Sources of Revenue:

General Fund,Special Fund,Other Fund

Legislation creates:

A New Program

Fiscal Note Summary

Effect this measure will have on costs and revenues of state government.

The purpose of this bill is to create an independent Office of Administrative Hearings (OAH) within the Executive Branch of Government which consolidates the Administrative Law Judge and Hearing Examiner functions from individual agencies, boards and commissions to a centralized Office of Administrative Law (OAL). The bill provides that the Governor, Judiciary Branch, Legislative Branch, cases involving conduct of inmates, Parole Board and cases involving conduct of persons in the military are exempt. Authority is given to the Governor to temporarily exempt any agency from the OAL until July 1, 2008. Allows for agencies that are not required to submit cases to the OAL to request that a case be heard by an adjudicator at the OAL. Allows the OAL to charge the requesting agency a fee for services sufficient to cover actual costs of services. The bill provides for a three tier salary system for ALJ’s and Hearing Examiners. ALJ’s salary shall be not more than 90% or less than 50% of current Circuit Judges salary, which is $116,000. The Chief Administrative Law Judge’s salary shall be set by the Governor. A three tier salary system is also provided for Hearing Examiners which may not exceed that of Magistrates, which is currently $50,000. The bill also establishes an Administrative Law Commission made up of seven members appointed by the Governor and confirmed by the Senate. The members of the Commission shall be paid reasonable compensation for each day worked and expenses consistent with the state travel regulations. The full-time personnel utilized for administrative adjudication, assets, liabilities, contracts, property, records, and unexpended balances of appropriations, authorization, allocations and other funds shall be transferred to the OAH. All adjudicators in the OAH shall be professionals who are members of the classified service. All ALJ’s shall be members of the West Virginia State Bar. However, those current ALJ’s who are not attorneys shall not be required to be an attorney. The bill allows the OAH to contract for qualified individuals to service as ALJ’s. All decisions of the adjudicators shall be final and binding but can be appealed to the Circuit Court. The exact fiscal impact associated with the passage of this bill can not be determined. However, as best can be calculated from the data collected, the total savings associated that could be obtained with the passage of this bill is $1,857,206.00. However, this figure assumes there would be a reduction in support staff in order to be in line with the average ratio of adjudicator to support staff. If no staff reductions were achieved there would be only a savings of $289,806.00 annually after the one time moving expense. Details are provided below.

Fiscal Note Detail

Effect of Proposal	Fiscal Year
Effect of Proposal	2007 Increase/Decrease (use"-")	2008 Increase/Decrease (use"-")	Fiscal Year (Upon Full Implementation)
1. Estmated Total Cost	150,000	-1,857,206	0
Personal Services	0	0	0
Current Expenses	0	0	0
Repairs and Alterations	0	0	0
Assets	0	0	0
Other	0	0	0
2. Estimated Total Revenues	0	0	0

Explanation of above estimates (including long-range effect):

