Legislature(2017 - 2018)HOUSE FINANCE 519
03/13/2017 01:30 PM FINANCE
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|HB90HOUSE BILL NO. 90|
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
HOUSE BILL NO. 90 "An Act relating to occupational licensing fees; relating to an occupational investigation surcharge; and providing for an effective date." 2:28:06 PM REPRESENTATIVE SAM KITO, SPONSOR, introduced himself and the bill. CRYSTAL KOENEMAN, STAFF, REPRESENTATIVE SAM KITO, explained that HB 90 eased the burden of regulatory costs for licensees governed under Title 8 regarding corporations, business and professional licensing. The legislation would remove investigative fees out of regulatory costs paid by each licensee and spread the total cost of investigation charges across all licensees regardless of profession. The investigative surcharge was in lieu of the current amount that licensees paid in their overall license fee. The licensee would pay a licensing and administrative fee and in addition, pay a separate investigative surcharge. The Department of Commerce, Community and Economic Development (DCCED) estimated the separate surcharge at $55 for all licensees every two years. Some boards would benefit greatly and conversely, others might experience a slight increase. She knew that the licensing issues pertained to working people that had an interest in avoiding large fee increases and a level playing field without barriers to entering a profession. She felt that licensees wanted assurances from DCCED that it would stabilize licensing fees. She elaborated that one of the reasons for large fee spikes was due to investigative costs, which were difficult to contain. If a professional licensing program received a complaint leading to a complex investigation, an enforcement action could exceed $100,000. The scenario would cause devastating fee increases in licensing programs with fewer licensees. She summarized that the bill would spread investigative expenditures across all 74,000 licensees. 2:32:33 PM Representative Wilson appreciated the effort to resolve the issue, but she wondered if the bill solved the issue related to investigations. She wondered what really drove the high cost of investigations Representative Kito identified that the yearly total investigative costs were relatively consistent at roughly $4 million. He recapped that for smaller boards an investigation can significantly increase their fees. Some boards were large and investigative fees were spread out across members. He commented that some boards with fewer members that developed a large debt were at risk of losing their ability to perform statutory board functions; one board did temporarily shut down. Some of the boards with higher costs caused fee increases to the point of being a barrier to entry into the professions. He surmised that since investigative costs were fairly consistent and the state had a large number of licensees, spreading the costs out was a small burden to the larger boards and eased the burden on smaller boards. He reported that one challenge that remained was how to ensure the state was maintaining efficient use of the fee revenue while still carrying out effective investigations. The issue was not addressed in the bill. Currently, individual boards identified which cases to consider and certain board members decided whether to pursue further action. Subsequently, the investigative result was communicated to the boards. He noted that the solution in the bill was similar to an insurance model. The goal was to protect public safety and have reasonable fees. He learned that some of the large boards ran a surplus in anticipation of an investigation, so the fees would remain consistent. However, if the investigation costs were spread out over all boards, the larger boards' fees may also decrease. The larger pool for investigative costs created fee stability that averaged out over years and prevented large fee spikes. He felt that the larger boards could eliminate their practice of maintaining a surplus. 2:37:28 PM Representative Wilson questioned whether each board should be responsible for its own costs and felt the issue was the larger policy call. She wondered whether another issue was whether the state decided to pursue investigations instead of the board. She mentioned hearing from the Board of Nursing, relaying that the board worked hard to keep its costs down. Representative Kito responded that the investigative process would not change. He offered that an investigation was initiated by the public or through a board member complaint. The exact same processes would be used to implement investigations. The provision was related to how costs were attributed to boards. He used the Board of Midwifery as an example. A single investigation caused fees to possibly skyrocket to $4.8 thousand biennially, which was identified as a barrier to entry by the Legislative Audit agency. An audit recommendation was to merge the midwifery board with a larger board. However, merging boards created members that lacked expertise in the other profession and engaged members in professional issues and functions they were not familiar with and possibly involved them in the decision on whether an investigation was warranted for a profession they did not belong to. How professions were licensed was a big question, but he wanted to ensure the professions were protecting public safety. Representative Wilson agreed the issue had existed for many years and appreciated the sponsor's effort. She was trying to determine if the proposed bill was the solution. She asked whether the boards were notified of the legislation and how the provisions would impact each board. Representative Kito responded that his office had been communicating with some of the boards. Some were supportive, and others had expressed concern about increasing fees. He noted that information was included in the member's bill packets regarding the new fee schedule ["Division of Corporations, Business and Professional Licensing Professional Licensing Fee Changes and Program Investigation Costs Comparisons" (as of January 1, 2017) (copy on file).] Representative Wilson hoped to hear feedback from the boards. She observed that the bill was a big policy shift that affected the boards. Ms. Koeneman relayed that DCCED was engaged in discussions with the boards regarding HB 90 and boards were meeting and proposing action. 