Legislature(2019 - 2020)GRUENBERG 120

05/11/2019 11:30 AM STATE AFFAIRS

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Moved HR 11 Out of Committee
Heard & Held
-- Public Testimony --
Heard & Held
-- Testimony <Invitation Only> --
+ Presentation: Payment Schedules for the Alaska TELECONFERENCED
Permanent Fund by Commissioner Tangeman, Dept. of
Revenue & Sidhya Balakrishnan, Jain Family
+ Bills Previously Heard/Scheduled 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                                                               
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                                                               
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                                                               
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                                                               
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                                                               
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                                                               
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                                                               
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                                                               
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                                                               
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                                                               
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