Legislature(1997 - 1998)
02/20/1997 03:37 PM Senate STA
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* first hearing in first committee of referral
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+ teleconferenced
= bill was previously heard/scheduled
CSHB 2(FIN) PERMANENT FUND DIVIDEND ELIGIBILITY
CHAIRMAN GREEN brought CSHB 2(FIN) before the committee as the next
order of business.
NICOLE POIERRIER , a legislative intern for Representative Pete
Kott, read the following sponsor statement into the record:
"HB 2 rights the wrong done by a particular court ruling. The
ruling's effects have unintentionally excluded spouses from
receiving permanent fund dividends in the event an individual
leaves the state under an allowable absence and the spouse
accompanies an individual.
"Historically the spouse is allowed to piggy-back on the individual
leaving the state under an allowable absence. A court ruling
changed this status by stating that marriage cannot be the reason
used to determine a person's residence eligibility.
Unintentionally, the effect of this ruling has disrupted the
allowable absences traditionally accepted which include a spouse
accompanying an individual for purposes of military service,
medical treatment and educational pursuits. Students who leave the
state on allowable absences remain eligible for the permanent fund
while their spouses who accompany them are ineligible. Similarly,
service members who leave the state on allowable absences remain
eligible for the permanent fund while the spouses are ineligible.
"Through monetary incentives the ruling has effectively encouraged
families to break apart for lengthy periods of time. The situation
is deplorable and will be remedied by HB 2.
"HB 2 excuses an individual from an absence of the state when the
reason for the absence includes accompanying another eligible
resident, who is absent for a reason permitted under this section,
as the spouse, minor dependent, or disabled dependent of the
eligible resident.
"Effective January 1, 1998, HB 2 will restore to spouses the status
they had prior to the Superior Court's unfortunate ruling. In
addition, this bill will permit Alaskans who, because of the
Court's ruling, did not previously qualify, to apply for prior year
dividends, provided they: (1) would have been otherwise eligible
for prior year dividends; and (2) apply for the prior year dividend
during the 1998 application period.
"HB 2 passed the House unanimously. This bill is good public
policy. I urge your support."
Number 195
CHAIRMAN GREEN noted the presence of Senator Mackie.
Number 227
REPRESENTATIVE PETE KOTT , prime sponsor of HB 2, came to the table
to respond to questions from committee members. Responding to an
inquiry by Chairman Green, he said the fiscal note from the
Department of Revenue shows two part-time people will be required
to verify the applications of persons filing. Conceivably, there
are 14,000 applications that potentially represents anywhere from
five to seven thousand individuals, although he doesn't think
anybody has a good grasp of the actual number. He also explained
that when that court decision was rendered, it really established
two classes of people. There were a number of cases in appeal to
the division for a number of reasons, and as those appeals were
resolved, those individuals were paid. These were individuals who
would have otherwise been affected by the court decision, but
because their appeals were heard in a most expeditious manner, they
were paid. However, there was this other group that had appeals in
the process, but because of the court decision, they were left out.
So, there were two groups of people and that was reason they went
back to 1992.
CHAIRMAN GREEN asked if he has extrapolated what the impact of this
legislation would be on future dividends. REPRESENTATIVE KOTT
responded that at the upper end it could effect the dividend by
about an $11 reduction in individual dividends, although it could
be substantially lower.
CHAIRMAN GREEN suggested that maybe at some point the issue of how
long an individual can be out of state for any reason and continue
to receive a dividend should be addressed and at some point have a
cut-off date.
Number 295
SENATOR MACKIE asked at what point do people that move away from
military service no longer become Alaska residents or qualify for
Alaska Permanent Fund Dividends. He questioned if somebody comes
here from Oklahoma and serves in the Air Force for a year or two
and then they are transferred somewhere else with probably no
intention of returning, how long are they being carried on the
books as Alaska residents, if they were in the state long enough to
become a resident and have their spouse become a resident. He also
asked if a military person leaves Alaska and marries someone, does
that spouse have to have been an Alaska resident in order to
qualify. He said he full well appreciates our armed forces, but
what bothers him and a lot of other people is people that come to
the state for one or two years, but then they leave with no intent
to return but still qualify for dividends. REPRESENTATIVE KOTT
commented that his questions were getting to the heart of the
problem, which is trying to define "intent." He said it is a
difficult issue whether it relates to the military or to students.
