley asked if Geron Bruce participated in the preparation of the fiscal note before the committee. Geron Bruce did not and said the Division of Habitat and Restoration had prepared it. Senator Dave Donley asked if they had reviewed the department's plan pursuant to the administrative order. Geron Bruce didn't think so, but the subject had not come up in his discussions with them. Senator Dave Donley suggested that since the governor's executive order from 1995 required them to have a plan to deal with the same issue, they should have a plan to deal with the legislation within their existing budget or they would be in violation of the governor's order. Therefore, he didn't think they would need additional staff. There was further debate. Senator Al Adams also read the order and noted that the order contained a provision to minimize the cost to the public of complying with state regulations. He interpreted that language to be different that the requirement of a cost benefit analysis dictated in the bill. Senator Dave Donley read a portion of the order into the record to make his point. "Each adopting agency immediately shall submit a plan to the Governor for a process of reviewing in consultation with the Department of Law its existing regulations for the purposes of identifying within budget constraints, revisions to be amended or repealed because the cost to the regulated public is excessive when compared to the state's interest in, or benefit from the particular requirement." He noted that the statement included both the words "cost" and "benefit". Break 8:20 AM / 8:21 AM Senator Dave Donley moved to amend the Department of Fish and Game fiscal note to delete funding for all provisions except the supplies line item component for all years listed (Amendment #12). This was to cover the postage for the supplemental notices. Senator Al Adams objected, saying the departments needed resources to carry out the provisions of the legislation. The Department of Law would need funds RSA'd to assist them in handling the determinations of the necessity of the cost benefit analysis. DEBORAH BEHR, Assistant Attorney General, Legislative and Regulations Section, Civil Division, Department of Law, spoke to the motion on the fiscal note at the request of Senator Al Adams. She repeated her statement that because this legislation was a new concept, the department anticipated court challenges. She gave examples of statutes that had been in place for many years and settled. Under this legislation, the process would have to begin all over again. She had particular concerns with Section 13, which would require the Department of Law to defend regulations against claims that the regulation imposed more than necessary intrusion on the rights of persons and property. The bill would require two tests that were not required now. It would be extremely expensive to bring evidence as to what was substantial state interest. She expected she would need an economist to help make these determinations. She would also have to get information about what the impacts would be on private people. Their information was protected by the Alaska Constitutional Right of Privacy so she would have to do extensive discovery requests to get that information. It would be an expensive and continuing cost on every new regulation. Sections 2 and 3 would also be very expensive. They required the Department of Law to look at the intent of the statutes. There was no time limit on the intent of the statute so she would have to research legislative intent. In most cases, it would be hard to get since the Alaska Legislature did not do formal committee reports, she warned. She said the agencies were focused on the cost benefit analysis and supplemental notice provisions. She felt they would be problematic but not as bad as the aforementioned sections. She would have to advise the departments on the cost benefit analysis about what were adequate costs and benefits, what types of records they would have to have to defend a court challenge and whether or not the exemption applied and their particular circumstances. She summarized saying this was a novel law and there was nothing in any other state or federal statutes to give direction. She would therefore have to give advice based on her best guess. Co-Chair John Torgerson interrupted asking if there wasn't another possibility that she would tell the agencies that the Department of Law needed legislation instead of trying to research many years of intent language. That was the heart of the bill. With that legislation there would be a fiscal note and therefore no need to hire additional staff to research. "You are running down a path that doesn't give you an out and you do have outs in this bill. One of them was to say 'You can't do that regulation because you can't defend the intent of the legislature at that time.'" He stressed. Deborah Behr clarified that even if it were clearly within the intent of the statute, there would still be a requirement for the cost benefit analysis. She added that there were some actions that needed to be taken when the legislature was not in session. She gave an example of air quality regulations. Senator Dave Donley reminded the committee that there was a specific exemption listed in Section 4. He read it into the record and said that if legislative intent was clear and in the statute, the example cited by the witness would not apply. Deborah Behr disagreed, saying that for most of the air and water programs, the statutes were general and non- specific. She interpreted Section 4 as requiring an express statutory language, rather than general. Many are exemptions dealt with small businesses. The language only would exempt it when it was expressly required by statute. In many cases the statute was "Alaskanizing" a federal requirement. Senator Dave Donley countered it would be easy, if the department found that problem, to request the Legislature to expressly authorize to address problems for small businesses in statute. Deborah Behr noted another section where she anticipated high costs for both the Department of Law and the state agencies was that of the supplemental notices. She said the way the section was written, it did not specify only for substantial changes as the record indicated. She referred to page 6 line 18. An earlier version did specify, this version did not. Therefore the departments would be required to go out for public notice each time and this was an extremely costly process. She repeated that she anticipated many court challenges. Senator Dave Donley suggested that if the supplemental process became so problematic, the Department of Law could request the Legislature grant a specific authorization or statutory change to address that rather than continue trying to do