Legislature(2007 - 2008)HOUSE FINANCE 519
03/26/2008 01:30 PM House FINANCE
| Audio | Topic |
|---|---|
| Start | |
| SB249 | |
| HB396 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | HB 278 | TELECONFERENCED | |
| + | HB 367 | TELECONFERENCED | |
| += | HB 396 | TELECONFERENCED | |
| + | HB 400 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | SB 249 | TELECONFERENCED | |
HOUSE FINANCE COMMITTEE
March 26, 2008
1:45 p.m.
CALL TO ORDER
Co-Chair Meyer called the House Finance Committee meeting to
order at 1:45:12 PM.
MEMBERS PRESENT
Representative Mike Chenault, Co-Chair
Representative Kevin Meyer, Co-Chair
Representative Bill Stoltze, Vice-Chair
Representative Harry Crawford
Representative Les Gara
Representative Mike Hawker
Representative Reggie Joule
Representative Mike Kelly
Representative Bill Thomas Jr.
MEMBERS ABSENT
Representative John Harris
Representative Mary Nelson
ALSO PRESENT
Frank Richards, Deputy Commissioner of Highways & Public
Facilities, Department of Transportation and Public
Facilities; Greg Winegar, Director, Division of Investments,
Department of Commerce, Community and Economic Development;
Jerry Burnett, Director, Division of Administrative
Services, Department of Revenue; Debbie Richter, Director,
Permanent Fund Dividend Division, Department of Revenue;
Allie Fitzjarrald, Acting Director, Division of Public
Assistance, Department of Health and Social Services.
SUMMARY
HB 278 An Act relating to sex offenders and child
kidnappers.
CS HB 278 (JUD) was SCHEDULED but not HEARD.
HB 367 An Act relating to the sale of raw milk and raw
milk products.
HB 367 was SCHEDULED but not HEARD.
HB 396 An Act relating to and increasing the amount of
the 2008 permanent fund dividend; and providing
for an effective date.
HB 396 was HEARD and HELD in Committee for further
consideration.
HB 400 An Act relating to a person who seeks medical
assistance for a person experiencing a drug
overdose.
HB 400 was SCHEDULED but not HEARD.
SB 249 An Act establishing the Alaska capstone avionics
revolving loan fund and relating to the fund; and
providing for an effective date.
SB 249 was REPORTED out of Committee with a "do
pass" recommendation and with new zero fiscal note
by the Department of Transportation and Public
Facilities and fiscal note #1 by the Department of
Commerce, Community and Economic Development.
1:47:50 PM
SENATE BILL NO. 249
An Act establishing the Alaska capstone avionics
revolving loan fund and relating to the fund; and
providing for an effective date.
Representative Thomas asked if Fish and Game and other
Alaska enforcement aircraft that does not want to be
identifiable would be exempt from the program.
FRANK RICHARDS, DEPUTY COMMISSIONER OF HIGHWAYS & PUBLIC
FACILITIES, DEPARTMENT OF TRANSPORTATION AND PUBLIC
FACILITIES, said there was a Department of Fish and Game
amendment to equip seven aircraft, but he thought
Representative Thomas might be referring to Department of
Public Safety law enforcement aircraft. The Department was
reluctant to equip planes that they did not want to be
tracked. He said the Federal Aviation Administration (FAA)
was working on technology to prevent transmission so that
certain aircraft could be equipped and not be tracked.
Representative Thomas thought if the avionics program was
being brought forward for safety reasons it seemed
counterproductive to have aircraft that could not be seen.
Representative Gara asked if the program had ever been a
grant program. Mr. Richards replied that initially the
aviation community had talked about a grant program.
Representative Gara wondered what the interest rate would be
and if the program would lose or make money.
GREG WINEGAR, DIRECTOR, DIVISION OF INVESTMENTS, DEPARTMENT
OF COMMERCE, COMMUNITY AND ECONOMIC DEVELOPMENT, said the
interest rate would be 4%. All expenses would be paid for
out of the fund. At sunset in 2020 the earnings would return
to the General Fund. There was a discussion about inflation
proofing the fund so that it would not cost the State over
time.
1:53:41 PM
Co-Chair Chenault referred to the language in the bill
establishing the interest rate at not less than 4% and
questioned who within the Department under what authority
would establish the exact interest rate. He wanted to know
why the bill did not establish the rate. Mr. Winegar replied
that the rate could be stipulated in the law, or regulations
could establish it. The Division came up with 4% because it
was low and provided for reasonable repayment amounts, while
ensuring that the fund paid its own way.
