SENATE BILL NO. 271 "An Act relating to fees charged for inspections by the Department of Environmental Conservation; and providing for an effective date." This was the second hearing for this bill in the Senate Finance Committee. SUE MOSSGROVE, Aide to Senator Taylor, testified the sponsor introduced SB 271 as a matter of fairness for all businesses providing food services, from restaurants to day care centers. Currently, she stated food inspection fees are included as a part of the permit process within the Department of Environmental Conservation Food Safety and Sanitation program. However, she noted some establishments were charged the fees but not receiving services. She said this legislation was introduced to separate the inspection fee from the permit process so establishments were not charged a fee unless they were actually inspected. Co-Chair Torgerson noted that the member's packets included information in response to requests made at the previous hearing by the Committee to the department. He relayed the Committee's intent at the last meeting was to follow the sponsor's intent to charge for actual inspections but also to identify the high risk health areas to possibly adopt statutes to exempt some facilities from inspections or require biannual inspections for others. JANICE ADAIR, Director, Division of Environmental Health, Department of Environmental Conservation testified via teleconference from Anchorage and reviewed the handout provided to the Committee by her division. [Copy on file]. Part 1: Risk Based Inspection Frequency Protocol, Risk Level = # of routine inspections per year - this showed how the division views food service facilities to determine the relative risk it may pose to public health. It also shows the process preparation or what was being done with the food, or what types of physical, microbial and chemical hazards might be generally present. Ms. Adair noted that the number of annual inspections shown on this chart was the ideal not the actual. Second page of Part 1 showed the considerations that may increase or decrease the optimal number of annual routine inspections. Ms. Adair told the Committee that the division was currently reviewing compliance history and targeted populations to see if a facility should be given a lessor or higher risk level ranking. Part 2: Inspection Risk Levels by Office - shows where division offices are located, the numbers of inspectors in those offices and how the overseen facilities are divided between each office by the risk level. This shows the total of risk levels two through four, what the division concentrates on and then the average number of facilities per inspector. Part 3: Food Safety and Sanitation Office Jurisdictions - a map showing the jurisdiction areas of each office. Ms. Adair pointed out that the Nome office was run by the Norton Sound Health Corporation and that the state has a designated grant to the corporation to operate the program in that area. Second page of Part 3 - listing of those communities shown on the map and which office oversees them. Part 4: 1999 Food Safety and Sanitation Facilities - this breaks down the different types of facilities, gives a count by facility type, whether or not they are permitted and whether or not they pay a fee. These are divided by their risk level. Ms. Adair noted that several of these facility types were not permitted and did not pay fees. She directed attention to exempted facilities. Part 5: Number of Inspections, Fee'd Facilities and Inspectors by Year - showing the percentages of fee's facilities that were inspected in the years 1997 through 1999. Ms. Adair corrected an error on this page changing the number of Fee'd Facilities in calendar year 1999 to 5022. She told of the inspectors who took advantage of the Retirement Incentive Program (RIP) and of other vacant positions. She also talked about the reduction of the program. She said the combination of these factors took a toll on the number of inspections that were performed. Co-Chair Torgerson asked about the increase of facilities during the time indicated on the handouts and if these were new facilities or if the department added existing facilities to their inspection list. Ms. Adair assured that this was a dynamic industry with many new businesses entering continually and that the department had not added any existing facilities to the program. She said seafood processors add to the fluctuation because they don't always operate every year. She explained permits are issued every year so if a processor does not open in a particular year, there would be no permit applied for and the facility would not be counted. Co-Chair Parnell asked of the number of facilities inspected each year, what percentages were in Anchorage, Fairbanks and Juneau. Ms. Adair responded to the facilities in Anchorage saying the only inspections done in the Municipality of Anchorage were processors involved in inter-state commerce and the railroad. She said she would provide information on Juneau and Fairbanks. Co-Chair Parnell wanted to know if the state was performing restaurant inspections in Anchorage, Chugiak or Girdwood. Ms. Adair replied that Anchorage is the only community that has adopted its own program and does its own restaurant inspections. All other restaurant inspections were performed by the state, she said. Co-Chair Parnell asked if it wasn't more common in the US that the local government do restaurant inspections. Ms. Adair said it was but there are so few facilities in communities to generate the fees to support a local program. She stressed that even Anchorage has to fund 50 percent of the inspection program from its general fund. She estimated that Juneau could only minimally fund a program and that other communities could not. She said state inspectors are sent to communities when needed and can cover several communities. Co-Chair Torgerson asked if any other communities had provided the services in the past but then turned the program back to the state. Ms. Adair responded that the City of Fairbanks had collected fees and paid $60,000 to contract with the state for the inspections. However, she said the program was dropped after the state fees were increased because the state could collect more revenue through increased fees than what could be collected from the city. Part 6: Revenue Lost from Exempt Food Facilities - this included Headstart programs in schools and other charitable food service organizations and the revenues lost to the program Co-Chair Torgerson asked if these facilities are exempt from paying the fee but not from being inspected. Ms. Adair said that was correct. Co-Chair Torgerson asked how this information tied into the information of Part 4, which showed the exempt facilities broken down by type of facility. Ms. Adair replied that the information on Part 6 was reflected on the Part 4 chart except for temporary food service facilities, which did not fit into any of the categories. Senator Adams asked if the Anchorage inspectors did inspections of seafood processors in Dutch Harbor and Unalaska. Ms. Adair said that was correct however she noted that currently, the inspector from Valdez was doing the Aleutian Peninsula inspections because his wife was currently living there. Senator Adams asked the frequency of the visits to this largest