SB 203-OFFICE OF ADMINISTRATIVE HEARINGS  DAVE STANCLIFF, staff to Senator Gene Therriault, stated the current administration would like to separate the individuals or agencies that adjudicate regulations and those that promulgate regulations. In Alaska there are a number or types of hearing officers (adjudicators) and hearing examiners and SB 203 deals with adjudicators that make the decisions when someone contests administrative law. Other states have found that by providing protection, separation and autonomy for their adjudicators, the work quality and decisional processes improve significantly. The sponsor has worked extensively with the administration to develop a system of centralized hearing officers that is cost effective and minimally disruptive for existing employees. SB 203 establishes that system within the Department of Administration. RCA, workers compensation and tariff functions were excluded due to the need for high expertise or long-term institutional knowledge. Included was the option for commissioners to assign final decision-making authorities to an adjudicator. However, the new rules that will likely be based on the judicial code of conduct apply to all hearing officers in the state, even those that don't fall within the central panel. Adjudicator decisions would be final unless the commissioner determines that some other action should be taken. In such instances, the commissioner would be required to take action within 30 days and substantiate the facts in the public record. The Alaska Association of Administrative Law Judges and Hearing Officers examined the bill and had seven recommendations. He noted the recommendations were listed in a blank committee substitute (CS). CHAIR GARY STEVENS asked for a motion to adopt the CS as the working document. SENATOR GRETCHEN GUESS made a motion to adopt CSSB 203 \Q version and there was no objection. CHAIR GARY STEVENS asked Mr. Stancliff if he had additional comments. MR. STANCLIFF emphasized that part of the reason for selecting the proposed model was because it is cost effective. The bill includes a liberal transition phrase to allow the administration to proceed deliberately and not incur heavy costs. That would be accomplished by having existing agency hearing officers and their support staff transfer to the central location. He opined the increased efficiencies would overcome associated startup costs. BENJAMIN BROWN spoke on behalf of the Alaska State Chamber of Commerce in support of SB 203 to assert that the bill would be an investment in long-term cost savings and efficiencies. More importantly, it would provide transparency and consistency to the Alaska citizens. The state chamber works with the administrative law process as individuals and businesses on a daily basis. When dissatisfaction with an agency decision occurs, it is problematic that the appeal must be made to that same agency. SB 203 creates a transparent, bright-line office of centralized hearings, which would make it much easer for Alaskans to know that impartiality is at play and the hearing officer has no inside agenda. When legislative research prepared an assessment of all the hearing functions done by state agencies, they found that the disparity in the turnaround time ranges from several weeks to over a year. SB 203 would standardize turnaround times and record keeping, which would work to everyone's benefit. 4:00 pm    CHAIR GARY STEVENS asked whether the new system would protect the hearing officer from agency influence by removing the hearing officer from the agency. MR. BROWN replied that it would remove the appearance of impropriety. Although his experience is that there isn't a lot of undue influence exercised, there is both the appearance and the potential. SENATOR JOHN COWDERY asked whether hearing decisions have legal standing. MR. BROWN explained that an administrative hearing decision is the final administrative law or agency action before it is appealed to a court. SENATOR COWDERY asked if a hearing officer petitions the court for enforcement of decisions. MR. BROWN said a court order could be obtained if an administrative hearing decision were ignored. RICK URION, Director of the Division of Occupational Licensing, testified in support of SB 203. His division has just one hearing officer and a caseload that is far too large for one individual. Because of this, one of the largest problems the division faces is the time it takes to reach final adjudication. In some instances, it has taken over a year for the entire process. In the interest of speedy adjudication of issues in his department, he urged passage of SB 203. CHAIR GARY STEVENS asked whether the number of cases in his department was consistent. MR. URION replied the caseload is consistently steady. He added they have had no difficulty with perceived or real impropriety; they simply don't have enough people to handle the load. ANDREW HEMENWAY, hearing officer with the Department of Administration, stated he worked with Mr. Stancliff and Mr. Jardell from the Commissioner's office to craft the legislation. He explained that they removed selected functions such as RCA, the worker compensation board and fisheries commission from consideration because they have existing hearing officer panels and therefore more flexibility in handling caseloads. Beyond that, they looked at the range of decisions that hearing officers make to determine whether or not the decisions were policy oriented or fact oriented. The latter seemed to