Legislature(2005 - 2006)CAPITOL 106
01/26/2006 08:00 AM House STATE AFFAIRS
| Audio | Topic |
|---|---|
| Start | |
| HB349 | |
| HB273 | |
| Confirmation Hearing(s): || Commissioner, Department of Administration | |
| Lieutenant Governor Designee | |
| Alaska Public Offices Commission (apoc) | |
| HB278 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB 349 | TELECONFERENCED | |
| += | HB 273 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| = | HB 278 | ||
HB 273-PFD: DELAY PAYMENT FOR ALLOWABLE ABSENCES 8:35:58 AM CHAIR SEATON announced that the next order of business was HOUSE BILL NO. 273, "An Act relating to the dividends of individuals claiming allowable absences; and providing for an effective date." [Before the committee was CSHB 273, Version 24-LS0871\G, Cook, 5/3/05.] 8:36:18 AM REPRESENTATIVE BRUCE WEYHRAUCH, Alaska State Legislature, as sponsor of HB 273, stated his concern regarding the legal implications of allowing stair-stepping exemptions, for example. He said he spoke with the director of the Permanent Fund Dividend Division and the Office of the Attorney General and suggested representatives from those entities present feedback to the committee. 8:38:31 AM CHRIS POAG, Assistant Attorney General (AG), Civil Division, Department of Law, said he has been attending hearings on the bill and heard discussion on amendments, some of which raise equal protection concerns. He mentioned an amendment idea from Representative Gardner that he said would not be a problem. He mentioned an amendment idea by Representative Lynn that would exempt out the allowable absences of the military. He said given the statistics he has seen, he has a problem with treating that class separately. 8:39:45 AM CHAIR SEATON clarified that the committee had adopted an amendment that would let anyone with an allowable absence receive his/her permanent fund dividend (PFD) for the first two years and after that it would be held until the person returned to Alaska. He said that applied to all classes of allowable absences. He asked Mr. Poag to confirm that that amendment is the one he did not think would raise a constitutional problem. 8:40:09 AM MR. POAG responded that the amendment does not pose a problem "on the face of it." He said there is a common sense approach that the longer a person is gone, the less likely he/she is to return. He said, "Representative Gardner's amendment seems to adopt that common sense approach, and as long as it applies to all categories, it doesn't raise the protection concern." 8:40:57 AM CHAIR SEATON asked what the impact of the amendments that raised the problems of equal protection would have on "the program." 8:41:19 AM MR. POAG responded as follows: Well, I suspect ... we would have an individual who would apply for a permanent fund dividend on one of these allowable absence categories. They'd be denied the dividend, and they would appeal, and they would allege that they're being treated disparately from a specific group - the military - and that they should also have been given the exemption that the military was given. MR. POAG noted that military and students statistically have about the same rate of return; approximately 65 percent do not return. So, if a student were to challenge that in court by arguing the statistics, inevitably [the State of Alaska] would end up before the [Alaska] Supreme Court trying to justify why it treated one category differently than another. Mr. Poag said his concern was that the exemption for military seemed to be based on need; however, the provision for allowable absences is really designed to say that if a person is not physically present in Alaska during the qualifying year, that person's absence has to be consistent with his/her intent to return. He clarified, "Exempting a group based on their need to receive the PFD is inconsistent with the purpose of ensuring that they're permanent residents." 8:42:55 AM CHAIR SEATON said he has heard that "those kind of cases" might result in other problems concerning the Internal Revenue Service (IRS) and taxability. 8:43:09 AM MR. POAG said he hasn't heard any testimony regarding IRS qualifications or disqualifications. 8:43:42 AM SHARON BARTON, Director, Permanent Fund Dividend Division, Department of Revenue, in response to a question from Representative Gruenberg regarding a survey the committee had requested on allowable absences, said she could offer some information verbally, but the job ended up being a bigger one than anticipated, thus the written report is still not "polished up." She said information was also requested regarding return trends. At end of ten years, the percentage of people who do not return to Alaska in the following categories was found to be: Secondary school, 67 percent; Caring for the terminally ill, 38 percent; merchant marines, 50 percent; settling an estate, 33 percent; and caring for a family member, 43 percent. In response to Representative Gruenberg, she said those are the primary categories. She said there is a congressional staff category, and the data shows that about 50 percent of them have not returned after 10 years. She added, however, that some of those people are still in office. 