SB 211-EXTEND OCCUPATIONAL LICENSING BOARDS  1:41:54 PM CHAIR BJORKMAN reconvened the meeting and announced the consideration of SENATE BILL NO. 211 "An Act extending the termination date of the Board of Professional Counselors; extending the termination date of the Board of Marital and Family Therapy; extending the termination date of the Board of Psychologist and Psychological Associate Examiners; extending the termination date of the Real Estate Commission; extending the termination date of the Board of Social Work Examiners; and providing for an effective date." 1:42:20 PM MATT CHURCHILL, Staff, Senator Jesse Bjorkman, Alaska State Legislature, Juneau, Alaska, introduced SB 211 on behalf of the sponsor and read the following summary: [Original punctuation provided.] This bill extends the sunset dates of five State Professional Boards, those of: (1) Professional Counselors, (2) Marital and Family Therapy, (3) Psychologist and Psychological Examiners, (4) Social Work Examiners, and of the (5) Real Estate Commission from their current sunset dates of June 30, 2026. SB 211 follows the extensions recommended by the State's audits for each of these boards. The State's 2025 audits of the Boards of Marital and Family Therapy and of Social Work Examiners each recommended extending the termination date of their boards by eight years, the maximum extension allowed by statute. The audits of the Boards of Professional Counselors and of Certified Real Estate Appraisers recommended six-year extensions. The audit of the Board of Psychologist and Psychological Examiners recommended a five-year extension. And finally, the audit of the Real Estate Commission recommended extending the board's termination date by four years. 1:44:45 PM KRIS CURTIS, Legislative Auditor, Division of Legislative Audit, Legislative Affairs Agency, Juneau, Alaska, testified by invitation on SB 211. She reported on the audits for five different boards and read the following: [Original punctuation provided.] Real Estate Commission  Overall, we found that the commission effectively conducting its meetings, actively amending regulations, and effectively licensing real estate professionals. The audit also found areas for improvement and the audit includes five recommendations. We recommend a four-year extension which is half of the 8-year maximum allowed in statute. I'll walk you some of the key information in the report. On page 10 you will find the standard licensing statistics. As of January 2025, there were 2,854 active licenses and 591 registrations. On page 11 is the schedule of revenues and expenditures. The commission had a surplus of $807,000 as of January 2025. We have five recommendations beginning on page 17. First, we recommend that DCBPL's director provide training and update written procedures to ensure minutes are prepared for all commission meetings as required by law. Our audit found that DCBPL wasn't recording minutes for committee meetings. Rec no 2 on the next page, the commission chair should update regulations and forms to include independent contractors. The audit identified that the real estate industry has evolved away from employment relationships and licensees are typically independent contractors affiliated with brokerages. Statutes were updated in 1998 to reflect this change, but the commission never updated its regulations and forms. 1:46:35 PM MS. CURTIS continued with the Real Estate Commission audit: Rec no 3 the DCCED commissioner should work with policy makers to improve the recruitment and retention of investigators and DCBPL management should consider ways to assist the commission in clearing its investigative backlog. Auditors reviewed 14 cases and determined that all 14 cases had unjustified periods of inactivity, and other delays, ranging from 160 to 726 days, with an average delay of 14 months. The audit found three primary types of delay with many cases showing multiple types. First, the longest periods of inactivity related to Division of Corporations, Business and Professional Licensing (DCBPL) waiting for a commission member to accept a case for review. Second, once accepted for review, auditors found delays associated with commission member review in other words, commission members were taking a long time to complete their review. Third, there were delays related to vacancies and turnover. Rec 4 on page 19, the commission should consider seeking legislation to eliminate the real estate recovery fund. The Real Estate Recovery fund which was established to provide a remedy for loss suffered in a real estate transaction as a result of "fraud, intentional tort, deceit etcetera." In 2018 there was a law mandating all licensees have errors and omissions insurance. Since the effective date of this new law, through January 2025, the recovery fund paid only $50,202 in claims while collecting over $640,000 in recovery fund fees from licensees. If you turn to page 14, you can see that there were virtually no claims paid out of this fund during our audit period. In summary, this fund has outlived its usefulness. And Rec 5, the commission should require licensees renewal applicants to submit a certificate of errors and omissions insurance coverage or seek a statutory change. Management's response to the audit begins on page 31. In general, both the commissioner of DCCED and the board chair concur with the report recommendations. 