1:55:19 PM
Representative Gara wanted a standard, such as "prime plus
one and a half," that would adequately capitalize the fund
so that by 2020 the State would get its money back. The
statute gives no guidance. Mr. Winegar replied that the
language is patterned on other similar loan programs. He
said a number of variables played into the decision. Until
the funds are loaned out they are invested by the Department
of Revenue, and those earnings will also be retained by the
fund. The numbers had been run with conservative default
rates and he was confident that the original principal plus
a substantial amount of earnings would go back to the
General Fund.
Representative Gara proposed language stipulating that the
rate would reflect an amount that would protect the
purchasing power of the endowment. Mr. Winegar thought the
language already in the bill was sufficient. Representative
Crawford stated the goal was to make the skies safer and he
wanted to see the avionics operating. If inflation continues
at about 3-4%, he thought the 4% minimum would work.
Mr. Winegar responded further that the FAA has done studies
estimating that savings from lost lives and search and
rescue costs would be well over $800 million to the State
over a 27-year period.
1:59:34 PM
Representative Gara reiterated his concerns with not putting
standards for rates in legislation.
Co-Chair Chenault asked if $4.8 million would be enough
considering the goal is to equip 4,000 aircraft. Mr. Winegar
replied that the amount would probably not cover equipping
all of the aircraft. However, a revolving fund allows
leveraging the money; the Division could potentially make
about $13 million in loans with that amount. If loan demand
is higher, they may need to come back.
Co-Chair Chenault thought the program should move forwarding
order to save Alaskan lives.
Representative Kelly stated his support for the program.
2:03:46 PM
Co-Chair Meyer referred to the fiscal notes.
Representative Joule asked if an aircraft equipped with
avionics would be easier to locate if it had an accident.
Mr. Richards answered that it would be.
Vice-Chair Stoltze MOVED to REPORT SB 249 out of Committee
with individual recommendations and with the accompanying
fiscal notes.
Vice-Chair Stoltze OBJECTED for discussion.
Vice-Chair Stoltze reported that airplane accidents have
killed more of his friends than car accidents. He referred
to accidents that had happened. Many Alaskans shared those
experiences. He thought the program was a priority.
Vice-Chair Stoltze REMOVED his OBJECTION. There being NO
further OBJECTION, it was so ordered.
SB 249 was REPORTED out of Committee with a "do pass"
recommendation and with attached new zero fiscal note by the
Department of Transportation and Public Facilities and
fiscal note #1 by the Department of Commerce, Community and
Economic Development.
HOUSE BILL NO. 396
An Act relating to and increasing the amount of the
2008 permanent fund dividend; and providing for an
effective date.
2:07:56 PM
Vice-Chair Stoltze moved to adopt the Work Draft for HB 396,
version 25-LS1504\C, Cook, 3/21/08 (Copy on File). There
being NO OBJECTION, it was so ordered.
Co-Chair Meyer reminded the Committee that the bill was
heard first on 3/19/08, and public testimony had been taken
and closed.
Representative Bill Thomas, Sponsor, explained that the CS
changed the funding source from the Permanent Fund Earnings
Reserve to the General Fund. Co-Chair Meyer asked if it was
his intent to use FY 08 money. Representative Thomas
responded in the affirmative.
2:09:31 PM
Representative Gara was concerned about spending $305
million in a year without enough money for other important
programs. He asked if the Sponsor had considered making the
$500 payment just to adults if the concern was energy.
Representative Thomas looked at the oil wealth as owned by
everyone and thought each Alaskan should be entitled to it.
He wanted to find a way to share it equally.
Co-Chair Meyer pointing out that using the same distribution
as the Permanent Fund Dividend (PFD) would mean less
overhead than if other factors such as age or income were
part of an application process.
Representative Gara stated his strong support of the PFD,
but he did not consider the amount a reasonable amount of
money. He wanted to get the money to people who need it and
not everyone.
Vice-Chair Stoltze pointed out that the payment has been
called an "energy dividend" by the press and asked the
Sponsor if it was his intent to have people use the money
for whatever they needed. Representative Thomas answered
that he came up with the idea in response to high energy
costs. He wanted a way to offset those costs, especially in
rural Alaska. He called it an "energy rebate."
Representative Gara agreed that most people in rural areas
needed the money because of energy cost increases.
2:14:39 PM
Representative Kelly queried as to the predicted amount of
the dividend.
