Legislature(2019 - 2020)GRUENBERG 120
05/11/2019 11:30 AM House STATE AFFAIRS
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| Audio | Topic |
|---|---|
| Start | |
| HR11 | |
| HB132 | |
| HR11 | |
| HB141 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HR 11 | TELECONFERENCED | |
| += | HB 132 | TELECONFERENCED | |
| *+ | HB 141 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| + | TELECONFERENCED |
HB 141-PFD PAYMENT SCHEDULE
11:48:32 AM
CO-CHAIR KREISS-TOMKINS announced that the final order of
business would be HOUSE BILL NO. 141, "An Act relating to
disbursement of the permanent fund dividend; relating to
transfers of permanent fund dividends into the restorative
justice account; and relating to contributions from, claims
against, and assignments of permanent fund dividends."
CO-CHAIR KREISS-TOMKINS, as prime sponsor, introduced HB 141 -
relating to the permanent fund dividend (PFD) payment schedule.
He expressed his desire to air the concept of quarterly
disbursements of the PFD; there is rising interest in the idea;
and the Senate Judiciary Standing Committee incorporated
quarterly disbursements into SJR 5 [4/14/19 committee meeting].
11:49:57 AM
SIDHYA BALAKRISHNAN, Director of Research, Jain Family
Institute, relayed that she performs research on the social
science perspective of quarterly payments versus annual payments
of guaranteed income. She said that the ideal scenario is that
a person would anticipate the annual payment and plan
accordingly; however, in poor households - ones constrained with
savings and credit - people cannot anticipate how to spend the
payment. She mentioned that literature is not conclusive in
supporting more frequent payments; however, literature suggests,
and it is her conclusion, that more frequent disbursements are
needed for poor households to smooth out their consumption. For
those lacking credit, money is needed more often in order to
make ends meet. She recommended an "opt-in" option for
frequency of payments. She emphasized the importance of people
receiving money when they need it most.
CO-CHAIR KREISS-TOMKINS restated Ms. Balakrishnan's perspective:
from the body of academic research, it is ambiguous that a more
frequent disbursement schedule is recommended; however, she
recommends giving PFD recipients the discretion for frequency of
payments.
MS. BALAKRISHNAN clarified that research results are ambiguous
inasmuch as the population is widely heterogenous and has a
variety of restraints; people who have large investments to make
can benefit from a single disbursement. She maintained that to
create a policy to help the most people, an option for frequency
of disbursements is best.
11:53:50 AM
REPRESENTATIVE STORY asked what the effect [of quarterly
payments] would be on the Alaska Permanent Fund Corporation
(APFC).
CO-CHAIR KREISS-TOMKINS answered that APFC has been clear that
it does not have a position or predilection of the payment
schedule; it needs certainty regarding the amount to be
disbursed and when it is to be disbursed.
REPRESENTATIVE VANCE asked whether there will be a formal
presentation on the proposed legislation before invited
testimony.
CO-CHAIR KREISS-TOMKINS replied that the invited testimony is on
the general question of disbursement frequency, and Ms.
Balakrishnan has studied the literature of disbursement of cash
transfers. He added that a formal presentation on HB 141 may be
forthcoming.
REPRESENTATIVE VANCE expressed that a formal presentation on HB
141 could inform the public; it is big issue among Alaskans; and
they will want input.
11:55:56 AM
REPRESENTATIVE HOPKINS asked Ms. Balakrishnan whether she is
aware of other social safety net programs in which a one-time
large distribution was replaced with smaller more frequent
distributions.
MS. BALAKRISHNAN mentioned guaranteed income literature and the
universal basic income (UBI) experiment in Stockton, California
disbursing monthly payments. She relayed that there have been
various proposals for the frequency of money transfers. She
reiterated that the evidence is different for different people.
She stated that giving people frequent payments helps smooth
consumption, especially in poor households, which relates to
Alaska villages.
REPRESENTATIVE HOPKINS asked whether quarterly payments of the
PFD would make it more like guaranteed income payments.
