HOUSE JUDICIARY STANDING COMMITTEE January 26, 1998 1:09 p.m. MEMBERS PRESENT Representative Joe Green, Chairman Representative Con Bunde, Vice Chairman Representative Brian Porter Representative Norman Rokeberg Representative Jeannette James Representative Eric Croft Representative Ethan Berkowitz MEMBERS ABSENT All members present COMMITTEE CALENDAR HOUSE BILL NO. 232 "An Act establishing the independent division of administrative hearings in the Department of Administration in order to provide a source of independent administrative hearing officers to preside in contested cases; relating to administrative hearing officers; relating to contested case proceedings; and providing for an effective date." - HEARD AND HELD; ASSIGNED TO SUBCOMMITTEE * HOUSE BILL NO. 272 "An Act to permit a court to order a defendant who receives a sentence of imprisonment for a misdemeanor to serve the sentence by electronic monitoring; and relating to the crime of unlawful evasion." - SCHEDULED BUT NOT HEARD (* First public hearing) PREVIOUS ACTION BILL: HB 232 SHORT TITLE: INDEPENDENT DIV. OF ADMIN. HEARINGS SPONSOR(S): REPRESENTATIVES(S) OGAN, Kohring, Hodgins, Ryan, Sanders, Dyson, Kott, Mulder, Vezey Jrn-Date Jrn-Page Action 04/04/97 990 (H) READ THE FIRST TIME - REFERRAL(S) 04/04/97 990 (H) JUDICIARY, FINANCE 04/18/97 1189 (H) COSPONSOR(S): VEZEY 04/28/97 (H) JUD AT 1:45 PM CAPITOL 120 04/28/97 (H) MINUTE(JUD) 04/28/97 (H) MINUTE(JUD) 05/02/97 (H) JUD AT 1:00 PM CAPITOL 120 05/02/97 (H) MINUTE(JUD) 05/06/97 (H) JUD AT 2:15 PM CAPITOL 120 05/06/97 (H) MINUTE(JUD) 01/26/98 (H) JUD AT 1:00 PM CAPITOL 120 WITNESS REGISTER REPRESENTATIVE SCOTT OGAN Alaska State Legislature Capitol Building, Room 126 Juneau, Alaska 99801 Telephone: (907) 465-3878 POSITION STATEMENT: Sponsor of HB 232. TERESA WILLIAMS, Assistant Attorney General Fair Business Practices Section Civil Division (Anchorage) Department of Law 1031 West 4th Avenue, Suite 200 Anchorage, Alaska 99501-1994 Telephone: (907) 269-5100 POSITION STATEMENT: Provided department's position and answered questions regarding HB 232. EDWARD H. HEIN 3000 Blueberry Hills Road Juneau, Alaska 99801 Telephone: (907) 586-7261 POSITION STATEMENT: Answered questions and testified on HB 232. DALE ANDERSON 9040 Glacier Highway Juneau, Alaska 99801 Telephone: (907) 789-1965 POSITION STATEMENT: Testified in support of concept of HB 232; suggested amendments. PAM LaBOLLE, President Alaska State Chamber of Commerce 217 2nd Street, Suite 201 Juneau, Alaska 99801 Telephone: (907) 586-2323 POSITION STATEMENT: Testified in support of HB 232, with fine- tuning by subcommittee. CATHERINE REARDON, Director Division of Occupational Licensing Department of Commerce and Economic Development P.O. Box 110806 Juneau, Alaska 99811-0806 Telephone: (907) 465-2534 POSITION STATEMENT: Presented department's position and answered questions regarding HB 232. ACTION NARRATIVE TAPE 98-3, SIDE A Number 0001 CHAIRMAN JOE GREEN called the House Judiciary Standing Committee meeting to order at 1:09 p.m. Members present at the call to order were Representatives Green, Porter, Croft and Berkowitz. Representative Rokeberg arrived at 1:11 p.m., and Representatives James and Bunde arrived at 1:18 p.m. HB 232 - INDEPENDENT DIV. OF ADMIN. HEARINGS Number 0024 CHAIRMAN GREEN announced the committee would hear HB 232, "An Act establishing the independent division of administrative hearings in the Department of Administration in order to provide a source of independent administrative hearing officers to preside in contested cases; relating to administrative hearing officers; relating to contested case proceedings; and providing for an effective date." CHAIRMAN GREEN reminded members the committee first heard HB 232 on April 28, 1997, prior to which they had been advised by the Office of the Attorney General. Chairman Green noted that Teresa Williams of that office would be on teleconference soon; he mentioned that in her letter of April 25, 1997, Ms. Williams had called this concept "intriguing." Chairman Green indicated the committee would hear an update on what had been done during the interim and would take testimony. REPRESENTATIVE SCOTT OGAN, prime sponsor, said he would not recap the previous hearing but would answer questions afterwards. He noted that HB 232 will affect a relatively small number of government hearing officers operating under the Administrative Procedure Act (APA); he had included a list of those. Number 0252 REPRESENTATIVE OGAN advised members he had considered an all- inclusive bill that would cover all administrative hearing officer functions in the state. He said if HB 232 is passed and properly implemented, they should not need such an exhaustive, broad-brush approach. Agencies can voluntarily avail themselves of the new independent hearing officer system under HB 232. REPRESENTATIVE OGAN said in the interests of time, with the cooperation of the Knowles Administration, he is willing at this time to stay with this more conservative, incremental, APA-based approach to establishing an office of independent hearings. He expressed hope that the positive results achieved by this new, unbiased, and more efficient office will encourage other agencies to avail themselves of its services without being forced to do so by the legislature; this bill provides that option. REPRESENTATIVE OGAN said it is his desire to work with the Administration to put in place a complete, separate, independent hearing office in Alaska. However, if the Knowles Administration delays action on House Bill 232 with fiscal maneuvering or suggesting they will lose expertise by insisting on independent hearings, he said he had told the commissioner and the Governor's office that he will proceed in another direction. Representative Ogan said he doesn't believe the Administration would be well- served by defending the present hearing process throughout the state. "We should get on with the changes through House Bill 232 and turn our attention towards serving the public and not the bureaucracy," he added. Number 0343 REPRESENTATIVE OGAN discussed the bureaucracy as a fourth branch of government, saying it has all three of the other functions under one roof. He said with hearing officers, there is a potential for bias. If an administrative hearing officer works in the agency that helps write the regulation, or maybe the policeman who finds the infraction is also the hearing officer that adjudicates it, there is not a separation of powers or lack of bias. Number 0447 REPRESENTATIVE OGAN mentioned a saying of Winston Churchill: When there is a lack of separation between the administration and the judiciary, there is a formula for tyranny. He then advised members that Edward Hein, a federal administrative law judge, was present as an expert witness to answer questions; Judge Hein had provided a sectional analysis of the bill, included in members' packets. Number 0511 REPRESENTATIVE ERIC CROFT asked Representative Ogan what work had been done in the interim and what changes were made to the draft. REPRESENTATIVE OGAN said they had not changed anything in members' packets. They had had the Division of Legal and Research Services, Legislative Affairs Agency, do an exhaustive search on all of the administrative hearing officers throughout state government, and they had looked closely at whether or not they wanted to include everyone. Representative Ogan said they have decided at this time to do it on more of an incremental basis and stick with those officers under the Administrative Procedure Act. If this runs as well as he believes it will, he said, some of those other agencies may want to pony up and have their administrative hearings through the independent panel. REPRESENTATIVE OGAN said a lot of those people are on a contract basis. Noting that attorney rates are at least $100 or $125 per hour, he said he would argue that there will be some serious cost savings there. Representative Ogan said he believes the House Finance Standing Committee needs to take an in-depth look at the true costs of the present system in Alaska. Committee packets contain a memo wherein he requested that the subcommittee chairmen in the House Finance Standing Committee ask for a specific break- out of the administrative hearing costs; the co-chairs of that committee are aware of the request, which Representative Ogan believes will be accommodated. Number 0636 CHAIRMAN GREEN asked whether it is Representative Ogan's understanding that the information would be made available fairly soon. REPRESENTATIVE OGAN said he would ask the subcommittee chairmen whether they've been given instructions by the committee chairman to try to provide that information as quickly as possible. Number 0700 REPRESENTATIVE OGAN referred to a memorandum dated April 25, 1997, from Paul Brandt and Patricia Young, legislative analysts for Legislative Research Services, and to a table in the memorandum titled, "Expenditures for Administrative Adjudications, Fiscal Years 1994-1996." Representative Ogan explained that for 1996, they could identify about $6 million on these hearings. He noted that the state of Colorado does four to five times as many hearings, on a $2-to-$3 million budget, with this type of panel. Number 0760 CHAIRMAN GREEN asked Ms. Williams to address her objections. Number 0786 TERESA WILLIAMS, Assistant Attorney General, Fair Business Practices Section, Civil Division (Anchorage), Department of Law, testified via teleconference from Anchorage. She inquired about a letter she had sent that morning. CHAIRMAN GREEN called an at-ease at 1:21 p.m. to make copies for members, and he called the meeting back to order at 1:24 p.m. He then called a second at-ease at 1:25 p.m. so that members could peruse the letter, and he called the meeting back to order again at 1:26 p.m. Number 0855 MS. WILLIAMS explained that the APA sets out hearing procedures for agencies that are named. The bill would create a subset of procedures that would apply in APA proceedings. However, that subset subsumes the whole. There are no agencies that are not under the APA which have procedures under the APA. As a result, a number of statutes in the APA are not amended; they retain the authority of the agency, for example, to determine the time and place of