HJR 18-CONST. AM: ADMINISTRATIVE HEARINGS CHAIR JAMES announced HJR 18, Proposing an amendment to the Constitution of the State of Alaska relating to an office of administrative hearings is before the committee. Number 0031 REPRESENTATIVE OGAN, sponsor of HJR 18, explained that it brings due process and separation of powers back to state government, which lacks separation between the executive and judiciary branches. The legislature has delegated authority to the executive branch to write laws by regulation and also to adjudicate that law. REPRESENTATIVE OGAN remarked that people are supposed to be able to go before a fair and independent tribunal when they break the laws. For example, if a person creates a violation, the investigative officer will cite them. Oftentimes, that investigator is involved in writing that regulation. Then it's brought before someone with quasi-judicial authority that answers to the commissioner. Representative Ogan said, "This approach would separate all that power out of the bureaucracy, it would keep it within the executive branch, but it would set up independent hearing officers." A few years ago oil royalty disputes were reviewed in that manner and worked very well. "It was also applauded by the Administration," he added. REPRESENTATIVE OGAN cited his personal experience on the "Big Game Commercial Services Board," where he had the quasi-judicial authority to pass judgment on folks who violated the regulations. A hearing officer would present his or her case. The board members were not allowed to ask questions, have conversations with the accused, or testify on that person's behalf before the board. The board simply looked at the recommendations of the hearing officer and voted them up or down, which Representative Ogan indicated he was uncomfortable with because judgment was passed without the person facing his or her accusers and being able to answer questions. The accused person's license was revoked, which created financial ramifications. Number 0180 DEBORAH VOGT, Deputy Commissioner, Department of Revenue, appeared before the committee. She pointed out her basic concern with HJR 18 is that administrative hearings are not a one-size-fits-all proposition. The Department of Revenue is responsible for administrative procedures for the permanent fund dividend program (PFD); child support enforcement; taxes which have been treated differently since three years ago; charitable gaming; and the Alcoholic Beverage Control Board. MS. VOGT stated that obviously there's a big difference between a PFD hearing versus a three- or four-month trial that might take place in a several hundred million dollar tax case. It would be a mistake for the legislature to tie its own hands by enacting a constitutional provision that approaches all administrative hearings the same. MS. VOGT detailed some of the hearings the Department of Revenue holds. In-house hearing officers, in the commissioner's office, review denials of PFDs and review child support enforcement cases. Charitable gaming matters also come before them. Procedurally, the department can exercise control over that function. In 1995 there were 4,663 matters pending at the division level and 1,556 matters pending at formal hearings. After streamlining, as of last month, the department has 76 matters pending at the division level and 154 at the formal hearing level. On the PFD side, in 1995 there were more than 243 cases pending that were over six months old. There are currently eight cases that are older than three weeks. Substantively, hearing officers are used in those functions very much as part of the program and are able to work with them on how regulations are interpreted and how they should be changed. The hearing officers can also bring problems to the department's attention. MS. VOGT pointed out that certain actions that a person takes are inconsistent with a person's intent to remain an Alaskan, such as getting a resident fishing license from another state; receiving benefits based on a resident's tuition; and registering to vote, because a person takes a solemn oath that he or she is a resident of the state in which that person is registering. Number 0272 MS. VOGT noted that many kids who are going away to school don't read the fine print carefully and are found ineligible for PFD. The regulations hold in statute that one must be a resident before leaving Alaska on an allowable absence of six months. By working with the hearing officers, the department was able to discover a way to make the students eligible the following year without making them quit school to come back and live in the state. MS. VOGT stated that the legislature passed legislation three years ago creating the Office of Tax Appeals in the Department of Administration. Outside consultants were hired to review the in-house hearing functions. She said Paul Frankel, a taxpayer advocate, was on a nationwide mission to get all states to move their tax appeals out of their tax departments. Mr. Frankel had always testified that there are three elements to a good tax review: (1) the taxpayer gets to have his day in court, (2) the tax proceedings are not answerable to the commissioner, and (3) the tax hearings are held by tax experts. Deputy Commissioner Vogt noted that the third would be obligated by HJR 18. To amend the constitution to address this issue is the wrong way to go. It would also bind the hands of the legislature; flexibility needs to be preserved. MS. VOGT cited the Alcoholic Beverage Control Board as an example; when they need to hold a hearing, they hire somebody by contract from the private sector, generally an attorney. Deprivatizing that function might create some savings because state employees aren't paid as much as outside counsel who charge on an hourly basis. However, no one agency has enough work to justify hiring somebody on a full-time basis. She indicated the state should maintain the flexibility to address different functions in different ways. REPRESENTATIVE OGAN referred to the comment that the hearing officer should be an expert in tax matters, that this constitutional approach would not allow for experts to hear particular cases; and that it also binds the hands of the legislature to allow that to happen. He said Section 28, line 8, "The jurisdiction of the office shall be prescribed by law," gives the legislature the flexibility to specify who will hire what types of people to adjudicate these regulatory matters. MS. VOGT remarked that perhaps it does. Her concern is that in other states that have created a centralized panel, the matters rotate amongst them. And, Alaska might lose that specific focus. Number 0341 REPRESENTATIVE OGAN asked whether judges are experts in areas in which they hear cases. MS. VOGT responded, "That's one of the issues that came up. In fact, the opposite of that proposed bill that passed was Representative Green's bill that the Governor supported, and it originally started out as a bill to create a tax court in the (indisc.