HOUSE BILL NO. 26 "An Act extending the termination date of the Board of Certified Direct-Entry Midwives; and providing for an effective date." 2:24:35 PM LAURA STIDOLPH, STAFF, REPRESENTATIVE KURT OLSON, relayed that the bill would extend the sunset date of certified direct entry midwives to June 30, 2017; a two-year extension. She noted that the board's deficit and audit issues had been discussed during a previous hearing and that there were people on hand to speak to those specific issues. 2:25:59 PM Co-Chair Thompson relayed that the fiscal note reflected $5,500 of expenditures for board travel and advertising of meetings. He related that in FY 14 the board's revenue total was $3,990, while expenditures were $55,795; a deficit of $51,805. He said that the board had a current operating deficit of over $115,000, and had been in deficit spending since 2008. He shared that licensing fees had increased, and were due for another increase in spring 2014, but with the limited number of midwives in the state, how the board would catch up with the deficit was questionable. Ms. Stidolph answered that with the board bearing the burden of the large cost of investigations, even an increase in the board's fees would not cover the deficit. She deferred the question to the department for further detail. Co-Chair Thompson understood that Legislative Budget and Audit (LB&A) had been tasked with reviewing the board and would be coming forward with recommendations. SARA CHAMBERS, DIRECTOR, DIVISION OF CORPORATIONS, BUSINESS AND PROFESSIONAL LICENSING, DEPARTMENT OF COMMERCE, COMMUNITY AND ECONOMIC DEVELOPMENT, stated that the fiscal note spoke to the expenses that were particular to the board; if the board were to sunset the division would continue to license midwives and would relieve licensees of the expense of board travel, which was the only isolatable expense in regard to the board itself. She agreed that the board had been in a deficit position and had been working toward an assertive and meaningful to the budget. She relayed that fees had been increased for both midwives and apprentices; midwives now paid the highest licensing fee charges by the division: $1,750 every two years. She added that the apprentice fees had risen from over $100 to over $900 in 2013. She noted that it would take several more increases and continued attempts to rein in spending and get out of the deficit positon, but with a very small number of licensees that could take several licensing cycles. Co-Chair Thompson observed that most of the deficit was due to investigations. Ms. Chambers replied in the affirmative. She added that investigations figured prominently in the legislative audit findings. Co-Chair Thompson highlighted the LB&A criticism of the department for not pursuing 4 different midwifery cases. Ms. Chambers responded that there were several cases that had been referred to the Department of Law's Office of Special Prosecutions and Appeals that had not been followed up on and had been deemed a low priority. She said that at the time the agency had not done its due diligence to follow up on the cases, but that since had corrected the issue putting new safeguards into place to double check files sent over to sister agencies; in addition, an expert witness had been retained to review the cases to determine which of the agencies was most appropriate for each case. She explained that the licensees involved in the cases in question had refused to sign a consent agreement. She assured the committee that the division was actively pursuing remedies to the problems. Co-Chair Thompson asked if there was any chance of recouping the investigation expenditures. 2:32:14 PM Ms. Chambers answered no. She shared that there was a proposal in the budget that would give the board and the division the opportunity recoup fines to help mitigate some of the expenses. Co-Chair Thompson observed terminating the board would cost the state more money than renewing the sunset date. Ms. Chambers replied that she was not familiar with the numbers. Representative Wilson queried the difference between retaining the board, and allowing the licenses to be handled by the department. Ms. Chambers replied that the board currently had the ability to review and approve licenses, which would revert back to the division. She said that the board handled most of the administrative elements, including investigative, which allowed for public deliberation that would not be allowed under the department. Representative Wilson expressed concern that the fiscal note did not reflect the $115,000 deficit. She asked who paid the $115,000 when it was not being paid by the board. Ms. Chambers answered that the division had appropriation authority. She added that board was in a deficit position, which department was working actively to correct, and the appropriation authority was being covered by boards that were in a surplus position. She stated that that this happened on an annual basis by nature because there was one time, every two years that a board would bring in revenue that was meaningful during their renewal period and offset the programs that had opposing biennial revenue periods. She stated that the funds were not mixed in the sense that the operations were being paid for by another because of the carry forward, but at the higher appropriation level all of the licensing programs were able to be solvent to stay in the black. 2:36:24 PM Representative Wilson wondered if another audit when the bill would be up again for sunset in two years. Ms. Chambers deferred the question to the Division of Legislative Audit. KRIS CURTIS, LEGISLATIVE AUDITOR, ALASKA DIVISION OF LEGISLATIVE AUDIT (via teleconference), replied if the board received an extension, another sunset review would be triggered by statute. She said that given the sort timeframe since the last audit she expected the field work would take less time, but another audit would be conducted. Co-Chair Thompson understood that LB&A planned to examine the board and make a recommendation. Ms. Curtis answered that the current review by that committee had not factored into the suggested sunset date. Representative Wilson asked how much the most recent audit had cost. Ms. Curtis replied that the division did not track the cost of audits. She shared that an hourly rate of approximately $67 per hour had been calculated, so that could be multiplied by the 1,100 hours it took to conduct the audit. She explained that a typical sunset occupational board audit took approximately 500 to 600 hours to complete. She relayed that this particular board audit took longer because of the nature of the problems that were found and because it had been done by a new auditor. 2:39:30 PM Representative Gattis felt that not hearing from the board was limiting the conversation. She queried the purpose of the board. She asserted that she was pro-midwife, but she believed the board had struggled. She relayed that she took issue with extending the board another two years. Ms. Chambers noted that the department had invited the board to address the committee. She believed it would be appropriate for the board to provide input during committee discussions. Co-Chair Thompson asked whether the increase in fees would affect the number of midwives paying into the licensing pool. Ms. Chambers replied that it was a possibility. She said that it was always a concern, not specific to midwifery, that a rise in fees would cause people to drop out of licensure. 