seafood processing area in the state. Ms. Adair explained that Dutch Harbor mostly produces fresh frozen seafood, which is a very low risk. The remainder of the processing, such as surimi imitation crab, requires an inspector to visit three times annually. Ms. Adair clarified that the retail restaurant fees had increased and are expected to cover more services that just the cost of inspections. She stated that the fees cover the entire cost of the program with the exception of recovery of travel costs, which is prohibited by statute. She detailed the other services such as training, response to an emergency, and resolving complaints. She noted that it is just as important to a facility to know it is not the cause of a food borne illness. Co-Chair Torgerson asked about putting exemptions into statute for facilities with a low risk level that may not require an inspection every year. Ms. Adair responded that there was currently no statutory requirement for an inspection and that the inspection is what the department performs to verify compliance to the food safety requirement. While she was aware that other states had laws that dictated the number and frequency of inspections based on the type of facility, she stressed the system needed to be flexible. She gave as an example, the E. coli outbreak that was traced to undercooked ground beef. Before this outbreak, she explained, ground beef was not considered a threat by the general public. Since the 1993 incidence at Jack-in-the-Box restaurants, those facilities that serve hamburgers were given a higher risk level, which requires more frequent inspections. Co-Chair Torgerson wanted to know why the fiscal note did not indicate a loss of revenue considering the provision of SB 271 to inspect only certain facilities. He noted that the division only performed half of the ideal number of inspections. Ms. Adair responded that when the vacant positions were filled, the division hoped to increase the number of inspections. She warned that if the fees were taken away, the number of positions would need to be reduced. She told the Committee that she had figured how to change the program so everyone pays a flat fee whether or not the facility was inspected. She added that those facilities that are inspected would then pay an additional cost. Therefore, she calculated if the number of inspections stayed the same, about half of the facilities would pay an inspection fee and the remaining facilities would pay a flat fee to support the entire program. Co-Chair Torgerson asked if the Committee were to consider the flat fee and also keep Senator Taylor's bill in mind, the Committee would need to know what the flat fee would pay for. Ms. Adair was concerned about charging an extra fee whenever an inspection was performed. She understood the complaints that caused the bill to be introduced, but thought it would only change the complaint. She explained the complaint would change from "I'm paying for inspections that I'm not getting" to "Every time they come in and do an inspection, they hand be a bill even if they don't find anything. They're in here to pad their budget." Co-Chair Torgerson agreed in part but did not think the witness was making the case as to what services the fees covered. He stated that many facilities do not know what functions the fee goes to pay for. He wanted to find a compromise for the department and the bill's sponsor. Senator Leman asked if it was reasonable to implement a flat fee or whether some facilities cause the department to exert more effort and if the fee system should be framed differently. Ms. Adair responded that was the reason the department used permitting time and inspection time to calculate the fee. She explained that some canneries took up to 18 hours to do an inspection as opposed to a convenience store that may only take 30 minutes. The theory, she said was that there are some kinds of services and some compliance issues that take more time for the department to process than others. She noted that is the purpose for the different risk levels. She added that some facilities that have a proven compliance record would not need inspections as frequently as others would. Co-Chair Torgerson did not think there would be that hard of time proving the need for different fees for the risk levels. He did not mind charging more of restaurants for re- inspections for restaurants with low scores. Ms. Adair noted there are re-inspection fees already in place for those facilities that score low and must be revisited to ensure compliance. Co-Chair Torgerson stated the reason behind the bill was a small espresso stand that is charged the same amount as a 200-seat restaurant. He surmised that the risk was undeniably different. Senator Green wanted to confirm the exemptions shown on Part 6 and whether the lost revenues represented by the $300,000 lost fees were then calculated into the for-profit fees. Ms. Adair noted there are general funds in the program but that most went to support seafood related activities. She said the lost revenues were off set by higher fees charged to the retail food service facilities. Co-Chair Torgerson tried to clarify the $279,920 was the current amount collected or the total of all costs. Ms. Adair responded that amount is what the department would collect if all the facilities were charged a fee, including the currently exempted facilities. Co-Chair Torgerson asked what would be the revenue loss if the additional exemptions were permitted. Ms. Adair answered $36,625. Co-Chair Torgerson requested exploring the flat fee for health services related to facilities by risk and also the intent of the bill to pay for inspections when they occur instead of across the board. He asked for another summary that incorporates these scenarios and includes the current amount of general fund support for the program. DOUG RHODES testified via teleconference from Glennallen about his concerns of the price of the inspections. He told of being charged for two inspections of his facility, one for the kitchen portion and the other for the bar portion, saying the two are located in the same building within ten feet of each other. He warned this expense would result in no more small roadside businesses. He thought there were too many Department of Environmental Conservation employees in his area and spoke of the frequent travel of inspectors. Co-Chair Torgerson assured the witness that Committee was trying to work through his concerns. Senator Green asked if the two places were inspected on the same day or different times. Mr. Rhodes said the inspections were done on the same day. SENATOR ROBIN TAYLOR did not oppose a flat rate for an annual permit that included the cost of inspections. He was concerned about the ability of the department to raise the fees to cover the costs of the department's program. He complained that the inspectors were driving new Ford Explorers to perform the inspections and he understood why the small operators questioned the amount of their fees. Senator Taylor continued that the legislature's intent is to downsize the department but that the department would not comply. Senator Leman clarified that the previous year the Department of Environmental Conservation budget was actually increased. Co-Chair Torgerson ordered the bill HELD in Committee.