--coughing) of superior court and eventually evolved into a child of that, that was an administrative law judge outside the Department of Revenue. That's one of the issues, that's why we believe there needs to be a level of review of tax cases before they go on appeal to the superior and then the supreme court, but is heard by tax experts, and we would certainly oppose having tax cases go straight to court to random assignments of judges, because there is not a tax expertise. And the court system, I believe, supported us on that." REPRESENTATIVE OGAN said his point is that in our justice system, superior court judges and magistrates alike are appointed politically by the governor with no confirmation by the legislature. For example, an environmental attorney, who was recently appointed had never set foot in a court room as a trial lawyer to his knowledge, is currently a superior court judge. CHAIR JAMES referred to Ms. Vogt's comment about the hearing officer who was hearing the cases for the students who registered to vote outside of Alaska. She asked whether Ms. Vogt had said the department worked with the hearing officer to change the regulations. MS. VOGT replied that what they did in that matter was not in the context of any particular case but was a recurring question. Department personnel met internally, with folks from the hearing section, from the division, and from the commissioner's office. They first found a way to interpret the existing regulations to permit them to pay folks the next year. The regulations have been changed, so it is clear that folks only lose one dividend as long as they maintain and continue to pay out-of-state tuition, and so on. Number 0428 CHAIR JAMES said that concerns her because the person who is hearing a decision also helps to make it. MS. VOGT reemphasized that they wouldn't do that in the context of an ongoing case. CHAIR JAMES added that judges aren't able to influence legislation that may have messed up a case in front of them. The folks' perception is that they are completely subject to the administration by the hearing officer. REPRESENTATIVE KERTTULA asked Deputy Commissioner Vogt for clarification about administrative appeals. MS. VOGT responded that when folks are dissatisfied with the results, they can appeal to the superior court. The superior court will hear that case as an appeal, not as a trial relying on the record that was developed at the administrative level, and will not substitute their judgment for factual findings unless they believe that there was a clear error in the way the evidence was interpreted, and so on. So, it is a much more deferential standard of review, and that is one thing that leads to folks' wanting to move agency review out of the "self-agency." MS. VOGT said she recognizes that folks can perceive that the agency's control over its own hearing in some way hurts them. However, in her view, it lends strength to the program. The public is the department's top priority, and she believes the department can serve them better by holding hearings in-house. REPRESENTATIVE OGAN asked if she anticipated any change on how hearings are dealt with on the superior court level. MS. VOGT replied that she is not sure. She said she is concerned with Section 28, "The power to conduct administrative law hearings and to render final decisions is vested in an office of administrative hearings," and which seems to be an oxymoron because the agency is the agency that has the program; for someone outside the agency to render a final agency decision doesn't seem possible. The final agency decision is going to be the final action that the agency takes, and the outside hearing officers or administrative law judges may modify it. That makes the judicial review different because the reviewer will be looking at what the administrative law judge and the agency did. She said it's not clear how that is all going to line out. Number 0502 ANDREW HEMENWAY, Hearing Officer, Procurement and Longevity Bonus, Department of Administration, testified in opposition of HJR 18. He noted the fiscal note was provided by the Division of Elections. He stated, "We really don't know what the fiscal impacts would be until we see the nature of the implemented legislation. ... First is the type of jurisdiction that the new agency has, and other elements that might be in the implementing legislation range over such a wide variety that it's really impossible to predict what the scope of the amount of work that that office might be doing and how that's going to impact the various other agencies." MR. HEMENWAY said, for example, two years ago legislation that was introduced was relatively limited in terms of its impact; a few agencies would have been affected. But other possible versions would have substantially broadened it. Another reason why it's difficult to predict the fiscal impact is because there is a lack of knowledge about the present costs of the system. Legislative Research prepared a review for Representative Ogan which is full of precautionary notes about how soft their numbers are; there are some elements in it that they included that are clearly not adjudication costs, such as investigation costs and various other things added up to approximately $6 million. However, if those numbers were firmed up, the cost would be substantially lower. [See Table 1, Expenditures for Administrative