hearing, to issue subpoenas, and to handle evidentiary questions, depositions and so forth. They are inconsistent with HB 232, and they would create a conflict if the bill were enacted. They need to deal with the APA as a whole and not create subsets that are inconsistent. Number 0942 MS. WILLIAMS said the bill would apply to certain boards and commissions that only provide an adjudicatory function and have no other function. It would apply to boards and commissions that currently have licensing and discipline functions, such as all the occupational licensing boards, (indisc.) council, and the Alcohol Beverage Control Board, so that a hearing officer, rather than the board, would determine whether a license should be issued, whether a conduct is a misconduct, and what the sanctions should be for that misconduct. MS. WILLIAMS pointed out that HB 232 gives final decision-making authority to the administrative hearing officer in all issues, not just factual issues, and that would include policy issues and legal issues. This would be a broad grant of executive power to a single person, which is problematic. Ms. Williams stated, "The agency itself, because it becomes merely a party to the proceeding, would have appeal rights in superior court which -- we had a question of additional litigation. There is a question, of course, about agency expertise; I address that at some length in the memo, and I don't think I need to go through that here." MS. WILLIAMS continued, "In terms of questions in the bill about the way it's drafted, the chief administrative hearing officer protects and ensures the decisional independence of each hearing officer. And the question there is: Does that preclude the chief hearing officer from promoting consistency in decision making? And does that inhibit the supervisory powers of the chief?" Number 1067 MS. WILLIAMS advised members that the power to accept money, grants, bequests and services may be at conflict with the Executive Budget Act or the prohibition on dedicated funds. It certainly should be phrased to make it clear that this money goes to the division and not to that person personally. Again, there also needs to be a resolution of whether or not interested parties can pay money to the division. MS. WILLIAMS further advised members that there needs to be broader statement of precluded outside employment; right now, the prohibition is just on paid outside employment. The question would arise if a person on a pro bono case had just heard a case involving the state, either as a decision maker or an adversary in some matter. MS. WILLIAMS next discussed the question of placement of administrative hearing officers in the classified service. That is particularly a problem for the Alaska Labor Relations Agency, which was moved, in fact, under the Department of Administration to take away one conflict; then placing those people in a bargaining unit would create a new problem as far as impartiality. She said they also don't know in this bill whether the chief would be in the classified service or the partially exempt service. MS. WILLIAMS concluded by saying those are just a few of the issues they had noted, and she had not had a chance to work on this over the interim, nor had her office been asked to do so. She said she would be thrilled to work on it, with the idea that this really has some problems that need to be fixed. Number 1173 CHAIRMAN GREEN asked whether the sponsor had a response to the many points that had been brought up. He asked whether Ms. Williams had other issues that she believed should be brought up. MS. WILLIAMS replied that issues come up; the more she works on it, the more these matters come to light. She specified that while there are certainly policy issues, her office is not speaking to policy issues, which would be handled by someone else, not by her office. She concluded by saying in terms of general areas, this pretty much covers what they have seen so far. Number 1223 REPRESENTATIVE OGAN asked Ms. Williams what she likes about the bill. MS. WILLIAMS replied that the idea of having independent hearing officers is a good one. "I don't think that this bill, as written, gets us where we want to be," she added. Number 1243 REPRESENTATIVE OGAN noted that they had received Ms. Williams' analysis two hours before this hearing. He expressed regret that Ms. Williams hadn't had the time or direction to work with the sponsors over the interim. MS. WILLIAMS responded that she had had a few conversations, and for the most part she was told that "they were waiting for Representative Green to convene a meeting or that the particular staff person I needed to speak with was not working during the interim." She said she had faxed some material at least two weeks ago but didn't get a response. CHAIRMAN GREEN asked whether Ms. Williams had been expecting this committee to do something. MS. WILLIAMS replied, "I was told that Representative Ogan's office was waiting for Representative Green's committee to do something." Number 1301 REPRESENTATIVE OGAN noted that Dave Stancliff, who has been working on this primarily, has been in his employ throughout the interim. "And we've had no contact at all," he stated. "They haven't raised one question." Number 1324 REPRESENTATIVE CROFT said to the extent he understood the concerns, most of them were drafting concerns. It is not a policy difference but a question of whether there is an APA coverage issue where it conflicts with other statutes, including whether they want to decide whether the chief is classified or partially exempt. Representative Croft suggested those kinds of consistency changes could be worked out fairly quickly. He stated support for the idea of this bill but said he wants to make sure the "T"s are crossed and the "I"s are dotted. Number 1356 CHAIRMAN GREEN concurred, noting Ms. Williams' opening comments about "the inconsistencies with some groups within APA." He suggested the rest seem to be housecleaning measures. He asked whether that was the sponsor's call on it. REPRESENTATIVE OGAN indicated he had just received Ms. Williams' memo and had not had time to do an in-depth analysis. He said he didn't know whether Judge Hein could shed any light on it. CHAIRMAN GREEN asked Judge Hein to first respond and then to give his testimony. Number 1392 EDWARD H. HEIN provided some background. He is Chief Appeals Officer for the National Marine Fisheries Service (NMFS) in Juneau, and this is his fourth year in that position. From 1981 to 1988, he had worked as a bill drafter for the legislative legal services office. He is currently a member of the Alaska Bar Association and the National Association of Administrative Law Judges (NAALJ); the latter had drafted the original Model Act on which this was based. However, Judge Hein was on this occasion representing himself and the NAALJ. JUDGE HEIN advised members he first saw this memorandum from Ms. Williams just before he got into the hearing room, and he had reviewed it quickly. He specified that he would defer to the drafting attorney who worked on this version of the bill to address any specific drafting problems. Number 1451 JUDGE HEIN told members he had noted two points in the memorandum with which he disagrees, both on page 2. The first is in the section titled "Final Decision-Making Authority," at the bottom of the second paragraph. The paragraph talks about the courts' generally deferring to expertise-based decisions that agencies make, including in their administrative decisions. Judge Hein said, "And the attorney general states that this expertise is lost if final decision-making power is placed with an administrative hearing officer. I would disagree with that, and I can address further the issue of expertise later in my testimony, but I'll just note that as a point of disagreement." JUDGE HEIN said that second, at the very bottom of page 2 there is a statement that the hearing officers in the central panel, as well as the chief hearing officer, would be precluded from engaging in the practice of law except in pro bono cases. Judge Hein said while that is technically true, it is also true that the bill would require that persons employed as administrative hearing officers with this panel would devote full time to their positions; the only exception would be if someone were hired on a part-time basis. JUDGE HEIN noted that while those were the only two points that had struck him, he may have further comments. He offered to answer questions. Number 1554 REPRESENTATIVE ETHAN BERKOWITZ said it seems the sponsor and Ms. Williams both have some valid points. He suggested it would be unfortunate if the efficiencies which this bill seeks to promote are lost because the details of the bill cannot be reconciled, as those seem to be solvable problems. Representative Berkowitz offered to work with the sponsor and Ms. Williams, if necessary, to iron out those details. Number 1590 REPRESENTATIVE JEANNETTE JAMES said having been down that road of trying to make a change to the APA, it is necessary to go through the Act and find out who these different agencies or commissions are, for example. If they are talking about any group in the state with authority to make regulations under which there might be an appeal and a need to have a hearing officer, there are different structures to these committees and commissions that need to be looked at individually; she didn't know whether the drafter had done that. She said she is very supportive of this procedure and this legislation, but she wants to be sure there are no little snafus. She offered to help look that up, too, perhaps before the next hearing or whenever it could be meaningfully done. Number 1662 REPRESENTATIVE OGAN advised members that the drafter would be there as soon as possible. He brought to members' attention a memorandum from Terri Lauterbach, Legislative Counsel for the Division of Legal and Research Services, dated April 26, 1997. He began to read from paragraph 2 of that memorandum. CHAIRMAN GREEN asked whether Representative Ogan was citing that in response to Ms. Williams' questions or as additional input. REPRESENTATIVE OGAN said it was additional input. CHAIRMAN GREEN suggested they should cover all the questions first. Number 1705 REPRESENTATIVE NORMAN ROKEBERG