1:49:01 PM CHAIR BJORKMAN asked whether the real estate recovery fund is a sweepable account. 1:49:09 PM MS. CURTIS replied no, the fund would not be sweepable if the funds were used for a certain purpose. 1:49:28 PM MS. CURTIS continued with the Board of Social Work Examiners' audit report and read the following: [Original punctuation provided.] The board served the public's interest by generally conducting meetings in an effective manner and actively amending regulations. Licenses were found to be issued in compliance with state law except for licenses renewed through the online portal, which lacked adequate documentation. The audit also found one board position had been vacant for an extended period. We recommend an eight year extension. On page 6 you will find the board's schedule of licensing activity. As of January 2025, the board had around 1,300 active licenses. The schedule of revenues and expenditures is on page 7. We concluded that board fees were not set at a level that covered regulatory costs but general fund allocations prevented a deficit. We have two recommendations beginning on page 9. First we recommend that the office of the governor, boards and commissions director take steps to ensure board seats are filled in a timely manner. We found that a board seat had been vacant for over a year and another board seat had become vacant after we began the audit. That left two of the five board seats vacant. On page 10 We recommend that the board chair and DCBPL director work together to ensure renewal applicants comply with continuing education regulations or seek a regulation change if deemed necessary. Management's response to the audit begins on page 21 with the office of the governor. Generally the office of the governor and the DCCED commissioner concurred with the recommendation. The board chair also concurred and notes that the board vacancies have led to delays in processing applications, cancelled meetings due to a lack of quorum, and delays in closing out investigations. 1:51:45 PM MS. CURTIS continued with the Board of Professional Counselors audit report and read the following: [Original punctuation provided.] This board generally conducted meetings in an effective manner, actively amended regulations, and effectively licensed professional counselors. The audit also concluded that one board position had been vacant for an extended period and license fees were not sufficient to cover the profession's regulatory cost. We recommended a six year extension. If you turn to page 5 you will see that the board had 1,676 active licenses as of January 2025. On pages 6 and 7 we conclude that fees were not sufficient to cover the cost of operations and fees were not increases in a timely manner. According to Division of Corporations, Business and Professional Licensing (DCBPL) management, a fee analysis was performed to determine whether board license and renewal fees should be increased. The analysis supported increasing fees and was presented to the board at its September 2024 board meeting, at which time the board supported the fee increases. However, the fee increase was not made due to noncompliance with a new fee approval process. Please turn to page 19 of the audit where you will find a memo from the Governor's chief of staff. The subject line reads "No Tax/Fee/Revenue Increases without Chief of Staff approval." Via this memo, the governor's chief of staff declared that new or increased taxes, fees, revenues, or any other mechanism to collect new or additional revenue must be approved by the chief of staff, with input from OMB prior to the request being made. In accordance with the new policy, OMB established a procedure whereby all requests for fee increases were to be submitted to departments' respective Divisions of Administrative Services, whose staff, in turn, would submit the requests to OMB for review. OMB staff were to determine whether a request would be forwarded to the governor's chief of staff for final review and approval. This audit found that DCBPL staff sent this board's fee increase request to the Division of Administrative Services; however, due to staff turnover, the request was not forwarded to OMB. Consequently, fees were not increased and the board's deficit is expected to grow. The board had a deficit of $210,000 as of January 2025. 1:53:47 PM SENATOR DUNBAR asked what is the statutory authority that allows boards to set or recommend their fees, and where in statute is there a requirement that this process be routed through the Governor's Chief of Staff. Additionally, what discretion do executive agencies have in setting fees versus following directives established in law. 1:54:39 PM MS. CURTIS replied that AS 08.01.065 requires the department to set fees by regulation at levels that cover the cost of regulating the profession. She argued the proposed fee increases are therefore mandatory, and that adding extra approval steps would delay implementation, worsen deficits, shift costs to future licensees, and potentially require general fund support. 