Adjudications, Fiscal Years 1994-1996 and Table 2, Expenditures for Administrative Adjudications.] Mr. Hemenway cited another study by the Office of Management and Budget (OMB) (1983) that showed approximately $2 million for the adjudicated functions; he said obviously that's going to be substantially higher. So, there's a lot of uncertainty out there. MR. HEMENWAY said there are two ways that it is going to have fiscal impacts; one is on the deprivatization. The amount of current contracting is unclear, but based on the information he reviewed, it might be in the neighborhood of $500,000 to less than $1 million. Secondly, there can be impacts on the economies of scale and efficiencies in operation through larger case loads and better case management, for example. Number 0575 MR. HEMENWAY cautioned that some states have experienced, particularly in a short run, an increase in costs when changing over to this system. It must be done carefully. He cited for example, when South Dakota passed its central panel legislation, the cost- per-case basis doubled, and the state was forced to repeal the legislation. REPRESENTATIVE HUDSON asked Mr. Hemenway to provide information that talked about where the hearing process exists within the agencies, and what those expenses were. MR. HEMENWAY replied he would provide that information. REPRESENTATIVE HUDSON said when someone has a dispute with the state on a bid, there is an appeals process. He implied the government tends to function as a protection on behalf of the "deep pockets", whereas separate agencies come out in favor of the individual, over the deep pockets. He said, "I'm wondering whether or not, when you set up sort of a separate hearing office, if they don't become more like courts where there would be greater costs to government because the decisions would render toward the individuals against the deep pocket." He asked Mr. Hemenway if there is any relationship to the costs of the awards, as well as the timeliness of it, in other states where they have put this kind of a process in place. MR. HEMENWAY replied he is not aware of any studies in that regard. REPRESENTATIVE HUDSON said he believes that is something the committee would like to look at. When he was the commissioner of the Department of Administration, things were done in a timely manner, and doesn't know when this changed. REPRESENTATIVE OGAN asked Mr. Hemenway if he has ever looked at how many people fit in this and how much this would cost. Number 0642 MR. HEMENWAY said he believes Legislative Research looked at it. It's difficult to ask the right questions to get the right information. He mentioned OMB's study in 1993 and noted they did another quick survey last year and came up with a number on their own. However, he believes there were some flaws in that, as well. REPRESENTATIVE OGAN referred to Attorney General Bruce Botelho's letter addressed to Representative James, dated March 3, 1999, regarding HJR 18, and read the following text: AGENCIES THAT WOULD LOSE PRIMARY FUNCTION Some agencies exist for the primary function of conducting administrative hearings. Under HJR 18, they would no longer have that function. Those agencies include: Alaska Workers' Compensation Board, State Board of Parole, Occupational Safety and Health Review Board, Fisherman's Fund Advisory and Appeals Council, State Assessment Review Board, and Violent Crimes Compensation Board. All of these agencies are boards and commissions; most are comprised of citizen appointees. REPRESENTATIVE OGAN stated that the Governor is on record saying that he would like to see consolidation. Representative Ogan remarked that he believes this may eliminate some functions and would be a cost savings. MR. HEMENWAY replied that he can't speak to the policy aspects of it. He again mentioned bringing the work that is being done by private attorneys inside the bureaucracy for a cost savings. Other states have experienced a tremendous variety on how they implement other cost savings. CHAIR JAMES asked if it would be fair to assume that there would be implementation costs before reaching any savings. MR. HEMENWAY said that he understands that, generally there is a short-term increase. If the wrong system is put into place, it can cost more money in the long run, as well. REPRESENTATIVE OGAN asked Mr. Hemenway if he is aware that there is an administrative law judge association that has model legislation. MR. HEMENWAY remarked the American Bar Association has a model act which is supported by the national association. Number 0693 DIANE BARRANS, Executive Director, Alaska Commission on Postsecondary Education (ACPE), Department of Education appeared before the committee to address what the legislation might do and how it might impact the commission. CHAIR JAMES noted that the committee isn't addressing the implementation today. She said she would like to keep the testimony focused on the constitutional amendment on allow this to happen. MS. BARRANS stated ACPE's primary roles, as an institutional regulator and financial lending agency, it currently receives a wide variety of requests for exemptions to statutory, regulatory and procedural requirements. She read the following testimony for the record: Under its statutory mandate to regulate institutions and administer the state's student financial aid programs, the commission generally requests statutory authority, promulgates regulations, and develops and implements policies designed both to meet its fiduciary responsibility to the [Alaska] Student Loan Corporation as well as to protect Alaskan consumers. Staffs then follow these requirements by administering the terms and conditions of the student loan and by monitoring the regulated publics compliance with minimum standards to operate postsecondary institutions in Alaska and market their educational products to Alaskans. TAPE 99-11, SIDE B Number 0001 ...Property rights of a citizen, which is a right to borrow under the loan program, a right to their permanent fund dividend that is being garnished, are handled in one way. The other appeals that have to do with regulations, the terms and conditions of the loan, are handled in another manner. CHAIR JAMES asked if HJR 18 