asked Ms. Williams to point out in the bill where, for example, such groups as the Alcohol Beverage Control Board and the Alaska Real Estate Commission might be brought under this and have their ability to make determinations about licensure "within the purview of this bill, as opposed to those bodies." Number 1754 MS. WILLIAMS explained that the bill would change the procedure for all agencies that are under the APA. All of the occupational licensing boards, the state medical board and the real estate commission are under the APA, as is the Alcohol Beverage Control Board. Whenever there was a dispute over whether, for example, a bar should be licensed or should have its license revoked, or whether a doctor should be licensed or should have the license revoked, that final decision would be made by a hearing officer, and the board or commission would have no authority to make the final decision in those matters. Number 1788 REPRESENTATIVE OGAN advised members that before he was in the legislature, he'd served on one of those licensing boards, what was then the big game commercial services board, also known as "the guide board." One reason he became interested in this issue was because he was uncomfortable passing judgment as a board member about someone's license, including possibly putting a person out of business or fining someone up to $5,000, with no ex parte communication. They had been disallowed any opportunity to interview the accused; rather, they simply received the hearing officer's report and had to rely on the competency and impartiality of the hearing officer. In addition, they had not been allowed to ask the witness any questions. REPRESENTATIVE OGAN stated, "And we were getting ready to put this guy out of business. And that always bothered me a great deal. I thought he was not getting due process. And ... to my recollection, we only overturned one hearing officer recommendation. But ... we couldn't ask the hearing officer questions. I mean, we read the report, and we either rubber- stamped it or we 'thumbed down.'" Representative Ogan stated his belief that in spirit at least, if not in law, that violates people's due process rights. Number 1847 CHAIRMAN GREEN noted that a couple of years ago, because of that lack of de novo review, he himself had sponsored a bill on tax appeal that embodied the same concept; it is now law. But that also required a significant amount of interchange and searching to be sure that they dotted the "I"s and crossed the "T"s. Chairman Green said that is a good point and Representative Ogan is on the right track. Number 1872 REPRESENTATIVE JAMES asked how this would work differently, suggesting they may be talking about apples and oranges. When a board acts as a hearing officer in a case, as opposed to having a separate hearing officer, someone could appeal the board's decision to a hearing officer, perhaps, or to a court. Number 1912 REPRESENTATIVE OGAN replied that that is a very good point. When a regulation writer also adjudicates regulations, Representative Ogan believes there is an inherent bias, which is what they are trying to get at here: The boards can still write regulations, but they won't be able to adjudicate them. He suggested if a police chief wrote the law, enforced it and adjudicated it, there would be more overcrowding in our jails. Number 1945 REPRESENTATIVE JAMES said she agrees with that concept. However, some boards are strictly there for the purpose of adjudicating decisions made somewhere else; those boards would have to be sorted out and treated a little differently. Number 1960 REPRESENTATIVE CROFT agreed, adding that he can see how this bill solves a lot of problems, but not necessarily the ex parte communication issue. Instead of the board having a "reject or rubber-stamp option," there wouldn't even be that option. There may be a more impartial judge, but without the review by the board anymore. He asked whether he was reading that right. Number 1981 REPRESENTATIVE OGAN replied that he believes that is correct. He noted that Judge Hein was nodding his head. JUDGE HEIN responded, "That may be true in some instances, and you may need to look at that. If you have agencies under the APA whose sole function is to decide administrative cases, then yes, ... this would have an effect on their authority. It would shift that to the central panel, as now written. And you may need to look at specific commissions, boards, agencies to determine whether in fact that is their sole function and, if so, whether, as a legislative choice, you would want to have those particular agencies be the decision maker or, in fact, transfer this to a central agency." JUDGE HEIN continued, "It seems to me that the primary purpose of administrative adjudications is to have what is hopefully an independent decision maker who offers parties who have to deal with executive agencies an opportunity to have their so-called day in court without having to go to a judicial court, with all the time and expense that that involves. And the only way that I think you can fairly assure that is if you have a decision maker in the hearings who does not represent, or appear to represent, the agency's policy and is not under the agency's direct supervision. ... But specifically, the answer to your question: If there are such agencies, then that becomes a policy question as to whether you want those particular agencies to continue that function and carve them out from the list - you can do it ... by drafting - or whether you wish to fold those agencies and fold it all into the central panel, in which case you'd need some different kinds of amendments." Number 2068 REPRESENTATIVE BRIAN PORTER asked whether he was correct that there are some agencies which, under the APA, would have an administrative hearing, the results of which would be advisory to the board, while for others, the administrative hearing decision would be compulsory, only appealable to the superior court. JUDGE HEIN deferred to Ms. Williams to answer. He added that yes, under the APA as it is currently written, these would be primarily proposed decisions, but he doesn't know to what extent they are currently allowed to be final decisions. Number 2111 MS. WILLIAMS responded, "Yes, the decisions of the hearing officers are proposed decisions made to the final decision maker. The final decision maker has several options, what to do with that proposed decision. If the person wants to - or the board or commission wants to - increase the sanctions, they call for the entire record and review it. They can remand it for further proceedings, or they can accept the decision as written, or they can decrease the penalties; those are the options that are currently under the APA." Number 2138 JUDGE HEIN added that the bill, as currently drafted, would make all decisions under article 8 of the APA final decisions, but it would also provide for advisory or preliminary decisions for those agencies that choose to use the services of the central panel. REPRESENTATIVE PORTER asked whether currently, under the APA, there are the three options mentioned by Ms. Williams for the results of the hearing officer on all agencies that are within that procedure. Number 2176 MS. WILLIAMS said yes, then explained that there are actually four options. They can accept the decision as written. They can remand the matter back to the hearing officer and request that there be additional evidence taken or additional factors considered. They can accept the decision and decrease the penalty. And fourth, they can call for the record, review the entire record and make their own decisions, based on that record. REPRESENTATIVE PORTER suggested that is, in effect, a rejection. MS. WILLIAMS replied that sometimes they call for the record and then uphold the decision; at that time, they can take additional evidence and so forth. She clarified that the hearing officer at that time is available to the board; the hearing officer can go to deliberations with the board and can talk about what the record is all about and what the bases were for some of the proposals, for example. While that is an option, apparently the hearing officer didn't do that with the big game guiding board when Representative Ogan was on it, which Ms. Williams said is unfortunate. That is the general procedure, but some hearing officers don't understand that, which is why they now have a hearing officer manual that explains that those services should be available to boards and commissions. Number 2231 REPRESENTATIVE PORTER asked whether it would be fair to say this bill wants to take the employment position of the hearing officers out of the agencies and then create a separate agency, but basically not interfere with the process as they have heard it explained. REPRESENTATIVE OGAN agreed it is a fair assessment. He added that the boards cannot take testimony from the witnesses during that process, which is the part that really bothered him. He said while he didn't want to impugn the character of any hearing officer, they work for a commissioner and have somewhat of a potential for a bias. CHAIRMAN GREEN suggested it is a perceived bias. REPRESENTATIVE OGAN concurred. Number 2274 REPRESENTATIVE CROFT said if that is true, he'd misunderstood how this works. It seems a positive development to take the hearing officers out of their individual areas and mass them together, to have less perceived institutionalized bias. "But I thought that we also, then, made that the final determination, rather than giving the 'perceived bias' board again a final call," he said. "And so, I guess I wanted a clarification on that. Under the new proposal, would the board still have the option of rejecting, taking or modifying ... the decision of the now-perceived-impartial administrative law judge?" Number 2304 JUDGE HEIN said no; he had addressed that on page 7 of his memorandum to the committee dated January 26, 1998, comparing this version of the bill to the Model Act adopted by the American Bar Association and drafted by his organization. JUDGE HEIN explained that the bill currently provides two things that are new, with respect to this issue. First, it removes the hearing officers who are currently doing APA-type hearings from the agencies and puts them