SB 225-OCCUPATIONAL LICENSING FEES  2:33:14 PM CHAIR BJORKMAN reconvened the meeting and announced the consideration of SENATE BILL NO. 225, "An Act relating to occupational licensing fees; and providing for an effective date." 2:33:54 PM SYLVAN ROBB, Director, Corporations, Business & Professional Licensing, Department of Commerce, Community and Economic Development (DCCED), Juneau, Alaska, introduced SB 225 on behalf of the administration. She began a presentation and advanced to slide 2: [Original punctuation provided.] What Does SB 225 Do?  • Removes investigation, legal, and hearing costs from the "regulatory costs" covered by professional license fees as required under AS 08.01.065. • Shifts funding for investigations and hearings from professional licensing fees (1156) to corporations' fees (1005) so the division remains self-sufficient. MS. ROBB explained that the division collects more from corporate filings than is needed to fund the program. This change does not require an increase in corporate fees (the division currently diverts lapses funds to the general fund from these fees). 2:35:12 PM CHAIR BJORKMAN referred to SB 203, which would increase fees. He asked what those fees are for and where they would go. MS. ROBB replied that this is another bill by the Governor that proposes to return business license fees to 2008 levels. She explained that licensing fees were reduced in 2009. CHAIR BJORKMAN asked what account these fees go in to. MS. ROBB replied that the collections come in as DGF collections and excess funds flow into the general fund. She noted that these are the funds referred to in slide 2. She explained that collectively - between corporations and business licensing - the division lapses over $8 million to the general fund in a typical year. SB 225 proposes that some of these funds be used to help pay for investigations for professional licensing. 2:36:36 PM MS. ROBB advanced to slide 3 and stated the important language regarding the calculation of professional licensing fees on the slide is bold print: [Original punctuation provided.] AS 08.01.065(a) & (c) Currently  (a) Except for business licenses, the department shall adopt regulations that establish the amount and manner of payment of application fees, examination fees, license fees, registration fees, permit fees, investigation fees, and all other fees as appropriate for the occupations covered by this chapter. (c) Except as provided in (f) (k) of this section, the department shall establish fee levels under (a) of  this section so that the total amount of fees  collected for an occupation approximately equals the  actual regulatory costs for the occupation. The department shall annually review each fee level to determine whether the regulatory costs of each occupation are approximately equal to fee collections related to that occupation. If the review indicates that an occupation's fee collections and regulatory costs are not approximately equal, the department shall calculate fee adjustments and adopt regulations under (a) of this section to implement the adjustments. In January of each year, the department shall report on all fee levels and revisions for the previous year under this subsection to the office of management and budget. If a board regulates an occupation covered by this chapter, the department shall consider the board's recommendations concerning the occupation's fee levels and regulatory costs before revising fee schedules to comply with this subsection?. MS. ROBB said that "investigation fees" includes the cost of certified investigators as well as legal costs for the Department of Law and hearing costs at the Office of Administrative Hearings, superior court, and supreme court. She explained that this will impact licensing fees for the associated professions in years with a high number of complaints or complex cases. SB 225 is an attempt to mitigate this. 2:37:27 PM SENATOR GRAY-JACKSON asked for clarification that the lapsed money would cover the fees. MS. ROBB returned to slide 3 and replied that currently, the professional licensing fees must cover the costs of regulating the program. She explained that the money that is lapsed to the general fund comes from dues paid for business license fees and corporate filing fees. 2:38:15 PM SENATOR GRAY-JACKSON said that SB 225 removes investigation, legal, and hearing cost and clarified that these are the costs that her question is referring to. She asked if the money that lapses to the general fund would cover these costs. MS. ROBB replied yes. She added that it does not take all the funds that currently lapse to the general fund as it would only require $4.7 million. SENATOR GRAY-JACKSON asked what would happen in the event that the division does not have enough lapsed funds to cover the costs. MS. ROBB replied that the division would need to seek an additional source of funding. She added that the number of corporate filings and business licenses purchased have increased consistently over the years and this growth is expected to continue. 2:39:37 PM MS. ROBB advanced to slide 4: [Original punctuation provided.] Primary Reasons for SB 225  • Currently volatile license fee rates would stabilize, as investigations, legal, and hearing costs are the most variable element of the fee setting equation. • Licensing fees would be reduced for many programs, helping in the effort to attract professionals to Alaska. • This would be fairer to Alaska's professional licensees who comply with the laws regulating their profession as law-abiding professionals would no longer bear the cost of investigations of licensees who have potentially violated licensing laws and/or on individuals practicing without a license. • Remove a potential disincentive to report members of their profession. MS. ROBB explained that investigations are the most volatile aspect of the equation for setting licensing fees as there is no way to determine what the costs will be. This can cause large swings in licensing fees from year to year. She reiterated that licensing fees are based on the costs to run the program and removing investigatory and hearing costs from this equation would reduce program costs and therefore reduce licensing fees. She clarified that this would not be the same across the board but would depend on how many investigations a particular profession has seen - and how complex the investigations are. However, no profession would be negatively impacted by the change. Lower licensing fees would also help to recruit professionals to work in much needed areas like veterinary medicine and nursing (both of which have high licensing fees relative to other states). 