applies to boards and commissions. REPRESENTATIVE OGAN affirmed that it does cover boards and commissions. MS. BARRANS continued: The first type of appeal routes first to the staff level. If the staff denied the request, it goes to the executive director level. The executive director's level in certain instances is the final administrative appeal and the matter then can be appealed to the superior court. The types of issues subject to this process are those technical ones relating to terms and conditions of the loan as set in statute and regulation. For example, request for deferment of loan payments, loan settlement offers, denial of forgiveness benefits, defaults, et cetera. The second type is an appeal of default determination which goes immediately to the executive director. Current statutes require that a borrower appeal this determination with 30 days of receiving a default notice, and the executive director's determination is the final administrative or agency decision. That too is appealable to the superior court. The third process goes first to staff, then to the executive director, and then to the full commission if the executive director denies the appeal. The commission's decision is final in those instances. The single issue that is subject to that process is the denial of a student loan that goes all the way to the commission. CHAIR JAMES stated her understanding that that is not appealable to the court. MS. BARRANS replied they are all appealable to the superior court. Number 0060 MS. BARRANS continued reading: The next set is a staff determination that is denied, it goes to the executive director, if the executive director's decision is negative as well, then a hearing officer appointment is requested. These types of issues are two, actually just one - it's if we deny a request to cancel a loan obligation due to a medical condition. The last set is an appeal to staff that is denied that goes directly to a hearing officer. The hearing officer issues a recommended decision to the commission. The commission may choose to accept, reject or amend the hearing officer's decision. And, this appeal group is the garnishment of permanent fund dividends for defaulted borrowers. If the commission upholds a hearing officer's decision, which is negative to the appellant, that too is appealable to the superior court. We've reviewed the activity that has occurred in these different categories over the last two years. The commission has had between 500 and 750 appeals each year in these miscellaneous categories. Our contractual costs for hearings have been significantly diminished due to the fact that only two issues go to a hearing officer. The majority of those are permanent fund dividend garnishments which, because they occur en masse, it's once a year, they're treated as a group even though they are individually reviewed, the hearing officer's time is very efficiently used and we found that those costs are less than $19,000 a year for the last two years. And, they represent one-half of the total appeals that we receive. Number 0109 If this process were to move to an administrative appeal process, we are concerned about two issues. One is the timeliness. Currently staff has an internal standard to turn around appeal requests within ten working days. The executive director has that same standard for appeals of that decision - the staff decision. So, currently our customers do receive very timely responses to their appeals. The only exception to that are medical cancellation appeals which tend to be more in depth, they require more documentation on the part of the appellant and therefore, there are longer periods of time involved there. Potentially delays aside, the costs, if all these appeals were to go to the hearing officer, we estimate it would increase to about $125 thousand per year. We're assuming those costs would be billable to the agency, and therefore our other customers would be expected to incur those costs as a program expense. Number 0135 MS. BARRANS stated that, "As the responsible fiduciary for the [Alaska] Student Loan Corporation, we would have a concern along the lines, of that raised by Representative Hudson, that if these decisions were to be made by an independent authority that viewed the corporation as having deep pockets there may be a tendency to lean in the appellant's favor rather than consider the corporate good and the fact that the corporation is funded by other consumers in Alaska as well." CHAIR JAMES said that she also doesn't agree with Representative Hudson's comments because she would like to believe the decisions are fair. CHAIR JAMES further stated that it doesn't seem final agency decisions in HJR 18, it would include boards and commissions because they work on different matters. If a board's or commission's decision was appealed to a commissioner, it seems that is when it would go to an administrative law clerk. MS. BARRANS replied that she asked that of the Assistant Attorney General, Teresa Williams. Ms. Williams advised that, under HJR 18, the ACPE would be subject to this process. CHAIR JAMES said she didn't think the ACPE would be violating this constitutional amendment. REPRESENTATIVE HUDSON asked how many appeals have gone to court. MS. BARRANS replied that approximately five went to court. REPRESENTATIVE HUDSON asked if there is one particular topic that falls within those five. MS. BARRANS responded that there were miscellaneous issues; there wasn't a trend. Number 0201 REPRESENTATIVE OGAN asked if the ACPE writes and adjudicates the regulations. MS. BARRANS replied that the regulations are passed by the commission board. REPRESENTATIVE OGAN asked if the commission adjudicates the regulations as well. MS. BARRANS replied yes they do write the regulations and administer compliance under them. She pointed out that certain decisions are set in regulation and the administrative decision ends with the executive director. However, others go as far as the commission, so they act as the adjudicatory boards. Number 0276 PAUL GROSSI, Director, Division of Workers' Compensation, Department of Labor, appeared before the committee. He said the Department of Labor and the Division of