in a central panel agency, under the Department of Administration. Second, it makes all of their decisions final decisions, for those agencies under the APA. It also provides that other agencies which are currently not under the APA can, by agreement with the central panel, make use of the services of the central panel hearing officers, and they would have a choice as to whether they wanted to allow those decisions to be final decisions or not; that would be part of the agreement they worked out on a case-by-case basis with the central panel. Number 2361 REPRESENTATIVE PORTER asked for which other agencies it would be voluntary. JUDGE HEIN cited as examples the Commercial Fisheries Entry Commission and many functions of the Department of Revenue and the Department of Labor. To the extent departments are not fully covered by the APA, those kinds of decisions excluded under AS 44.62.330 would also be subject to this voluntary option. Judge Hein stated, "For example, if you look at any of these departments here, ... other than the boards and commissioner, most of which are professional licensing boards, the department hearings tend to be limited coverage under APA, just for certain subject areas, and others are left out." JUDGE HEIN stated his understanding that for the Department of Transportation and Public Facilities, for example, only hearings and decisions relating to aeronautics and communications are covered, and it presumably would not cover contracts and other disputes within the department. He asked Ms. Williams to correct him if he was wrong. Number 2408 CHAIRMAN GREEN said, "But in each case, whether they volunteered to be bound or came under APA, they would be the appellate process." JUDGE HEIN concurred. Number 2416 REPRESENTATIVE BERKOWITZ said it seems they are striving to balance efficiency against fairness in dispute resolution. He stated his understanding that there are essentially two classes of APA resolution, with either advisory opinions or final opinions. He asked whether there are broad groupings of agencies that tend to make advisory opinions, as opposed to those that make final opinions. He also asked what the rationale is for that distinction. Number 2446 MS. WILLIAMS replied, "All of the decisions made by hearing officers under the APA are advisory." REPRESENTATIVE PORTER asked, "And this would make them ...?" MS. WILLIAMS said, "Final." REPRESENTATIVE PORTER added, "Compulsory." Number 2455 MS. WILLIAMS clarified that there are differences between this bill and the Model Act put together by the administrative law judge group. She mentioned a section on proposed decisions and orders under the Model Act [ends mid-speech because of tape change]. TAPE 98-3, SIDE B Number 0006 JUDGE HEIN stated, "Well, two things: One is that the bill, as it's written, does make that provision for those cases which would be voluntarily referred to the agency. Secondly, the memorandum I've provided, pages 4 through 7, section by section, discusses briefly the differences between the Model Act and this bill. So, ... it is addressed there." Number 0028 REPRESENTATIVE JAMES said as she understands it, these administrative law judges are to make decisions on regulations that have been adopted and on whether the regulations are being aptly applied. What they are trying to fix by this legislation is to have a separate group, in a separate agency, that has no interest in or exposure to the issue. It seems that the procedure is that a person can bring a complaint to the agency and point out the belief that the agency has made an error. "I'm talking about regulations, now," she specified. If the agency disagrees, the complainant can take it to the commissioner. Representative James asked: If the commissioner agrees with the agency, is there another step? Or is this hearing officer supposed to help the commissioner make a decision? REPRESENTATIVE JAMES said that is her issue, because it seems that after the commissioner said, "No, I think we've done everything correctly," they would have this step of the administrative hearing officer, prior to going to state court. She stated, "But that really would start a court action after the commissioner had said that, no, this is the way this is going to be. So, it seems to me like that when we're going up this step, and after we've once passed the commissioner's decision, we go to the hearing officer, that that decision ought to be final. In other words, an unbiased person has taken all of the information, and this is the decision; they either support the agency's decision or not. And if the person who's still dissatisfied would then have to take his case on to court." REPRESENTATIVE JAMES continued, "Now, ... in laying that out, I see absolutely no reason to have a hearing officer make an advisory opinion, and here's why, is because one of the main issues we're trying to address here is - whether it is real or perception - the problem of the same people making these decisions or the same group of people all along the way, and, in the case of boards and commissions, those appointees are politically appointed. And so, we're wanted to clean this thing up of any kind of influence by anyone who either works in the agency or has helped write the regulations or helped to implement the regulations or has ... made any decision based on - as a board, as a political person with a special interest, which they do have special interests - that that is erased, and this person is to be given a ... clean reason or answer to their situation, without any bias, with a person who is qualified to do this." REPRESENTATIVE JAMES continued, "Just to say, then, that one of the biggest complaints that we hear on these kinds of issues is, 'Well, this administrative officer doesn't have the expertise.' The people in the agencies, the people in the commissions, really believe they know these issues and therefore they can make the best decisions. It is my personal opinion that administrative officers are unbiased, and they don't need that expertise; and whatever they need, they will have, because if they had it, they couldn't give an unbiased opinion. So, you know, that's the way I understand it. Correct me if I'm wrong and that's not the way it's working now and the way that is intended to work." CHAIRMAN GREEN suggested she was both right and wrong. Number 0183 JUDGE HEIN responded, "Well, that was a lot. And I agree with you in most of that. ... What the bill does, it seems to me, is it does take the hearing officers out from under the control of the agency itself. Currently, a hearing officer's decision is reviewable by the commission or board that's over it, and then after that can still be taken to court. And the question is really: ... What do you want the relationship to be between the agency and the hearing officer? There are issues of expertise, which I can address during my regular testimony. But ... it is sort of changing the order of things by taking the hearing officer out of the agency, to the extent that the hearing officer's decision is a final decision. The hearing officer is reviewing the commissioner or the board or the agency. The agency makes its initial cut at it, and if it is appealed, then you have a hearing officer that takes another look at it, rather than just a process within layers ... of the agency." JUDGE HEIN continued, "I could tell you that, for purposes of making impartial decisions, it can be very difficult for a hearing officer to have the courage to do what he or she thinks is the right thing, when he knows it's going to overturn the agency's view, and may feel that it's futile if it's just going to be reversed again by the commissioner or by the governing board. And so, that's a key provision of this whole concept of having a central panel." Number 0250 CHAIRMAN GREEN added that there is at least a "two-step" in most large departments, which can be avoided by doing this. He stated, "And the problem is, you go to the person that made the decision, you appeal to that supervisor, to another, and then finally to the commissioner, and then you appeal to court. And unfortunately, the court reviews the record, and the record has all been by a biased agency. And that's what they're trying to avoid. Two steps out and ... an independent view of it." Number 0269 JUDGE HEIN said he could add two other points. Within the Administrative Procedure Act, there is a procedure for reconsideration of a decision, and the agency would certainly have as much right to seek reconsideration of a decision as would another party. That is part of the point: He believes the bill emphasizes and makes more clear that the agency is itself an interested party in the outcome of the decision and should be treated that way, and that there needs to be an impartial decision maker. Judge Hein noted that the decision maker would be paid by someone and has to be put somewhere in the scheme of government. "But, as much as possible, you want someone who does not from the outset give the appearance - or the reality - of being on the side of the agency necessarily," he concluded. Number 0306 REPRESENTATIVE CROFT stated his understanding, from reviewing this and from discussions with the sponsor, that the primary boards and commissions to be included are the fish and game boards, plus occupational licensing entities in various areas; excluded would be things like workers' compensation, the Child Support Enforcement Division (CSED), limited entry and "other political tough ones." He asked whether that general impression is true. Number 0331 JUDGE HEIN replied that that is essentially correct; there is a specific list of the boards and agencies covered in AS 44.62.330. "But your characterization is basically true," he added. REPRESENTATIVE CROFT said it seems this is the "correct baby step," especially with the occupational licensing. He stated, "To the extent they have expertise to say how dentistry should be run, or what should be the standard is, fair enough; but to the extent they're judging another dentist - or veterinarians, or whatever - whether they lose their license, that becomes more problematic." Number 0371 REPRESENTATIVE PORTER said he would think part of the idea is to serve the public better and save time. The existing system doesn't