8:46:25 AM REPRESENTATIVE GRUENBERG observed that the accompanying dependents, active military, secondary schools, and students, are "far and away higher than the other categories in not returning." 8:47:32 AM MS. BARTON confirmed that's correct. 8:47:38 AM REPRESENTATIVE GRUENBERG asked, "If we looked at those categories as presenting a much higher statistical rate of nonreturn and [treated] those differently from the other categories, would that be legally defensible?" 8:48:14 AM MR. POAG said if the committee decides to treat allowable absences differently based upon statistics, then he strongly agrees with Representative Gruenberg's suggestion [at the previous hearing] to have legislative findings and purposes. However, if allowable absences will be treated equally across the board, there would be less of a need for those legislative purposes and findings. He continued: The allowable absence categories go to the heart of whether or not the person applying for the permanent fund dividend is an Alaska resident. Alaska residency is physical presence with the intent to remain indefinitely. It also is, if you're not physically present, your intent to return and remain indefinitely. ... One of the objective areas we look at is: Is your absence consistent with your intent to return? Those 13 allowable absence categories that you all have adopted in this statutory section are a legislative finding that we believe ... their absence is consistent with their intent to return. ... You folks probably did that based on common sense approach and also looking at the need - the reason why they were gone. It almost seemed that it was beyond their control. ... We've now discovered, statistically, that a good portion of those folks aren't returning like we had probably presumed they were. However, you folks get the ability to draw the line in the sand to say when it is that there rate of return is too low ... to say that it's palatable - that they are likely to remain Alaska residents. In other words, "Is their absence truly consistent with their intent to return?" MR. POAG said he thinks that's a policy call. He said he thinks Representative Gruenberg is absolutely correct that a person's case will be better in front of whatever court if the statistical evidence is higher. He offered further details. He said, "You folks get to draw that conclusion as to what is the amount of rate of return that is palatable ...." He said the [Alaska] Supreme Court has said that the legislature has given [the Permanent Fund Dividend Division] broad discretion to decide who are permanent Alaska residents. He continued: We've gotten great rulings from them, and if this body ... makes findings that 10 percent is just not acceptable, I think the supreme court would probably acknowledge that. However, clearly I feel on better ground standing before the supreme court if it's 60-70 percent of nonreturn rates. 8:51:52 AM REPRESENTATIVE GATTO offered an example of two people leaving for school, one born in Alaska and the other a two-year resident, and he asked if the rate of return is different. MR. POAG said he doesn't know the statistical answer to that; however, based on statute, both those people are considered Alaska residents and have to be treated the same. 8:52:59 AM MS. BARTON confirmed that that information had not been broken down in that manner. 8:53:22 AM REPRESENTATIVE GARDNER said she would like to know how the probability of return changes for each class after two years. 8:53:33 AM MS. BARTON said currently the trend looks like most people from the military and "accompanying groups" don't come back after the first year, and by five years most have dropped off the radar screen. She said it is a little bit different with students. More students that leave for one to two years tend to come back to the state than not. Once the students stay Outside for three or more years, most of them don't come back. The other groups are so small, Ms. Barton said, that making generalities about them is difficult. Notwithstanding that, she said, "They too appear that if they don't come back in the first year or two, they don't come back." 8:54:54 AM REPRESENTATIVE GRUENBERG expressed his appreciation of the answers from the witnesses. Regarding Representative Gatto's previously stated question regarding whether a person who is born here is treated differently than a person who has come to the state for only a few years, he suggested that that sort of analysis may run afoul of a certain supreme court decision. 