JOINT COMMITTEE ON ADMINISTRATIVE REGULATION REVIEW August 26, 1999 3:05 p.m. WORKSESSION MEMBERS PRESENT Senator Robin Taylor, Chairman Representative Jeanette James, Vice-chair Representative Mary Kapsner MEMBERS ABSENT Senator Georgianna Lincoln Senator Pete Kelly Representative John Harris COMMITTEE CALENDAR Update on Proposed Airport Regulations WITNESS REGISTER Mr. Kurt Parkan, Deputy Commissioner Department of Transportation and Public Facilities 3132 Channel Dr. Juneau, AK 99801-7898 POSITION STATEMENT: Answered questions about DOTPF's regulatory process Mr. Steve Pavish Alaska Air Carriers Association 929 E. 81st #108 Anchorage, AK 99518 POSITION STATEMENT: Commented on DOTPF's regulatory process Mr. John Steiner, Assistant Attorney General Department of Law 1031 W. 4th Ave. suite 200 Anchorage, AK 99501-1994 POSITION STATEMENT: Commented on the regulatory process Ms. Kim Ross, Director Alaska Air Carriers Association 929 E. 81st #108 Anchorage, AK 99518 POSITION STATEMENT: Commented on DOTPF's regulatory process Terry Elder Senior Securities Examiner Division of Banking, Securities & Corporations P.O. Box 110807 Juneau, AK 99811-0907 POSITION STATEMENT: Discussed new regulations proposed by the Division of Banking, Securities & Corporations Vincent Usera Assistant Attorney General Department of Law PO Box 110300 Juneau, AK 99811-0300 POSITION STATEMENT: Discussed new regulations proposed by the Division of Banking, Securities & Corporations Janice Adair, Director Division of Environmental Health Department of Environmental Conservation 555 Cordova St. Anchorage, AK 99501 POSITION STATEMENT: Answered questions about DEC's proposed regulations on fee increases ACTION NARRATIVE TAPE 99-02, SIDE A Number 001 CHAIRMAN ROBIN TAYLOR called the Joint Committee on Administrative Regulation Review meeting to order at 2:10 p.m. He announced that the committee would begin with an update on airport regulations. KIM ROSS, Executive Director of the Alaska Air Carriers' Association (AACA), made the following comments. The AACA thanks the committee and other legislators for putting forth so much time and effort to understand what the 200 pages of proposed regulations mean to the users across the state. Mr. Pavish retired in May from the Department of Transportation and Public Facilities (DOTPF) and has been hired by the AACA to gather comments and help AACA work through the regulatory process. During the July workshops, Mr. Pavish worked closely with both entities and his involvement with AACA has created a win-win situation for all. DOTPF has made many revisions to its proposed regulations in response to public comments. Because of the large number of substantive changes that have been suggested and all of the time and effort that have gone into the workshops, AACA feels strongly that it needs one additional 30 day public comment period. AACA has seen evidence of a more cooperative and receptive attitude from DOTPF but it still feels the state owes the user groups the opportunity to provide public input after seeing the final draft. Number 111 VICE CHAIR JAMES expressed concern that after public testimony is taken, the regulation drafters may or may not address the concerns expressed, yet the regulations are not made public again until they are final. She wholeheartedly agreed that another 30 day comment period should be provided after the final draft is published. CHAIRMAN TAYLOR asked Mr. Pavish if the final draft is available yet. MR. PAVISH said he did not expect to see a final draft for months as DOTPF's technical committee is in the process of reviewing the comments at this time. REPRESENTATIVE KAPSNER asked if the 30 day comment period would occur after the final draft is released. MR. PAVISH said yes and that once DOTPF reviews the comments, develops alternative language, and publishes a final draft, the AACA wants to see the draft to ensure that there were no misunderstandings. He noted that although DOTPF has made a good faith effort to understand the public's comments to date, the users want to make sure that that effort continues into the final regulations. Number 182 CHAIRMAN TAYLOR asked Mr. Parkan to respond to Mr. Pavish's comments. KURT PARKAN, Deputy Commissioner of DOTPF, explained that DOTPF extended the public comment period to July 30 at the request of ARRC members and others. DOTPF's technical committee is currently reviewing all of the testimony received and will then redraft the regulations. The redraft will be given to the policy committee to finalize. DOTPF then intends to publish the final draft on its website and to make it available to the public before the Commissioner signs off on it. The regulations will then be reviewed by the Department of Law. MR. PARKAN said DOTPF is interested in having people review the forthcoming