MS. BALAKRISHNAN explained that most people define guaranteed
income as frequent unconditional payments - enough to sustain a
certain standard of living. She said a lump sum payment is
close to a guaranteed income payment; however, assumptions are
made as to how people will spend that money and plan accordingly
depending on the size and frequency of the payment. She
maintained that it is a difficult question; guaranteed income is
regarded as high frequency yet is still discussed in terms of
the amount of money, not the frequency of the payment.
11:59:34 AM
CO-CHAIR KREISS-TOMKINS asked for a definition of consumption
smoothing.
MS. BALAKRISHNAN responded: An individual receiving income must
decide how to spend it; if it is an anticipated transfer - the
amount and time of payment is known - the person may plan. The
goal is to consume, save, or invest at the same levels in order
to avoid shocks or volatilities in income or consumption and by
doing this, spread consumption across a lifetime. This is
consumption smoothing.
12:01:37 PM
REPRESENTATIVE HOPKINS referred to a guaranteed income
guaranteeing a quality of life. He asked whether a payment of
$3,000 or $3,200 per year is enough to qualify as a guaranteed
income.
MS. BALAKRISHNAN replied no. She stated that Alaska's PFD
program has been mentioned in guaranteed income literature
because it is the most long-standing unconditional payment. She
stated that Alaska's PFD can be referred to as guaranteed income
but not universal basic income. She maintained that guaranteed
income does not refer to "minimum standard of living." Alaska's
PFD is included in the guaranteed income literature because it
serves as a proxy to understanding the unconditionality and the
long-term effects of payments, but it is not appropriate in UBI
literature.
12:03:15 PM
REPRESENTATIVE WOOL mentioned that a PFD check of $3,000 would
give a family with two adults and four children $18,000. He
suggested that this amount might be considered basic income in a
rural community.
MS. BALAKRISHNAN agreed, but said she would need to look at the
minimum standard of living for a household to make that
assessment. She said that typically UBI is discussed in terms
of $500-$1,000 per month payments; and Alaska's PDF amount falls
short of that threshold.
12:07:06 PM
REPRESENTATIVE WOOL expressed his belief that the concept of
payments over time stemmed from a desire to curb certain
spending habits of recipients and activities causing social
problems. He mentioned missed work, substance abuse, and
domestic violence. He referred to the mention of an opt-in
option and opined that the people who would best benefit from a
timed payment would be the ones not to choose a timed payment.
He asked whether under UBI, recipients are given the option of a
monthly payment versus a lump sum.
MS. BALAKRISHNAN relayed that there is ample evidence that
people in extremely constrained households do not use money
unwisely. She maintained that her reasoning in recommending an
opt-in option is not to change how people spend money, but
because she cannot know the constraints and needs of the
recipient. As a policy maker, she is looking for ways to help
people. She expressed her belief that people are the best
judges of their own lives and should be allowed to make the
choice of payment schedule.
REPRESENTATIVE WOOL relayed that Ms. Balakrishnan stated that
lump sum payments don't increase temptation purchases. He asked
whether she has looked at Alaska statistics. He mentioned that
certain behaviors are documented to have spiked shortly after
check disbursements, and anecdotally, there are stories of
increases in certain behaviors.
MS. BALAKRISHNAN responded that her citations are from social
science literature and research globally.
12:13:16 PM
BRUCE TANGEMAN, Commissioner, Department of Revenue (DOR),
relayed that that Alaska has distributed the PFD for 37 years -
from 1982-2018; the low was $331 in 1984 and the high was $2,017
in 2015. There was no discussion about when the check would be
distributed; it always was done in October. He speculated that
October was chosen because of the need for money for heating
fuel. He stated that from the department's perspective, cost
and technical challenges must be considered. He asked, "What's
the goal?" He acknowledged different opinions on the topic. He
relayed that a great deal of work goes into issuing the PFDs and
some of the biggest concerns are the cost of distributing four
times as many checks. He mentioned staff reductions in the PFD
Division and streamlining procedures. During PFD application
and distribution, it is "all hands on deck." Disbursement four
times per year would require a substantial reinforcement of the
division.
