HOUSE FINANCE COMMITTEE April 27, 1999 1:55 P.M. TAPE HFC 99 - 106, Side 1 TAPE HFC 99 - 106, Side 2 CALL TO ORDER Co-Chair Therriault called the House Finance Committee meeting to order at 1:55 p.m. PRESENT Co-Chair Therriault Representative Foster Co-Chair Mulder Representative Grussendorf Vice Chair Bunde Representative Kohring Representative Austerman Representative Moses Representative J. Davies Representative Williams Representative G. Davis ALSO PRESENT Senator Fred Dyson; Senator Gary Wilken; Bill Church, Division of Retirement and Benefits, Department of Administration; Jeff Logan, Staff, Representative Green; Kevin Jardell, Staff, Representative Green; Darwin Peterson, Staff, Senator Torgerson; Anne Carpeneti, Assistant Attorney General, Legal Services Section, Criminal Division, Department of Law; Janet Seitz, Staff, Representative Rokeberg; Lauree Hugonin, Executive Director, Alaskan Network on Domestic Violence and Sexual Assault; Pam LaBolle, President, Alaska State Chamber of Commerce, Juneau; Jennifer Rudinger, Executive Director, Alaska Civil Liberties Union (ACLU); Tom Lakosh, Anchorage; TESTIFIED VIA TELECONFERENCE Blair McCune, Alaska Public Defenders Agency; Jennifer Rudinger, Alaska Civil Liberties Union (ACLU). SUMMARY HB 34 "An Act relating to the crime of misprision of a crime against a child." HB 34 was HELD in Committee for further consideration. HB 176 "An Act relating to attorney fees and costs and the granting of public interest litigant status in proceedings related to administrative actions and inactions; and amending Rules 79 and 82, Alaska Rules of Civil Procedure, and Rule 508, Alaska Rules of Appellate Procedure." HB 176 was REPORTED out of Committee with "no recommendation and a zero fiscal note by the House Judiciary Committee, dated 4/22/99. CSSB 9(HES) "An Act relating to the calculation of employee contributions and credited service in the public employees' retirement system for noncertificated employees of school districts, regional educational attendance areas, the special education service agency, the Alaska Vocational Technical Center, and the state boarding schools; and providing for an effective date." CSSB 9 (HES) was REPORTED out of Committee with a "do pass" recommendation and with fiscal impact note by the Department of Administration dated 3/10/99. HOUSE BILL NO. 34 "An Act relating to the crime of misprision of a crime against a child." Representative J. Davies MOVED to ADOPT Amendment 1 (copy on file). Co-Chair Mulder OBJECTED for the purpose of discussion. Amendment 1 would add on page 1, line 9 "attempted murder, kidnapping, sexual penetration without consent, or assault where serious physical injury is inflicted on a child under 16 years of age, by another." REPRESENTATIVE FRED DYSON explained that the Department of Law recommended the amendment. He noted that the age of 16 is arbitrary. Co-Chair Therriault WITHDREW his objection. There being NO OBJECTION, it was so ordered. Representative Foster MOVED to report CSHB 34 (FIN) out of Committee with the accompanying fiscal notes. Representative J. Davies OBJECTED for purpose of discussion. Senator Dyson pointed out that federal legislation would prevent states from receiving funds under section 106 unless the Governor certified that the state had a law similar to HB 34. Co-Chair Therriault noted that an updated fiscal note is expected. He observed that the legislation would be held for the upcoming fiscal note. HB 34 was HELD in Committee for further consideration. CS FOR SENATE BILL NO. 9(HES) "An Act relating to the calculation of employee contributions and credited service in the public employees' retirement system for noncertificated employees of school districts, regional educational attendance areas, the special education service agency, the Alaska Vocational Technical Center, and the state boarding schools; and providing for an effective date." SENATOR GARY WILKEN, sponsor testified in support of SB 9. He noted that Representative Brice offered similar legislation in the previous session. He explained that the legislation affects noncertificated or classified school district employees such as custodians, cafeteria workers and administrative assistants and teachers aides. Under current law, these employees work nine months a year, which are contributed to their retirement plans. After 30 years of service they would have approximately 22 years of retirement credit. The legislation allows these school employees to pay into their retirement accounts in order to obtain full year retirement credit for each year that they work. It has no cost outside of a one-time $72 thousand dollar startup fee. The individual employee pays the increased