it by regulations. Senator Al Adams referred back to Administrative Order 157. He noted that the order directed the departments to "consider" minimizing cost, not necessarily do a cost benefit analysis. Deborah Behr had drafted that order and it was targeted for bills that were in Legislature at that specific time. She noted for the committee that the financial situation was considerable worse than at the time of that order. She explained the differences between the administrative order and the proposed legislation. Senator Al Adams spoke to references made to federal law and asked if this legislation matched the federal requirements. Deborah Behr had researched the federal law and found it was much different. This bill was unusual and novel. Senator Dave Donley said that since the witness was involved in the preparation of the administrative order requiring agencies submit a plan to the Governor, could she provide copies of the plans. Deborah Behr responded that the Department of Law plan was submitted to the Office of Management and Budget. She would talk to that office and request they provide copies to the committee. Senator Al Adams noted the budget cuts since the order was issued and that the administrative order directed the agencies to comply within their budget constraints. There were more constraints now then before due to severe budget reductions. TERESA WILLIAMS, Assistant Attorney General, Fair Business Practices Section, Civil Division, Department of Law testified via teleconference from Anchorage. She was prepared to testify on a possible conceptual amendment referred to by Senator Dave Donley. Senator Dave Donley spoke to the proposed Amendment #11 that dealt with the issue of setting standards of when commissioners could remand decisions for additional findings of fact. Co-Chair John Torgerson requested Senator Dave Donley to remove his earlier motion to amend the fiscal note, Amendment #12, so the committee could discuss Amendment Senator Al Adams asked if Amendment #11 would affect the fiscal notes. Senator Dave Donley was unsure if it would affect the department's testimony. Deborah Behr spoke to Amendment #11. In response to Senator Dave Donley's request from the last meeting, the department provided him with an amendment, which would work to address the problem but have no cost. She compared Amendment #11 to her suggested amendment and it was substantially different. Amendment #11 would put a cap of 90 days for a state agency to address a decision if they did not approve the remand. She pointed out that this provision would apply to all state agencies and there were boards and commissions that did not meet every 90 days so it would affect their costs. It would also place an additional priority to legal resources to assist the department. It would have a fiscal impact. Senator Dave Donley said he thought he should address this item as a separate piece of legislation. He spoke further on the merits of the provision. He said he would not be offering Amendment #11. The committee turned its attention back to Amendment #12. By a vote of 8-1, it was adopted. Senator Al Adams cast the nay vote. The committee then addressed the fiscal note from the Department of Environmental Conservation. JANICE ADAIR, Director, Division of Environmental Health, Department of Environmental Conservation, testified via teleconference from Anchorage. She said there were four sections in the bill the department believed created significant costs. The first was to Section 3 regarding changing the intent of statute. Generally speaking, she did not feel the department did that currently. Therefore, they must be doing something the Legislature wanted to change. She spoke to the difficulty in doing research in the Legislative Library on the intent of legislation. Section 4, the cost benefit analysis was another area of concern. The department did about 25 regulation packages a year, some of which were complex. The way she read the bill, and only one would have been exempted from the cost benefit analysis requirement. Most of the regulations that were based on federal requirements included provision to "Alaskanize" those requirements. The Department of Law did not believe the exemption would apply to the changes to federal requirements. She gave examples of water quality criteria, drinking water analysis and solid waste regulations. Therefore, most of the department's regulations would require an extensive cost benefit analysis. She noted that the department had submitted a plan to Office of Management and Budget to implement Administrative Order 157. She interpreted the requirement of the bill to be much different in that it would require the analysis to consider the cost and the benefit to the public at large rather than the regulated public. Currently, the regulations considered only the regulated public. She gave an example of the recently revised seafood processing regulations and spoke further of the problems associated with the requirements. Section 10 in conjunction with Section 14 were also problematic. These dealt with the supplemental public re- notices. She said the department currently re-noticed when there was a substantive change to the proposed regulations. She said they received many changes from the Department of Law, but did not have them review the regulations before they when out for public comment. Part of the fiscal note included funds for the Department of Law to have that review done first. That would hopefully be one way to limit the number of times a regulation went out for public comment. She added that the department also changed regulations based on public comment received. That was the purpose of the public comment period. The mailing list for the public notices exceeded 3000 names and it would be expensive to send out multiple public notices. It cost approximately $5,000 to send public notices for every regulation package the department did. The fiscal note added an economist for the cost benefit analysis, and a second paralegal position for the department. They would also need assistance in doing the research and an additional clerical position for support to those positions. Senator Loren Leman asked Janice Adair about the mailing list of 3000 names and wanted to know if the department made efforts to purge the list. Janice Adair replied they did purge the list and usually limited it to current permit holders and people who specifically requested inclusion on the list. Co-Chair John Torgerson noted the fiscal note reference to 25 regulations done per year with only one exempt under the regulation. He wondered if 49 regulations then went beyond the intent of the enabling statute. Janice Adair answered no, that she looked at the exemptions from page 3 relating to regulations drafted