HB 10-EXEC ETHICS: LEGAL FEES/FAMILY TRAVEL  8:47:46 AM CHAIR LYNN announced that the final order of business was HOUSE BILL NO. 10, "An Act authorizing state agencies to pay private legal fees and costs incurred by persons exonerated of alleged violations of the Alaska Executive Branch Ethics Act; allowing certain public officers and former public officers to accept state payments to offset private legal fees and costs related to defending against complaints under the Alaska Executive Branch Ethics Act; and creating certain exceptions to limitations under the Alaska Executive Branch Ethics Act on the use of state resources to provide or pay for transportation of spouses and children of the governor and the lieutenant governor." 8:48:08 AM TED MADSEN, Staff, Representative Max Gruenberg, Alaska State Legislature, presented HB 10 on behalf of Representative Gruenberg, sponsor. He said HB 10 would set into statute "much of the substance of some attorney general regulations regarding the [Alaska] Executive Branch Ethics Act that were promulgated ... back in December of 2009." He explained that Representative Gruenberg disagreed with the procedures within two regulations. The first issue had to do with 9AAC 52.045, which addresses transportation expenses of family members of the governor and lieutenant governor. Mr. Madsen explained that currently minor children are the only ones whose travel costs can be reimbursed, but the sponsor thinks it is appropriate to include any child of the governor or lieutenant governor who is dependent upon the care of his/her parents because of, for example, a physical, mental, or developmental disability - even if the child is over the age of 19. CHAIR LYNN said theoretically that could include a child of the governor or lieutenant governor who is 35 years of age. MR. MADSEN answered that is correct. 8:50:51 AM REPRESENTATIVE KELLER asked if current regulation prohibits coverage of travel costs for "a minor child who is dependent and becomes an adult." MR. MADSEN cited 9 AAC 52.045 (d)(2), which defines family member as "a spouse or minor child of the governor or lieutenant governor". CHAIR LYNN offered his understanding that HB 10 would increase coverage from a minor child to a mentally or physically disabled adult child of the governor or lieutenant governor. MR. MADSEN confirmed that is correct. REPRESENTATIVE KELLER ventured that just because it is not covered under regulation does not mean coverage of the travel cost of a dependent adult child of the governor or lieutenant governor would be prohibited. He described a scenario in which a former governor of the state becomes dependent on his children for care, and under HB 10 "a senior citizen would still not qualify." He questioned how big the value of HB 10 would be. 8:53:02 AM MR. MADSEN relayed that the sponsor believes it would be unfair to unnecessarily keep the governor's or lieutenant governor's family from [traveling together] when there is a child in the family who is dependent upon his/her mother or father for care. He directed attention to the stipulations related to travel cost reimbursement in Section 3, page 3, lines 19-31. For example, [as shown on lines 28-29] he stated that the event must be "a family-oriented or youth-oriented event at which the person's attendance is particularly appropriate". CHAIR LYNN suggested one example might be participation in the Special Olympics. MR. MADSEN concurred. REPRESENTATIVE KELLER said he realizes that. He stated his belief that because there is no prohibition, the executive branch could pay for travel as it sees fit; therefore, he questioned the necessity of the proposed legislation. 8:55:46 AM REPRESENTATIVE MAX GRUENBERG, Alaska State Legislature, as sponsor of HB 10, told Representative Keller that he is correct that currently there is nothing that prevents the executive branch from "doing what they're doing." However, he said he thinks it is better policy to give the oversight to the legislature, which appropriates the money and is a different branch of government. 8:57:22 AM REPRESENTATIVE KELLER opined that the spirit of the current regulation is meant to be "a little general." 8:57:47 AM REPRESENTATIVE GRUENBERG clarified his intent was to follow the same parameters as the regulation. He reiterated that the question is: Who decides? He said he thinks it is appropriate for the executive branch not to make policy regarding its own travel arrangements. 8:58:34 AM REPRESENTATIVE GATTIS stated that if she was the governor, she would want to know what the rules are before making travel arrangements. She said she thinks she can see both sides, but wants to know if currently there are rules to guide a governor who may want to travel with a child. REPRESENTATIVE GRUENBERG clarified that there are rules in regulation currently; the only difference is that under HB 10, adult disabled children would be included. 