2:41:55 PM Representative Guttenberg pointed out that the audit cited a division failure for some of the board's issues. He wondered how much of the financial problems of the board could be attributed to the department. Ms. Curtis answered that 100 percent of the cause for the reduced extension was due to the division and not the board. She related that areas for improvement would always be found; but in regards to the severity of the problems, the majority were at the division level. Representative Gara surmised that the board had done nothing wrong, and queried the logic of the limited extension. Ms. Curtis did not view the recommendation as a punishment. She asserted that legislative audit was the legislatures monitoring mechanism; the two-year extension was given because the issues were so important and worth the cost to come back to the table to ensure that the problems recognized in the audit were handled. 2:45:14 PM Representative Gara argued that the audit punished the board by creating uncertainty. He did not think that threatening the board was the proper way to get the department to do its job. Ms. Curtis relied that it was difficult to explain the reasoning pertaining to board action versus division action, and how that factored into an extension. She reminded the committee that it was only a recommendation; she would present the report and provide information but it would be up to policy makers to make the final decision. Representative Gara recommended that the board be given a full extension. He asked if fee increases were the only way that the board could maintain its finances. Ms. Chambers answered that the department was fully in compliance with legislative audit's recommendations and took full responsibility in the areas of deficiency. She stated that the division would set fees with the advice and input of the board. She believed that some of the responsibility lay with the board continuing to rein in spending and refining decision making processes to reduce expenditures. 2:49:19 PM Representative Pruitt read from the letter from the Board of Direct-Entry Midwives chair, Cheryl Corrick, located within the audit: "Recommendation No. 2: I concur with this recommendation, with reservations. The Board has requested that, in addition to the proposed increases in licensing fees for CDMs, the Division also increase apprentice licensing fees to 50% of CDM fees. The Board sees this as a potential way to help meet the shortfall. So far, the Board's request has been denied over the past two years." Representative Pruitt wondered why the board's suggestion had not been considered. Ms. Chambers answered that the increase had been implemented but that it affected a small number of midwives. She said that fees would need to be increased again in order to keep up with rate of spending while trying to chip away at the negative carry forward. Representative Pruitt wondered whether the division had the ability to recoup costs of the investigations from individuals found to be at fault. He asked whether the department had, or should have, the ability to recoup costs of investigations involving unlicensed individuals. Ms. Chambers answered that the division did not currently have the ability to recoup costs from licensed or unlicensed individuals; it would require a statutory change. Representative Pruitt asked whether the challenges found by the audit were related to the board or the department. Ms. Curtis replied that most of the problems stemmed from the department. Representative Pruitt asked whether similar challenges were faced by other boards. He requested suggestions from legislative audit on how to fix the problem. Ms. Curtis replied that the extension reduction was being driven by the investigative problems, which were specific to the midwife cases and were not found in other boards; this was not a division-wide problem. She spoke to fee setting. She relayed that if a board was significantly in a deficit, legislative audit would make a recommendation that the board work with the division to set fees appropriately. She pointed out to the committee that a fee schedule could be found in the audit. She said that deficits could vary widely and that the situation could be tricky when setting fees as a response to a spike in expenditures. She furthered that the audit performed in FY 06, had an annual licensing fee of over $2,000 biannually. She stressed that this was not a new problem for the board. 2:55:27 PM Representative Wilson pointed to page 2 of the fiscal note. She wondered what the licenses would cost if the board were to dissolve. Ms. Chambers answered that the numbers in the fiscal note would be different if the division were to manage the licensing program differently. Representative Wilson wondered who would pay for the investigations if the board were dissolved. Ms. Chambers replied that licensees always recouped the costs of investigations, the existence of the board would not change the licensing structure. Representative Wilson surmised that no matter what, the licensees would have to pay the fee if they wanted to remain legally licensed. Ms. Chambers replied in the affirmative. Representative Wilson expressed unhappiness with the problems faced by the midwives. She worried that midwives would end up with licensing fees that they could not afford. Representative Pruitt clarified that licensing would still exist even if the board disbanded. He felt that the midwives would be penalized if the bill did not go forward in the process. He thought that the legislation highlighted that something was broken within the department and not with the board or the midwives. 2:59:30 PM Representative Gattis reiterated her concern that the committee had not heard from the board. She strongly believed input from the board was needed. Ms. Stidolph agreed that a board member's input would be valuable. Co-Chair Thompson believed the board needed to exist. He expressed concern at the cost of the audit for a board that oversaw few licensees. He felt that the problem should be reexamined in 2 years after the legislature received a recommendation from Legislative Budget and Audit. He thought that passing the legislation would allow the board to continue to be involved in the ongoing education and certification of midwives. Representative Wilson reiterated concern of what could happen if the committee immediately did nothing. Representative Gara requested clarification on the cost of the audit. Co-Chair Thompson explained that the audit took 1,100 hours, billed out at $67 per hour, resulting in approximately $74,000 total. Representative Gara moved a conceptual amendment to extend the termination date to 3-years. Co-Chair Thompson said that the problem was that the costs of investigations were being placed on boards that were not responsible for the problems being investigated. He reiterated that it would be prudent to wait for the recommendations that LB&A would provide in 2 years. 3:04:57 PM Representative Gara withdrew the conceptual amendment. Co-Chair Neuman MOVED to REPORT HB 26 out of committee with individual recommendations and the accompanying fiscal note. There being NO OBJECTION, it was so ordered. HB 26 was REPORTED out of committee with a "no recommendation" recommendation and with one previously published fiscal impact note: FN1 (CED). Co-Chair Thompson discussed the agenda for the following day.