1:55:29 PM SENATOR DUNBAR asked what recourse the legislature has if an executive agency or the Governor's Office fails to follow a statute that mandates fee-setting to cover the costs of boards and commissions. MS. CURTIS deferred the question to legislative legal. 1:56:09 PM SENATOR YUNDT asked whether the fee deficits are typical, how long they have persisted, and how severe they have become. 1:56:21 PM MS. CURTIS replied that fee deficits were more common 1020 years ago due to reluctance to raise fees. Over the past eight years, the administration has generally enforced statutory fee- setting, keeping boards self-funded and building modest reserves to stabilize fluctuations. She said the current deficits are a recent development in this cycle. SENATOR YUNDT sought confirmation that, in Ms. Curtis's opinion, the board is not in fiscal distress, noting that while it has a current fee deficit, it is not in negative territory. MS. CURTIS replied the board is in negative territory with a $210,000 in deficit. She said delaying fee increases will require larger, more abrupt hikes later, which harms licensees. SENATOR YUNDT stated that the department needs to address the problem sooner rather than later. He asked what is a reasonable timeline to resolve the approximate $250,000 deficit given other boards have significant surpluses. MS. CURTIS deferred the question to the Department of Commerce, Community and Economic Development (DCCED). SENATOR YUNDT asked if Ms. Curtis could talk to the department and report back. MS. CURTIS replied that licenses operate on a two-year cycle, so if a fee increase is missed, it may be delayed for another two years; however, an increase is likely to come soon and the department can address it. 1:59:05 PM SENATOR YUNDT asked why the request for the Board of Professional Counselors is a six-year extension, while the Real Estate Commission receives only a four-year extension and what determines the difference. MS. CURTIS replied that the extension length is subjective and is determined individually by the legislative Auditor. She said she never recommends. full extension for a board that has a deficit. If a deficit is the only problem a board has then the extension is about 6 years. The Real Estate Commission received a shorter extension due to additional issues requiring ongoing compliance monitoring. 1:59:55 PM MS. CURTIS continued with the Board of Marital Family and Therapy audit report and read the following: [Original punctuation provided.] The audit concluded that the board served the public's interest by conducting meetings in an effective manner, amending regulations as needed, and generally licensing marital and family therapists in compliance with state law. The audit also found that a public board member seat had been vacant for 32 months as of March 2025. We recommend the legislature extend the board's termination date eight years. On page 5 of the audit you will find the board's schedule of licensing activity. As of January 2025, the board had 116 active licenses. The schedule of revenues and expenditures is on page 7. As of January 2025, the board had a surplus of $196,835. We have two recommendations beginning on page 9. We recommend the Office of the Governor, Board and Commissions director work with the board to identify potential applicants to fill the vacant board seat in a timely manner. Rec 2 is on page 10. We recommend the board ensure the renewal licensing application is sufficient to monitor compliance with teletherapy-related continuing education. The teletherapy continuing education requirements are fairly new and are only applicable for those licensees that provide services remotely. The audit found that the board has no way to identify which of their licensees are subject to the continuing education requirement and are not tracking compliance. Management's response to the audit begins on page 19. The office of the governor, the DCCED commissioner, and the board chair concur with the report conclusions and recommendations. 2:01:33 PM MS. CURTIS continued with the Board of Psychologist and Psychological Associate Examiners audit report and read the following: [Original punctuation provided.] The audit found that the board conducted meetings in an effective manner, actively amended regulations, and generally issued new licenses in compliance with statutes and regulations. The audit also found areas for improvement which led to five recommendations. We recommend a five year extension to help ensure corrective action is taken to address deficiencies On page 6 you will find the Board's schedule of licensing activity. As of January 2025, the board had 371 active licenses. On page 7 we explain that the board's fees were not sufficient to cover the cost of operations. DCBPL did a fee analysis which showed that fees should be increased. However, management did not present the analysis to the board in a timely manner. Management chose not to submit a fee increase request to their division of admin services in accordance with the new fee approval process because they believed that there would be delays in the approval process and management wanted to prioritize other fee increases which were associated with new license types. On page 8 you will find the board's schedule of revenues and expenditures. As of January 2025, the board had a deficit of just over 90,000. 