HOUSE BILL NO. 187 "An Act relating to professional and occupational licensing fees, including renewal fees, duplicate license fees, examination fees, instructor license fees, temporary license fees, continuing education course certification fees, out-of-state permit fees, delinquency fees, application fees, penalty fees, and trainee license fees; and providing for an effective date." 2:35:46 PM KONRAD JACKSON, STAFF, REPRESENTATIVE KURT OLSON, shared that the bill had been introduced at the request of the Department of Commerce, Community and Economic Development to levelize the dramatic changes in professional licensing fees. The stability provided by the concept in the out years would be of great benefit to Alaskan professional license holders. The bill's fiscal note proposed the transfer of costs using general fund dollars to cover investigatory costs. The current costs were spread across other like license holders. The investigations were important because they provided a consumer protection for Alaskans. He deemed it appropriate for the consumers to bear some of the cost, as the issue was related to consumer protection. 2:38:34 PM JO ELLEN HANRAHAN, DEPUTY COMMISSIONER, DEPARTMENT OF COMMERCE, COMMUNITY AND ECONOMIC DEVELOPMENT Thank you for the opportunity to discuss HB 187 related to professional licensing fees The purpose of the bill before you is to mitigate spiking of the licensing program costs, and provide alternatives for smoothing the potential for license fee spiking. The bill allows for: • GF support, for investigations which at times are an unpredictable cost of consumer protection o Of the 39 professional licensing programs, 36 experienced at least one year with a 25 percent or greater change in investigative costs from 2008 through 2012. The impact on small programs can be significant. o During this same time period, the investigator cost charged directly to licensing programs varied from a low of $876.0 to $1.7 million. o These variances - speak to the dramatic effect an "outlier" year can have on licensing fees and to the uneven nature of investigations. o Investigations are a consumer protection function, and perhaps should really be viewed as a public benefit as all Alaskans are beneficiaries of professional licensees and their services. • Averaging of revenue and expenses from current and prior biennium's • Extend the fee collection period over multiple biennium's - leveling out the fees over time • Consolidate fee types into a single fee (ex- license, examination, registration) where administrative efficiency could be gained) These proposed changes are permissive, not mandatory, and they do not reduce the authority of the boards. As I've stated previously in this committee, we have a collective responsibility to balance the encouragement of a positive business climate with the requirements of appropriate accountability and the protection of consumers. This conversation includes the push and pull between proposed regulation, public input and policy decisions. This bill is a continuation of the department's on- going commitment to address professional licensing issues, while focusing on the business climate and the need to stabilize cost and establish consistency for the professions. I say "on-going" as there are a number of efforts and solutions the department has grappled with to address the errors and issues that accumulated ,over what records show is an eight year time period. In summary, HB 187 provides tools for the boards, commissions, and the division to modulate professional licensing fee adjustments and encourage a positive business climate. 2:42:54 PM Vice-Chair Neuman asked Mr. Habeger if the state had collected fees or penalties if the profession operated without a license. He wondered why the department spent so much time on license enforcement if a penalty was not attached. Mr. Habeger replied that professional licensing occupied 90 percent of the department's investigative time. Vice-Chair Neuman assumed that the professional licenses were different than standard business licenses. Mr. Habeger agreed. Co-Chair Stoltze asked about the legislation's process of leveling out expenses for licensed professionals. Ms. Hanrahan replied that the professional licensees would obtain a benefit through obtaining an average of biennium costs when calculating fees. The fee collection would be spread over two or three biennium. Co-Chair Stoltze asked about the general fund impact of the proposed legislation. Ms. Hanrahan replied $1.8 million. 2:46:48 PM Representative Wilson agreed that the licensing boards should not have to pay for the investigations. She asked how many investigations were embarked on and how many licensed professionals were found guilty. She asked if the department collected fees from those found guilty. Mr. Hanrahan replied that approximately 1300 matters were brought to the staff of investigators annually. The department had 18 investigators on staff. Not all matters resulted in a case; some were moved to civil authority if a violation of statute occurred. The amount fined was limited by statute. Mr. Habeger stated that the investigative processes were established by the department. Complaints must be submitted in writing. Regulations must be addressed in the complaint. Evidence must be gathered to indicate that a violation occurred. If the evidence was present a licensing action would occur. He recalled 230 actions last year. Representative Wilson clarified that 70 cases were addressed per position, or 6 per month. She described a process where those found guilty were charged the investigation fee. She asked if the department embarked on a similar process. Mr. Habeger replied that the department's system had a civil fine penalty system. The department did not have authority to assign an investigative fine. Representative Wilson wanted additional information about the proposed investigations. She agreed that the fees should not be the responsibility of the board. She requested additional details about the 80 percent of cases reviewed. She opined that those licensed professionals found guilty should pay the investigation costs. 