CS FOR SENATE BILL NO. 203(FIN) am 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. Co-Chair Harris MOVED to ADOPT Work Draft #23-LS0903 Version M, Cook, dated 4/7/04, as the version of legislation before the Committee. There being NO OBJECTION, it was so ordered. DAVE STANCLIFF, STAFF TO THE ADMINISTRATIVE REGULATION REVIEW COMMITTEE, explained that the bill dates back five years and developed from an effort to consolidate and improve the public administrative hearing process. The bill contains two concepts: that the public deserves timely, efficient, and fair due-process oriented hearings when contesting a state agency; and that there are inefficiencies within state government. In other words, many types of hearing officers are scattered throughout the state and have many functions. The past two years of cooperative bipartisan effort that included the Administration has culminated in a well thought-out new system of hearings. Mr. Stancliff explained that the crux of the bill is found in the first eight pages. The central panel office will house the hearing officers. By using the current hearing officers and the existing functions, a more efficient government would be created with less fiscal impact. Mr. Stancliff stated that the second aspect of the bill relates to reforms that occur outside the central panel office. Hearing officers would be subject to new standards and reforms, and the central panel office would report to the House [and Senate] Finance Committees in the future. Their budget would be a separate component under the Department of Administration. He noted that twenty-seven other states and some municipalities have formed central panels in order to save money and serve the public better by creating efficiencies. Mr. Stancliff pointed out that the Office of Tax Appeals has final jurisdiction, and it is already operating to deal with oil tax issues. In this proposed committee substitute, the Administration would move the Office of Tax Appeals [Hearings and Appeals, Department of Administration] to the central panel for greater efficiency. He noted that the oil and gas industry was reluctant to change their office, which was specifically dedicated to their issues. However, he had worked with AOGA (Alaska Oil and Gas Association) to reach accord with the final three amendments in the packet. He asked the Committee to move the amendments. Co-Chair Harris referred to one of the [16] fiscal notes and asked if a new position would be created. Mr. Stancliff responded that it would. Co-Chair Harris asked if Fiscal Note #6 is still applicable. ERIC SWANSON, DIRECTOR, DIVISION OF ADMINISTRATIVE SERVICES, DEPARTMENT OF ADMINISTRATION, affirmed that Fiscal Note #6 would set up the funding structure and positions in the new office of administrative hearings. Co-Chair Harris discussed that it increases to $900 thousand in FY 06 and funding sources would include the Permanent Fund Dividend fund, the General Fund, child support enforcement, and interagency receipts. He asked about the 9 new full-time positions. Mr. Swanson clarified that these are transfers of positions that currently exist in other agencies. The funding increase occurs in the second year with the office coming together after January 1, 2005. There is some earlier funding for the Administrative Law Judge position that would oversee the office. Co-Chair Harris asked if the General Fund budget increased by $260 thousand in FY 06, would it decrease elsewhere. Mr. Swanson affirmed, and explained that most is General Fund transfers from other agencies. The increase of $50 thousand in General Funds in the first year would pay the first six months' salary for the Administrative Law Judge. There might also be start-up costs related to the new office, he said. Co-Chair Harris commented that all the other fiscal note decrements zero out Fiscal Note #6, except for the $50 thousand. He asked if the new office would use existing personnel. Mr. Swanson said that the Administrative Law Judge is a vacant position within the Office of Tax Appeals. He was unsure if that position would be moved into the new office, or deleted and a new position created. In any case, the net effect would be no new positions. Representative Joule asked if the current salary would carry over if the current position were transferred. Mr. Swanson replied that there would be no reclassifications. Any vacancy would also be hired at the existing level or classification. Representative Stoltze commented on high profile tax issues. Mr. Stancliff responded that there would be "cross-training" and improved efficiency with the new panel structure. Representative Stoltze asked if the Alaska judicial process would remain in place. Mr. Stancliff said that it would not, and pointed out that that process was subject to constitutional questions with appointments in one branch of government serving in another. The chief would be selected by the Governor and confirmed by the Legislature, and the chief would hire the central panel. The three amendments are qualifications that the industry requested for the handling of tax issues