2:41:19 PM SENATOR DUNBAR shared his previous understanding that SB 203 and SB 225 impacted the same kinds of fees. He asked for clarification that SB 203 impacts a flat fee while the fees in SB 225 are variable. He asked for more information on the fees and how they are calculated. 2:42:02 PM MS. ROBB explained the difference between corporation, business licensing, and professional licensing fees. She said that corporation fees are set in regulation - there are 64 different corporate fees depending on the type of filing and the type f corporation. These fees are not impacted by SB 225. However, SB 225 proposes to use the funds collected to offset the costs of investigations for professional licensing. She clarified that [SB 203] applies to business licensing, the fees for which are set in statute. She explained that "professional licensing" refers to 45 programs, including doctors, dentists, naturopaths, midwives, construction contractors, etc. Professional licensing fees must cover the cost of regulating the program. SB 225 proposes to remove investigatory fees from the calculations of the cost of regulating the program. 2:43:20 PM SENATOR DUNBAR commented that transferring less money to the general fund results in a large fiscal note for the state as a whole. He pointed out that SB 203 raises more money by increasing licensing fees. He commented that this is causing a lot of volatility and asked if there is a way to stabilize at a slightly higher number so that the cost of SB 225 is roughly equivalent to the net raised in SB 203. MS. ROBB replied she understands the question and surmised that the cost of investigations could potentially be parsed out further. She said that SB 225 only covers part of investigatory costs and acknowledged that the legislature could agree to cover a set amount from corporation fees to offset investigations. She added that the rest of the investigatory costs would remain a part of the fee setting equation. She commented that there are a number of ways to achieve what he is suggesting. SENATOR DUNBAR clarified that he is wondering if it would be possible to reduce volatility by removing the investigatory fees from the equation and setting the licensing fees a bit higher (while still lowering them from their current amount) in order to cause less fiscal harm to the state. 2:45:27 PM MS. ROBB expressed her understanding. She stated that part of the argument for SB 225 is that investigations into professional licensees and unlicensed practice is a public safety issue. She explained that, as currently structured, the onus to pay for this falls on licensees. She emphasized that these individuals are licensed and following the rules are paying for those who do not. She stated that professional licenses are intended to mitigate harm that can be done by those who are not trained in a particular profession. SENATOR DUNBAR expressed his agreement. He commented that bad actors in these professions are imposing the costs on the state. 2:46:27 PM MS. ROBB returned to speaking to slide 4 and reiterated that those following the rules are paying for the "bad apples." In addition, an understanding of how the fees are set could act as a disincentive for someone to report a member of their profession. SB 225 would remove this potential disincentive. 2:47:09 PM MS. ROBB advanced to slide 5: [Original punctuation provided.] Example of Substantial Fee Increases in Past Years  • Certified Direct-Entry Midwife Certificate Fees: • In FY2017 initial and renewal application fee increased from $1,750 to $3,800. • That was after an increase from $1,450 to $1,750 in 2016. • Fees have since been reduced to $2,800. • Midwife Apprentices in 2015: • Initial and Biennial Renewal Certification Fees increased from $125 to $825. • Initial and Biennial Renewal Certification Fees increased from $825 to $1,275. • Fees have since been reduced to $550. MS. ROBB gave another example of a dentist who is currently involved in an Alaska Supreme Court case for performing a procedure while on a hoverboard. She said all other licensed dentists are paying for the ongoing investigation and court costs. 2:48:40 PM MS. ROBB advanced to slide 6, displaying FY 2023 investigative stats. She explained that, in a typical year, anywhere from 1,200 to 1,600 investigations may be conducted by the division. 2:49:03 PM MS. ROBB advanced to slide 7, displaying the top complaints received by the division. She noted that the second most common complaint is individuals operating without a license and reiterated that those who are operating lawfully (i.e. licensed professionals) are paying for those who choose to operate without a license. The top complaints are listed as follows: • Continuing Education Violations (303) • Unlicensed Practice or Activity (178) • License Application Reviews (146) • Violation of Licensing Regulation (144) • Unprofessional Conduct (77) • Falsified Application (53) • Standard of Care (28) 2:49:27 PM SENATOR BISHOP asked if the department interacts with every licensed business once a year or once every two years. MS. ROBB replied that licenses are good for two years and all licenses for a particular profession expire on the same day. SENATOR BISHOP asked how the department finds a continuing education violation. MS. ROBB answered that when continuing education is required for license renewal, applicants attest to meeting these requirements on their application. The division selects a sample of applicants to audit and these individuals are then required to submit documentation showing that they have completed their continuing education requirements. 