8:55:39 AM MR. POAG responded: We'd be on thin ice. ... It depends on how that legislation was crafted and it would depend on what the statistical evidence showed. If we're ... creating allowable absence categories because we've discovered that certain folks who are absent are more likely to return than other folks, I think maybe we would be okay; but if we attempt in any way, shape, or form to ... create classes of permanent Alaska residents, we're definitely in trouble. We cannot do that. Once you meet the standard of the PFD eligibility, you have to be treated just as everybody else, whether you need the PFD, whether you don't need the PFD, whether you came here two years ago, or whether you've been here for 25 years. You're an Alaska resident for purpose of the PFD and you get it. However, ... if we are talking about categories of folks who we have evidence to show that they're more likely to return than other categories, that's the heart and spirit of what the allowable absence and exceptions are. They're bright line rules that make it administratively practical for Director Barton's division to say, "These 12 categories get to be absent because we've decided they're likely to return; the rest of you can only be absent for up to 180 days, and you're absence also needs to be consistent with your intent to return. So, I think those bright line rules are allowable, but I think there would have to be pretty strong statistical evidence to treat different categories of Alaska residents differently. And ... I think there would have to be a lot more on the record than there is today. 8:57:27 AM REPRESENTATIVE GRUENBERG said it would be dangerous not to treat the statistically similar categories the same. 8:58:52 AM MR. POAG emphasized his agreement. He said, "If we have statistical evidence that these five categories are not likely to return and statistical evidence that these three categories are likely to return, we should follow that statistical evidence and treat them accordingly." 8:58:59 AM REPRESENTATIVE GRUENBERG noted that the committee had not received the statistics regarding secondary education students. 8:59:21 AM MS. BARTON mentioned other data she has begun to compile. 9:01:20 AM CHAIR SEATON, in response to the discussion about data, said, "The whole purpose of this discussion is to make sure we treat everybody equally." He indicated that [focusing on the data could result in] the committee getting far off its objective of ensuring that "the permanent fund reflects Alaska residency." He stated: We have to remember that under this program, as proposed in the bill, everyone has the opportunity to qualify for allowable absences and everyone has the opportunity to return. And that these are choices that those people make not to return to Alaska, in every category. And so, people can simply qualify for their allowable absence permanent fund dividend by doing exactly what they're certifying, and that is [by] returning to Alaska at the end of that allowable absence. And so, personally, as the chairman, I'm not going to support it, and I hope the rest of the committee doesn't get into trying to parse difference between people on allowable absences .... 9:03:27 AM REPRESENTATIVE WEYHRAUCH said he appreciates Chair Seaton's comments. He remarked that the bill is based upon an idea that Chair Seaton articulated last year. 9:03:55 AM REPRESENTATIVE GRUENBERG commented that he put his name on the bill because he was concerned that lots of people were abusing the system. 9:04:20 AM REPRESENTATIVE GATTO noted that some college students have to go Outside because a line of study is not offered in Alaska. He said students may make financial and career decisions based on an assumption that was in place at the time of the decision. He stated his concern that those students could come back and sue the state because the parameters were changed mid course. He asked if that could be a legitimate argument. 9:05:46 AM MR. POAG said they could make the claim, but his response would be that the PFD is a statutory devise and not a vested property right; a person only gets one if he/she qualifies on an annual basis. He said the supreme court has said this, as well. He noted that any changes effected to the PFD today would be for next year's PFD and would not affect "the PFD they're applying for now." 9:06:31 AM REPRESENTATIVE WEYHRAUCH said students could choose to drop their Alaska residency and become a resident of the state in which they attend school and, doing so, would receive instate tuition, which he said is of far greater value than the PFD. 9:07:17 AM MR. POAG told Representative Gatto that those students who may be counting on receiving a PFD would get one, they would just get it when they returned to the state. 9:07:22 AM CHAIR SEATON reminded Representative Gatto that the students on allowable absences would get their PFD for the first two years, after which time it would be held. 9:07:31 AM REPRESENTATIVE GATTO said he was thinking about the Longevity Bonus [which Alaska seniors received until the program was ended]. He indicated that [the seniors] had an expectation in that case, and asked, "Has that ever been challenged and defeated, or has it simply never been challenge?" 