9:00:15 AM REPRESENTATIVE ISAACSON posited that HB 10 would help to rectify an issue that needs to be clarified. He said it is not good policy for the executive branch to ignore the legislature's statutory authority. He said he likes what the proposed legislation would do to clarify this issue, especially in terms of when a child's care is customary and needed, so that the child is not split apart from the family when the family is trying to follow the letter of the law. 9:02:16 AM REPRESENTATIVE KELLER clarified that he never meant to suggest that statute could be ignored by the executive branch. He stated, "The line between what's statute and what's law is a difficult one and a subjective one to draw." He said the question is how far [the legislature] can go in specifying policy in statute. CHAIR LYNN pointed out that the question is not regarding whom the governor can bring along when traveling, but who pays for those people. 9:03:57 AM MR. MADSEN, in response to comments made by Representative Hughes and the sponsor, offered clarification by citing the language in AAC 52.045(c), which read as follows: (c) For purposes of AS 39.52.120(a) and (b)(3), the use or authorization of use of state money or other state resources for transportation of a family member that does not benefit the state is presumed insignificant if the governor or lieutenant governor pays the state the cost of the family member's transportation. Except for transportation by state aircraft for partisan political purposes under AS 39.52.120(f), the agency that authorized or paid for the travel shall determine the cost of the transportation based on either (1) the actual fare paid; or (2) the fare for equivalent commercial transportation, if the travel was by state aircraft, vessel, or vehicle. 9:07:35 AM JUDY BOCKMON, Assistant Attorney General; State Ethics Attorney, Opinions, Appeals, & Ethics Section, Civil Division (Anchorage), Department of Law (DOL), in response to Representative Keller, offered a brief overview of the code of conduct set up through the Alaska Executive Branch Ethics Act. She said regulations have been adopted over time to provide additional parameters with respect to certain portions of the statute. In response to the chair, she said the Alaska Executive Branch Ethics Act applies primarily to someone in the executive branch of government while he/she is actively in service 9:10:59 AM CHAIR LYNN directed attention to the following language in the bill title, on line 3: "allowing certain public officers and  former public officers". MS. BOCKMON responded that both the regulations and the proposed legislation recognize the possibility that a former state officer could be the subject of an ethics complaint for conduct while in office, and the attorneys' fee provision covers that individual. She said the regulation and the proposed statute do not cover a former employee's violation of one of those provisions that apply after he/she leaves state service. 9:12:09 AM REPRESENTATIVE GRUENBERG directed attention to language in Section 5, on page 5, lines 5-9, which read: *Sec. 5. The uncodified law of the State of Alaska is amended by adding a new section to read: APPLICABILITY. AS 39.52.470, enacted by sec.4 of this Act, applies only to complaints under AS 39.52l.310 - 39.52.390 that are initiated or filed on or after the effective date of this Act. REPRESENTATIVE GRUENBERG stated, "That's talking about the attorneys' fees. The transportation would apply to applications that are made after the effective date; there's no retroactivity clause." 9:12:53 AM REPRESENTATIVE KELLER offered his understanding that HB 10 is looking at policy decisions regarding regulation that is already in place. He suggested that the committee needs to hear the rest of the presentation. 9:13:45 AM REPRESENTATIVE GRUENBERG clarified that the first part of the proposed legislation would adopt the regulations in statute, "except for the developmentally disabled kid." He offered his understanding that Representative Millett would be offering an amendment. He said she has sponsored legislation, which he has cosponsored, in support of the developmentally disabled community, and he indicated a change in phrase is needed from "mental disability" to "intellectual" or "developmental disability". 9:15:07 AM REPRESENTATIVE ISAACSON moved to adopt Amendment 1, labeled 28- LS0040\A.2, Wayne, 1/30/13, which read as follows: Page 3, line 12: Delete "or mental" Insert ", intellectual, or developmental" There being no objection, Amendment 1 was adopted. 9:15:47 AM REPRESENTATIVE GRUENBERG directed attention to Section 4 of HB 10, on page 4, line 7, through page 5, line 4, which addresses the ability for any person in the executive branch who is exonerated to recoup his/her cost in attorneys' fees in defending against an ethics complaint. He stated that under current regulation, the person can apply and receive payments before they are exonerated; under HB 10, the person would have to wait until he/she is exonerated. He said that is the normal practice in the state. He opined that if money is awarded in advance, the person may not prevail, and then he/she has to be chased down to get the money back, which is "unseemly" and "a waste of time." 9:18:51 AM REPRESENTATIVE KELLER asked at what point a person could begin to accumulate a legal debt because of a complaint. 