2:52:51 PM Representative Costello understood that the information regarding an ongoing investigation was limited to only one board member. She asked if the entire board would be privy to the information if the legislation passed. She thought that the investigation would benefit from the entire boards' judgment. Mr. Habeger replied no because ultimately a board would sit in judgment over the license. The Department of Law deemed the practice improper to allow too much information to board members prior to the judgment to preserve the rights of the licensee. Representative Costello asked if the boards had weighed-in on the legislation. Co-Chair Stoltze noted that two boards were present for public testimony. Mr. Habeger replied that 14 boards indicated some level of support. Some boards had motions in their minutes. 2:56:04 PM Co-Chair Austerman appreciated the idea of stabilization offered by the legislation. He opined that the Department of Law should handle the investigative cost. He understood that the single-fine system denied all restitution within the statutes. Mr. Habeger replied that a board would determine the severity of an issue and may assign a fee structure. He provided an example of a continuing education violation. Any income received by the division was deposited into the general fund. Co-Chair Austerman asked if the discussed matrix was in statute or regulation. Mr. Habeger replied that the matrix was considered an action of the board. Co-Chair Austerman asked if the process was in statute or regulation. Mr. Habeger replied that Title 8 allowed the boards jurisdiction over the licensees. Co-Chair Austerman asked about confidentiality in reference to the release of information. He proposed an example regarding medical professionals in anchorage. Mr. Habeger explained that the complaint was not a public issue until a board took an action or an accusation was filed. An investigation for a healthcare professional, often took time. He stated that the one board member privy to information about the investigation might advise the division about a concerning practice issue. The public would not be notified until the end of the investigative process. Co-Chair Austerman asked about the 230 cases that went to investigation. He asked about a general fund benefit related to convictions. Mr. Habeger replied that the figure changed from year to year. He noted that various fines were collected. Co-Chair Austerman asked if the $1.8 million in general funds would cover 100 percent of the investigation. Mr. Habeger replied that personal services time was the major issue. The total cost was approximately $2.5 million per year. The last 33 percent was for the Department of Law and expert witnesses. The licensees would assume responsibility for the last third. 3:02:15 PM Co-Chair Austerman asked if Mr. Habeger referred to administrative personal services including the commissioner's office. Ms. Hanrahan replied that the $1.8 million was specific to the 18 investigator positions. She noted that true investigations were distilled through a division process beginning with the 1300 reported matters. The hesitation to allow the public access to the information was related to the distilling process. Co-Chair Austerman explained that some people in small communities were hesitant to file complaints because of the worry about small-town politics and public information. He was pleased to hear about the delay in releasing investigative information to the public. 3:03:48 PM Representative Gara understood that the cost of the board was borne by the members in terms of fees. The investigative portion would be held over a number of years. Ms. Hanrahan agreed. She proposed that the investigator positions be funded with general funds every year. Representative Gara asked if the board members compensated the state for the cost of the investigation. Ms. Hanrahan replied that the members of the profession would not compensate the state for the cost of the investigators' time. The members of the profession would cover the cost of any mediation or expert witness cost associated with an investigation or the Department of Law costs. Representative Gara clarified that the cost of the investigation was transferred to the general fund without an avenue for compensation. Ms. Hanrahan stated that the cost of the investigator positions was transferred to the general fund. The cost of the expert witnesses, mediations and hearings would be borne by the professional licensees. Representative Gara observed the zero fiscal note. He wondered why the $1.8 million was not noted on the fiscal note. Ms. Hanrahan agreed. Representative Gara asked if the state would be reimbursed. Ms. Hanrahan replied that the general fund would not be reimbursed. She noted the fund change from receipt supported services to the general fund. Representative Gara noted that the state was previously compensated with receipt supported services, but would no longer be compensated for investigation costs. 