JERRY BURNETT, DIRECTOR, DIVISION OF ADMINISTRATIVE
SERVICES, DEPARTMENT OF REVENUE, said there would not be an
exact prediction for the amount until September. He
calculated that the distribution would be a little over $1.2
billion, so the dividend would be approximately $2,000. The
dividend for the previous year had been $1,654.
Representative Kelly asked why the money in HB 396 was
coming from the General Fund.
2:17:14 PM
Representative Thomas explained it was clearer to take it
from the surplus in the General Fund than from Permanent
Fund. Co-Chair Meyer added there was no need to use the
Permanent Fund earnings with the surplus. He said the
surplus has come at the expense of constituents, who are
suffering because of high oil prices. He agreed with the
Sponsor about sharing some of the surplus through a rebate.
Vice-Chair Stoltze favored using the General Fund because he
wanted to protect the Permanent Fund.
Representative Gara disagreed with some of the numbers being
used about the amount of the surplus.
2:21:21 PM
Mr. Burnett said the Department of Revenue uses a different
financial forecast than the Legislature uses. Co-Chair
Chenault thought the legislative numbers were dependable.
Representative Gara wondered how many people not living in
Alaska full time would benefit from the rebate. Mr. Burnett
explained that the rebate would follow the same guidelines
for distribution as the PFD. Only the military and members
of congress and their staff are allowed to be out of state
full time and receive the check. People in retirement
communities would have to be in the state at least 180 days
of the year and he assumed they would spend money while in
Alaska. Representative Gara pointed out that people in
retirement communities tend to leave during the winter, when
energy costs are highest.
Co-Chair Meyer stated that he himself needed help on his
fuel costs. He thought a secondary benefit of the bill would
be to put dollars into a slow economy.
2:25:35 PM
DEBBIE RICHTER, DIRECTOR, PERMANENT FUND DIVIDEND DIVISION,
DEPARTMENT OF REVENUE, spoke to the number of people who
live outside of Alaska. Last year there were about 10,000
people who received the dividend who were not physically in
Alaska at the time the dividend checks were issued. Most of
those were military and their families.
Representative Crawford felt that it would be political
suicide to even speak against the bill, but he stressed the
large amount of money would be better used in energy
projects in the places where people are hurting the worst.
He wanted to get people off diesel and developing
alternative energy, not hand out checks. He thought it would
be a huge mistake and set up the expectation in future years
for the same check.
Co-Chair Meyer agreed that there was a real need to find
alternative energy to reduce the cost of fuel, especially in
rural Alaska. However, that takes time. The energy rebate
would help buy a little time for people.
2:29:06 PM
Representative Thomas resented the fact that anyone would
think he was sponsoring the bill to get votes. He felt he
was responding to human need in his district. He referred to
a bill on renewable energy and he thought that should get
more support.
Vice-Chair Stoltze characterized legislators as trustees of
the people's money and thought the debate about how to spend
the surplus money was worthwhile.
2:33:38 PM
Representative Gara suggested that one way to address the
energy issue was through the low income energy assistance
program. Representative Nelson had asked for $8 million to
match the federal money. He had been told that a substantial
part of Alaska's wind energy needs could be met for $120
million. He was concerned that the renewable energy fund
would be underfunded and able to support only small energy
projects that could not match the great need. He would
rather put the large amount of money the bill would spend
into renewable energy.
2:35:56 PM
Representative Crawford apologized to Representative Thomas.
Representative Joule asked how the allocation proposed in
the bill would affect federal earmarks. Representative
Thomas worried that federal money was already waning. Co-
Chair Meyer did not know the effect on future federal
earmarks. He said the PFD has raised concern at the federal
level.
2:41:25 PM
Representative Gara reiterated his desire to not give extra
money to the rich. He noted that the Committee agrees on the
core point, that working class and rural Alaskans are facing
high energy costs and need help. He thought those Alaskans
should receive the money.
Representative Thomas MOVED to ADOPT Amendment #1 (25-
LS1504\C.1, Cook, 3/25/08) (Copy On File):
Page 1, following line 13:
Insert a new subsection to read:
"(c) A program administered by the state or any of
its instrumentalities or municipalities, the
eligibility for which is based on financial need,
may not consider a payment under this section as
income or resources."
Vice-Chair Stoltze OBJECTED.
Representative Thomas explained that the Amendment would
make sure the rebate would not impact social programs by
raising people's income level. Vice-Chair Stoltze asked if
the fiscal note reflected that. Representative Thomas said
it did. Representative Joule wondered how the increase would
impact the State at the federal level.