12:18:19 PM
REPRESENTATIVE WOOL suggested that applications would still be
once per year; disbursements would increase to four.
MR. TANGEMAN agreed. He stated that the other issue relates to
the thousands of PFD garnishments. He mentioned that
Pick.Click.Give. would be affected as well. He suggested that
the opt-in system would entail substantial costs for
reprogramming the computer system. He offered that APFC is
neutral on this issue; its main concern is with the percent of
market value (POMV) and the cash requirements. How the money is
spent is not its concern.
12:22:03 PM
REPRESENTATIVE HOPKINS asked whether quarterly disbursements
would mean money stays in the earnings reserve account (ERA)
longer; therefore, there would be greater earnings power over
the nine months of the year before the full amount is disbursed.
MR. TANGEMAN agreed. He maintained that the way the legislature
designed the POMV draw last year was very elegant; it gave DOR
and APFC the latitude to determine the most efficient method of
withdrawing cash as the needs arise. The APFC drew down from
the Constitutional Budget Reserve (CBR) first, in the beginning
of fiscal year 2019 (FY 19), then made the POMV draw from the
permanent fund in the fall of that year after the dividend was
paid. If the legislature does not vote to spend from the CBR,
then the cash withdrawals must be made sooner from the ERA.
REPRESENTATIVE HOPKINS stated that Ed King [chief economist for
DOR] discussed a jump in jobs in October, when the dividend was
disbursed, but they were short-term. He asked whether Mr.
Tangeman believed that quarterly PFD disbursements would result
in those jobs lasting longer, therefore, stabilizing the
economy.
MR. TANGEMAN acknowledged that one theory is that with quarterly
payments, more money would stay in state. He offered that the
consequences of a quarterly versus a yearly PFD disbursement
would be interesting to study, especially if the dividend were
as much as $3,000.
12:25:38 PM
REPRESENTATIVE WOOL asked whether the impetus of the proposed
legislation is to change behaviors and prevent binge spending.
He referred to the administrative difficulties of making
quarterly disbursements. He attested to a certain spike in
negative activities when dividends are paid out once a year and
asked whether there might be four spikes in this behavior under
this legislature. He asked, "What is the goal of having
quarterly payments?"
CO-CHAIR KREISS-TOMKINS maintained that he does not have a
predetermined goal for the proposed legislation and is not
convinced that a quarterly payment is good public policy given
the size of the dividend at present. He expressed that HB 141
is a vehicle for conversation and inquiry.
REPRESENTATIVE WOOL responded that there have been concerns
about disbursing a large check and the resulting spending
behaviors. He expressed that he does not know whether the
negative behaviors - increase in domestic violence and other
criminal activity - is anecdotal or supported by research. He
mentioned that he would be interested in hearing more about the
behavioral aspect.
CO-CHAIR KREISS-TOMKINS agreed and cited experts and studies
both at the Institute of Social and Economic Research (ICER)
[University of Alaska Anchorage (UAA)] and Stanford University.
He offered that he is also interested in the testimony of
[former Alaska state legislator] Clem Tillion, who supports more
frequent PFD disbursements.
REPRESENTATIVE WOOL mentioned that Ms. Balakrishnan relayed that
her studies have shown no increase in temptation spending. He
said that he has witnessed otherwise.
[HB 141 was held over.]
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB0141 Sponsor Statement 5.10.19.pdf |
HSTA 5/11/2019 11:30:00 AM |
HB 141 |
| HB0141 ver M 5.10.19.PDF |
HSTA 5/11/2019 11:30:00 AM |
HB 141 |
| HB132 Opposing Document - Letter of Opposition 4.25.19.pdf |
HSTA 5/11/2019 11:30:00 AM |
HB 132 |