promulgate the notion that an agency needs to keep on top of the time limits, for example. He mentioned "cognitive dissonance" and said if an agency wrote a regulation, they will probably say it is all right. If the complainant disagrees, what is the incentive for the agency to try to straighten it out? They can say, "Okay, go have a hearing, but I'll tell you, if they say they agree with you, I don't have to take their advice." Representative Porter said it could roll on and on and on. REPRESENTATIVE PORTER said he likes this idea of its being the final decision and not coming back as an "advisory thing." He stated, "In the same theory, this particular process would be asked periodically to say, 'Is this regulation consistent or not consistent with statute, or does it actually even have any statutory authority?' I wonder how many hearing officers that work for the commissioner who wrote the regulations ever came up with that decision?" REPRESENTATIVE PORTER said with that in mind, he thinks everybody is kind of on the same page. They just need to work with the Department of Law in the conformity areas. He suggested perhaps having a subcommittee or the sponsor do that. Number 0452 REPRESENTATIVE OGAN responded that he would be more than happy to work with the Office of the Attorney General. He noted that Representative Berkowitz had offered his services, and that Representative James was interested as well. Number 0488 REPRESENTATIVE ROKEBERG said within the boards and commissions that relate to occupational licensing, with which he is most familiar, it seems there are a number of statutory requirements now that give each particular board or commission a different level of power, allowing them to do certain things but not others. At a certain point, which he believes varies according to the board or commission, a hearing officer would come into play, followed by the rights of appeal. REPRESENTATIVE ROKEBERG expressed concern about that line of demarcation, suggesting it could be simpler and indicating his desire to be consistent with the desires of the sponsor and the committee, with which he agrees. He said he appreciates the comments on finality. He stated, "But my questions and concerns right now is: Don't the particular boards, commissions and agencies have different particular points at which there would be a -- to make a blanket statement and remove some powers? Isn't it where they're inconsistent with statute, you'd have to go back and rewrite the enabling statutes of every one of those boards and commissions? To be able to make sure that they were consistent with what is trying to be done here is a concern I have. And then, additionally, I think everybody ... particularly needs to keep in mind that in the occupational licensing area, that all of that activity that's carried out within the purview of those areas is paid for by the licensees that are covered by that. Therefore, while we're trying to keep an impartial, fair area here, the level of costs and so forth is intertwined budgetarily within those." REPRESENTATIVE ROKEBERG mentioned tossing that ball at the House Finance Standing Committee and said it needs to be kept in mind when talking about a public policy decision. He asked Ms. Williams whether his overview is correct, whether there is a particular point that the hearing officer comes into play, and whether that varies according to the agency or board. Number 0600 MS. WILLIAMS said yes, there is a variation, depending on the charge that is given to the agency. Representative Rokeberg is also correct that for most - or, she believes, all - of the occupational licensing boards, the enabling statutes give them hearing powers and powers to make the final decisions. For example, if a doctor were charged by the Division of Occupational Licensing with sexually harassing a patient, the first the board would know about that would be the filing of an accusation; if the doctor protested that, it would automatically be assigned to a hearing officer, who would conduct the hearing and issue proposed findings of fact and conclusions of law and an order. If the hearing officer said it was true that there was sexual harassment over a four-year period, there may be a recommendation that the doctor be directed to go to a class. The board, looking at that, could say they don't feel that that is the appropriate outcome. MS. WILLIAMS stated, "That's the kind of oversight we're getting now from boards: 'We assume those facts to be true, but that isn't where we wanted to go from there.' On a very rare occasion, there is a factual error by the hearing officer that both sides agree is a factual error. Those problems come up. Sometimes ... there's a legal error. ... But for the most part, by having that review process, those issues can be cleared up during the (indisc.) that a board is entering the final decision." Number 0698 REPRESENTATIVE ROKEBERG asked whether some boards and commissions have the authority to remove a license but then have a hearing officer as an appeal level from that. MS. WILLIAMS replied no, the boards and commissions do not make the initial decision on removing a license; those are handled at a different level, so they don't make both that initial decision and the final decision. She suggested that more comparable to what Representative Rokeberg is talking about is a person with a criminal conviction for theft who wants to be licensed as a teacher. An initial decision denying the certificate would be followed by a hearing before a hearing officer to determine what happened, what the conviction was for, what other circumstances or recommendations had been, and what should happen. Ms. Williams then said she realized that isn't a good example because the Professional Teaching Practices Commission sits as a group with the hearing officer, as do some of the occupational boards and the Alaska Labor Relations Agency. Number 0766 REPRESENTATIVE ROKEBERG said as a result, once the hearing officer is in play, the board comes back in and makes the final decision as far as the board is concerned. MS. WILLIAMS concurred, saying that is why the board has a more well-developed record. She suggested that the board could then understand why their preliminary decision shouldn't be the final decision, or the board may disagree and say that the person should not be allowed to have a license. Number 0791 REPRESENTATIVE ROKEBERG asked whether that is where the issue of expertise comes into play. MS. WILLIAMS said that is correct. REPRESENTATIVE ROKEBERG asked whether all APA decisions by boards are appealable to the superior court. MS. WILLIAMS replied, "Absolutely." She said in addition, the court will have available the proposed decision, and certainly if the proposed decision seems more fair than the final decision, that will be accessible to the court. Number 0816 REPRESENTATIVE OGAN advised members that something in Ms. Williams' letter had been brought to his attention; he referred to page 2, which states, "This is a broad grant of executive power to a non- constitutional judicial officer." Then he referred to a memorandum by Terri Lauterbach, Legislative Counsel, dated April 26, 1997, which says, "HB 232 does not involve a shift of functions from one branch of government to another ...." Representative Ogan said the separation of powers doctrine isn't violated; they are essentially transferring this authority from one agency within the administration to a central agency within the same administration. He said he would argue that it belongs in the judiciary, but he thinks it would be even more problematic to attempt to do that. He concluded, "So, I would say that her argument that it's non- constitutional is not well-founded, with all due respect." Number 0877 MS. WILLIAMS replied that she is not saying it is unconstitutional. Specifying that was a term of art, she explained, "This, as a judicial office, is not created under the state constitution." Number 0906 JUDGE HEIN noted that they had touched on a number of things that he was going to address anyway. He said one deals with the concept of administrative adjudication and review by the judicial branch. Courts currently review decisions that come from government agencies, using a general standard of "arbitrary and capricious" that is a very low standard for the government to meet. That means a hearing officer must be way off-base, in many cases, or take a very unusual reading of the law for a court to overturn it. Courts defer to agency decisions generally on matters of fact-finding, just as they do on trial court decisions of fact-finding. And they also defer to agencies because agencies have particular expertise in the areas in which they are deciding. Courts like to have agencies make decisions that, in most cases, will end up being the last decision, because the majority are not appealed to court. And the courts generally require parties to exhaust procedures and remedies available through an agency before going to court. JUDGE HEIN explained, "And so, you want a system whereby the public can come in and have a fair decision, both in appearance and in actuality, without necessarily having to go to court for justice. Many, many parties that come before agency hearing officers are not represented by lawyers, and they're not required to be. ... The system was designed to be simpler than court procedures, and cheaper and faster. But it was also designed to give people a meaningful decision. And if people perceive that it is futile to try to get justice from an agency, and that they are only going through the motions until they can get to court - because the court requires them to do that - you are burdening the public. You are adding another layer of hearing and time and expense before they can get a real, independent hearing. So, there should be a strong emphasis on the quality and the impartiality of the decisions that come from agency hearing officers." Number 1064 JUDGE HEIN said this bill provides for a panel of a professional core of hearing officers, trained in the substantive area with which they will deal, in administrative law and procedures, and in ethics. Judge Hein noted that hearing officers will be subject to a judicial code of conduct, which hearing officers in Alaska are