Number 370
DEBORAH VOGT , Deputy Commissioner, Department of Revenue, said over
the years the department has supported legislation such as HB 2 to
provide benefits to the spouses of individuals who are on allowable
absences, whose benefits were foreclosed by the court decision.
The department has a program that the Legislature has set up to
permit a number of categories of individuals to leave for permitted
purposes. Through the years the department has felt that it is
more equitable for all of the members of a family to be paid if
some of them are.
However, Ms. Vogt related that the department does have some
difficulty with the retroactivity portions of the legislation. One
reason is that for a person that was absent in 1992, the
information is getting fairly stale for the department to now make
a determination on whether the absence was permissible under the
rules and the intent that the individual harbored in 1992.
Another reason she would raise is that the Legislature has not
passed the legislation in three different iterations. The
department held a number of these cases open for years while the
Legislature considered several of these bills, thinking that the
Legislature was going to reverse the court's decision in this area
and allow them to pay these people. Last year when the legislation
failed, the department resolved those cases by denying those
appeals. Ms. Vogt said it now seems uncomfortable to them to go
back and reopen all the cases and pay folks for those past years.
She reiterated the department favors the legislation on an ongoing
basis, but would oppose it in its retroactive application.
Ms. Vogt said the department has a list of 11 allowable absences,
most of which were enacted by the Legislature, but the department
does have the statutory authority to add to the list at the
department level if the commissioner so chooses, although they
would rather not. She said every line that you draw has inequities
on one side or another. Her personal preference would be to have
it just like the longevity bonus program, people are not paid while
they are gone from the state.
Responding to Senator Mackie's concern about how long people can be
gone and still keep getting paid, Ms. Vogt said there are a couple
of rules, one of which is a departmental regulation and the other
the Legislature passed. One is the two-year rule, where people are
automatically ineligible if they have not been physically in the
state sometime within the last two calendar years before their
application. She noted that when the Legislature passed that law
a lot of people who had been gone for many years became ineligible
and were no longer able to stay on the roles.
Number 456
CHAIRMAN GREEN asked if there has been a visible difference since
the two-year requirement was passed, and MS. VOGT acknowledged
there was a very dramatic difference after that. She said the
other rule that addresses that issue is a regulation that says
after a person has been gone for five years, that individual is
presumed to no longer be a resident.
Number 470
SENATOR MACKIE inquired as to the actual number of spouses that
would be eligible under this legislation. NANCI JONES , Director,
Permanent Fund Division, related the cumulative number from 1992 up
to 1996 is 5,900. The application period for the 1997 dividend is
still open, but it is estimated there will be an additional 2,500
applicants. Ms. Jones added that the retroactive provision is the
section of the bill that the division disagrees with because it is
setting a bad precedent; it is opening up a filing schedule for
people who never filed before.
Number 540
SENATOR DUNCAN asked what the department's position was on CSHB
2(FIN). MS. VOGT responded that the department supports the
legislation without Section 4. MS. JONES added their support for
the first section of the bill which is separating the residency
from the eligibility requirements by putting it into statute.
Number 555
SENATOR MACKIE asked if the department would agree that the
original intent of the program was to allow for the spouses, and
the reason they haven't been receiving the dividend is because it
is the court that has said that they don't comply. He then asked
why they wouldn't support this legislation if it fixes the original
intent of the program. MS. VOGT clarified that the department does
support the legislation, but without the retroactive portion
because (1) the information is stale, and (2) because of the
failure of the Legislature to pass this legislation in the last
three years.
Number 566
CHAIRMAN GREEN opened the meeting to public testimony.