final draft, however he expressed concern that the final regulations must be considered final at some point. CHAIRMAN TAYLOR noted that a slight language change could have a major impact on businesses therefore a 30 day period should be provided after the final draft regulations are published so that people can contact the Commissioner about any changes that might be necessary. MR. PARKAN said he understands the concern and will look into that possibility, however he cannot commit to providing an additional formal public comment period. He pointed out that a review period does not allow for formal comments, but if major problems are uncovered during the review period, DOTPF will have to take another look at the draft regulations. He repeated that at some point DOTPF has to determine that the regulations are final so that it can move forward. He also repeated that DOTPF is committed to a review period but will consider another public comment period. Number 239 VICE-CHAIR JAMES said that although she believes DOTPF has "bent over backward" to make changes, the Department of Law could make substantive changes during its review. She stated that she plans to request, in writing, that the final draft be written in plain English. She questioned why any of the users would bother reviewing the final draft regulations if they are unable to have any input. CHAIRMAN TAYLOR said he understood Mr. Parkan to say that DOTPF will reopen the public comment process if the final regulations contain a serious error. VICE-CHAIR JAMES noted she felt comfortable with that. CHAIRMAN TAYLOR remarked that he also heard Mr. Parkan say that DOTPF can make no commitment. Number 281 MR. PARKAN clarified that according to the Department of Law, DOTPF cannot accept formal comments after the final draft has been published. CHAIRMAN TAYLOR maintained that the airport regulation process has been going on for a long time, and that DOTPF did not bother to speak to the businesses who were leasing facilities before it drafted regulations that created a "whole new world" for people to operate in. Apparently, the process has evolved into a working group that is actively and affirmatively accomplishing the task. He encouraged DOTPF to continue that approach to its ultimate goal by making a commitment to speak to, and review with, the participants the final draft before the Commissioner signs off on the regulations. VICE-CHAIR JAMES asked whether the public comments on the final draft could be published on DOTPF's website. MR. PARKAN said the comment period is officially closed therefore no new comments can be taken in a formal manner. He noted that 800 pages of comments have been taken up to this point. VICE-CHAIR JAMES clarified that she was referring to comments taken after the final draft is published on the website. MR. PARKAN stated taking public comments after the final draft is released would raise legal questions that he is unable to speak to. He was unsure about how comments could be posted to the website because the public would need access to the website to do so. CHAIRMAN TAYLOR remarked that it would be beneficial to all concerned for DOTPF to publish the final draft as quickly as possible and then review the regulations with the working group one more time so that errors can be found and resolved quickly. Number 350 MR. PARKAN said they all share the same goal, and to the extent that DOTPF can stay on the legal side of the matter, he will do what he can to facilitate the final process. He noted that, at the least, DOTPF should sit down with the working party and explain what it did and why. The participants and DOTPF may disagree on some areas, but in those instances DOTPF should provide a reason. MS. ROSS commented that AACA has already been through the process of requesting of DOTPF an opportunity to comment, and whether DOTPF has good intentions or not, the Department of Law will not allow DOTPF to accept comments. During the July workshop, DOTPF was told that if a comment was received one minute past the due date, the document had to be returned to the sender. She said once the regulations are promulgated, the user groups will have to pursue statutory changes on every issue it disagrees with. Ms. Ross noted that many individuals sent her copies of the comments they submitted to DOTPF, and every one of those individuals requested an additional 30 day comment period. CHAIRMAN TAYLOR asked what the cost will be to provide an additional comment period. MR. PARKAN estimated that the public notices will cost $10,000, and there will be administrative travel costs. He recalled that last year when DOTPF was at its final draft stage, it met with the AACA in a formal group setting. DOTPF was able to discuss and work through the changes made at that time. He thought a similar activity