not currently subject to. This bill will provide a centralized agency, "so that you will have professional people supervising their own kind of people." There will be lawyers and hearing officers who are experienced in this area, who understand the pressures that hearing officers are under; they will be doing the performance evaluations. JUDGE HEIN told of hearing horror stories at national conferences from other states' hearing officers, who can be evaluated on the percentage of times they uphold or overturn agency decisions. It puts hearing officers in a difficult, if not impossible, position when they have to jeopardize their careers or promotions in order to make what they feel is the right decision. It is also a burnout factor for some who feel that if they buck the agency, their decisions will just be reviewed again and reversed. Judge Hein stated, "And they quickly get the message, 'Either go along or get out.' I don't know to what extent this is common throughout Alaska, but I know that it happens, and I know that it's a general problem with hearing officers around the country." Number 1140 JUDGE HEIN referred to the question of expertise, one of the points he had noted in Ms. Williams' memorandum. He advised members that 25 states now have central panels; in every state where this type of legislation has been introduced, the argument has been raised that they will lose expertise. Judge Hein stated, "Now, I'm not saying that there'll be absolutely no difference. But in many cases, the very people who are now hearing cases within the agencies, that have the expertise, would under this bill end up in the central panel; they'd just change bosses." Judge Hein said in addition, agencies themselves have expertise from other people and can come before the hearing officer as witnesses, as parties, providing documents, providing whatever they feel is necessary to educate the hearing officer. And third, there is training available. Number 1202 JUDGE HEIN said he believes there is one other factor that isn't often mentioned here, and he'd found this in his own work. When he took his job four years ago, it was the first time they had a hearing office within Alaska for the whole Alaska Region of the National Marine Fisheries Service. Judge Hein came in after the programs being appealed to him had been developed, and he was not involved in the development of regulations. JUDGE HEIN said first he looked at the regulations and read them, all the way through. He then talked to people in the agency, who would tell him what they believed something meant. Judge Hein stated, "And I said, 'Well, you know, it doesn't seem to say that.' And they said, 'Well, everybody knows that that's what it means,' you know. There were times when I would start to write a decision, and based on what I knew to be the practice and the way the agency had interpreted its own regulations, I would start to say in a sentence, in a decision, you know, 'This is the rule.' And then I would look to the regulations to find the citation to put it in there, and it wasn't there. And, my God, you know, all of a sudden, the basic assumptions are being challenged." JUDGE HEIN said he was able to do that because he had come in with a fresh eye, without assumptions. He said he wasn't picking on them for any problems with drafting or anything else. "But when you work too close to a problem, even if you don't intend to be biased, you don't see things," Judge Hein said. "And so, to the extent that even some expertise might be lost, despite the fact that people are trained, despite the fact that some of the same people might be the hearing officers, despite the fact that the agency can provide other expertise, you've gained something in having a second opinion from an objective source, as objective as we could make it, you know." JUDGE HEIN told members it is hard enough to be a fair and competent decision maker in oftentimes-very-complex cases - to read the whole record, to listen to everybody's arguments, to be fair, to give them full due process procedures - when everything is the way it should be. Judge Hein stated, "But when on top of that you have an agency which is looking over your shoulder, ... with one hand there, waiting to get your decision back, and with the other hand, they're handing you your evaluation, it makes it very difficult. And I don't know how many other hearing officers do it. I do what I can live with, what my conscience allows. But sometimes I have to fight for it." JUDGE HEIN recounted how when he was hired, he was supervised by the person whose decisions he was reviewing. His boss would make a decision and then it would be appealed to Judge Hein to say whether his boss was right or wrong. The first time there was a decision where Judge Hein disagreed, they butted heads. Judge Hein stated, "And I made strenuous efforts and succeeded in getting my office removed, the creation of a second office. We now have the same boss. I am still within the agency, but I must say I've been given a lot of autonomy. But I don't know how it is ... for many other hearing officers out there. And that is the focus of this bill: not only so it looks good, not only so that the public feels good about it, but so that the hearing officers who are actually deciding the cases are treated fairly and are not put in an impossible position." Number 1461 DALE ANDERSON came forward to testify, specifying that he was speaking on his own behalf in support of the concept of HB 232. He provided a thumbnail sketch of his background and how it relates to the subject at hand. He had recently completed a term as a commissioner on the Commercial Fisheries Entry Commission (CFEC), where the primary portion of his job description was serving as an administrative law judge, settling disputes over individuals' rights to hold permits necessary to harvest Alaska's fisheries resources. During his term, he had participated in the adjudication process for more than 550 cases. MR. ANDERSON advised members that over the four years he served, he had also attended the National Judicial College at the University of Nevada. The course of study he completed resulted in a Certificate of Judicial Development in Administrative Law. During one advanced administrative law course, there had been an in-depth discussion about this nationwide movement establishing centralized offices of administrative hearings as independent agencies within the executive branches. Mr. Anderson said this discussion provided a unique venue to discuss the pros and cons of such an agency and the many varied methods, means and rules that several states implemented while creating them. MR. ANDERSON urged serious consideration and passage of this legislation. First, it certainly appears to provide a more independent administration of justice, by removing the adjudicatory functions from the agencies who write, promulgate and then enforce regulatory law. And second, it is definitely a step in the right direction to create a smaller, more efficient state government. Number 1581 MR. ANDERSON advised members, however, that before passage, he would like to discuss with the sponsor, and the committee, some alternative treatment on two points within the existing bill. The first point deals with the appointment process of the chief administrative law judge. On page 3 of the bill, line 5, it proposes that the chief administrative officer of the agency be "appointed by the commissioner of administration." Mr. Anderson said in the present form, he sees an opportunity for the appearance of political influence in this selection process. In our organizational form of the executive branch, the governor has the power to appoint the commissioner of Administration, who then appoints the chief administration officer. Mr. Anderson said he'd spoken at length with the chief administrative law judge in South Carolina, Judge Steven Bates (ph), who in early days went through this process with the legislature in South Carolina to develop this program there. Mr. Anderson told members he had obtained the South Carolina statutes, and he offered to make copies for the sponsor if he wanted to peruse them for ideas during a subcommittee meeting. MR. ANDERSON suggested that if a primary purpose of the bill is to create independence from outside influence, they can complete the task and ensure independence by considering paralleling the appointment process of the state ombudsman, which involves the legislative branch in the selection of this chief officer. He said, "Judge Bates stated that the importance of involvement in the legislature in the appointment process was not only the chief officer but the six administrative law judges within his panel. He questioned the importance of this at the outset of their program, but over the course of years has seen the validity in the process. In South Carolina, the appointments are made by the legislature alone, and ... no approval is necessary by the executive branch." Number 1724 MR. ANDERSON said his second point of discussion is in reference to the set of requirements to be used to establish or register persons as qualified to serve as administrative law judges under the chief officer. He read from page 4, lines 20 through 22, which says that "the requirements must include admission to the practice of law in this state and the practice of law in this state for at least five years preceding employment by the division". Mr. Anderson commented, "If you interpret my discussion as somewhat self- serving, you may be right; at this juncture, I have no concrete plans to apply for this position, but you never know." He then stated his opinion that having such tight restrictions on the basic qualifications limits the scope of potential applicants capable of conducting impartial, fair hearings that result in sound justice and clear and concise decisions capable of withstanding the scrutiny of an appellate court. MR. ANDERSON explained that he is not "law-trained" but has the experience and talent to adjudicate administrative law cases. Simply being an attorney accepted by the bar does not automatically create meaningful judicial qualities in a person, nor does being a bad attorney - not being able to hack private practice - offer a good qualifier, either. There