benefit. School districts across the state have shown support. In response to a question by Co-Chair Therriault, Senator Wilken explained that there is no employer match. The employee would have a 1.25 premium added to their benefit cost during their nine months of employment. He noted that it would not affect the university. BILL CHURCH, DIVISION OF RETIREMENT AND BENEFITS, DEPARTMENT OF ADMINISTRATION noted that there is no long term cost to the retirement system. It is structured to leave the extra component open. The rate can be increased or decreased as needed based on the actuaries' determination. Vice-Chair Bunde asked if the legislation represents a one time opt-in provision and what it would cost an average employee. Mr. Church stated that the election to increase the retirement contribution is irrevocable. There is no cost outside of the surcharge of an additional 1.4-percent. He stated that testimony indicated the additional 1.4-percent surcharge would not be a burden. Representative Austerman noted that the bill is not retroactive. Mr. Church stated that the employees could not buy up past service. Representative J. Davies questioned why the option would be irrevocable. Mr. Church stated that it would be difficult to administer the program if it were not irrevocable. He stressed that the choice would be a career path that would allow them to retire at the end of thirty years. Co-Chair Therriault noted that there is a fiscal note that would be paid by the retirement system. Representative Foster MOVED to report CSSB 9 (HES) out of Committee with the accompanying fiscal note. There being NO OBJECTION, it was so ordered. CSSB 9 (HES) was REPORTED out of Committee with a "do pass" recommendation and with fiscal impact note by the Department of Administration dated 3/10/99. HOUSE BILL NO. 176 "An Act relating to attorney fees and costs and the granting of public interest litigant status in proceedings related to administrative actions and inaction; and amending Rules 79 and 82, Alaska Rules of Civil Procedure, and Rule 508, Alaska Rules of Appellate Procedure." JEFF LOGAN, STAFF, REPRESENTATIVE GREEN testified in support of HB 176. He maintained that the legislation is designed to take the "kick me sign of our backs." Alaska has a resource development economy. Resources are disposed for payment to fund government services. The legislature has developed a process to protect the public. He maintained that there is a competent group of people to carry out the administration of this process. He observed that if a member of the public finds themselves in opposition to an agency action or in action then they can challenge the action through the administrative appeals process. He maintained that people are being paid by the state to sue the state. He observed that the court has ruled that some litigation is so important to the public at large that the public at large should pay for the litigation. He acknowledged the merit of the court's assumption, but stressed that the court has let the people of Alaska pay for specific questions. The legislation would change state policy to require plaintiffs against the state to pay for their own lawyers. Representative J. Davies asked the criteria for establishing public interest status. KEVIN JARDELL, STAFF, REPRESENTATIVE GREEN noted that there is a four part test used by the courts to decide if a party qualifies qualify as a public interest litigant under rule 82: 1) Is the case designed to effectuate strong public policies? 2) If the plaintiff succeeds will numerous people receive benefits from the lawsuit? 3) Can only a private party have been expected to bring the suit? 4) Would the purported public interest litigant have sufficient economic incentive to file suit even if the action involved only narrow issues lacking general importance? In response to a question by Co-Chair Therriault, Mr. Jardell clarified that rule 82 governs the allocation of attorney fees for the prevailing party. He explained that the judge makes a determination after a case is settled. The attorney of the prevailing party then fills a motion to recover the cost of attorney fees under rule 82. The judge under general cases would apply rule 82 and apportion a portion of the attorney fees to the prevailing party. This is generally around 30 percent of the cost incurred. Representative J. Davies questioned how statutes regarding frivolous lawsuits would factor into the process. He expressed concern that the legislation would take away lawsuits that would affect public policy and benefit numerous persons. Co-Chair Therriault maintained that the current administrative system is adequate to address Representative J. Davies' concerns. Representative