could take place at this point. He asked whether the AACA considers its request for an additional 30 day comment period to be its final request for input. CHAIRMAN TAYLOR said that will be difficult to determine until AACA sees the final regulations. Number 350 MR. PARKAN noted that while DOTPF strives for consensus, there may be some areas in which the users and DOTPF do not agree, therefore all parties will not be satisfied. Mr. Parkan said DOTPF will go as far as it can legally to get a sense of its success in responding to the requested changes without having to go through an expensive and protracted formal comment period. MS. ROSS added that other groups, such as the Alaska Airmen's Association, the Alaska Transport Association, the nationwide pilots' association, the seaplane pilots' association, and at least 12 individual carriers have asked for the same reasonable comment period. She assured members that AACA has no intention of drawing the process out; it just wants to make sure that DOTPF is listening to the users. MR. PAVISH clarified that during the "comfort" review meetings, once the direction changes from informing participants to discussing the changes with participants, DOTPF would begin to cross the line with the Administrative Procedures Act. That is why the AACA is opposed to that approach and is requesting one more formal comment period. He added that public comment periods can be costly but he estimated one could be done for $5,000 or $6,000. He stated that all participants feel that closure is possible but they want the opportunity to look at the final regulations one more time so they can rest easy. REPRESENTATIVE KAPSNER thought that $10,000 is a reasonable cost to ensure that Alaska's leasing regulations are meeting the needs of the carriers. CHAIRMAN TAYLOR recommended that DOTPF grant an additional 30 day public comment period upon submitting its final draft regulations. He noted he will make a formal motion to that effect at the next ARRC meeting. There being no further testimony on the proposed airport regulations, CHAIRMAN TAYLOR asked Mr. Dale Schwartz to testify. DALE SCHWARTZ made the following comments via teleconference from Kenai. He is requesting an extension of the public comment period on regulations being promulgated by the Department of Environmental Conservation (DEC). He stated the comment period was too short and occurred during the middle of the summer. He expressed concern that the comment period is not designed to have any impact as DEC's notice implies that the public can comment but the comments will not necessarily matter. He noted that he asked Ms. Adair to extend the comment period, but questioned her response when she said because of legislative budget cuts, fees were being increased to run the program. He stated that the method DEC used to raise the fees has not been equitable. Those fees tripled a few years ago and will now be doubled. Number 515 VICE-CHAIRMAN JAMES commented that she has heard similar complaints that the public notice does imply that public comments will not necessarily have any impact. CHAIRMAN TAYLOR noted that Ms. Adair would be speaking to the committee shortly but, in the meantime, he would take testimony from Terry Elder. TERRY ELDER, Director of the Division of Banking, Securities and Corporations in the Department of Commerce and Economic Development, said he would be discussing the Division's regulatory project with Vincent Usera, the Division's senior securities examiner. MR. ELDER stated that during the past two legislative sessions, HB 486 and HB 83 were introduced. HB 83, which amended the Alaska Securities Act, was enacted. The Division needed to revise its regulations to comply with HB 83, as well as to comply with federal law. In addition, a number of the proposed regulations deal with securities and are from the North American Securities Administrators' Association. When HB 486 failed to pass two years ago, the Division went ahead and publicly noticed the draft regulations it was projecting for the future to give interested parties a "heads up." Once HB 83 passed, the full regulatory process began. CHAIRMAN TAYLOR said that Alaska went through a Ponzi scheme investigation in the not too distant past. He asked if the new regulations will enable the state to prevent such an occurrence in the future. MR. ELDER replied that no statute or regulation can prevent a crook from pulling a scam. The best way to prevent such scams is to have a strong enforcement arm. He noted the Ponzi scheme utilized an exemption from registration. He looked at similar exemptions in other states to see if a regulation could control the use of that exemption. The new regulation project does include a limitation on the use of that exemption from registration. CHAIRMAN TAYLOR said he