be more appropriate to include in the central panel system and the policy oriented decisions were initially left out. In terms of the financial impact and efficiency of the hearing function, he said that his perception is that as his caseload goes up efficiency goes down. Consolidating the hearings would spread the caseload so the various agencies could get a consistent level of service and the hearing officers could have a consistent caseload. He referenced Senator Cowdery's previous question and made it clear that under this legislation the hearing officer would issue the proposed decision, it would go to the agency for adoption and enforcement would be up to the agency. The hearing officers have no role in the investigation or enforcement. CHAIR GARY STEVENS asked what the qualifications were for hearing officers and whether they were all attorneys. MR. HEMENWAY replied that hearing officers must be attorneys for hearings conducted under the Administrative Procedure Act, which accounts for less that 50 percent of all administrative hearings. There is no statutory requirement that the hearing officers be attorneys in any other hearings. He noted that all hearing officers that would transfer under the transitional provisions of the legislation are attorneys. CHAIR GARY STEVENS asked how professional standards would be improved. MR. HEMENWAY said the bill would formalize the current practice that hearing officers are attorneys with two years practice. With hearing officers in a central panel, an in-house training process could be created that might not be financially feasible in a single agency. KEVIN JARDELL, Assistant Commissioner of the Department of Administration, reported they have had success with the independent hearing officer for tax appeals that works largely with oil and gas tax issues. Industry believes they are treated more fairly at hearings even though the win loss record has not changed. He said they look forward to the same success with the proposed centralized panel. He acknowledged that the financial picture is incomplete, but they project a net increase of about $136,000 in the phase one personnel shift. Once they receive the financial data from the minor boards and commissions that can't justify a single hearing officer and have been contracting private attorneys, they feel confidant they will show a great savings and the public will realize increased response efficiency. CHAIR GARY STEVENS asked if the plan is to eventually expand to agencies that aren't currently included. MR. JARDELL replied they want the system to be expansive enough to ensure that it has a chance to work, but small enough to be manageable. They hope to continue to bring in agencies to increase efficiencies and not bring in agencies that are working well on their own. SENATOR COWDERY asked how they develop time limits for the hearings. MR. JARDELL said the timeline was 180 days at one time, but the attorney general suggested making it just 90 days. Some hearings are certainly more complicated in nature and take more time to develop the record. The concept in the bill is to address a majority of the cases, give the public a quick turnaround and if an agency needs a greater amount of time then do it through regulation and justify the need. SENATOR GRETCHEN GUESS asked for assurance that the bill wouldn't change the way regulations are created. MR. STANCLIFF replied SB 203 does not address the creation of regulation. MR. HEMENWAY clarified that the legislation would provide that the chief hearing officer would promulgate the procedural regulations that govern the hearing. MR. STANCLIFF noted that evidence from other states indicates that when the adjudication bar is high, more care is taken in the promulgation and enforcement of regulations. SENATOR GUESS noted the commissioners of education, HESS and DNR weren't listed in the transitional language even though the departments were included. She asked if this was because those departments don't have a hearing officer. MR. STANCLIFF explained that Tamara Cook [Director, Legislative Legal Services] developed the list and although changes might still be made, the sponsor didn't want to "create any different flow, administratively, in these conforming statutes." SENATOR GUESS asked for a list of those not included. She then commented she found it interesting that the Department of Administration was willing to assume the function and asked why the Department of Law wasn't selected. MR. STANCLIFF said they deferred to the national organization that created the model. MR. HEMENWAY pointed out the Department of Administration already has some legal functions and certain labor relations. The Department of Law is primarily a prosecutorial function of government and placing adjudication there might create the appearance of conflict. MR. STANCLIFF stated they were trying to keep the function in a neutral place. SENATOR GUESS asked to whom the chief would report. SIDE B  4:30 pm    MR. STANCLIFF replied the Legislature would review the budget of the new entity and the attorney general would review any complaints made against the chief administrative hearing officer. SENATOR GUESS asked if there was a reason that the chief hearing officer wouldn't be approved by the Legislature. MR. STANCLIFF replied that although they opted for legislative approval initially, Tamara Cook advised it is a gray area and the Attorney General's Office determined it might stand a weak constitutional test. To avoid