9:07:35 AM MR. POAG said he has never participated in "giving legal advise to the Longevity Bonus fund" and is not familiar with that program. REPRESENTATIVE WEYHRAUCH proffered, "The case, as I understand it, was dismissed as summary judgment grounds as legislative policy and has not appealed to the supreme court ...." 9:08:58 AM MR. POAG, in response to a suggestion from Representative Gruenberg, said currently a person is only allowed to qualify for allowable absences for 10 years. He said the legislature needs to make a policy decision based on the statistical evidence that it is acceptable for those on an allowable absence to be gone "with 10, or 20, or 30 percent rates of return." He said, "I don't know if it's any more defensible." He continued: I guess if I had to choose one of the two options for defense purposes, I would think a three-, or a five-, or six-year ... cut-off would be easier to defend than a series of categories and exceptions, because groups are always going to say, "Well, what about me, how come there's not a category for me?" And then one category may say, "Well, why are they getting treated this way and I'm not getting treated this way? REPRESENTATIVE GRUENBERG noted that the legislature constantly sees people requesting to add new categories to allowable absences. He concluded that if the cut-off time were changed to five years, "that would be defensible," easier for the Permanent Fund Dividend Division to manage, and would probably result in less lawsuits in the long run. 9:10:48 AM CHAIR SEATON, in response to Representative Gruenberg and comments from Mr. Poag, said the latter was discussing current statute. 9:11:11 AM MR. POAG, in response to a request from Representative Gruenberg for overall clarification, said current statute provides that a person may get an allowable absence for up to 10 years, no more. The bill would broaden that language and allow someone an allowable absence for up to 10 years, after which the person's eligibility would be conditioned upon his/her return. He stated that Version G, assuming it "has Representative Gardner's provision in it," would provide that allowable absence categories get the PFD for the first two years, after which their eligibility is conditioned upon their return and their being present in the state without an allowable absence necessary. At that point, he said, those people would be eligible for the PFDs that had been held back. 9:12:53 AM CHAIR SEATON reopened public testimony only for those who had not had a chance to testify already. 9:12:58 AM MARY LOU KELSEY testified on behalf of herself in opposition to HB 273. She stated that students are Alaska residents, even while studying Outside; they live and work in Alaska when out of school and pay out of state tuition. She asked the committee not to penalize these students by denying and delaying their PFDs, which are greatly needed for current college costs. By delaying payment of the PFD, she opined, the legislature is punishing those Alaska residents just because they are students. She said it is a hardship on families. She asked the committee to give these students equal protection and not terminate their constitutional rights based on arbitrary guesses about their intent to return, but rather to pursue those who are really committing fraud concerning the PFD. 9:14:29 AM TRACIE L. BROWN, testifying on behalf of herself, said her son is currently a college student paying out-of-state tuition. She concurred with the previous testimony of Ms. Kelsey. She said she feels that "this bill arose from the insinuation of fraud," which she said is insulting. She said her son spends the summer session at home, working in Alaska. She indicated that asking students to commit to living in Alaska is a double standard. She explained by asking, out of the entire population of Alaskans living in state who are receiving their PFDs, how many would still be residents in 10 years. 9:16:54 AM REPRESENTATIVE RAMRAS told Ms. Brown that he is sensitive to her situation, but asked her to answer the following question: If this legislation were enacted and your son's permanent fund [dividend] was held until he returned to Alaska, what would his life be like four years from now if, when he came home from college, he was the beneficiary of the four permanent funds ...? Wouldn't that ... be of some value unto itself that he would have a nest egg? [AN UNIDENTIFIED PERSON uttered a remark that was heard via the Legislative Information Office (LIO) teleconference system, but was not intended for public record.] 9:18:12 AM MS. BROWN, after emphasizing that the remark of the unidentified speaker was not her own response, stated that what Representative Ramras said seems valid - it seems like it would be a positive thing for her son to get a chunk of money upon his return. However, she stressed her son's need is to receive the money now. 9:19:02 AM REPRESENTATIVE RAMRAS clarified that his question is not about what is lost by surrendering the permanent fund [dividend] each year. He said he wants to know "what benefit would be derived from college students or military whose permanent [fund dividends] are held until they do return." He said it wouldn't be money lost forever, but rather money held until their return to Alaska. 