is hopeful that the new regulations contain a definition that could be of benefit to prevent future scams. [PORTION OF TAPE INAUDIBLE DUE TO STATIC] MR. ELDER said a limitation was adopted in this regulation project so that once an issuer has 30 shareholders or owners of interest in the security, the exemption can no longer be utilized. TAPE 99-5, SIDE B CHAIRMAN TAYLOR said although the activity in the Ponzi scheme was illegal, the Division had the opportunity to do a more careful examination on the reading of the exemption. MR. ELDER concluded by saying the changes made to the Division's regulations are substantive, and some of those regulations will become effective on October 1 in order to comply with MISMIA. The regulations were split into sections so that the Department of Law could first review the regulations that have the October 1 deadline. Those pertain to fees, examination requirements, and registration requirements. CHAIRMAN TAYLOR thanked Mr. Elder and Mr. Usera. MR. RICHARD GOULD commented via teleconference that the new regulations will allow investors to raise capital a lot easier. The regulations will cut a lot of red tape for those selling stock in-state. He thanked all those involved in the passage of HB 83 for their efforts. CHAIRMAN TAYLOR asked Mr. Gould if he is having any trouble with the current exemption he is working under. MR. GOULD said only with the restriction of talking about selling stock to anyone out-of-state. REPRESENTATIVE KAPSNER asked if that restriction is unconstitutional under the Commerce Clause. MR. GOULD said he is restricted because he is under an exemption. He asked whether the public comment period is over. MR. USERA said the public comment period and Department of Law review for Project 1 have been completed. The public comment period for Project 2 is closed, however it could be reopened if requested. MR. GOULD asked if the language on page 37, subsection (H) includes the Alaska Bidco (ph) Act. MR. ELDER replied that it is likely that Bidco (ph) would be considered to be an institutional investor and that an exemption exists for institutional investors under (B)(4). He noted it is not specifically listed in statute, however he has no doubt that the Division would consider Bidco (ph) to be an institutional investor. MR. ELDER thanked Mr. Gould for his comments and stated the Division has attempted to make it easier for legitimate businesses to raise capital but it also wants to be the worst "nightmare" for anyone who tries to cheat Alaskans. JANICE ADAIR, Director of the Division of Environmental Health, Department of Environmental Conservation (DEC), said that she would focus her testimony on the answers she provided to the questions posed to her by Sue Mossgrove, Committee Aide. MS. ADAIR noted that Ms. Mossgrove asked how DEC determined the new fees. Ms. Adair said that calculation was included in DEC's public notice mailing. An average annual salary for the professional and clerical staff was determined. That number was divided by the average number of hours per year that a person would work on inspections to calculate an hourly rate. Using information from DEC's database, she determined the average number of hours the Division spends on permitting and inspections, even though the fees cover other costs. The hourly rate was multiplied by the time DEC spends on each permit and inspection to determine the fee. The facilities covered by the fees are any business that sells or serves food to the public outside the Municipality of Anchorage, which has its own program. A whole laundry list of exemptions exists. MS. ADAIR said the second question pertained to under which circumstances an operator might pay more than one fee. If an operator has two distinct operations within an establishment, they will pay a fee for each operation. MS. ADAIR indicated that Ms. Mossgrove asked what the relationship is between the budget cut and the increase in fees. MS. ADAIR explained that when she was before both DEC Finance subcommittees, quite a bit of discussion ensued about moving the food inspection program to municipalities. In most other states, county governments operate retail food inspection programs. There was a desire to make Alaska's inspection program more self sufficient through fees so that the discussion with municipalities might be more successful. The Senate Finance subcommittee took general funds in the amount of $887,000 and changed them to general fund program receipts. The House Finance subcommittee changed that amount to designated program receipts. The conference committee then cut the general fund program receipt authority by $548,000. The net effect was that DEC's program receipt authority was increased by $339,000 which is what the fee increase represents. MS. ADAIR said the final question