Legislature(2017 - 2018)SENATE FINANCE 532
04/03/2018 09:00 AM FINANCE
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HOUSE BILL NO. 278 "An Act extending the termination date of the Board of Certified Real Estate Appraisers; and providing for an effective date." 9:47:38 AM MEGAN HOLLAND, STAFF, REPRESENTATIVE ANDY JOSEPHSON, discussed HB 278. She stated that the bill extended the termination date of the Board of Certified Real Estate Appraisers. She shared that the Board of Certified Real Estate Appraisers came to be after the housing market crash in the early 2000s. There was a federal mandate requiring states to regulate real estate appraisers, so the state board served to fulfill the federal requirement. The board was responsible for licensing, training, regulating, and license enforcement of real estate appraisers in the state. She stated that the board currently managed 261 licensees. The board received a full eight-year recommendation from Legislative Audit. Additionally, there were additional audits from the federal audits in 2005 and 2007. She stated that she had received no opposition to the board extension. KRIS CURTIS, LEGISLATIVE AUDITOR, ALASKA DIVISION OF LEGISLATIVE AUDIT, addressed the document "A Sunset Review of the Department of Commerce, Community, and Economic Development, Board of Certified Real Estate Appraisers (board)," (copy on file). She stated that the audit included a background information section beginning on page 3, which explained the regulatory oversight structure for the appraisal industry established by the federal government. The framework involved private entities that set appraisal standards and qualification criteria for licensing. It included state boards that certified and licensed real estate appraisers, and it included federal entities that regulated the industry. She stated that the Federal Appraisal Subcommittee was responsible for monitoring state licensing boards and enforcing standards. She explained that the information was included in the background section of the audit, because it was important to highlight that the board was subject to external oversight outside of the sunset process. The external oversight included onsite compliance reviews of the board. She stated that the additional oversight factored into the recommended term of extension. She noted that page 7 held the report conclusions. She stated that it was found that the board was serving the public's interest by monitoring certificate holders and licensees; and working to ensure that only qualified individuals were practicing. She stated that it was also found that the board developed and adopted regulations to comply with federal requirements to improve the real estate appraisal industry and better protect the public. She stated that there were two recommendations beginning page 16. The first recommendation was that that the director continue to improve administrative support to the board. She shared that through the testing, some challenges were found to administrative support. She explained that there was an examination of the entry of the certificate holders into the national registry, which was a federal requirement. The audit found that three certificate holders were entered into the registry incorrectly. Those entries were correctly, when the division was notified. She stated that there were five investigative cases tested, and three of the five had extended unjustified periods of inactivity. She stated that the periods ranged from 130 to 203 days, so there were some improvements needed in the timeliness of the investigative process. She remarked that there was not proof of whether three of the eleven board meetings held during the audit period were public noticed. She felt that those findings were not individually significant, but when considered together it indicated a need for improved administrative support to the board. 9:52:07 AM Ms. Curtis looked at page 17, which was the second recommendation. It was recommended that the division director, in consultation with the board, reduce fees to address the surplus. She shared that as of March 2017, the surplus was $165,000, however it was expected that the surplus be significantly higher as the renewal period was June 2017. She remarked that by the end of FY 17 there was an expected significant surplus. She noted that the board had asked for a fee analysis from the division management, but due to competing priorities there was no fee analysis. As a result, licensees paid a higher than justified fee. She looked at page 11, which was the standard schedule of licensing activity. She noted that there were 261 licensees as of March 2017. The schedule of revenues and expenditures was on page 12, and the schedule of licensing fees on page 13. She remarked that on page 14, it was discussed that the board planned to move forward with regulating appraisal management companies. It would significantly expand the boards duties in the future. She noted that, despite the change of duties, she recommended the maximum eight-year extension, which was in recognition of the additional federal oversight. The Federal Oversight Committee performed onsite reviews every two years. The department's response to the audit was on page 27, which was a concurrence of the findings and recommendations. The board's response was on page 29, and they also were in concurrence. She announced that on the bottom page 31, the board stated that they had received an attorney general opinion that concluded in order to move forward with regulating appraisal management companies, a statutory change was required. She stated that Legislative Audit did not agree with that conclusion. She noted additional auditor comments beginning on page 33, which described the review of the federal code and state statutes. She remarked that she did not believe that it was essential to change statutes, but felt that "it certainly would not hurt to clarify them." Co-Chair MacKinnon noted that page 11 gave the up or down percentages on all the other boards. She wondered whether the 261 licenses up or down compared to the last auditing period. Ms. Curtis replied that the prior sunset audit identified 266 licenses as of March 2013, so that was a slight increase. Co-Chair MacKinnon asked if new appraisers were coming online successfully, or if there were challenges. Ms. Curtis replied that there was no found challenge in recruiting and retaining appraisers. Co-Chair MacKinnon noted that they were held constant from the previous audit. Ms. Curtis replied that there were 266 as of March 2013, which was relatively stable. Co-Chair MacKinnon asked if Ms. Chambers could speak to consistent numbers for the board, as there had been a suggestion that the board made it difficult to process new appraisers. She wondered about what challenges were present. SARA CHAMBERS, DEPUTY DIRECTOR, DIVISION OF CORPORATIONS, BUSINESS AND PROFESSIONAL LICENSING, DEPARTMENT OF COMMERCE, COMMUNITY AND ECONOMIC DEVELOPMENT, relayed that appraisals were a fairly stable industry, and she had not heard of any inherent challenges to getting licensed. Co-Chair MacKinnon asked why the fees were not considered sooner. Ms. Chambers informed that the fees fell at a time when the department was juggling multiple priorities, and there had been a lack of resources. She offered to provide an update. 9:58:27 AM Co-Chair MacKinnon OPENED public testimony. DAVID DERRY, CHAIR, BOARD OF CERTIFIED REAL ESTATE APPRAISERS, KENAI (via teleconference), testified in support of the bill. He commented that the department had given support that had allowed for the board. He discussed the board being subject to annual audits. Mr. Derry addressed Co-Chair MacKinnon's question about the challenges to becoming certified. He discussed federal requirements. The new regulations would be effective May 2018. Co-Chair MacKinnon CLOSED public testimony. Vice-Chair Bishop discussed the fiscal note. Co-Chair MacKinnon queried the board's proposed fee schedule that what was proposed from the department. She noted that the board proposed $179,923, and the division proposed $264,823. She wondered why there was a difference in proposals. Ms. Chambers wondered whether that query was held in the audit. 10:04:53 AM AT EASE 10:05:46 AM RECONVENED Co-Chair MacKinnon remarked that Ms. Chambers needed time to research the difference. HB 278 was HEARD and HELD in committee for further consideration.