HOUSE BILL NO. 279 "An Act extending the termination date of the Real Estate Commission; and providing for an effective date." 2:14:19 PM MEGAN HOLLAND, STAFF, REPRESENTATIVE ANDY JOSEPHSON, briefly explained the bill. She relayed that HB 279 extended the termination date of the Real Estate Commission until June 30th, 2026; a full 8 years as recommended by the Legislative Audit Division. The commission oversees brokers, associate brokers, and sales licenses. In addition, the commission regulated supervisors and licensees. The current total of licensees across the state was 567. Representative Wilson noted that members' packets included a letter of opposition (Deborah Brollini, January 29, 2018) (copy on file). She asked for details. Ms. Holland answered that the letter had been addressed the previous week in the House Labor and Commerce Committee. Ms. Holland had given the letter to Tracy Barickman, Chair, Real Estate Commission, who reviewed the letter and discovered that the complaint had been previously processed and concluded that the substance of the complaint was not under the commission's purview. 2:16:29 PM Representative Wilson asked if any information or response had been sent back to the author of the letter. Ms. Holland deferred the question to the Real Estate Commission. TRACY BARICKMAN, REAL ESTATE COMMISSION, PALMER (via teleconference), answered that the complaint had been addressed via an investigative process and the individual had been notified of the findings. 2:17:51 PM KRIS CURTIS, LEGISLATIVE AUDITOR, ALASKA DIVISION OF LEGISLATIVE AUDIT, referenced a copy of the audit report dated June 2017. She cited the "Report Conclusions" found on page 7 and read the following: Overall, the audit concludes the commission is serving the public's interest by effectively licensing and regulating real estate licensees and offices. The commission monitored licensees and worked to ensure only qualified individuals practice in Alaska. Furthermore, the commission developed and adopted regulations to improve the real estate industry and better protect the public. In accordance with AS 08.03.010(c)(19), the commission is scheduled to terminate on June 30, 2018. We recommend that the legislature extend the commission's termination date to June 30, 2026. Ms. Curtis delineated that the prior sunset audit was in July 2015 and only extended the commission through June 2017. The prior audit concluded that the commission was not serving the public's interest because it failed to procure a master errors and omissions insurance policy. The commission had been required in statue in 2008 to obtain the master errors and omissions insurance policy for the real estate licensees and required the licensees to obtain an error and omissions policy either through their independent policy or through the board's master policy. However, if the board was unable to provide the master policy, the statute absolved the licensees from their requirement to obtain the insurance. The audit discovered that no suitable reason had been given by the division or board why the insurance was not procured. During the prior sunset period statutes were changed requiring all licensees to carry the errors and omissions insurance policy regardless whether the board obtained a master copy. However, the division awarded the contract for the policy in June 2017, and the current audit recommended an 8-year extension. She moved to page 17 of the audit that contained Recommendation 1: DCBPL's chief investigator should continue to improve oversight to ensure cases are actively investigated and completed timely. She explained that the recommendation was a repeat from the prior audit that discovered 29 out of 36 investigative cases had unjustified periods of inactivity ranging from 124 days to 4.5 years. The audit found that the division had made progress in decreasing the period of inactivity. An electronic dashboard was created to monitor the case resolution progress, and internal benchmarks were designed to establish timeliness and performance goals for investigators. The current audit identified three cases in a judgmental sample of seven cases with periods of inactivity without justification, ranging from 72 to 194 days. The testing found improvements were still needed. Therefore, the audit recommended that the chief investigator should continue to improve oversight to ensure cases were actively investigated. She reported that page 29 included the department's response to the audit and page 31 contained the board's response. The governor's response to the audit was on page 27. All the responses concurred with the audit findings and recommendation. 2:21:24 PM Representative Kawasaki had a question about the fund balance surplus. He noted that the balance was over $600 thousand. He wondered how the board would reduce the surplus. SARA CHAMBERS, DEPUTY DIRECTOR, DIVISION OF CORPORATIONS, BUSINESS AND PROFESSIONAL LICENSING, DEPARTMENT OF COMMERCE, COMMUNITY AND ECONOMIC DEVELOPMENT, answered that the board had recently completed a renewal period. The division and board were working together to ensure the surplus did not remain. Representative Kawasaki asked if Ms. Chambers had worked for the department in 2011 when the fees were doubled. Ms. Chambers answered in the affirmative. Representative Kawasaki surmised that the commission had made vast improvements. He asked whether there was reason to believe the fee spike would occur again in the future. Ms. Chambers explained that the reason the fee spike occurred was the failure of the division to adequately communicate with the commission and licensees, which came as a surprise. In addition, the division had made major improvements to the fee analysis that was used in tandem with boards and commissions. She voiced that it was difficult to use the past to predict the future. She related that spikes could be anticipated in the future because there were unknown quantities that needed to be factored in for statutory requirements. The primary variables were investigations and appeals of board decisions. At times, investigations cost upwards of $100 thousand. A similar scenario could unpredictably swing the fees higher. State law required licensees to cover the costs; the division attempted to provide a cushion but not one as large as the commissions. 2:24:50 PM Representative Kawasaki mentioned the fiscal note costs. He noted that the fiscal note for a 7 member commission was the same as the previous fiscal notes for a 5 member commission. He wondered why. Ms. Chambers believed the fiscal note contained an error and would address it with the division director. She stated that all the boards and the real estate commission specifically, were doing an excellent job in cutting costs using video and teleconferencing for meetings. Representative Guttenberg spoke to periods of investigative inactivity in cases referenced in the audit. He noted the improvement but wondered what the expectation should be. He thought that the current period of inactivity was still long. He wondered if there was a conflict between the full extension and the recommendation. Ms. Curtis answered it was a division function and not a board function. Therefore, the auditors did not weigh the issue heavily in the audit recommendation pertaining to the sunset extension. 2:27:01 PM Representative Thompson spoke to the fiscal note error and deduced that the fiscal note missed two members. He asked if it was necessary to fix the fiscal note before the bill moved out of committee. Co-Chair Seaton asked whether the committee could count on a revised fiscal note. Ms. Chambers replied that it was necessary to discuss the matter with the division director. 2:27:57 PM AT EASE 2:28:24 PM RECONVENED Co-Chair Foster asked Ms. Chambers to address the fiscal note. Ms. Chambers explained that commission was structured similarly to other boards and commissions. The fiscal note FN1 (CED), represented the additional expenses to operate the commission. The fiscal note provided the spending authority of $21 thousand for board members to attend four meetings per year, travel, advertising of public notice, per diem, and training and conference fees. 2:29:29 PM Co-Chair Foster OPENED public testimony. Co-Chair Foster CLOSED public testimony. 2:30:06 PM AT EASE 2:30:38 PM RECONVENED Co-Chair Foster relayed the bill would be held. HB 279 was HEARD and HELD in committee for further consideration.