asked about the facilities that will not be inspected. She explained that inspections are one part of a food safety program and not the most important part. DEC spends more time on training, education and technical assistance. DEC considers the fees to be program fees rather than inspection fees. Also, DEC responds to some facilities on a complaint-only basis. That pool of facilities is getting larger. DEC tries to inspect as many places as possible while staff is traveling in remote communities. DEC does not want to write any business off from the start and then send a bill after the business has been inspected because it is difficult for those businesses to plan that way. Although DEC does not plan to do routine inspections, all of its other services are available and inspections will be done if a complaint is received. MS. ADAIR noted that Ms. Mossgrove's final question was the number of each type of facility. The number of facilities in each category was included in the public comment information (page 3). She stated that number changes as businesses start up and close. Number 413 REPRESENTATIVE KAPSNER asked how often a DEC inspector visits places like Bethel or King Salmon. MS. ADAIR said DEC visits those locations quite often. DEC does have difficulty getting to places like the lodges outside of King Salmon that operate for only three months out of the year. REPRESENTATIVE KAPSNER remarked that she is shocked at the cost of the fees. She noted that all of the restaurants in Bethel have water shipped in and stored in holding tanks, and sewage shipped out. Their expenses are a lot higher than in any other location in the state. Bethel has also been hit by cuts to the Power Cost Equalization Program. Some small stands only operate on the 4th of July therefore the fee will be a substantial expense to them. She expressed concern that many businesses will be forced to close this winter. CHAIRMAN TAYLOR said that 13 or 14 years ago, he suggested that the ferry system be given program receipt authority so that it could raise revenues through fees and since that time, more departments have wanted that authority so that they do not have to rely on the general fund as much. DEC has used this approach more than any other department. MS. ADAIR said she disagrees that fees are the solution and they are not her first choice. She noted that by statute DEC cannot charge fees that are higher than the cost of providing a service. CHAIRMAN TAYLOR likened that restriction to the spending limit on the Legislature. MS. ADAIR said her Division probably charges more fees than any other division, and that she takes complaints about those fees very seriously. She tries to show people how the fees were determined and wants to provide the best service possible for the fee charged. CHAIRMAN TAYLOR said he appreciates Ms. Adair's concern yet the Legislature and the Administration, not wanting to account for those monies because that would increase the general fund numbers, created a category called "other money." As a consequence, that money does not show up on the general fund budget, which if federal funds and all other sources were included, could amount to $5 billion. He expressed frustration that Commissioner Brown went to the press with a lot of rhetoric about the consequences of DEC's budget cut when the cut was $330,000 out of $47 million. Commissioner Brown also said that 4,000 restaurants will no longer be inspected so the Legislature should be blamed if people get sick. He asked why DEC's request for four people would have cost $330,000, yet when that money was not made available, 7 employees were cut. MS. ADAIR explained the increment was for $330,000 but only $222,000 was for personal services which was for four employees. The $339,000 cut was specific to the food service budget. Her first approach was to determine which employees' costs added up to that amount and to lay them off. Initially she held the meat inspection program which was held 50 percent harmless by the federal government. When she saw the number of offices that would have to be closed, she became uncomfortable so she decided to give the meat inspection program back to the federal government. The USDA must provide a meat inspection program if it is not provided by the state, and it is the only food inspection program with that federal requirement. As a result, DEC is able to do more of the food safety services that no one else will do. One benefit of having a USDA meat inspection program in Alaska is that producers can ship their products out of state. She noted that 25 states do not have their own meat inspection programs. Ms. Adair said that she believes her decision to relinquish DEC's meat inspection program to the USDA was best for the public health of the people of the state. Number 264 