Workers' Compensation have concerns with HJR 18 because the division is one of the earliest quasi-judicial agencies. The Division of Workers' Compensation was in the forum of tort reform around the turn of the century, which involved an agreement between labor and industry to take work-related injuries out of the workplace and put them in an administrative agency so that they could be dealt with by a formula. MR. GROSSI pointed out that industry or management benefited because they had protection from lawsuits in the courts. Employees also benefited because they had a no-fault system for compensation of work-related injuries. He stressed that the department is concerned because HJR 18 moves away from that concept. MR. GROSSI added that Alaska developed the Workers' Compensation Board and the panel usually consists of a labor representative which is a member of the Labor Union, an industry-seat member which is an owner of a company, and an employer or an upper management person. The commissioner is designated as a legal expert in workers' compensation. MR. GROSSI noted that workers' compensation is a specialized field and requires a certain expertise. In addition to the commission's designee, in a hearing they also have that input from the private sector that keeps it not just from being a decision rendered by a professional legal expert. It is balanced objectivity with an employee representative and an employer representative. Mr. Grossi expressed concern that this will take away from that. He referred to the "Larson's Workers' Compensation Law" for case laws and analysis. Number 0345 MR. GROSSI indicated that case law is expansive on workers' compensation. In some years there are as many as 10 supreme court cases and approximately 70 cases a year are appealed. He noted that the record of the Division of Workers' Compensation is good as far as getting affirmed by the courts because of the legal expertise and the ability to make this decision objectively. MR. GROSSI stated that he was looking at the decisions from the superior court for January and February. Out of the 12 decisions, 2 were reversed and 10 were affirmed. He said he believes that their numbers are better than they were historically. MR. GROSSI reiterated concern that the balanced approach that has developed over a long period of time will be lost by the change in this resolution. MR. GROSSI pointed out that the Fishermen's Fund Advisory and Appeals Council within his division has the same concept; that it is a board that consists of five fishermen and a commissioner designee and decides cases on medical benefits for fishing-related injuries. MR. GROSSI stated that the Alaska Labor Relations Board the Division of Employment Security (which determines cases on unemployment) and the Occupational Safety and Health Review Board may also be negatively impacted. REPRESENTATIVE OGAN referred to a handout and read that Colorado reduced its workers' compensation premiums by 22 percent prior to establishing the division the state had 40 hearing officers including full-time, part-time, and contract personnel. After consolidation, there were 12 and backlogs were reduced by 95 percent with hearing times of 88 days instead of 263 days. CHAIR JAMES commented that that will be addressed later and called on the next witness. Number 0415 KENNETH BOYD, Director, Division of Oil and Gas, Department of Natural Resources, testified via teleconference from Anchorage. He said that Title 38 says what the commissioner and directors shall do in which they make a lot of decisions that impact what will happen in the future. MR. BOYD said, "My concern with the bill is this really strips any decision-making ability out of Title 38 and puts [it] in the hands of the hearing officer. ... However, most of our decisions don't involve hearing officers. It's me, or the commissioner, or us jointly making decisions on things like resales - best-interest findings. A best-interest finding is a complex document that is a whole series of decisions bound into a file decision that is determined to be in the best interest of the state. And it certainly does have a flavor of the person who is working on it, and to say that flavor persists into the future is a true statement, and maybe it should." MR. BOYD further expressed a concern that is like taking the decision-making out of the hands of people that make decisions every day, which lead to a timeliness problem. His technical concern is about the aspects of how to make decisions. He pointed out that most of the department's decisions do not need a hearing officer; in his eight years with the agency, there have been three decisions that used hearing officers. This will also lead into the technical aspect. For example, he was the hearing officer on a dispute between two companies that wanted to expand a "participating area" in Prudhoe Bay. It involved a very detailed discussion on seismic data and was confidential. Mr. Boyd noted that a normal person who walked into that room would have thought he or she was hearing a foreign language. Number 0459 BOB LOEFFLER, Director, Division of Mining and Water Management, Department of Natural Resources, also testified from Anchorage. He said Division of Mining and Water Management has three concerns regarding the effect on the division and the mining industry: First is the standard of review for most of their decisions, second is the level of technical expertise necessary, and third is an increase in time and money that may be required. MR. LOEFFLER pointed out that the standard of review is what is in the best interest of the state and is legislatively delegated to the commissioner, who further delegates it to staff. It is not a technical or legal standard and it is adjudicated by a hearing officer or the court. Mr. Loeffler cited an example of leasing an area for coal. MR. LOEFFLER said the Department of Natural Resources makes technical decisions. For example, the department just approved advanced exploration permits for a mine; one complex question the public brought up involved a geochemistry in acid rock drainage. That question was reviewed for a couple months. Mr. Loeffler said that he didn't try to explain