2:43:19 PM Co-Chair Foster suggested Representative Wilson work with Representative Kito's office on the issue. Co-Chair Seaton was concerned about investigations related to non-licensed individuals, which resulted in a cost to law abiding licensed individuals. He asked how the issue was handled within the system. Representative Kito answered that the question pertained to unlicensed practice and whether the board should have to pay for the investigations. He elaborated that if the state made unlicensed practice a crime, the Department of Law would investigate, but it was likely the DCCED investigators would still be drawn in because of their expertise. He had not collected information identifying how many of the complaints were a result of unlicensed practice or other activities related to a licensed practice. He hoped to pursue unlicensed practice as a separate issue next year. Co-Chair Seaton voiced that one board the committee had heard from had high fees due to investigations related to unlicensed individuals. He suggested that the legislature consider a remedy that included cost recovery from the unlicensed individuals. He thought the scenario could lower licensing fees. Representative Kito answered he would keep the issue at the forefront of their work. Vice-Chair Gara asked whether the cost impact of the one fee proposal on all the boards was accessed by the department. Representative Kito answered that the information was included in members' packets. [Document cited earlier.] Ms. Koeneman added that DCCED performed the analysis and the fee was $55 every two years. Vice-Chair Gara asked for the number of boards. Ms. Koeneman replied there were 43 boards. Vice-Chair Gara did not believe that the sponsor should perform an analysis on every board. Ms. Koeneman answered that if board action was required to proceed, a board meeting was necessary, which could add additional costs for the boards. Vice-Chair Gara spoke to a recent committee hearing on a midwifery bill. He referred to a conversation regarding penalties for violations. He asked whether there was a uniform penalty structure for boards. Ms. Koeneman replied that AS 08.01.075 outlined the disciplinary powers of a board and subsection 8 specified that the fine not exceed $5,000. In addition, AS 08.01.102 authorized that DCCED could issue a citation for unlicensed practice or activity but did not specify a dollar amount. Vice-Chair Gara asked whether the penalty structure also included cost recovery for the state. Ms. Koeneman replied in the negative. 2:50:03 PM Representative Kito interjected that one issue involving cost recovery for investigations was that penalty proceeds were deposited into the general fund (GF), which he preferred. He worried that collecting penalties to support the licensing program opened the possibility that investigations could be used to fund the licensing program. He favored using the licensing fees to fund the programs. Vice-Chair Gara clarified that he had only inquired whether the costs were recovered in general. Representative Kito replied that he would examine the issue over the interim. Ms. Koeneman added that DOL raised concerns with the issue of raising penalties to cover the full investigative costs. Representative Guttenberg spoke to investigations of people practicing without a license and how it impacted the cost to a specific board. He suggested parity for a board when the investigative cost were recovered and deposited into GF. He asked whether the sponsor considered some type of cost recovery allocation from GF to a board. He stated that the system was broken and believed the bill contained a decent solution. 2:54:01 PM Ms. Koeneman replied that if there was a mechanism in place for the fines to reimburse the board, more than likely it would come through the operating budget process and the legislature could possibly allocate some funds back to the boards. Representative Thompson relayed hearing about incompetence by state board investigators that resulted in longer than necessary investigations which added costs onto the profession. He favored a cost recovery process for the boards. He believed HB 90 was a good solution. He worried about boards currently with large defaults that increased its fees. He asked whether the one fee system would be charged in concert with fees related to a large deficit. Ms. Koeneman answered in the affirmative and added that the boards with deficits were required to pay their deficits before participating in the bill. She agreed it would hurt to pay off the deficits, but it would be in the best interest in the long-term. She reported that the Medical Board accrued investigative costs of $632 thousand over the biennium. The Nursing Board had $909 thousand in investigative costs for FY 14 and FY 15. The Big Game Commercial Service Board accrued investigative costs of $559 thousand. She surmised that in the long run the costs would level off and create a more predictable cost structure for all boards. 2:58:18 PM Representative Pruitt spoke to a handout ["Division of Corporations, Business and Professional Licensing, Professional Licensing Fee Changes and Program Investigation Costs Comparisons as of January 1, 2017" (copy on file)]. He remarked on the large income disparity among the different professions. He identified the Board of Barbers and Hairdressers and cited the professions as examples of lower income occupations. He asked how to justify increasing fees for some boards and penalizing them for mistakes and incompetence by the state when managing boards' fees. He agreed that a solution was needed but disagreed with the provisions in HB 90. Representative Kito answered that at first glance the solution seemed unfair due to the income inequities. However, he likened the solution to an insurance policy and pointed to how automobile insurance works as an example of the benefits of HB 90. He offered that the Board of Barbers and Hairdressers may not receive a benefit in the current year, but perhaps there would be an investigation in the future that would have significantly increased their fees. He communicated that rather than every board paying for 30 percent to over 50 percent of their investigations, everyone paid a smaller percentage and all boards had access to the investigative services. Ms. Koeneman added that in FY 12 and FY 13 the Board of Barbers and Hairdressers had only paid $59 thousand for investigations but the amount rose to $131 thousand in FY 14 and FY 15. The board's surplus was diminishing; one more large investigation would likely increase their fees. She expected that the bill would level off fees. Representative Pruitt countered that if the provision was likened to insurance, a person paid less if they were accident free. He surmised that there should be different levels of payment versus one fee, for boards with lower costs; lower cost boards should pay less. He stated that currently there was pressure on the legislature and DCCED for prudent use of investigations to contain costs. He opined that the pressure was necessary to keep the investigatory process in check. He wondered how the bill ensured the efficient use of investigations. 3:06:01 PM Ms. Koeneman answered that there would be 74,000 licensed individuals to collectively weigh in on the department's regulatory process and the amount of the surcharge, which would maintain pressure on the department. Representative Kito interjected that one of his concerns was a board that made decisions regarding whether to proceed with an investigation based on fees increasing. He believed the scenario was an example of inappropriate pressure; if the state did not investigate a person practicing inappropriately the state was failing its mission. He related that investigators were overworked and responded to public or licensee complaints. He had not heard of investigators "trying to drum up work for investigations." He reiterated that the investigatory process would remain the same. He did not believe that currently boards made investigatory decisions based on possible fee increases. Co-Chair Seaton OPENED public testimony. SUSAN TERWILLIGER, PRESIDENT, MIDWIVES ASSOCIATION OF ALASKA, ANCHORAGE (via teleconference), spoke in strong support of the legislation. She voiced that the bill was beneficial for the consumers of midwifery care. She shared that midwifes attended the births of people in all different occupations. She hoped the bill would pass. Co-Chair Seaton CLOSED public testimony. HB 90 was HEARD and HELD in committee for further consideration.