to meet federal requirements. Co- Chair John Torgerson countered that the regulation would be exempt if it did not go beyond the scope of the enabling legislation. Janice Adair responded that many of the statutes had been on the books for a long time and intent was lost. Therefore, it had to do with the number of years the statutes had been on the books, not that the department was going outside the intent. Janice Adair added that the fiscal notes only dealt with the department costs and did not reflect the public costs. Co-Chair John Torgerson suggested if there was question, the department could submit legislation so the Legislature could debate the merits of the regulation. Senator Dave Donley began to comment. Tape: SFC - 99 #68, Side B Senator Dave Donley continued saying the witness raised a concern the committee might want to address relating to exemptions to regulations needed to meet federal requirements. He noted the possibility of the department wishing to exempt the applicability of an existing federal requirement and said he would consider an amendment to allow that. Co-Chair John Torgerson commented that he didn't always agree with the federal requirements. He asked if the amendment would allow the department to adopt the regulations without Legislative approval. Senator Dave Donley said the intent was to enable the department to address those times when they were exempting the applicability of a federal requirement because they had a parallel state requirement that met the federal mandate. Senator Dave Donley moved Amendment #13. This would add language to page 3 line 11 and page 7 line 8, ".or to/that exempt the applicability of federal requirements." That would address the witness's concern. Senator Loren Leman suggested the provision allow for revising or reducing the requirements. Senator Dave Donley entertained the friendly amendment to insert "to revise" before "or exempt". Senator Dave Donley made the amendment conceptual to allow the drafters make the language simpler. Senator Al Adams asked for comment by Janice Adair. She thought that might help. Senator Pete Kelly referred to comments by Co-Chair John Torgerson that if the department could not find the intent of a statute, they could make a request of the Legislature. He asked where that was contained in the bill. Co-Chair John Torgerson replied page 5 line 13 explained it most clearly. It said that a state agency was not required to prepare a cost benefit analysis if the estimated cost to implement the proposed regulatory action was equal to or not substantially greater than the cost of implementing the proposed regulatory action estimated in the fiscal note prepared for the bill. He did not want the department to second-guess through the cost benefit analysis. He emphasized that when the Legislature passed legislation and the Governor adopted it, both parties made a policy call on the expense involved. He did not want the departments to undermine that and essentially veto the legislation by citing a large cost benefit analysis. Senator Dave Donley moved to amend the Department of Environmental Conservation fiscal note to only include the $5,000 supply component for each year (Amendment #14.) Senator Al Adams objected, saying this agency needed the large fiscal note because they dealt with many regulations. He felt it should include at least $50,000. Senator Gary Wilken referred to page 2 of the fiscal note asking which of the four components Senator Dave Donley objected to. He thought this department was one that required the most support for regulation review. Senator Dave Donley replied that section 1 dealt with determining Legislative intent. Clearly, if there were a specific problem with that it would be preferable that the department come back to the Legislature and ask for additional guidance rather than adopt regulations that did not comply. The second section dealt with the cost benefit analysis. It included specifying changes between Alaskanizing federal requirements. Amendment #13 addressed that. This would eliminate the need to hire an economist. The bill included several exemptions to the cost benefit analysis. He detailed the exemptions and argued that the department should have a position already in place to comply with the requirements of Administrative Order 157 even though the department said they complied differently. He felt the committee already gave sufficient leeway in giving flexibility on how the cost benefit analysis was prepared. The third section dealt with the public notice, which would be funded by this amendment. Senator Gary Wilken asked if those reasons eliminated the need for the remaining line items on the fiscal note. Senator Dave Donley believed the department would have to change the way they did business. He felt they could be done with existing staff who should have experience under the philosophy of the current Administration. Senator Loren Leman spoke to the amendment saying he felt they should revise the way the public notices were published if the mailing list contained up to or over 3000 names. He said there were less expensive ways, such as using Internet bulletin boards. If someone wished to be on the mailing list just to get mail, they should pay for that, in his opinion. Senator Loren Leman then asked Janice Adair if the regulations were consistent with statute, then what was the basis for the recent bed and breakfast regulations. What was the understanding of the statute authority and did the department admit they overreached? Janice Adair quoted the statute directing the department to adopt the regulations regarding serving food. As far as whether there was an overreach, the department just didn't use the correct terminology in defining all bed and breakfast providers. She noted that under this bill, they would have to go back out to public notice to do this regulation. Senator Pete Kelly referred to Section 4 and the cost benefit analysis requirement based on Amendment #13. He asked about the venue to come back to the Legislature to ask for intent clarification. He pointed out that the Legislature at that time could be different than the Legislature that adopted the law. Senator Dave Donley suggested there were many venues, which were currently available. The department could request a bill be introduced. They cold make suggestions during the budget subcommittee process. They could approach the standing chairperson of the particular committee that had oversight of the matter and suggest changes. Or they could go to the sponsor of the original bill and ask for revisions. Senator Pete Kelly requested further discussion to clarify and define these avenues. Co-Chair John Torgerson ordered the bill held in committee. No action was taken on Amendment #14 and it was also held.