9:19:39 AM MS. BROWN said it would be the same as if her own PFD had been held and she was given a lump sum every four years, rather than receiving the PFD every year. She stated, "There's no time in our life that our money is more valuable to us than those college days." She asked Representative Ramras if that answered his question. 9:20:20 AM REPRESENTATIVE RAMRAS replied, "No, it did not, but I thank you anyway." 9:21:17 AM MIKE MILLIGAN, testifying on behalf of himself, said the PFD was never meant to be an entitlement, but rather a way to keep Alaska's money in the hands of Alaskans versus in the hands of government. He said the children [of the previous testifiers] are not being punished if they don't get their PFD checks, "they would be punished if they ... [had] to pay a fee." He revealed that he is the parent of three students in Alaska - two in state and one out of state. The one who is going to school Outside is in her second year of [doctoral] school and "she doesn't claim a residency." MR. MILLIGAN focused on who is being punished. He stated, "There's no group of Alaskans more punished under current tax code and our PFD-awarding scenario than people who own property in Alaska and pay tax on that property. He said Alaskans have not been asked to be citizens of the state by paying an income tax. He mentioned a bill by former House Representative Jeannette James, which proposed a property tax exemption from state income tax and "hobbled that to a PFD application." He questioned how many people would be willing to "drop $100 during the PFD application in order to get $700 or $900 in the fall." MR. MILLIGAN stated that he thinks HB 273 is a courageous proposal. He recalled hearing that approximately 17,000 people "get a check Outside." He indicated that the bill has a positive benefit of educating the public. He said he thinks it's time to ask who is being rewarded on the state's tax policy and whom the state wants to reward. He predicted everyone would want to sign up for a private account to be managed by the government. He added, "Everybody would sign up for that, and they could still leave after a certain amount of time." He concluded, "I applaud the debate, but I think it's time to look at possibly [an] absolute small half a percent of your federal income tax ... hobble that to a PFD application." 9:25:19 AM CHAIR SEATON closed public testimony. 9:25:41 AM REPRESENTATIVE GATTO regarding Representative Ramras' previous question about receiving a nest egg, said: I think the correct answer to that is: if a person is Outside on an allowable absence in a school and does not receive their permanent fund dividend, they've simply raised their debt on their Outside costs. I don't believe that the people who are attending school Outside, by and large, have all the money they need to do that. I think they engage in debt. The nest egg that would be here would simply not be a nest egg as much as it would be a way to pay off the debt. But it would also be interest-free, while the debt would have ... interest. So, in the end, I believe the woman who was testifying is indicating there is a net loss to a student doing that. 9:26:38 AM REPRESENTATIVE RAMRAS interpreted that a lot of the testimony that has been heard on HB 273 suggests that "once you lose your permanent fund [dividend] it goes away forever." He said it's not a net loss bill. When a student comes back to Alaska, he said, he/she is made "almost whole." He said [Ms. Barton] manages a small group of people that work hard and many of the questions being asked are difficult to answer. He provided an analogy of going through security at an airport even if a person is not a terrorist, and he explained that he is an advocate of setting standards. He noted that 55 percent of the people in his district are in the military, thus he has a hypersensitivity to those in the military. He also noted that he was a student who would have been hurt had he not been able collect a PFD; however, he reemphasized the importance of setting a standard. Representative Ramras concluded by stating his support of HB 273. 9:28:37 AM REPRESENTATIVE LYNN asked what would stop someone from coming back to get their money and then turning around and leaving the state again. 