2:02:35 PM MS. CURTIS continued with her audit of the Board of Psychologist and Psychological Associate Examiners and read the following: [Original punctuation provided.] The audit has five findings and recommendations which begin on page 11. We recommend the Governor's boards and commissions director work with the board to identify potential applicants to fill board seats and take steps to ensure qualified applicants are appointed in a timely manner. Rec 2 on page 13 The board chair and DCPBL's director should work together to ensure renewal applicants comply with continuing education regulations or seek a regulatory change if necessary. Rec 3 on page 14, Board members should review investigative cases in a timely manner. Auditors reviewed two board cases that had been open for over 1,000 days and identified one unjustified period of inactivity of 656 days. The delay was related to a board member not completing their review in a timely manner and a lack of alternate qualified board members to review the case. Rec 4, DCBPL's director should ensure courtesy licensees comply with monthly reporting requirements. Rec 5 on page 15. DCBPL's director should ensure the board's fees cover the cost of regulating the profession. Management's response to the audit begins on page 27. The office of the governor, DCCED commissioner and board chair concur with the reports conclusions and recommendations. 2:04:17 PM CHAIR BJORKMAN asked whether the change of Realtor appraisers from employees to independent contractors raise any workers' compensation concerns, and were any issues identified in the audit. 2:04:55 PM MS. CURTIS replied no. The individuals have long been independent contractors, but application forms create confusion between employee and contractor status. CHAIR BJORKMAN asked for clarification that the discussion was about the Real Estate Commission, not real estate appraisers. MS. CURTIS replied in the affirmative. 2:05:45 PM SENATOR YUNDT asked how many years were recommended for the Board of Psychologist. MS. CURTIS replied that the audit is recommending a five-year extension. 2:06:00 PM SENATOR GRAY-JACKSON expressed appreciation to the auditors for their work with timeline extensions and for their oversight in ensuring follow-up on recommendations. 2:06:56 PM SYLVAN ROBB, Director, Division of Corporations, Business and Professional Licensing, Department of Commerce, Community and Economic Development (DCCED), Juneau, Alaska, offered the response by the Division to the findings of the Legislative Auditor regarding the Real Estate Commission, Board of Social Work Examiners, and Mental Health Board: Real Estate Commission: The Real Estate Commission had five audit findings, some requiring commission decisions. One recommendationregarding the Real Estate Recovery Fundwould require a statutory change and is under consideration, though its necessity has diminished since errors and omissions insurance became mandatory. The commission now requires proof of that insurance at license renewal, resolving a prior issue. Staffing is stable, with only one investigator vacancy due to recent retirement. Board of Social Work Examiners: One finding is the need to ensure board seats are filled; efforts include outreach through social media and industry associations to recruit qualified applicants. Mental Health Boards: Findings for the mental health board focused on renewal issues, particularly related to telework and documentation of continuing education. All issues have been resolved quickly with updated forms and processes. 2:11:20 PM SENATOR DUNBAR stated that there was discussion that some recommended fee increases may be delayed by a more stringent administrative process than what is outlined in statute. He asked whether the recommended fee increases will be approved soon enough to avoid significantly larger increases later. 2:11:51 PM MS. ROBB replied that fees must be set through regulation, so increases take effect only after completing the regulatory process. The approach aims to avoid volatile fee swings by maintaining modest reserves and implementing gradual increases. She said programs in deficit are expected to recover once new fees are adopted, with adjustments spread over time to minimize financial impact on licensees. 2:13:20 PM SENATOR DUNBAR stated that Ms. Curtis said that in statute fee changes may be routed through the Governor's Chief of Staff. He asked whether that is accurate, and if so, is such approval required or authorized by statute. 2:13:45 PM MS. ROBB replied that it is not specified in AS 08.01.065, which authorizes fees. The statute does not mention other members of the executive branch. She declined to comment on anything in the executive budget act. 2:14:24 PM SENATOR YUNDT asked how operations like payroll and basic expenses are maintained when a board has a deficit of over $200,000, and who covers those costs. 