are states that don't rely on the restriction of this qualification. MR. ANDERSON said there is no standard for a formal administrative hearing, but it should have substantially the same formality, dignity and order as a judicial proceeding; the traditional formal administrative hearing resembles a trial before a judge sitting without a jury. The goal is the development of a fair, accurate and concise record. The hearing should move as rapidly as possible, consistent with the fundamentals of fairness, impartiality and thoroughness. Number 1851 MR. ANDERSON stated, "As in my experience, it does not take a law- trained attorney to be a fair and impartial judge. I would like the committee or sponsor to consider removing the requirement on line 20 and 22 and establish other criteria, or at least put in some equivalencies, for example, the certification in judicial development at a recognized college, possibly two years' experience in adjudication process and administrative law, recognizing areas of expertise that would be valuable in administrating justice through sound decisions." Number 1886 MR. ANDERSON referred to page 10 and said there is a transitional clause in this bill, at the end, that says the state can hire those working for the state on July 1, 1998. "Unfortunately, I'm not working for the state at this point," he commented. "But it also says 'that meets those requirements.'" He said it is unclear whether they are going to require, even in that transitional statement, a law degree. He offered to help research the qualification standards used by other states, if the committee desired that. He concluded by saying he supports the concept of the central panel of administrative law judges, and he urged the committee to work toward that end. Number 1941 REPRESENTATIVE BERKOWITZ commented, "I've got to say that that requirement is the nicest thing the sponsor has ever had to say about attorneys. But I'd tend to agree. I don't think having a law degree or having practiced law necessarily qualifies you to do much besides practice law. And this is something entirely different." Number 1980 PAM LaBOLLE, President, Alaska State Chamber of Commerce, came forward to testify, saying Mr. Hein had said it so well: This bill does a lot to aid the public's perception of the fairness of the administrative process, but it should also go farther than the perception. Ms. LaBolle stated, "You can imagine that business has a great interest in this, because it is a problem that if an agency makes the rules and decides ... your case, you don't perhaps feel that you've been able to get the full measure of justice. And then the point that you have to go through the process, even if you don't think it's fair, before you can even go to court, and then the court will rely so much on the record of the administrative hearing, it is fraught with unpleasant experience for business, too often. We are completely in support of this legislation, and we have confidence that the subcommittee will be able to work out the fine-tuning of the legislation so that it is, in fact, fitting within the requirements of the law." Number 2093 CATHERINE REARDON, Director, Division of Occupational Licensing, Department of Commerce and Economic Development (DCED), came forward to testify. Noting that she had arrived late, she asked to be informed if she was going over ground already covered. She stated, "I'm here because we do have one of what I believe are three APA hearing officers in this state, working for the Department of Commerce and Economic Development; and the 20 occupational licensing boards I work with are one of the primary groups that would be affected by this legislation." Number 2149 MS. REARDON referred to a question by Representative Rokeberg about how the hearing officers are involved in the occupational licensing process. She emphasized that the hearing officers are involved in initial decision making, not just appeals; she said she didn't know whether that had come across earlier. She stated that when disciplinary decisions are being made - revoking and suspending licenses - it is the hearing officer who is actually hearing the evidence and making a recommendation for the initial action. MS. REARDON said if the hearing officer moves into the role of being the final decision maker, and if they want boards to make a decision first, which is then appealed to the hearing officer, they will still need someone to help them through that process. Oftentimes, there is a one-week or two-week hearing before a disciplinary decision is reached. A panel of dentists, for example, will have difficulty setting aside two weeks for a disciplinary hearing; even if they can, they need someone knowledgeable about legal activities to help them hear the evidence, hear the attorneys object and make evidence motions, and so forth. Ms. Reardon commented, "It's too much for some people like me, who aren't real familiar with that, to run hearings without that type of assistance. So, we do need some kind of a hearing officer to help with the initial decision making, not just the appeals, I believe." Number 2259 MS. REARDON said in license denial cases, similarly, the hearing officer comes in at the appeal level. The board has denied the license and now it is being appealed. The hearing officer is hearing the information for the first time, then bringing it back to the same board. She stated, "And I would say that if I understood Representative James correctly, if the board - or, in the absence of the board, the commissioner of Commerce - were to be making the initial decision, that decision also may ... require lengthy evidence-taking. For example, sometimes we're denying an initial license because we believe the person proved themselves to be incompetent in another state; and that takes expert witnesses and things like that. And so, the commissioner of Commerce is probably not going to have time to sit and think about and read through all of the evidence before making an initial decision that's then appealed to the hearing officer. ... The internal review is a little bit more complicated than it might initially seem, and it's been helpful to have hearing officers assisting with that." Number 2361 MS. REARDON said another concern she has is about paying two different agencies to decide whether regulations are statutorily well-founded. Right now, boards adopt regulations; however, those regulations are sent to the Department of Law, which, reasonably, is billing the agency to decide whether they are statutorily authorized. Frequently, the Department of Law says no or amends those regulations; therefore, it is not a rubber-stamping. An outside agency decides whether regulations are well-founded. Ms. Reardon stated, "So, we'll go through that and then we'll have a hearing officer, possibly, who is going to strike down the regs and say, 'Although you got legal advice from an outside source saying that they were okay, they're not really okay.' And the cost of that, with the bouncing back and forth, is something I have a little bit of apprehension about. But perhaps I misunderstood, and perhaps striking down regulations wasn't going to be one of the authorities of the hearing officers. They could, of course, ... tell us if we weren't complying with our own regulations; that's very important. But whether they're actually going to say the regulation is not a good regulation is another matter." MS. REARDON said in general, she is a little curious because it seems perhaps this legislation is focused on what is probably the strongest and cleanest part of the appeal processes within the state. TAPE 98-4, SIDE A Number 0006 MS. REARDON mentioned other hearings that are going on in less structured APA settings. She again suggested they are focusing on fixing up the part that is already the strongest, while maybe the weaker parts are not being addressed. MS. REARDON advised members that she hadn't discussed this legislation with the occupational licensing boards. She wanted to get it on the table that the boards may have strong opinions on the topic and may view the ultimate disciplinary decision making as one of their most important powers, to take away licenses. However, they may be fine with this. MS. REARDON said, "It's the legislature that created the licensing boards to make initial licensing decisions and make disciplinary decisions. And so, of course, if the legislature decides that they don't want to have that role, you might want to think about whether they still are playing a meaningful role - because what would be ... left to them was writing the regulations in the first place - or whether you want to create another kind of role for them in the process .... Perhaps the hearing officer would be deciding the findings of fact and law, and the boards would get to decide what punishment was appropriate, given that. I'm just throwing things out, kind of off the top of my head, in a little risky procedure here, but they might be able to decide whether a doctor should lose a license if he did the following things, and if the law did read the following way. Or perhaps boards could assist in deciding which cases to pursue, more like a grand jury before they went to the hearing." Number 0142 MS. REARDON explained, "The division is kind of the prosecution; we charge people. And usually the board's acting as the ... judicial body, but perhaps they would act to say, 'No, division, you don't have enough evidence,' or maybe, 'That's not a high-priority case, we have other ones we'd rather have you pursue,' but somehow, you might want to think about some role for the, because they would be losing quite a bit, I think, in this process." MS. REARDON said finally, she has some concerns about costs, which may be more appropriately addressed by the subcommittee or the House Finance Standing Committee. She stated, "One nice thing about having one hearing officer in the department is that we know that that's the most our hearing costs can be. And when it gets separated into a different department, I would just have some concerns that there won't be an incentive not to have hearings go on at great length or in expensive ways, because the person creating the cost and the person paying it are in two separate budgets. And I'm just a