9:28:57 AM CHAIR SEATON explained that the purpose of the bill is to ensure that people do exactly what they say they will do, which is to come back and establish their residency. To do so, he said, they would have to reside in the state for 185 days in a year. After that, there is nothing to stop those people from leaving; however, he expressed the hope that after coming back and reestablishing themselves, people would decide to stay. 9:31:02 AM REPRESENTATIVE LYNN moved to adopt Amendment 1, labeled 24- LS0871\F.2, Cook, 1/23/06. He said it is basically an amendment to protect the military. Amendment 1 read as follows: Page 4, line 6, following "AS 43.23.008(a)(1) - (8) or (10) - (13).": Insert "This subsection does not apply to the payment of a current year dividend to an individual claiming an allowable absence under AS 43.23.008(a)(3) if, for a period during the qualifying year, the individual (1) was serving as a member of the armed forces of the United States on active duty (A) at a location outside of the United States and outside of North, South, and Central America; (B) considered to be a remote tour of duty by the armed forces of the United States; or (C) at a location outside of the state, has a spouse or minor or disabled dependent, and the spouse and each minor or disabled dependent is eligible for the current year dividend without claiming an allowable absence under AS 43.23.008; or (2) received care in a hospital outside the state while (A) serving on active duty as a member of the armed forces of the United States; or (B) a spouse or minor or disabled dependent of an individual serving on active duty as a member of the armed forces of the United States who is eligible for a current year dividend." 9:31:46 AM CHAIR SEATON noted that the committee did not yet have a copy of Amendment 1. 9:32:01 AM REPRESENTATIVE LYNN, at the request of Chair Seaton, withdrew his motion to adopt Amendment 1 until the committee received a copy. The committee took an at-ease from 9:32:14 AM to 9:36:06 AM. 9:36:09 AM REPRESENTATIVE LYNN repeated his motion to adopt Amendment 1 [text provided previously]. 9:37:19 AM CHAIR SEATON stated his understanding that Version F was already before the committee as a work draft. 9:37:35 AM REPRESENTATIVE LYNN stated that Amendment 1 would protect the military, which, he added, protects "us." He offered further details. 9:38:10 AM CHAIR SEATON objected. He said [Amendment 1] would violate the state's constitutional due process and equal protection. 9:38:36 AM A roll call vote was taken. Representative Lynn voted in favor of Amendment 1. Representatives Gatto, Elkins, Ramras, Gruenberg, and Seaton voted against it. Therefore, Amendment 1 failed by a vote of 1-5. 9:39:26 AM REPRESENTATIVE ELKINS moved to report CSHB 273, Version 24- LS0871\F, Cook, 1/18/06, out of committee with individual recommendations and a zero fiscal note. 9:40:16 AM REPRESENTATIVE LYNN objected. He emphasized that he thinks the intent of bill is good, but he wants to make it better. He stated that the bill brings blatant discrimination against military and students. He said the bill holds the PFD hostage and is bad public policy. He suggested the appropriate policy for getting people to return to the state is to provide better educational and job opportunities, and to go after fraudulent claims. He stated his understanding that Alaska has the highest percent of military retirees and veterans of almost any other state in the union. He stated his opposition of the bill. 9:42:01 AM REPRESENTATIVE LYNN, in response to a comment from Representative Gatto, explained that although there is no reference to students in the failed Amendment 1, he had added a reference to students in his comments. 9:42:15 AM REPRESENTATIVE GATTO recalled that Mr. Poag had testified that sub-groups cannot be made without jeopardizing the entire bill. He stated, "While I certainly support the military saving their dividend - and the students, and allowable absences for all reasons, I think it's unfair to jeopardize the bill with the information that we have before us. And I'll be voting in favor of it." 9:42:48 AM REPRESENTATIVE ELKINS concurred with Representative Gatto's comments and said he would support the bill "for the same reasons." 9:43:04 AM CHAIR SEATON expressed his appreciation to the Permanent Fund Dividend Division for its work in pulling together the information requested by the committee. He summarized that $154 million has been paid out in PFDs to people who left the state and did not return "to the qualifications." That money would have gone into the PFDs of true Alaska residents; none of the money would go to financing state government. 9:43:55 AM REPRESENTATIVE GRUENBERG said he would like Ms. Barton to continue her investigation and make her findings available to the committee. 9:44:11 AM CHAIR SEATON said he has asked Ms. Barton to finish the requested work so that it could be reported to the committee and "follow the bill." 9:44:27 AM REPRESENTATIVE GRUENBERG said he is conflicted on the bill, even though he is a co-sponsor of it. He said his mind is "still open on the subject," and he reiterated that he wants to see Ms. Barton's future findings. 9:44:44 AM A roll call vote was taken. Representatives Elkins, Ramras, Gardner, Gruenberg, Gatto, and Seaton voted in favor of reporting CSHB 273, Version 24-LS0871\F, Cook, 1/18/06, out of committee with individual recommendations and a zero fiscal note. Representative Lynn voted against it. Therefore, CSHB 273(STA) was reported out of the House State Affairs Standing Committee by a vote of 6-1.
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