geochemistry to an administrative law judge. This is one reason why judicial agencies review only procedural aspects of an agency decision. MR. LOEFFLER stated the amount of time and money it would require to take appeals and decisions that are currently quickly made within the division and move them to outside the division. It would be an expensive and time-consuming process to educate someone who isn't familiar with the issue. Number 0514 TERESA WILLIAMS, Assistant Attorney General, Fair Business Practices Section, Civil Division, Department of Law, testified via teleconference from Anchorage. She said that HJR 18 is written in powerful language and that the same language is used in this amendment is used to develop the executive branch, the judiciary and the legislature. Basically, the stature of the office of administrative hearings would be equivalent to a fourth branch of government. MS. WILLIAMS said "agency" has been defined to include any aspect, any entity of the executive branch, the judicial branch and the legislative branch, and that there is no exemption for boards and commissions. "Agency" includes any branch of state government and any sub-branch of state government. MS. WILLIAMS stated that "administrative law hearing" includes traditional reviews and paper reviews where documents are presented by both sides which is a hearing for the purpose of administrative law. She said the decision that is being discussed, which is being made by personnel in an agency rather than a hearing officer, is an administrative law hearing and would be subject to this constitutional amendment [HR 18]. MS. WILLIAMS indicated that the amendment only created an idea and that the legislature could exempt agencies and the legislature attempted to take away the power to hear certain sentence appeals by the supreme court, but the supreme court held that the legislature could not take away that appellate authority. The jurisdiction that could be prescribed by law could decide perhaps whether something was reviewed at one level rather than another. However, the ultimate judicial authority, having been vested in the supreme court, could not be taken away because that was a constitutional power. Number 0549 MS. WILLIAMS reiterated, "Similarly here, once the power to conduct administration law hearings would be vested in the office of administrative hearing, the legislature would not have the power to exempt agencies." This would be voted by the people and it would be a document that would have precedence over any legislative action. MS. WILLIAMS explained that the administrative law hearing is any dispute over facts, or any dispute over the application of (indisc.--paper shuffling). Any of these disputes, for example, providing welfare benefits, student loans, licensing of bars, or certifying whether a doctor should remain in practice, would be made by this single office. It would be making policy on every aspect in which people have a contact with the state and would become the most powerful entity in state government. Ms. Williams stated that all of these functions would be transferred to the central office and that there would be a level of review which would be more expensive than the present level of reviews, by persons who were not trained in that field. Number 0581 MS. WILLIAMS noted that other states do have a centralized hearing office for some purposes; however, no state has a centralized hearing office for all purposes. It's rare to give the final decision-making power to the centralized offices. Final decision-making power is delegated because the issue is not technical and it doesn't involve central policy-making types of decisions. MS. WILLIAMS said that if a hearing officer had final determination that person would have the power to determine essential policy such as whether or not a foster care facility should keep its license or whether an applicant is fit to practice medicine in the state. Those decisions would be taken away from the bodies that currently have that decision-making authority and expertise in that area. MS. WILLIAMS referred to Representative Ogan's past experience with the Big Game Commercial Service Board. She said it appears the board wasn't given clear information on its powers and that any board under the Administrative Procedure Act has the power to call for the record, to talk to the witnesses, and to talk to the parties to make its own independent decision. If the board decides only to review what has come before it by the hearing officer, that's an important function. For example, if a hearing officer decided to revoke a license, the board can say that the sanction was too severe and that this person can continue to practice under certain restrictions. Ms. Williams stressed that that is a very important role that a board or commission plays. The ultimate question is what serves the public interests. Number 0626 MS. WILLIAMS referred to a list of state agencies that would be affected by HJR 18. She said that there are a number of state agencies that were set up for the sole purpose of conducting administrative hearings and that they would be abolished in a sense because they would have nothing left to do. MS. WILLIAMS stated that once the constitutional amendment went into place, the power to conduct an administrative law hearing, which is broadly interpreted, would be removed from the administrative agencies and there would be a delay while the office of administrative hearing was established. MS. WILLIAMS concluded that there would also be an increase in appellant review because currently the judiciary, in reviewing decisions made by the executive branch, gives (indisc.) to the fact that the executive branch is making policy about matters within their scope of expertise. The court system would not give that same level of (indisc.) - decision made by the office of administrative hearing; therefore, the cost of litigation for both parties would increase at the court level. The number of appeals may also increase because there would be a greater chance of reversing the hearing officer's decision on appeals. REPRESENTATIVE OGAN stated, "You said that this panel would end up making policy, and I'm a