little concerned because I do have to tax to cover the costs." Number 0244 REPRESENTATIVE ROKEBERG asked Ms. Reardon, with her knowledge of occupational licensing laws and the establishment of boards, whether it would be necessary to change each of those statutes to be consistent with this law now, because of variances in the levels of power granted to the various boards and the different procedures. MS. REARDON replied, "There aren't many differences. All of them have basically the same powers. But I do agree that we'd probably need to have a section in the back of the bill repealing or amending a lot of the statutes, because they almost all do refer to the board making disciplinary decisions, or the board making licensing decisions. In fact, most of them don't really refer to hearing officers at all. They were created anticipating that boards themselves were sitting and hearing cases. And over time, it evolved that we used hearing officers instead. So, I'd think you would need to go in and amend a lot of those statutes. I don't know if it would be very complex or not to do so." Number 0332 REPRESENTATIVE ROKEBERG referred to mention of some of the weak points of the APA and how it is administered. He asked whether Ms. Reardon agrees that one of the weakest points right now in the system is the inability of the Department of Law to react to the agency's or board's request for assistance in pursuing these cases before a hearing officer, resulting in a backlog. MS. REARDON replied that within the Division of Occupational Licensing, at this point most of the backlog is not at the hearing stage; it is before the hearing stage. They definitely need more legal services than they get, and more than they pay for. Ms. Reardon explained, "We do have an increment in the budget to ask to pay for more legal services, to get more. And I think probably the Department of Law would agree ... that we need more legal services than they are currently able to provide." Number 0410 REPRESENTATIVE ROKEBERG asked where the investigators come from and how they are paid. MS. REARDON explained, "The Division of Occupational Licensing investigators are employees of mine, employees of the division. They do have regular beats, as it were. One ... does almost all medical. One might do mental health professions and dentistry. But they also switch around those roles, depending ... on case load. They aren't hired for particular expertise in an area. And that is also an area where backlog occurs, I'll be honest. We have a backlog of investigations that haven't even made it to the Department of Law stage." REPRESENTATIVE JAMES commented that Representative Rokeberg had asked the questions she had been concerned about. Number 0475 REPRESENTATIVE PORTER said his were more comments than questions, but to the extent he was off-track, he requested a response. He stated, "I was anticipating the same thing that Representative Rokeberg brought up, and that you had mentioned, that the role of the boards would change. If it is that the intent of the legislation is that the system be changed, and that the hearing officer not issue an advisory but a compulsory opinion, then that does take something out of the boards' authority. And all of them would have to be looked at. And I don't know if that can be universally or individually." He suggested that the subcommittee would have some work to do in that regard, and he expressed the hope that Ms. Reardon could be involved in that process. REPRESENTATIVE PORTER stated, "I would think, in the interest of saving the money that we all know that you have to save, that it would be an important part of the exercise to make this a nice, clean step. I think what we're hearing is the boards should create the regulations and then not have much to do with adjudicating them, you know. So, to the extent that they would be taking evidence and all that stuff, I don't think so. I think that's what the hearing is all about. ... It's been my experience, and I don't know if it's yours, but some of the delays from legal were delays because the procedure said that you had to get something from legal, but whether you really need it or not is another thing. ... If the agency could do the investigation that's necessary to say, 'We think that this license ought to be pulled,' pull it. And that's what the hearing's all about, you know. It doesn't have to go around five times before it comes out the other end." Representative Porter said that would be his thought, for the subcommittee to look at streamlining the whole process, rather than just trying to "nickel and dime it" to get the appearance of objectivity, when in fact the system needs to be looked at. CHAIRMAN GREEN commented that this is what extended subcommittees are built on. Number 0633 REPRESENTATIVE JAMES agreed with Representative Porter's assessment but said that is a whole different thought. She said from what she'd heard Ms. Reardon testify, it sounds complicated and it sounds as if the hearing officers do far more than just being hearing officers, including research and other functions. MS. REARDON responded, "The hearing officer is just the hearing officer. All the evidence gathering is done by the two parties. However, considering that evidence and making findings of law is a pretty ambitious project. And so, all I was suggesting was that if the hearing officer is going to be the last step, and if the idea is that perhaps the commissioner of the department or a board is going to first look through this evidence and try to make a decision, that that's a hard thing for lay people to have the time to do. And so, the commissioner of Commerce probably really isn't going to be able to spend two or three days reviewing Catherine's decision and looking at all of the evidence to decide -- to do kind of the ... internal appeal, before it goes to the hearing officer. I thought that what I was hearing was that first the agency might reconsider and think about everything and maybe have its own kind of appeal before it went to the hearing officer -- or own reconsideration before it went to the hearing officer. And I just wanted to suggest that that was a big project to be doing, to even consider all of the evidence." Number 0746 REPRESENTATIVE JAMES referred to earlier discussion and said it appears there are some areas under the APA that don't meet the same criteria as others. She suggested the purpose of this particular legislation is really to get at those agencies that write regulations and then have a hearing process, "more than it is the licensing thing," although she thinks that needs some help, too. Number 0811 REPRESENTATIVE ROKEBERG indicated they are all very interested in this concept but there are structural issues to iron out. He said it sounds as if they are venturing into almost rewriting the APA. He said to Representative Ogan, "I'm not sure that's really what you want to do. I think your intention is to set up independent hearing officers." REPRESENTATIVE ROKEBERG asked Representative Ogan whether he thinks his bill would be damaged if these hearing officers were set up independently but could still work within the structure of the APA. He cited an example of a complaint issued to a board or agency that would be turned over to the hearing officer, who would be independent under this bill. The hearing officer would do the findings of fact and send that back to the commission or board, as it is done now under the APA. He said, "They'd make a ruling and make that hearing officer the final -- make it appealable to him if there was a problem. And, therefore, his decision would be final, but after that, going to the courts, if there was a further appeal. That way, we wouldn't have to rewrite everything in the statute book and still maintain the independence of the hearing officer without really changing the APA statutorily or destroying that and, I think, creating a huge burden here that may not be able to be overcome without a very long-range rewrite of the statute - or something like that, anyway." Number 0919 REPRESENTATIVE OGAN responded, "I guess, on first blush, what you were saying, if I understand it correctly, it would almost be duplicative, because we would keep in place the existing process and then add another layer on top of it. And I'm not sure we would gain the efficiency and impartiality." He suggested the subcommittee may wish to pursue that issue. Number 0967 REPRESENTATIVE CROFT said twice now, this idea of "adjudication versus penalty" has come up. He asked the sponsor or Judge Hein whether that division is ever done, where the independent hearing officer decides guilt and then sends it to the board to decide the proper consequence. He suggested there may be a policy element to penalty that is not appropriate in adjudication of guilt. Number 1005 JUDGE HEIN responded, "I can't tell you specifically if it's done, how often it's done. Maybe Ms. Reardon or Ms. Williams could tell you better than I. But it seems to me it's a question of what questions, what issues, are put before the hearing officer. It's certainly possible that you could have - particularly in professional licensing cases - a determination in a hearing that these were the facts, ... that the law should be applied to this set of facts, and have the board or commission bound by those findings and conclusions. Whether it would then take some statutory amendments to then split that off and leave determination of 'Now what?' to the board or the agency, you know, that's something you could look at. But conceptually, ... I don't think it's necessarily a problem, as long as the agency or board is bound by the findings and conclusions of the hearing officer." Number 1065 CHAIRMAN GREEN assigned HB 232 to a subcommittee consisting of Representatives James, Berkowitz and Bunde, with Representative Bunde as chairman. He encouraged participation by Representative Ogan or his designee; Terri Lauterbach, the drafter; and Catherine Reardon, who had brought up several points that he believed the subcommittee should review. (HB 232 was held over.) CHAIRMAN GREEN announced his intention of rescheduling HB 272 for the following week. ADJOURNMENT Number 1139 CHAIRMAN GREEN adjourned the House Judiciary Standing Committee meeting at 3:06 p.m.