by the Administrative Law Judge. Representative Stoltze thought that it was a major shift to have the Legislature confirm the position because it was a judicial position. Mr. Stancliff agreed that it is a departure, but he emphasized that the tax work on oil issues would retain the current standards and statutes, and the position would have final decision-making authority. He said that with all those adjustments, the need for the judicial counsel appointment had become less important. Representative Co-Chair Williams MOVED to ADOPT Amendment #1. Co-Chair Harris OBJECTED for purposes of discussion. Amendment #1 reads: Page 31, lines 6-10 Delete all existing language and replace with: *Sec 67. AS43.05.420 is amended to read:    (b) A person conducting a proceeding authorized under AS    43.05.405-AS43.05.499 shall have at least four years of    professional experience as a tax attorney, or be a certified    public accountant practicing in the area of tax, or a tax    administrator. This amendment is being offered to insure that the high quality of standards of expertise developed in the original tax appeals office remain in place as the Central Panel absorbs and executes those adjudicatory functions. Mr. Stancliff explained that the amendment was negotiated between the bill sponsors, the Administration and AOGA. It deals specifically with the expertise that would be required by the person taking up the tax appeal issues. He read the language. Co-Chair Harris WITHDREW his OBJECTION. Amendment #1 was adopted. Co-Chair Williams MOVED to ADOPT Amendment #2. Co-Chair Harris OBJECTED. Amendment #2 reads: Add a new section that reads as follows and re-number all other sections accordingly: Code of conduct    The following fundamental canons of conduct shall be  included in the code adopted by the Chief Administrative Law  Judge:    An administrative law judge or hearing officer shall in the  carrying out of their official duties:     1) uphold the integrity and independence of the office.     2) avoid impropriety and the appearance of impropriety.    3) shall perform the duties of the office impartially   and diligently.    4) shall conduct unofficial activities so as to   minimize the risk of conflict with the obligations   of the office.     5) shall refrain from inappropriate activity in seeking   employment with another agency or employer or in   seeking reappointment.    Mr. Stancliff explained that Amendment #2 is part of the adjustments important to uphold the integrity of all the administrative judges. The code of conduct is modeled after existing judicial canon, and the industry is comfortable with the language. Co-Chair Harris WITHDREW his OBJECTION. Amendment #2 was adopted. Co-Chair Williams MOVED to ADOPT Amendment #3. Co-Chair Harris OBJECTED. Amendment #3 reads: Page 30, line 29, After the word "section" remove the period and add: "however AS44.64.070 does apply to such hearings."  Mr. Stancliff explained that the amendment provides for preemption ability. If a person felt that a conflict existed and wanted a new hearing officer, one would be appointed. The oil industry requested this amendment and asked that the provision of refusal apply to their tax appeals officer. It is an important technical change. Co-Chair Harris WITHDREW his OBJECTION. Amendment #3 was adopted. Representative Croft observed that the amendment is not only technical but also substantive. Industry representatives in an oil tax appeal could now replace a judge they didn't like. Mr. Stancliff agreed that it is substantive regarding that change, but technical in terms of conforming to the existing provisions in the central panel. During negotiations on the legislation, Amendment #3 helped the oil industry accept not having judicial counsel involved in the appointments. Representative Croft commented on the level of expertise required in Amendment #1. He questioned if, by granting the power to preempt a judge or hearing office, it would create a limited pool of administrative law judges fitting the qualifications to hear tax appeals. Mr. Stancliff replied that a situation of a very small pool could arise. However, the bill would not prevent the Administration from arranging for a contract-hearing officer with those credentials, and that was felt to be enough of a safety valve. Representative Croft asked if workers' compensation is excluded from the bill's provisions. Mr. Stancliff affirmed. Representative Croft noted that the proposal to combine hearing officers makes a lot of sense. He thought that tax and workers compensation are two specialized areas, and asked if there are other major exclusions from the bill. Mr. Stancliff affirmed, and said that there were discussions of the areas where expertise is more critical. Ratemaking cases are not included under this jurisdiction. Representative Foster MOVED to report HCS CSSB 203(FIN) out of Committee with individual recommendations and the accompanying fiscal note. There being NO OBJECTION, it was so ordered. HCS CSSB 203(FIN) was REPORTED out of Committee with a "do pass" recommendation and sixteen fiscal impact notes.