2:50:41 PM SENATOR BISHOP expressed his understanding that the division does not check every business but is doing a random sample. MS. ROBB replied that this is correct. She stated that the division has 109,000 professional licenses and would require a lot more staff to check each licensee. SENATOR BISHOP agreed and compared this to the Occupational Safety and Health Administration (OSHA), where the large number of businesses makes it impossible to investigate each one for possible violations. He surmised that complaints come in and are then investigated. 2:51:21 PM MS. ROBB agreed that a majority of investigations are complaint driven, though they do conduct inspections for some professions. 2:51:37 PM SENATOR GRAY-JACKSON said that she had the same question as Senator Bishop. 2:51:47 PM SENATOR DUNBAR referred to the current license renewal schedule in which every person in a particular field is renewed on the same day. He surmised that this would cause a variety of challenges in certain professions (such as nursing). He asked if there has been discussion of a rolling application process. MS. ROBB expressed her understanding and explained that licensees are required to comply with regulations, which can frequently change. She stated that without a firm date to determine compliance, it would be difficult to track expiration dates. She offered an example of nursing, which has 32,000 licensees. Tracking which had expired - and then notifying those who need to renew would create a great administrative burden - especially adding the extra burden of cross-referencing individual expiration dates with regulation changes. She added that the division needs to notify licensees in a timely fashion when renewal is required. She pointed out that the 45 licensing programs are spread out over the 2-year period in order to minimize the burden on the division. 2:53:38 PM SENATOR DUNBAR expressed hope that the technology to automate this process would someday be available. He commented that if all nursing licenses expire on January 1 - and someone becomes licensed on December 30 - this means they would have to complete the entire process again two day later. MS. ROBB replied that the renewal process for professional licenses can be done online, although some things require hands on consideration or further viewing in order to renew. She added that those who receive their licenses within three months of the expiration date are grandfathered in and do not owe a fee for the subsequent two-year period. 2:54:53 PM MS. ROBB advanced to slide 8, displaying the top ten programs that received complaints and number of licensees per program in FY 2023: Top 10 Programs Receiving Complaints:  • Board of Nursing (369 complaints; 32,169 licensees) • State Medical Board (164 complaints; 9,221 licensees) • Board of Pharmacy (138 complaints; 6,428 licensees) • Big Game Commercial Services Board (70 complaints; 1,521 licensees • Board of Barbers and Hairdressers (67 complaints; 7,086 licensees) • Real Estate Commission (59 complaints; 4,335 licensees) • Board of Massage Therapists (54 complaints; 1,232 licensees) • Construction Contractors (43 complaints; 10,290 licensees) • Board of Social Work Examiners (43 complaints; 1,351 licensees) • Business Licensing (38 complaints; 99,599 licensees) • Board of Dental Examiners (38 complaints; 3,355 licensees) 2:55:21 PM SENATOR BISHOP asked for an example of a Construction Contractors complaint. MS. ROBB replied that many of the complaints received about construction contractors are related to the maintenance of required bond and insurance. Other complaints are related to unlicensed practice. She added that the division sometimes receives complaints that are outside of the division's jurisdiction (e.g. someone may be unhappy with the way their construction project looks when completed). 2:56:11 PM MS. ROBB advanced to slide 9 and discussed the top 10 professions receiving complaints in FY 2023: Top 10 Professions Receiving Complaints  • Registered Nurse (252) • Physician (142) • Massage Therapist (54) • Certified Nurse Aide (53) • Pharmacy (43) • Real Estate Salesperson (42) • Wholesale Drug Distributer (41) • Dentist (38) • Clinical Social Worker (37) • Advanced Nurse Practitioner (37) 2:56:41 PM CHAIR BJORKMAN expressed curiosity about the possibility of adjusting the statute to allow licensing boards to maintain a larger fund balance in their board account to act as a shock absorber for large spikes in investigatory costs. He shared his understanding that boards are required to draw their fund balance (if they have one) down to nearly zero. He questioned whether it would be possible to allow these boards to maintain a larger fund balance to level out their fees. MS. ROBB stated that this is an excellent idea and explained that there is carry forward language for all professional licensing fees that are collected. She added that the division tries to maintain one year's worth of expenses for the program in order to provide some amount of shock absorption. The division tries to keep fees from changing excessively. Generally, if a program has accrued a significant amount of surplus, the division is conservative on the number of potential license renewals and new applications while being generous with what the potential costs might be. She acknowledged that this carry-forward ability has allowed the division to smooth the fee changes somewhat. 2:58:46 PM At ease 3:00:02 PM CHAIR BJORKMAN reconvened the meeting. 3:00:10 PM CHAIR BJORKMAN held SB 225 in committee.