2:14:51 PM MS. ROBB replied that the division operates as a single budget unit, not separate line items by board. While statutes require each program's fees to cover its regulatory costs, the division can use surpluses from other programs to cover expenses, while still tracking each program's finances closely. SENATOR YUNDT commented that it may appear that boards with a surplus are subsidizing those in deficit. He asked how that works in practice and what is the short extension the Division has given a board. 2:16:30 PM MS. ROBB reassured that Real Estate Commission licensees are not subsidizing professional counselors. She said the shortest board extension she has observed is two years, though that decision is primarily handled by Ms. Curtis. 2:17:23 PM CHAIR BJORKMAN asked for an explanation on how board funds are accounted for and tracked to ensure each board's licensees cover the costs of regulating their profession. 2:17:42 PM MS. ROBB replied that each program's revenue and expenses are tracked on separate spreadsheets. Staff time and investigator work are recorded by program, including shared staff, using detailed allocations and cost accounting to ensure each board's licensees cover only the costs of regulating their profession. 2:20:02 PM CHAIR BJORKMAN solicited a motion. 2:20:04 PM SENATOR MERRICK moved to adopt the committee substitute (CS) for SB 211, work order 34-LS1252\N, as the working document. 2:20:15 PM CHAIR BJORKMAN objected for purposes of discussion. 2:20:28 PM KONRAD JACKSON, Staff, Senator Jesse Bjorkman, Alaska State Legislature, Juneau, Alaska, presented the summary of changes from version A to version N for SB 211. [Original punctuation provided.] Summary of Changes ver. A to ver. N  Page 1, lines 4-5: Bill title is amended by adding the extension of the board of Certified Real Estate Appraisers. The following sections are renumbered accordingly. New Section 5: Amends AS 08.03.010(c)(20) extending the Board of Certified Real Estate Appraisers from 2026 to 2032. Page 2, line 20: Retroactive date is changed to June 30, 2026 2:21:22 PM CHAIR BJORKMAN removed his objection; found no further objection and CSSB 211 was adopted as the working document. 2:21:36 PM SENATOR DUNBAR asked to hear from MS. Curtis. He stated that there are concerns about the real estate appraiser board's deficit and recent administrative policy changes. He asked if the extension is shortened to 2027 or 2028, would a new audit be required or could the current audit be used, and if a new audit is needed, how long would it take. 2:22:33 PM MS. CURTIS replied that statute requires an audit the year before the board's termination date, so shortening the timeline would require a new audit. Audits typically take at least two years, and shorter cycles are used only for serious issues. She said as an alternative, the legislature can require follow-up reporting on audit findings without conducting a full new audit. 2:23:45 PM SENATOR DUNBAR stated his belief that the committee doesn't think the board has severe issues, though a broader policy change in the Governor's Office could lead to widespread deficits if fee increases are not approved. He said while this board is not a major concern, the issue could affect all boards next year. He asked how to best address the deficit. MS. CURTIS replied that the issue likely affects multiple boards, not just a few, due to delays in fee increases. No clear solution is identified and addressing it may raise legal questions about legislative authority versus executive branch decision-making. 2:25:21 PM SENATOR DUNBAR asked when deficits occur, are they backfilled through general funds. MS. CURTIS replied that in the past, the department has requested legislative appropriations to address deficits, including general fund support during COVID due to a fee freeze. She said deficits have arisen for various reasons, such as changes in cost allocation methods, but more often the costs are ultimately passed on to future licensees through higher fees. 2:26:31 PM SENATOR YUNDT stated that costs are ultimately borne by future licensees or the general fund. He asked what would happen if a board were not extended at all. 2:26:51 PM MS. CURTIS replied that licensing and operations would continue under the Division of Corporation of Business Professional Licensing (DCBPL), without a board's professional expertise, likely increasing reliance on contracted experts. If not extended, the board would enter a one-year administrative wind- down period. SENATOR YUNDT stated that he won't be proposing an amendment and noted that he has concerns that delaying action until deficits reach extreme levels is fiscally irresponsible. MS. CURTIS replied that fee-setting is not affected by the board's existence; the division, not the board, is responsible for setting fees, and that process remains unchanged even if the board is dissolved. 2:28:38 PM CHAIR BJORKMAN suggested having a joint meeting with Community and Regional Affairs (CRA) to talk about the process. 2:29:46 PM CHAIR BJORKMAN held SB 211 in committee.