J. Davies stressed that there are checks and balances between the three branches. He emphasized that the Court System allows a final check to executive and legislative branches. He maintained that public litigant lawsuits are non-frivolous and have the ability to affect a large number of citizens. Mr. Jardell stated that the state of Alaska is the only state that has a public litigant provision. He noted that most states have adopted the federal procedure of identifying specific causes of actions and getting specific protections for the cause of action. Under this method the state can control the cause of action that is being litigated. He asserted that lobbying costs have been included in attorney fees. He emphasized that rule 82 lists a number of factors that the court can use to assess rewards. He maintained that the Court can award full attorney fees under Rule 82. He added that there is a high threshold for establishing frivolous lawsuits. Co-Chair Therriault questioned if the legislation only affects Rule 82. Mr. Jardell noted that it amends statutory language that directs the court in setting attorney fees. It also amends court rules as a preventative measure to prevent the adoption of a court rule that would supersede a legislative direction. The legislation reinforces the rule by amending AS 44,62,300, which deals with actions against the state and regulations and the process of administrative appeals. Co-Chair Therriault asked if public interest litigant status would remain. Mr. Jardell noted that public interest litigant status would not be allowed if the party was litigating an action of the executive branch. It would remain for actions against municipalities, or the legislature. Representative J. Davies questioned why it would not be granted against a municipality or the legislature. He observed that the legislature is the policy making body. He noted that the policy of administrative review has to do with the inappropriate execution of executive power. It is the ultimate power the citizens have against an over weaning government. Mr. Jardell stated that the reason it has been removed from the executive branch is because that is where the problem has occurred. Representative J. Davies objected to the characterization that the legislation would remove the "kick me sign". LAUREE HUGONIN, EXECUTIVE DIRECTOR, ALASKAN NETWORK ON DOMESTIC VIOLENCE AND SEXUAL ASSAULT testified against the legislation. She recounted a case that the Network brought against the Alaska Court System. The Network won the case and was awarded two-thirds of their attorney fees. She acknowledged that the legislation would prevent a similar case. She expressed concern that the legislation would prevent future cases against the executive branch. She also expressed concern with the affect of the legislation on SB 123, which amends rule 82. She noted that SB 123 would limit public interest litigants to 30 percent of their fees on issues in which they prevailed. She concluded that the legislation would have adverse affects on smaller public interest groups. She expressed doubt that groups are making money on the award of attorney fees. Co-Chair Therriault questioned how long it took the Council to decide that their only course of action was through the court system. Ms. Hugonin replied that it was only a few months. Co-Chair Therriault questioned if the legislature had time to consider the actions of the administration and court system to implement the law that was passed. Ms. Hugonin noted that the action took placed during the legislative interim. PAM LABOLLE, PRESIDENT, ALASKA STATE CHAMBER OF COMMERCE, JUNEAU testified in support of HB 176. She maintained that if public interest litigants would pursue frivolous cases if they do not have anything to lose. She observed that they do not have to pay the other party's fees. She noted that businesses that lose must pay the prevailing party's fees. She referred to a current suit regarding Beluga whales. She noted that if a public interest litigants win any part of their suit they are awarded attorney fees. Representative J. Davies pointed out that the legislation does not pertain to businesses. He added that attorney fees are not awarded at 100 percent. (Tape Change, HFC 99 - 106, Side 2) Ms. LaBolle reiterated objections to the public interest litigant status. Representative J. Davies stated the legislature should look at if the courts are awarding costs that should not be awarded, if that is the problem. In response to a question by Co-Chair Therriault, Mr. Jardell explained that Alaska is the only state that has fee shifting. He did not know of any other state that has the American rule as opposed to the