controversy, they removed the confirmation process. SENATOR GUESS noted that hearing officers are partially exempt and asked whether that is a change. MR. STANCLIFF said, no they're classified. To make the panel work they need to be partially exempt or exempt employees, but they need some protection. As a model, they chose the Division of Election employee model, which is statute AS 39. MR. HEMENWAY clarified that some of the hearing officers are now classified while others are partially exempt. It varies and an ancillary benefit to this is standardization in job function. SENATOR GUESS asked what the difference is between exempt and partially exempt. MR. STANCLIFF replied he didn't have an answer. MR. HEMENWAY said he was told it is simply pay scale. SENATOR GUESS expressed the following concerns with regard to future administrations: · The governor would have control over the chief, not the Legislature  · Partially exempt employees serve at the pleasure of the governor  MR. STANCLIFF replied they welcome creative suggestions and as the bill moves through the committee process, they are open to exploring different ideas. MR. HEMENWAY said the chief hearing officer is appointed for a fixed term, which gives some insulation from the political process while providing some accountability. Although hearing officers are exempt, they are entitled to the same protections any other state employee would have. If they are to be discharged, there must be a hearing and it must be for cause. The main impact of the exempt status is at hiring. SENATOR GUESS referred to page 3, line 13 of the CS and said that, as a legislator, she would like to know whether the process is working. MR. STANCLIFF agreed with the point and said it is their intent that legislators know how well the process is working and whether or not the public is satisfied. SENATOR GUESS asked how the chief would prioritize the workload. MR. STANCLIFF replied the chief would determine areas of expertise, the workloads and cross training needs. One of the major efforts of the job would be to determine how to efficiently work through the caseload. He admitted the key to success is to hire the right person for the job the first time around. SENATOR GUESS pointed out a discrepancy between page 5, line 25 and page 8, line 2 and said it was unclear who would have choice in the matter. She asked whether an agency would have the choice of having their complaint go to the central office and would the central office have the choice of taking that complaint. MR. STANCLIFF said they envisioned it that way. MR. HEMENWAY explained the hearings that are listed on pages 4 and 5 would be mandatory. Others are at the discretion of the receiving agency. SENATOR GUESS expressed concern about setting up a separate agency to conduct hearings and make rulings because there are many ways the agency could say they didn't agree with the decision. MR. STANCLIFF said that is addressed on page 8. They decided on the decisional process whereby the decision of the hearing officer stands if action isn't taken within 30 days. Page 8, line 24 might provide comfort in that it eliminates the temptation to make an arbitrary reversal of a hearing officers' decision. MR. HEMENWAY said that from the administration's policy point of view, it's very important that the final decision authority be retained with the final decision maker. The key is that the final decision maker is the person who is accountable to the executive branch and ultimately to the people. SENATOR GUESS asked if that means she doesn't have to worry about page 8, line 21 that says the agency may return the case to the hearing officer, take additional evidence or make additional findings. MR. STANCLIFF replied that this is largely the same language that is in existing law under the Administrative Procedures Act. SENATOR GUESS asked if there is an appeal by either party before going to the court system. MR. STANCLIFF said that under most statutes there is the opportunity to request reconsideration. SENATOR GUESS asked for the difference between a hearing officer and a hearing examiner and why there was a decision to group the officers and not the examiners. MR. STANCLIFF explained that a hearing examiner resolves disputes for an agency while a hearing officer is an adjudicator between two parties that are in direct dispute. MR. HEMENWAY opined the difference is semantic. When he looked at the classification system he couldn't tell the difference and administrative law judge is another name that is sometimes used. SENATOR GUESS noted that agency is a term used throughout the bill while commissioner is the term used throughout the testimony. She asked whether they were synonymous. MR. STANCLIFF replied the buck with the agency ultimately stops at the commissioner's desk. SENATOR GUESS pointed out there is a difference between what happens within an agency and what happens at a commissioner level. MR. HEMENWAY said the hearing function is an agency function. The final decision maker is usually, but not always, the commissioner. The terminology that is used is to avoid identifying any individual because it could be any person within the agency who currently has the final decision making authority. CHAIR GARY STEVENS announced he wanted to move the bill to the Judiciary Committee for consideration. SENATOR COWDERY made a motion to move CSSB 203(STA) and attached fiscal notes from committee with individual recommendations. There being no objection, it was so ordered.