2:44:35 PM
ALLIE FITZJARRALD, ACTING DIRECTOR, DIVISION OF PUBLIC
ASSISTANCE, DEPARTMENT OF HEALTH AND SOCIAL SERVICES,
explained that some of the federal programs give the State
broad discretion in setting eligibility rules and others do
not. The Amendment would state intent that the rebate not be
counted in determining eligibility for public assistance or
other needs-based programs. She said it was similar to the
Permanent Fund hold harmless statute.
Representative Joule asked if that meant there would be no
impact for the State-run programs. Ms. Fitzjarrald answered
that the Amendment would mean that.
Representative Hawker referred to the over-riding hold
harmless provision already in place and asked if the
Amendment could actually negate that by adding duplicate
language.
2:47:10 PM
Ms. Fitzjarrald clarified that the rebate was General Fund
money and no longer Permanent Fund.
Vice-Chair Stoltze wondered if the rebate could be garnished
for delinquent child support payments. Mr. Burnett answered
that the money would be subject to garnishment especially
now that it is not Permanent Fund money.
2:49:33 PM
Representative Gara wanted examples of federal benefit
programs where the rebate would count as income. Ms.
Fitzjarrald responded that the federal programs allow some
State discretion in setting the eligibility rules. The State
would need either statutory or regulatory authority to
determine whether income is counted. She did not know of a
federal program that would mandate counting the rebate as
income if the Amendment passed. The one exception is a
Social Security program for people with disabilities.
However, since the check comes at the same time as the PFD,
there would be no net effect to that program.
Representative Gara asked about Medicaid. Ms. Fitzjarrald
explained that the Department has an option to exclude the
rebate as income.
Representative Crawford queried whether incarcerated people
would receive the rebate. Mr. Burnett replied that as
currently written the eligibility for the PFD and the rebate
would be the same, so incarcerated individuals who meet the
standards would not receive the rebate. The calculation for
the PFD felon funds is a separate issue and will remain a
concern.
2:52:55 PM
Vice-Chair Stoltze asked about the fiscal note. Ms.
Fitzjarrald answered that the Amendment would change the
fiscal note to zero. Mr. Burnett added if it was zero it
would not matter. Everyone's dividend would get larger.
Co-Chair Chenault wondered if another fiscal note would be
coming since the bill was changed to General Fund. Ms.
Fitzjarrald said she was not aware of fiscal notes from
other departments.
Vice-Chair Stoltze REMOVED his OBJECTION.
Representative Kelly OBJECTED. He stated that he has
difficulty with exclusion overall. He thought the welfare
system was already fine-tuned and did not want to add this
on.
2:56:55 PM
Mr. Burnett said the Amendment would have no affect on child
support or similar kinds of garnishment. Representative
Kelly thought it was tampering with the public assistant
system.
A roll call vote was taken on the motion.
IN FAVOR: Stoltze, Thomas, Crawford, Gara, Hawker, Joule,
Meyer, Chenault
OPPOSED: Kelly
Absent from the vote: Harris, Nelson
The MOTION PASSED (8/1).
Representative Gara MOVED to ADOPT Amendment #2 (25-
LS1504\A.1, Cook, 3/20/08) (Copy On File):
Page 1, line 1, following "dividend":
Insert "for certain individuals with limited
incomes"
Page 1, line 6:
Delete "INCREASE IN AMOUNT OF 2008 PERMANENT FUND
DIVIDEND"
Insert "2008 PERMANENT FUND DIVIDEND AMOUNT FOR
CERTAIN INDIVIDUALS"
Page 1, line 7, following "residents":
Insert "with limited incomes"
Page 1, line 8, following "increased":
Insert "for individuals eligible under (b) of this
section"
Page 1, line 10, following "dividend":
Insert "for those individuals"
Page 1, following line 10:
Insert a new subsection to read:
"(b) An individual who is eligible for the 2008
permanent fund dividend, is a member of a
household with a gross monthly income that did not
exceed 300 percent of the federal poverty
guidelines for this state for January through May
of 2008, and who files an application for the
increase, is eligible for the increase in the 2008
dividend under (a) of this section.
Notwithstanding permanent fund dividend
application procedures or deadlines, an individual
may apply for the increase on or before September
30, 2008. The Department of Revenue shall prepare
a form for applications under this section. The
form must include notice of the penalties provided
under AS 11.56.205 and AS 43.23.035."