9:19:39 AM MS. BOCKMON answered that when a complaint is first received, the department does a preliminary review and analysis to determine whether it states appropriate Ethics Act claims and warrants investigation. If the department decides to formally accept the complaint, then statute requires that the subject of the complaint is notified, and the investigation would proceed. She said most investigations are resolved at some level of the investigatory phase; however, statute provides for more formal accusation that might lead to a hearing. She shared that her experience has shown that most subjects do not immediately hire an attorney when they are served with a complaint, unless the circumstances are serious. She said, "If it got to the public accusation phase without otherwise resolving, I would expect most folks would hire an attorney - but maybe not." 9:21:40 AM MS. BOCKMON, in response to a question from Representative Hughes regarding possible costs to the state, explained that the fiscal note is zero, because under [HB 10], neither the transportation costs nor the attorneys' fees would impact the Department of Law. She said the Office of the Governor has an administrative account that is addressed in the budget and appropriations process every year, and the transportation costs are covered within that funding. She offered her understanding that the attorneys' fees are covered through the Division of Risk Management, in the Department of Administration (DOA), and the DOA provides the fee payments through interagency assessment; therefore, if there was a particular person subject to an ethics complaint who chose to avail him/herself of the attorneys' fees benefit, that would be addressed through the Division of Risk Management and that particular person's agency. MS. BOCKMON, in response to a request from Representative Hughes regarding historical information, said there are instances where state employees are the subject of various complaints - not just ethics complaints. She said she is not fully educated on all the parameters in which a defense might be provide in whatever the law suit is. In addition to Ethics Act proceedings, she said, there are also other proceedings, which can make a conflict challenge or bring a complaint under the hearing officers' procedures, for example. The regulations for the Ethics Act have been in place only since December 2010. She offered her understanding that to date there has been no one seeking reimbursement of attorneys' fees costs. She recollected two significant matters involving attorneys, and in both instances the individual was not exonerated. She said there may have been one smaller complaint that was dismissed where an attorney was involved; however, she said she is not aware that there have been any requests for reimbursement of attorneys' fees since the regulation went in to effect. 9:26:02 AM REPRESENTATIVE HUGHES asked if there is any statutory limit in what would be paid to attorneys' fees. MS. BOCKMON replied that in August 2009, the Division of Risk Management set a cap of $25,000 per proceeding, regardless of the number of claims made. She offered her understanding that the division set that as policy, and said, "I don't see a citation to ... another authority." 9:27:39 AM REPRESENTATIVE KREISS-TOMKINS offered his understanding that HB 10 would change when attorneys' fees are paid out, not how; a person would be paid back his/her attorneys' fee costs only after being exonerated. 9:28:14 AM CHAIR LYNN offered his understanding that under HB 10, the person who had been exonerated or the Division of Risk Management would be reimbursed. 9:28:34 AM REPRESENTATIVE GRUENBERG answered that is correct. In response to Representative Hughes' previous questions, he said the general rule for fiscal notes is that they are viewed only in terms of the effect of the bill. The only effect of HB 10, he said, is "an unknown amount, which will ... potentially save the state money," because it will protect against a circumstance where a person is reimbursed for the attorneys' fees and subsequently is not exonerated. He opined that a zero fiscal note is very appropriate, because under HB 10, nothing would be changed but to ensure that a person is not paid erroneously. REPRESENTATIVE GRUENBERG directed attention to language beginning on page 4, line 31, to page 5, line 4, which he said does not set an amount for attorney's fees, but outlines that those fees must be reasonable, related to the cost of legal representation, and necessarily incurred. CHAIR LYNN said "reasonable" is in the eyes of the judge. REPRESENTATIVE GRUENBERG said that is correct. He said this pertains to regulation 9 AAC 52.040(d)(2), which read: (2) expenses are reasonable if, based on an evaluation of the complexity of the alleged claim, the attorney's fee or hourly rate, the hours expended, the relationship between the amount of work performed and the significance of the alleged claim, and other relevant factors, the expenses were necessarily incurred to defend against an allegation in a complaint brought under AS 39.52.310 - 39.52.390; those expenses may (A) include attorney's fees, fees incurred for professional legal services customarily performed by an attorney but delegated to and performed by an investigator, paralegal, or law clerk, and related costs; and (B) be apportioned by alleged violation if a complaint alleges more than one violation, but only if the public officer provides clear documentation that the expenses paid were limited to the alleged violation for which the public officer is exonerated; and REPRESENTATIVE GRUENBERG stated, "We didn't go into that detail in statute, because that's covered in the [regulations]." 