little bit perplexed by what you meant by that. It seems to me that the agency that writes the regulations makes the policy, and adjudicated functions are simply to pass judgment on whether or not that person accused of violating that policy is guilty or not. And they also act as somewhat of an independent, and that's the whole idea of the judiciary, right? It's a safeguard between - to correctly interpret between the people that enforce regulations or policy and between the people that write them and correctly interpret whether or not the person has violated that policy in a fair manner. Isn't that a fair description of what any (indisc.) a judiciary function is supposed to be?" MS. WILLIAMS replied that the legislature is taking away the enforcement ability from the agencies that have expertise and vesting it in the administrative hearing office. Number 0676 REPRESENTATIVE OGAN asked Ms. Williams if it is appropriate to give enforcement ability to the legislature. MS. WILLIAMS explained that the executive branch is unique in that it has all three branches of government within it; the quasi-legislative function of writing regulations, the enforcement ability and the quasi-judicial aspects have been historically noted. The U.S. Supreme Court decision stated that it assumed agencies will look at the public interest, keeping that in mind as their foremost concern, and will apply their expertise in resolving factual disputes and disputes about applications of law. REPRESENTATIVE OGAN asked if the constitutional amendment breaks up the lack of separation of powers. MS. WILLIAMS noted that there is a separation of powers in the state. As far as she knows, every state has the same system. The courts have reviewed this over the decades and have always found that this is an appropriate separation of power because the executive branch is limited on both sides. The legislature can change the law and, in turn, the regulations would need to be changed to reflect the new legislation. The judiciary can also overturn the decision through the executive branch to ensure that there are checks and balances on both sides. The functions that are conducted within the executive branch are necessary for it to carry out the functions that have been delegated by the legislature. REPRESENTATIVE OGAN again asked, whether this would clearly break up that power within the executive branch. MS. WILLIAMS said that she believes that it would break up the power in a different way. It would take away all policy making ability by the executive branch; therefore, it would eliminate it from that tripartite system. Number 0712 ED HEIN, Hearing Officer, Office of Administrative Appeals, National Marine Fisheries Service, and a member of National Association of Administrative Law Judges, appeared before the committee. TAPE 99-12, SIDE A Number 0001 MR. HEIN stated that 24 states currently have central administrative law judge panels and that three models are used to organize those panels. Many agencies still have their own hearing officers, but others have a central agency that makes recommendations or makes final decisions; the agencies still have the review power to finalize those decisions. The third model is more like an administrative court in which the central hearing office appeals agency as an intermediary between the agency and the judicial branch. MR. HEIN explained that HJR 18 is not intended to remove executive agencies, including boards and commissions, all of their policy making authority and all of the decisions which they make, t is to move the hearing officers within the executive branch and their functions to a centralized office is intended to deal with contested cases with adjudications. MR. HEIN said that the focus is on improving impartiality of decision-making, the professionalism or the core of judges for hearing officers, and the efficiency of having full-time people doing this job rather than a maze of different, sometimes part-time, hearing officers throughout the executive branch. He agreed that there would be a disruption of agencies in the transitional period. MR. HEIN asked how should these cases be decided and why this is a constitutional amendment rather than a bill, noting that a bill to create a central office has been before the legislature more than once but gets bogged down in a million details because many agencies are affected by it. MR. HEIN pointed out that this resolution would put before the public the basic concept of centralizing the adjudicatory functions and would give the legislature the role of deciding what jurisdiction this office would have, what agencies would be included, what agency's decisions would be decided by that office, and what kinds of decisions would be decided by the central hearing office. Number 0089 MR. HEIN stated that if this were approved by the public in November, 2000, the legislature would need to give itself time to implement the legislation which would be the appropriate time to decide what agencies should be exempted and to define exactly what jurisdiction this agency would have. MR. HEIN said there are basic questions on the legislation to address, including whether this decision-making should be exclusive to the central office and whether these would only be final agency decisions. MR. HEIN remarked every branch of government makes policy one way or another but the courts decide policy through cases and administrative judges and hearing officers make policy by adjudication. This has always been the case and will continue to be the case and it is not the intent of HJR 18 to take away from the executive branch all the authority that they currently have to make policies. MR. HEIN remarked nor is it the intent to eliminate expertise of the existing agencies. He said, "I would assume that the legislature would provide in its implementing legislation that these people are not just going to be dismissed and go away, that these people will most likely be transferred over to the central office. There is nothing in this resolution which prevents this central office from having substantial expertise in a wide range of areas." Number 0174 MR. HEIN stated that the focus is on having a more professional