CHAIRMAN TAYLOR said Commissioner Brown told the Anchorage Daily News that DEC's relinquishment of the meat inspection program is a real shame and that local processors are already complaining about unresponsive federal regulators. MS. ADAIR said DEC has received complaints. There were transition pains, and the USDA has very peculiar rules regarding transition. She noted in a perfect world she would not have wanted to relinquish the program because food safety is a continuum and DEC will no longer have information about meat recalls. CHAIRMAN TAYLOR asked if the USDA uses the same standards as DEC did. MS. ADAIR said that is correct, however DEC had some testing requirements that the USDA does not require. REPRESENTATIVE KAPSNER expressed concern that the businesses in rural Alaska are being hit from both sides and that she feels obligated to protect them. She asked if the fees are set in stone or if there is anyway to work together to make them more reasonable. MS. ADAIR replied that fees must be the same across the state. If local governments were to pick up the programs, they could charge different fees in their areas. Her only option, if DEC does not raise the additional funds through fees, will be further reductions to the food safety program because the money must be collected before it can be spent. REPRESENTATIVE KAPSNER asked if the City of Bethel or City of Aniak could administer a food safety program if they wished to do so. MS. ADAIR said they could, and that DEC has a process for delegation of that program. She noted that most communities do not have the economy of scale to take on their own programs. The Municipality of Anchorage's fees are similar to DEC's, yet the Municipality only collects about 50 percent of its costs through fees. She added that the program requires some scientific expertise so it is difficult for small communities to run a food safety program. She told Representative Kapsner that she understands the dilemma for businesses in rural areas, however she is unable to solve the problem on her own. Number 172 REPRESENTATIVE KAPSNER asked why it takes 2+ hours to issue a permit. MS. ADAIR said DEC looks at the facility and its compliance record, and whether any remodeling has occurred. The 2+ hour time frame is an average. If a restaurant has had compliance problems in the past, DEC is likely to inspect the facility. CHAIRMAN TAYLOR asked if the Legislature increased DEC's program receipt authority last year. MS. ADAIR explained the net result was an increase. CHAIRMAN TAYLOR asked if DEC laid off employees to make up for the lost revenue. MS. ADAIR stated the budget that both the House and Senate approved for DEC's food safety program was $3,481,200. That amount was the same for FY 99. The difference between the House and Senate budgets was the mix of funding within that amount. In FY 99, $982,000 of the $3,481,200 was from program receipts. The amount approved in total program receipt authority by both the House and Senate for FY 00 was $1,870,000, an increase of about $887,000. At the same time, there was an accompanying reduction in general funds in the same amount. The Conference Committee then reduced the program receipt amount by $339,000. As a result, the food safety program budget was reduced by $339,000 leaving a total budget amount of $3,100,000. Number 078 VICE-CHAIRMAN JAMES asked what amount of federal funds DEC gave up. MS. ADAIR said about $300,000. VICE-CHAIRMAN JAMES noted the food safety program budget is over $600,000 short when the federal and state fund decreases are combined. MS. ADAIR said that is correct, however the Conference Committee allowed DEC to collect those federal funds, therefore that reduction is not reflected in DEC's authorized budget. VICE-CHAIRMAN JAMES said the $3.1 million is $300,000 less because it does not include the $300,000 in federal funds. She asked if the meat inspection program cost $600,000. MS. ADAIR said the meat inspection program was the bulk of it, however other funds had to be cut. She noted the general fund match for those federal funds did not equal $339,000. VICE-CHAIRMAN JAMES asked if the increase in fees did not make up the difference so DEC was forced to make cuts. MS. ADAIR said that is correct, even with the increase in program receipts. VICE-CHAIRMAN JAMES indicated that DEC's reduction in overall spending is $600,000 because it gave up $300,000 of federal funds and took a general fund budget cut of $300,000. DEC then added fees. She asked what amount DEC's budget is down. MS. ADAIR said the total fees DEC hopes to collect is included in its FY 00 authorized budget of $3.1 million. DEC has been given authority to increase its program receipt collections and expenditures by $548,000. That has nothing to do with the cut and DEC is not trying to make up