Reletter the following subsection accordingly.
Vice-Chair Stoltze and Representative Hawker OBJECTED.
Representative Gara explained there is precedence for
using federal income guidelines to determine benefits.
He said the Amendment proposes making the rebate
available to people who make three times the federal
poverty guideline. For a single person, that would be
someone who makes $39,000 or less. For a family for two
that would $52,500 or less. His intent is to avoid the
expenditure of a third of a million dollars for checks
for people who do not need the money.
3:02:23 PM
Mr. Burnett pointed out the administrative hurdles the
Amendment would create, including sending a second
application form and extending the Dividend out to
September 30. He said the Department does not have
people trained on income verification and does not have
a system set up to process dividends of different
amounts. He anticipated it would cost hundreds of
thousands of dollars. He guessed that half the people
in Alaska would qualify under the Amendment. There is
no state program to verify income.
3:04:52 PM
Co-Chair Meyer wanted to avoid overhead costs.
Vice-Chair Stoltze questioned the term "limited
income." Representative Gara said that term could be
changed.
Co-Chair Chenault asked what the number was for a
family of four. Vice-Chair Stoltze answered that it was
$79,300.
Representative Crawford thought the overhead costs
would be saved in the money not being put out in
checks. He stated grave qualms about setting a program
in place that it would be difficult to pay in years to
come. He did not think it would remain a one-time
program. He wanted the investment to be made into
infrastructure.
3:08:00 PM
Representative Thomas stated he did not support the
Amendment and that it entirely changed his intent with
the bill.
Representative Gara stated that he had not heard an
explanation why the state should cut a check to a
family that makes more than $80,000. The main argument
he heard pertained to administrative costs. Even if
half of Alaskans qualified for the $500 check, the
Amendment would save the state $150 million by setting
up the administrative structure. He thought that was a
good investment. He listed ways $150 million could be
spent, including extensive education programs.
3:11:32 PM
Representative Hawker MAINTAINED his OBJECTION.
Co-Chair Chenault stated that he did not support the
Amendment. He thought many people who needed the money
were too proud to ask for help. He thought the
resources should be shared equally.
A roll call vote was taken on the motion.
IN FAVOR: Crawford, Gara
OPPOSED: Thomas, Hawker, Joule, Kelly, Stoltze,
Chenault, Meyer
Absent from the vote: Harris, Nelson
The MOTION FAILED (2/7).
3:15:44 PM
Representative Kelly worried about the rebate being an
entitlement that people would continue to expect. He
referred to the $300 million attempt to address the fuel
shortage through the weatherization and grant program, and
$1.25 billion reduction in value through the pipeline. The
PFD is being increased around 20%. He stated he did not
support the bill although he respected Representative
Thomas's motives and understood the need.
3:18:53 PM
Representative Gara agreed with Representative Kelly. He
reiterated his concerns.
Representative Joule said he would have preferred the rebate
come out of the Permanent Fund earnings. He said he would
support the bill but he wanted to see an open discussion
about capping the Permanent Fund so the leftover earnings
could be used for the costs of government.
3:23:43 PM
Representative Hawker stated that the bill would ultimately
create more problems for the fiscal process than it solved.
He said he would vote against the bill and he urged others
to do the same.
Representative Thomas accepted the will of the Committee.
Co-Chair Meyer noted that the bill had generated healthy
discussion and hoped it would move to the floor to encourage
similar discussion. He wanted to determine how to help
suffering people and thought the bill had merit.
3:26:20 PM
Vice-Chair Stoltze MOVED to REPORT CS HB 396 (FIN) out of
Committee with individual recommendations and with the
accompanying fiscal notes. Representative Hawker OBJECTED.
Representative Gara said he would vote against the bill and
explained that he wanted to see relief go to people that
need it. He believed in making society better for people who
need help and in creating opportunity for people who do not
have opportunity. Government should not do more than that.
Representative Crawford noted that he could not vote for the
bill. He acknowledged the good parts to the bill.
Representative Joule wanted to save money for tough times
ahead but did not want Alaska to save itself into the
poorhouse. He wanted infrastructure taken care of.
AT EASE: 3:30:31 PM
RECONVENE: 3:31:23 PM
Vice-Chair Stoltze withdrew the motion to move the bill from
Committee at the request of the Sponsor.
HB 396 was HEARD and HELD in Committee for further
consideration.
3:33:22 PM
ADJOURNMENT
The meeting was adjourned at 3:33 P.M.
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