3:07:34 PM Ms. Hanrahan replied that the state would not be compensated for the cost of the investigations. Co-Chair Stoltze added that the fiscal note reflected the change in fund sources. Ms. Hanrahan concurred. Representative Gara voiced his confusion. Co-Chair Stoltze believed that the fiscal note was factual. Representative Gara stated that his current understanding was that members of the profession paid the cost of the investigation through receipt supported services. Without the reimbursement, he wondered how the fiscal note was zero. Ms. Hanrahan replied that the change led to a zero fiscal note because the operating budget showed no increase with the change in funding source. 3:09:25 PM Representative Gara asked if the member fees would increase to cover the cost of the investigations. Ms. Hanrahan stated that one purpose of the legislation was to stabilize the licensing fees because the members would no longer cover the cost of the investigator positions. Co-Chair Stoltze clarified that he only wished to explain the department's approach, he did not endorse it. Representative Munoz asked if the state collected $1.8 million last year in fees that covered investigations. Ms. Hanrahan explained that the statute required for collection of any expense incurred by the boards. Representative Munoz asked if the personal services expense was $1.8 million last year. Ms. Hanrahan replied that the state collected fees for more than the costs of the investigators. The state collected fees for the cost of processing, examinations and the underlying infrastructure to provide the services. Representative Munoz asked for the total cost that the department collected. Ms. Hanrahan agreed to provide the information. 3:11:26 PM PATRICIA SENNER, ALASKA NURSES ASSOCIATION, ANCHORAGE (via teleconference), testified on behalf of the Alaska Nurses Association. The Alaska Board of Nursing licenses 11.732 Registered Nurses, 907 Licensed Practical Nurses and 3,399 Certified Nursing Aids for a total of 16,038 licensees. This represents about one-third of the professionals receiving licenses from the Division of Corporations Business and Professional Licensing. This also means that nurses pay about one-third of the overhead for the Division. The Alaska Nurses Association has no objection to the Division's attempt to reduce the number of small fees it collects. We also have no objection in calculating licensing fees based on a 2-year license renewal cycle rather than yearly. We are also not opposed to "amortizing" individual Board expenses over a longer period of time. In order to increase efficacies and reduce costs we thing these changes are needed. We are however opposed to shifting the total cost of paying for investigators form licensing fees to general funds. In a time of billion dollar budget shortfalls it does not make sense to increase the cost to the general fund by 1.7 million. This bill effectively reduces the income coming into the State by 1.7 million. We understand that smaller Boards have difficulty covering expensive investigations because of their small licensee base. We would suggest that a cheaper alternative would be to create a fund to help pay for expensive investigations. For instance, a fund could be set up to pay for investigations that cost over $10,000. There are fewer investigations that have a large cost so this approach should be much cheaper to the State. From a historical perspective, the decision to have licensee fees pay for the cost of the Boards was made during a time of diminishing state revenues. We do not think that over the next several years the Division is going to want to be reliant on a diminishing source of general fund revenues when they could have had a more steady income source with licensee fees. If the Division can't get enough general funds to pay for their investigators how are they going to prioritize investigations? There is also some concern about what the Division means by licensing groups. Within the Board of Nursing there are many groups of licensees, each which has a different license fee. These fees are based in part on the income levels of that particular group of licensees. For instance, the license fees for RNs are higher than those of Nurse Aids. We do not want to see all the Board of Nursing licensees lumped into one group. 3:15:28 PM DALE NELSON, ALASKA PROFESSION DESIGN COUNCIL, ANCHORAGE (via teleconference) testified on behalf of 5000 registered professionals. He expressed confusion about the legislation. He explained that the fees for his profession doubled last year. He requested information to better understand the fees collected by the state, but did not receive an answer from the department. He noted concern about the first section of the bill. He wished to understand where the fees were spent. He mentioned the value of the investigator working for the board. He opined that the bill required additional discussion. Co-Chair Stoltze asked Mr. Jackson if he preferred that members contact him or Ms. Hanrahan with questions. 