SUSANNE BADILLA of Juneau, testifying in support of HB 2, said she
has been a resident of Alaska since 1979 and had been receiving
permanent fund dividends since the program's inception. In 1994
she and her husband decided to move their family of five to
Washington for a year so that her husband could attend college to
get a special education endorsement. Because the family was out
of state for 180 days in two separate calendar years, she was
denied dividends for both of those years; however, her husband and
children continued to receive their dividends. She said as the
statute now stands, it penalizes spouses who choose not to be
separated from their families, as well as putting a financial
burden on families who are depending on the dividend to make ends
meet. She urged the committee to rectify the situation by passing
HB 2.
TAPE 97-6, SIDE B
Number 015
JOAN HALE , testifying from Anchorage in support of HB 2, stated she
has lived in Alaska since 1977, except for temporary absences when
her husband was stationed in Mississippi for his military service.
While they were out of state, her husband and children continued to
receive their dividends, and she received hers until 1994 when she
was denied the 1994 dividend after the court ruling came down, in
spite of the fact that she had returned and was living permanently
in the state. To demonstrate their intent to return and remain
permanently she and her family returned once in 1992 for three
weeks and twice in 1993 for a total of four weeks. She said she
and her family followed the rules that were required to maintain
their residency for the dividend, but none of the information they
provided to the department was considered in the denial during the
appeal process. The sole reason for the denial was the arbitrary
exclusion of the piggyback rule. Ms. Hale then filed suit after
all attempts through the permanent fund appeal process had failed.
They prevailed in Superior Court; Judge Shortell agreed that the
Department of Revenue had erred in applying the Zieler case as the
sole reason for the denial of Ms. Hale's 1994 dividend as there
were other factors that must be considered and they were not. The
department has filed an appeal with the Supreme Court and is
demanding that the Hales pay its courts cost should the department
prevail, but on the other hand, the department is unwilling to pay
any of the costs incurred by the Hale family. She urged the
committee's support for HB 2.
Number 075
WOODY WENSTROM , testifying from Fairbanks, said in 1992 he was the
recipient of an international teaching fellowship. This fellowship
sent him and his family to Australia for the entire year of 1992.
Because of this they were denied the 1993 dividend, and because
they arrived back home during the second week in January of 1993,
they were also denied the 1994 dividend. He said the statute
provides that professional educational development and sabbaticals
are allowable allowances for receiving the dividend. The Fairbanks
North Star Borough School District has informed the Department of
Revenue that they consider his fellowship a sabbatical and the
Department of Education considers his fellowship professional,
educational development, but the Department of Revenue refuses to
accept these letters as acceptable to award he and his family the
dividend. He suggested the best way to handle this situation is to
include in the bill his situation as a international teaching
fellow as an allowable absence to receive the dividend.
Number 100
JILL HOCKEMA , testifying from Homer in support of HB 2, said she
was born and raised in Ketchikan, living there until 1993 when she
moved to Oregon with her spouse, who is in the U.S. Coast Guard.
The whole time they were gone, she maintained her Alaska residency
and she returned to the state every single year that they were
gone, but she has been denied dividends since 1994. She was
informed by the department that she was denied the 1996 dividend
solely because she did not own a home in Alaska and she chose to
work outside of the state while her husband was serving his tour of
duty. Ms. Hockema said she has been a resident for thirty years
and she feels like she is being penalized for marrying a member of
the military who gets transferred out of state and even if they
have every intent to move back.
Number 152
LYDIA CLARK , a resident of Sitka, voiced her strong support for HB
2. Her husband was diagnosed in Sitka with ALS in 1994. They were
told to seek better medical care in the Lower 48, which they did,
and, as a consequence, she and her children lost their eligibility
for leaving with him. She and the children returned to Sitka in
July 1995, and they have been denied the permanent fund dividend
for 1995, 1996 and they will be in review for 1997.
Number 192
There being no further public testimony, CHAIRMAN GREEN stated
there were a couple of things she wants to check on relating to the
bill, and that the bill would be back before the committee the
following week.
There being no further business to come before the committee, the
meeting adjourned at 4:45 p.m.
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