Based upon the current salaries of the Administrative Law Judges there would be an increased cost for salaries in the amount of $143,855.20, as 7 current ALJ’s make less than the salary provided for in the proposed bill. However, it should be noted that these ALJ’s may not be attorneys licensed to practice law in the State of West Virginia. The bill requires all new hires in the position to be an attorney. Adding language in the bill that all current employees maintain their salary could eliminate this increased cost for ALJ salaries. There would no increased costs in regard to Hearing Examiner salaries as the current salaries are within the salary range identified in the bill. The position of Chief Administrative Law Judge is appointed by the Governor. The Chief Judges’ salary is at the discretion of the Governor. It is unknown what salary would be provided for, however, based upon the qualifications and experience required for the position, it is estimated that the salary would be in the range of $57,444 to $106,272. This is the salary range established by the Division of Personnel for a Chief ALJ. Additionally, it is unknown whether a current ALJ would move into the position of Chief ALJ or whether it would be a new hire. Therefore, there may be no increased cost for the position of Chief ALJ. There would be an approximate cost of $5,000 or less associated with the creation of the Administrative Law Commission. There would be 7 Commissioners who are entitled to reasonable compensation plus expenses as set forth in the state travel regulations. This figure assumes they would meet quarterly and reasonable compensation would be $150.00 per day (4,200) which is the per diem for legislators. Expenses should not exceed an additional $800.00 annually. There would be a one time expenditure for the actual moving costs. This is estimated to be approximately $150,000. This figure is based upon an average of $500.00 per person which would include the moving of their furniture, equipment, files, copiers, etc. It is estimated that a maximum of 250 people would be moved into the OAH. It is estimated that the consolidation of office space would result in a minimal cost savings. The exact amount can not be determined as the exact square footage that would be required and that is currently utilized is unknown. Please note the average square footage required per employee is 250 and the average price per sq foot is $13.00 annually which includes the utility costs. The savings can’t be determined because we have no knowledge of what is currently being spent. Currently our records indicate there are 123 in-house adjudicators with a support staff totaling 103 employees. The total salary for the support staff is $2,853,874.00. This is an average of $27,700. The average ratio for supervisor versus staff is three to one. Using that average, based upon 123 adjudicators, there would be a need for 41 staff employees at a salary of $27,700. The support staff could be reduced by 62 employees or in an amount of $1,717,400. Those 62 employees could be eliminated through attrition or transferred to other state agencies in need of their services. The centralized OAH would allow for cross training of ALJ’s and Hearing Examiners which could result in a reduction of adjudicators and staff through attrition. A dollar amount can not be determined but over time could result in reduction in work force and a more efficient streamlined government. The true cost savings would be a result of the elimination of contract adjudicators who are paid on an hourly basis. Based upon the information collected, during the 2005 calendar year, there was a total of $544,933.11 paid to contract adjudicators. We believe this is a conservative amount based upon our inability to obtain information from all agencies, boards and commissions. We were provided names of adjudicators utilized, however, we may have paid their company or law firm rather than the individual adjudicator so those funds expended would not be reflected in the above total. The totals were derived based upon an individual search of the statewide accounting system’s vendor file. Additionally, there were many instances that agencies, boards and commissions paid employees of the Attorney General’s office to provide adjudicator services on an hourly basis. Since those adjudicators are full time employees it could not be determined the amount of funds expended for their services. The Attorney General’s office would have been compensated/reimbursed for their services but that amount is unknown. The Attorney General’s office has collected $3,002,942.40 for its services to date for this fiscal year. They advised that most of those funds would be for representing clients in legal proceedings and very little of the work would have been for general advice or contract review.

Memorandum

In the preparation of this fiscal note several assumptions were made. Those are outlined below: 1. All funds that come from outside sources currently for adjudicator services such as special revenue, federal money or grant money could be maintained after the transfer of the employees to the OAH. However, the current language in the proposed bill may not be adequate to capture those funds. 2. The compensation for the Administrative Law Commission would not exceed $150.00 per day which is the per diem paid to the legislators. 3. A central office would be established in Kanawha County, West Virginia, with satelite offices in other areas of the state where consolidation of space is warranted. The data collected to date would indicate that office space could be consolidated in Morgantown, Beckley and other areas where the state currently has adjudicators who work for different agencies in separate offices in the same vacinity. 4. Creating a centralized OAH would largely eliminate the need for contract adjudicators except in rare circumstances. 5. When determining the one time moving cost it was assumed that the new office space that employees would be transferred to would already be wired for computers, telephones, etc. 6. No revenues would be generated by the OAH for providing adjudicator services as the bill states they would be reimbursed for their costs. However, any monies received for the services would further subsidize their operating budget. 7. Having an independent office of adjudicators would improve the perception that decisions are fair and unbiased which may reduce the number of appeals to the Circuit Court. Having the adjudicator located within the agency gives the appearance that decisions are more favored to the employer. Additionally, the creation of an independent OAH would help with the separation of powers issue.

Person submitting Fiscal Note: Donna Lipscomb
Email Address: dlipscomb@wvadmin.gov