3:23:36 PM Mr. Jackson stated that his office worked well with the department. He believed that either contact was appropriate. Co-Chair Stoltze stated that Mr. Jackson would provide the voice for discussions. Co-Chair Austerman asked if public testimony would remain open. Co-Chair Stoltze replied yes. Co-Chair Austerman asked about balancing revenues over a two or three year cycle. He wondered about the criteria used to establish the type of board that would encounter a two or three year cycle. He assumed that the bill allowed the department to make the choice of cycle. Ms. Hanrahan replied that the bill allowed the boards, commissions and divisions to use the tool. The department would approach each board with the information about fee changes. Recommendations would be received by each board for input in the process. Co-Chair Austerman asked if the board would make their own decisions by regulation. Ms. Hanrahan replied that the statute required the department to have board input when setting fees. Co-Chair Austerman asked if each board made their own decision. Ms. Hanrahan replied that the department had the responsibility to regulate the recommended fee with public input. Co-Chair Austerman asked about the consolidation of certain fee types. Ms. Hanrahan replied that a profession may have multiple types of fees including registration, examination, permit and license fees. The bill would allow for consolidation of those fees into one fee if the board wished to gain administrative efficiencies. She noted that the department tracked 457 types of fees in the professional licensing program. 3:28:21 PM Vice-Chair Neuman asked how much money was recovered for fees and penalties. Fees were covered by the professional licensing and the department wished to see the general fund cover the cost of the investigators. He asked how much was generally collected in fees as opposed to the $1.8 million figure provided. Ms. Hanrahan responded that she did not have a total collection figure for the professional licensing program. She clarified that the fees were collected to support the program. Vice-Chair Neuman asked if the fees swept into the general fund. Ms. Hanrahan replied no, the fines swept into the general fund. The fees were collected to support the program. She stated that she would provide the total revenue in fees and the total revenue in fines to the committee. Vice-Chair Neuman asked if the fines were matched to the cost of the investigations. Ms. Hanrahan replied that the fines did not match up with the cost of the investigation; they ranged from $150 thousand to $300 thousand. Vice-Chair Neuman understood that the professional licensing members covered the differential. Ms. Hanrahan concurred. Representative Costello stated that the budget subcommittee discussed the issue over several years. She requested a look-back over time of the professional licenses and fees assigned on an annual basis. She believed that the information would be valuable for the committee to solve the problem. She opined that business planning required the licensing fee requirements. She recalled discussion about posting budgets online. 3:32:03 PM Ms. Hanrahan responded that the quarterly financial reports were published online detailing expenditures. Representative Costello asked if the look-back spread sheet could also be provided to committee members. Ms. Hanrahan agreed to provide the spreadsheet. 3:32:41 PM Representative Gara asked about page 4, lines 5 - 7. He understood that the cost to the professional group should approximate the regulatory cost for the licensing group. He asked if the regulatory cost for the licensing group included the investigation. Ms. Hanrahan replied that the cost of regulating the group included the cost of the investigators. The bill language allowed for other appropriations to be included when calculating the fees. Representative Gara understood that the fees charged to the members should cover the regulatory cost. He suggested that some years might require a general fund supplement because of the higher cost averaged over the course of years. Ms. Hanrahan stated that the intent of the section was to allow the state to provide other appropriations in addition to the program receipts. The fiscal note identified other appropriations linked to the cost of the personnel services cost for the investigators on an annual basis. Representative Guttenberg asked about the 42 sections of the bill related to various occupations and licensing. He assumed that the goal was to place all occupations on equal footing. 3:35:44 PM Ms. Hanrahan replied that the equal footing was limited to the cost of investigations for the various occupations. Representative Guttenberg noted that the statutes for the different occupation were different. Ms. Hanrahan concurred. Co-Chair Stoltze encouraged the department to spend additional time with Representative Gara. Representative Gara offered to revisit the issue with the department after the committee meeting. Representative Munoz asked Ms. Hanrahan for additional information about the consolidation of the occupational and business licensing fees. Ms. Hanrahan agreed to provide the requested information to the committee. Co-Chair Austerman asked the department about the consolidation of fees and the supplementation of the general fees collected for investigators. He wished to know what the reduced fees would look like. Co-Chair Stoltze wished for resolution of the issue prior to close out of the operating budget. He suggested that more clarity would aid the department in their presentation of the legislation. Mr. Jackson offered to work with Ms. Hanrahan to provide the committee with answers to their questions. HB 187 was HEARD and HELD in committee for further consideration.