the cut by increasing fees. DEC cut the program and laid people off and is now attempting to collect the program receipt increase. VICE CHAIRMAN JAMES asked if DEC has increased its fees but will not be able to do the job. MS. ADAIR said DEC will not be able to provide the same level of services because there was a cut to the program. CHAIRMAN TAYLOR asked what program cuts were made, other than the relinquishment of the meat inspection program. MS. ADAIR replied the food safety program was one budget component that included seafood, meat, and retail food inspection. When she looked at how to allocate resources, she looked at the relative risks to public health that a type of food operation poses, which DEC has categorized. The highest risks are smoked seafood and canned food. The lowest risk food service operations are fresh frozen seafood and espresso carts. DEC planned to inspect the low- risk facilities once per year, of which there are about 4,000. It is now likely that those facilities will be inspected every few years, which is the additional program cut that took place. CHAIRMAN TAYLOR asked how much money was saved through the layoff of the inspectors who were involved in the low-risk inspections. MS. ADAIR said DEC had five meat inspectors and one vacant position. DEC lost four meat inspectors. A fifth part-time meat inspector position was fully funded to inspect other foods. The inspector position in the Tok and Dutch Harbor offices were eliminated and a vacant position in Fairbanks was eliminated. REPRESENTATIVE KAPSNER asked Ms. Adair to clarify DEC's budget increase. MS. ADAIR explained that the food safety program's total budget was reduced by $300,000 so its budget is $3.1 million. In addition, the source of the funds changed. Revenues generated from fees increased, while general funds decreased. She noted that DEC is proposing to increase fees that will allow it to collect the full expenditure authority that it has for fees. The program services will be less, however. VICE-CHAIRMAN JAMES repeated that DEC is now charging higher fees to provide fewer services. MS. ADAIR said the only other option is to cut the program even more by not increasing fees which she does not think serves the public's interest at all. VICE-CHAIRMAN JAMES said it depends on whether the fees are being used on expenditures that are not directly related to them. MS. ADAIR replied that everyone who pays the fees gets the benefits of the services that the food safety program provides. VICE-CHAIRMAN JAMES asked if the fees collected for the food safety program are making up any other deficits. MS. ADAIR said the fees are not making up any deficit at all. The legislature gave DEC authority to raise its program receipts by $548,000 which is still a reduction of $339,000 over its FY 99 authorized budget. DEC is only attempting to collect the full amount of its program receipt authority. VICTOR GUNN, legislative aide to Senator Pete Kelly, made the following comments via teleconference from Fairbanks. An owner of a large multi-outlet food operation in Fairbanks wanted to let the committee know that the fee increases will ultimately be passed on to the consumer, and that their internal safety procedures and inspections constitute about 10 pages of their corporate inspections and DEC does quite a bit less in that regard. The owner also noted that an increased corporate tax will be reflected in prices to the customer also. He asked from which pot of money DEC pays for food inspections and administrators to travel to seminars out of state. MS. ADAIR replied that typically DEC gets money from the U.S. Food and Drug Administration to do that, otherwise DEC uses general funds because DEC is not allowed to use the cost of travel in its fee calculations. MR. GUNN asked if the purchase of equipment such as computers is also paid for with general funds. MS. ADAIR stated the program receipts portion of the budget makes up about 50 percent, so it depends on how one looks at it. MR. GUNN noted the public sees DEC purchase Ford Expeditions for staff to drive while fees are being increased and questions what is going on. MS. ADAIR thought those vehicles are emergency response vehicles paid for out of the 470 account. CHAIRMAN TAYLOR expressed concern that the Legislature and the Administration continue an increasing addiction to fees. The food inspection program fees were doubled several years ago and will now triple. VICE-CHAIRMAN JAMES added it is called "targeted taxing." CHAIRMAN TAYLOR said dentists complained to him after they got tired of paying a significant fee for inspection of x-ray equipment when the equipment was never examined. The machines were inspected by the manufacturers because of product liability concerns or the dentists paid for inspections to prevent