9:33:00 AM REPRESENTATIVE KELLER asked if it is the norm in other states to have no money paid until after exoneration from an ethics complaint. He posed the possibility that ethics complaints can be used as a tool in the toolbox of various organizations. He continued as follows: For example, a political organization puts out the word and says, "Okay, we've got to have lots of complaints filed." That may or may not have an effect on the AG, but we know that the ... media is involved at a different level than what it normally is in the courts, and this becomes a matter of public opinion, you know, then that ... can affect the results of what happens with the ... next ethics complaint. REPRESENTATIVE KELLER expressed his concern that HB 10 can be used as a political tool. Further, he questioned whether it is appropriate to remove the option that the executive branch would have of protecting an employee that may have become a political target. He offered his understanding that the passage of HB 10 would "prevent that kind of coverage." He asked if the executive branch would have the option of "putting the money out there ... to help protect its employees" if the proposed legislation does not pass. 9:36:12 AM REPRESENTATIVE GRUENBERG responded that the practice before any litigation came about was like that in criminal law where there was no reimbursement for anything, but worse because there is no public attorney appointed to represent the defendant in an ethics case. He said neither the public defender nor the Office of Public Advocacy have any statutory provision that allows them to represent "these folks." He opined that when former Governor Palin was hit with litigation, that brought people's attention to "the fact that there should be some method of dealing with this." He said the AG decided not to provide a public attorney for the defendant, but to provide a method of reimbursing a private attorney for the reasonable amount of the fee. Even under the Alaska Legislative Branch Ethics Act, there would be no one to defend legislators, he said, but "fortunately that hasn't happened." REPRESENTATIVE GRUENBERG, regarding the question about fairness, said it is possible that the person upon whom the ethics complaint was filed could incur considerable expense; however, he said he thinks the chance of not being exonerated is much greater. He echoed Ms. Bockmon's statement that most of the cases are handled in house and do not require the attorneys' fees. He said he thinks the issue of vexatious litigation goes beyond the scope of HB 10. 9:42:45 AM REPRESENTATIVE KELLER asked the bill sponsor if he thinks HB 10 would "expand the potency potential of vexatious complaint." REPRESENTATIVE GRUENBERG responded that he does not think the proposed legislation would have any effect on vexatious litigation. 9:43:55 AM CHAIR LYNN said it seems that there are two separate bills in HB 10. He reviewed that the first part of the proposed legislation deals with the governor or lieutenant governor being able to do what should be done for a disabled child of any age. He questioned whether the two parts of the bill belong together. 9:44:29 AM CHAIR LYNN, after ascertaining that there was no one else who wished to testify, closed public testimony. 9:44:48 AM CHAIR LYNN stated his support for the first part of HB 10, and said the second part raises a lot of questions that merit more discussion. 9:45:24 AM REPRESENTATIVE GATTIS offered her understanding that testimony has shown that frivolous ethics complaints are exposed, which she said addresses her concern that a person would not have to shell out the money to cover attorneys' fees for a frivolous complaint and get reimbursed later. Regarding a nonfrivolous ethics complaint, wherein the person has to hire his/her own attorney, she stated, "Our constituents have to do the same thing, and I think they're looking at us to have the same rules." 9:46:43 AM REPRESENTATIVE ISAACSON said the bill sponsor has pointed out that the intent of HB 10 is not to address the issue of vexatious litigation; however, he estimated that the bill would notify the plaintiff that if he/she makes it through the executive branch ethics process, he/she will not bleed the governor's funds, because if the governor prevails, then the governor will be reimbursed. He suggested perhaps the situation with former Governor Palin was that people tried to "bleed her dry." He stated, "That is not what we want our executives to have to endure." He concurred with the chair that HB 10 may be two bills in one, but stated his support of both aspects of the proposed legislation, because it would provide "clear instructions to all involved." 9:48:41 AM REPRESENTATIVE KREISS-TOMKINS offered his understanding that with vexatious complaints; it is the complainant that will "pay through the nose" when his/her complaint is found to be meritless. He added, "It's just a question of when." He opined that the second part of HB 10 is logical and merely aligns "when that money is paid out for executive branch people with members of the general public." 9:49:40 AM CHAIR LYNN reiterated his previous remarks about the complexity of the second part of the proposed legislation. CHAIR LYNN announced that HB 10 [as amended] was held over.