English rule, where parties bare their own cost except in individual causes of action. The public interest litigant doctrine is a creation of the state of Alaska. Co-Chair Therriault questioned how public interest litigants bill for attorney fees. Mr. Jardell discussed the Weiss case. He observed that the public interest litigants were awarded 100 percent of their attorney fees even though the court did not grant any of their points. He noted that a third party won based on challenges on a different argument. The Supreme Court ruled that the public interest litigants' goal was achieved through the award of the third party. They were awarded $454 thousand dollars. JENNIFER RUDINGER, EXECUTIVE DIRECTOR, ALASKA CIVIL LIBERTIES UNION (ACLU) testified via teleconference in opposition to HB 176. She maintained that it would jeopardize the public's participation in government and their ability to question government's decisions in court. She pointed out that current law recognizes that the normal attorney fee provisions in Alaska would create a significant impediment to litigation in the public's interest. The court attempted to remove this impediment as a matter of justice and fairness. Long standing judicial practice has exempted litigants acting in the public interest from paying the prevailing parties cost. She noted that litigants that fit this category includes individuals, nonprofit groups, Native tribes, and political organizations. Issues that may result in a granting of public interest litigant status includes: civil rights, discrimination, equal protection issues, tribal rights, political reinforcements, patients rights, and open government cases where individuals are seeking access to state government decisions. There have been cases on fish and game regulations, reapportionment, and anticrime issues. She maintained that the rhetoric from proponents of HB 176 seems to be anti-environmental. She pointed out that HB 176 throws the "baby out with the bath water." She noted that current law awards public interest litigants, who prevail, full and reasonable attorney fees. She acknowledged that public interest litigant that lose do not have to pay the state's attorney fees, but emphasized that there are many litigants that would not be able to bring litigation due to a lack of economic incentive. She maintained that citizens should be able to challenge governmental decisions in court. Public interest litigants are only reimbursed if they prevail. She maintained that the legislation punishes small public interest litigants. She expressed concern that the legislation will result in the elimination of public interest litigation. She stressed that it is in everyone's interest to encourage challenges in the public interest. Discussion Vice-Chair Bunde referred to the ACLU's lawsuit regarding campaign financing. He questioned if it improved the campaign financing law. Ms Rudinger discussed the ACLU's case. TOM LAKOSH, ANCHORAGE testified via teleconference in opposition to HB 176. He maintained that the legislation violates five sections of the Alaska Constitution, Article I, Sections 1, 2, 6 and 7, and Article 8, Section 17. He stressed that there is an equal protection issue. He referred to Article I, Section 2. - SOURCE OF GOVERNMENT: All political power is inherent in the people. All government originates with the people, is founded upon their will only, and is instituted solely for the good of the people as a whole. Mr. Lakosh asserted that the will of the executive branch is being placed above the will of the people. He added that the people's right of petition under Article I, Section 6 would be abrogated. He reiterated arguments that the legislation would be unconstitutional. In response to a question by Representative J. Davies, Mr. Logan observed that the Department of Law did not testify on the legislation in Judiciary. Representative Kohring MOVED to report HB 76 out of Committee with the accompanying fiscal note. Representative J. Davies OBJECTED. He argued that the legislation would take away a status that would advance cases, that are not frivolous, which could effectuate strong public policy and benefit numerous people. He asserted that the legislation is a reaction to a small class of lawsuits. A roll call vote was taken on the motion. IN FAVOR: G. Davis, Foster, Grussendorf, Kohring, Williams, Austerman, Bunde, Mulder, Therriault OPPOSED: J. Davies Representative Moses was not present for the vote. The MOTION PASSED (9-1). HB 176 was REPORTED out of Committee with "no recommendation and a zero fiscal note by the House Judiciary Committee, dated 4/22/99. ADJOURNMENT The meeting adjourned at 3:10 P.M. House Finance Committee 9 4/27/99