malpractice lawsuits. He also noted that food inspections in Ketchikan used to be unannounced and would occur every four or five months. MS. ADAIR said that unannounced inspections still occur. CHAIRMAN TAYLOR maintained that the level of public health protection the state should provide is a policy call. He said he thinks the fees are outrageous compared to what they were a few years ago, and that a lot of the outrage over the fee increase is being driven by the political rhetoric rather than by a professional who can explain what is occurring and why. VICE-CHAIRMAN JAMES indicated that she has always had a problem with fees because they are a burden to the people who provide the service rather than the beneficiaries, the public. Rules and regulations need to be set so that businesses operate in a certain way but people who want to have clean air to breathe, clean water to drink, and clean food to eat need to understand that they have to pay for that. REPRESENTATIVE KAPSNER asked Vice-Chairman James whether she was saying she wanted a sales tax, income tax, or a "yes" vote on the advisory vote. VICE-CHAIRMAN JAMES said she was saying that if the general fund is not big enough to provide the services we want, we need to get more of it and she does not have a specific choice of how we get it. She repeated her concern that the costs should not be borne by the business people who have already invested their money to provide the services people want and need. CHAIRMAN TAYLOR maintained that he gets the feeling that the Administration is going to cut programs in the most painful places that it can and then go to the press with the dilemma. They will then raise fees in order to support their political agenda. MS. ADAIR said that was not the case in the fee increase for the food safety program. CHAIRMAN TAYLOR said the timing was coincidental and he does not think the publicity and increase was done with any malice, it just happened. He then expressed concern that DOTPF employees have met to discuss the ferry system 25 times in Ketchikan over the last two years yet they never used the ferry to get there. He thanked Ms. Adair for her participation in the meeting. MS. ADAIR acknowledged that the budget cut did allow her to combine program management positions. Up until July 1, both the seafood inspection program and the retail food program had managers. The two positions were combined and she is already seeing benefits in terms of coordination. VICE CHAIRMAN JAMES said she believes there are a lot of ways that state government could be made more efficient at less cost, but, because of inner-agency problems, that can't be done unless budgets are reduced. The problem is not unique to Alaska; it is endemic in every government entity in the United States. CHAIRMAN TAYLOR noted that Mr. Ayers wrote a memo to state employees that restricts and prevents state employees from talking directly to legislators about ways to save money. He noted the other 49 states have had extensive experience with privatization. DALE SCHWARTZ, testifying from Dot Lake via teleconference, asked whether food inspection fees could be based on the square footage of a restaurant, or on the seating capacity. He expressed concern that smaller businesses will not be able to pass the cost increase on to the customer because they have a limited number of them. MS. ADAIR said she did look at that possibility, however DEC does not have the information it needs to know where the break points should be. She added that she mailed Mr. Schwartz a letter on that subject the previous day. MR. SCHWARTZ noted that the fees have increased from $65 to over $300 in three years and that not enough adjustment was done by DEC. MS. ADAIR said it will take a substantial amount of time, possibly one year, for DEC to gather the data it needs to create different categories and look at that possibility. She said creating another category creates as much angst among the public as raising the fee. CHAIRMAN TAYLOR asked if that information could be acquired on the application form. MS. ADAIR replied DEC does ask for that information but the information supplied is often incorrect. CHAIRMAN TAYLOR thanked all for participating and informed committee members that the people who wanted to discuss the hospital regulations had to leave. SUE MOSSGROVE informed committee members that each member was given a written update from Jay Livey as to the subcommittee's work. The subcommittee will be meeting the following day and will be attending the ASHA meeting on September 13 in Fairbanks. CHAIRMAN TAYLOR asked what the position of House members is on SJR 3. VICE-CHAIRMAN JAMES said she does not know why it did not pass this year but would look into it. There being no further business, CHAIRMAN TAYLOR adjourned the meeting at 4:25 p.m.