group of hearing officers that establish uniform rules so that all agencies adjudications are governed by the same rules, so that the attorneys treat them in the same fashion regardless of the agency. He said that there may be exceptions because of the nature of some hearings. For example, the Alaska Public Utilities Commission would be approached differently than a professional licensing hearing would. MR. HEIN indicated that of the half of the states which have adopted this policy, none of them have abandoned this concept. He said the state could have fewer court cases because there would be a well-established administrative record to take to court. MR. HEIN said that the state could also build in alternative dispute resolution procedures which could be used where appropriate across the board and there are a number of benefits to it. REPRESENTATIVE OGAN asked Mr. Hein to address the conflicts of interest that a hearing officer would have versus the impartiality of the administrative panels. MR. HEIN mentioned that he talked to state administrative judges from around the country and that he continually hears horror stories about people who are pressed by their own agencies and supervisors to cite cases a certain way. He said he thinks the state needs people who can have a fresh look at these issues. Number 0274 TAMARA COOK, Director, Legislative Legal and Research Services Division, Legislative Affairs Agency, appeared before the committee. CHAIR JAMES asked Ms. Cook to address the boards and commissions. MS. COOK said that she believes the Department of Law is correct and that boards and commissions can be "little tiny things," or they can be "horrifically important powerful things." Designating something as a board, or a commission, or an agency does not identify the magnitude of the power that it exercises or its responsibilities. MS. COOK stated, "So I'm not sure that it is even, from a policy point of view, logical to make a distinction based on whether we call something a board or commission, or whether it's a hearing that's conducted within one of the principal departments. But the word 'agency' is used by the courts depending on the context, either broadly or narrowly. Most often broadly, it means more than the principal department. If it is the desire of the legislature to have this apply only to the principal department, even the boards and commissions are generally placed (indisc.) Administrative (indisc.) within a principal department. Then we would need to be much more refined in the language that the resolution uses." Number 0299 CHAIR JAMES asked that when we write legislation to implement this, could we specifically indicate those functions which are just part of their jobs? CHAIR JAMES stated that loan officers make decisions on loans, it is their job, and if there is a question on a particular loan, it may be assigned to the supervisor for a decision. She said it doesn't seem to rise to the level of an administrative hearing officer unless there is a valid dispute; then it would have to go to the supervisor and next to a hearing officer. MS. COOK responded that that is essentially correct. If, for example, the state were going to apply this resolution to a particular agency, board or commission, it would be critical to designate the point, after an appeal has been made, that it goes to this board. There also would be the need of being precise that a decision of the commissioner may be appealed to this board. Ms. Cook stated that obviously there is a decision that is made initially with respect to the loan example on whether or not to grant a loan application. She referred to the student loan examples and she said at what point the applicant formally invokes the appellate aspect would probably need to be spelled out and it would be at that point that the matter is then transferred to a central hearing. CHAIR JAMES noted that there may be a point where there is satisfaction, in which case it would not have to go to a hearing. MS. COOK responded that it true right now in statute. Most of the statutes we have that set up the system that included administrative appeals do that right now. We have a decision that is made, a first decision, and the individual involved must decide whether to appeal that further, and sometimes there is a step - an informal meeting that is less than a formal appeal. But eventually, depending on the statute, the opportunity to appeal an agency decision becomes formal in nature and it needs to be invoked by the person who is receiving the effect of the adverse decision. Mr. Hein was correct in pointing out the enabling legislation could potentially be very complicated and filled with numerous policy choices at what point this thing needs to be to go to a central agency, what types of situations are going to be granted this level of appeal and so forth. Those decisions have been made already in statute. The process of making decisions regarding the levels of appeal is not a new concept. We've done that over and over. Deciding what of that to retain, and what of that to transfer, is obviously a horrifically important decision but it is not anything that is not going on right now when the state sets up a board or commission. REPRESENTATIVE OGAN said the amendment says the jurisdiction of this office shall be prescribed by law. He asked how much latitude that gives the legislature. Number 0379 MS. COOK replied that she doesn't know. She stated that HJR 18 is drafted very broadly and there has been testimony to that effect. Like any constitutional amendment, we don't know what the court is going to decide about the freedom that the legislature may have to set up a separate board and commission, for example, the Alaska Workers' Compensation Board, and say, "None of your decisions go through this agency." Ms. Cook said she is not sure that the court would decide that the legislature has that type of power; however, it might because the legislature also has the power to set up quasi-judicial agencies in the constitution, in another provision. So the balance between those two is not clear to her and she doesn't know how it would be implemented. [HJR 18 was held for further consideration.]