Legislature(2007 - 2008)SENATE FINANCE 532

07/24/2008 09:00 AM FINANCE


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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+= SB4002 RESOURCE REBATE PROGRAM FOR RESIDENTS TELECONFERENCED
Heard & Held
+= SB4003 APPROP: ENERGY RELIEF/REBATE/FUEL TAX TELECONFERENCED
Heard & Held
Bills Previously Heard/Scheduled
SENATE BILL NO. 4002                                                                                                          
                                                                                                                                
     "An Act establishing the Alaska resource rebate program                                                                    
     and relating to the program; and providing for an                                                                          
     effective date."                                                                                                           
                                                                                                                                
9:09:06 AM                                                                                                                    
                                                                                                                                
Co-Chair Stedman  commented on the  problem of the  high cost                                                                   
of energy in Alaska.  SB 4002  and SB 4003 address this issue                                                                   
in the form of a rebate.                                                                                                        
                                                                                                                                
RANDALL  RUARO, SPECIAL  ASSISTANT, OFFICE  OF THE  GOVERNOR,                                                                   
related  that  SB 4002  is  an  important bill  for  Alaskans                                                                   
because it would allow the state  to share part of its wealth                                                                   
on  a  one-time  basis,  with a  $1,200  payment  to  Alaskan                                                                   
residents.   There  are three  main advantages  to the  bill.                                                                   
All  Alaskan  residents  would share  equally  regardless  of                                                                   
where they live.  He referred  to Article 8 which states that                                                                   
Alaskans own the state's resources.                                                                                             
                                                                                                                                
Mr. Ruaro said that the second  advantage of the bill is that                                                                   
the rebate could be paid quickly.   The third important point                                                                   
is  that the  bill includes  payments to  veterans and  holds                                                                   
them harmless from financial offsets.                                                                                           
                                                                                                                                
9:13:10 AM                                                                                                                    
                                                                                                                                
Mr.  Ruaro noted  a  disadvantage  of the  bill  in that  the                                                                   
payments are taxable  income; however, they would  not reduce                                                                   
benefits from federal programs.                                                                                                 
                                                                                                                                
Senator  Huggins asked  for a  definition of  resident.   Mr.                                                                   
Ruaro  related   that  the   residency  definition   for  the                                                                   
permanent  fund dividend  is  being  used.   Also  used is  a                                                                   
definition for  those who have  recently moved to  Alaska and                                                                   
can prove residency.                                                                                                            
                                                                                                                                
Senator  Huggins   asked  if   any  non-residents   would  be                                                                   
included.   Mr. Ruaro said the  second group is  not eligible                                                                   
for a PFD and  have not applied for a PFD,  but have lived in                                                                   
Alaska for a six-month period and intend to remain.                                                                             
                                                                                                                                
9:16:38 AM                                                                                                                    
                                                                                                                                
Senator  Olson inquired  what options  those who qualify  for                                                                   
public  assistance  have.    Mr.  Ruaro  replied  that  those                                                                   
individuals  could  elect  not  to  receive  the  rebate  for                                                                   
various reasons.                                                                                                                
                                                                                                                                
Co-Chair  Stedman asked  about  the title  "Alaskan  Resource                                                                   
Rebate".   He  also wanted  to know  if the  program was  for                                                                   
energy relief  or if it  was a way  to pay excess  revenue to                                                                   
citizens.   Mr. Ruaro replied that  at the end of  the fiscal                                                                   
year  there  was  an excess  of  $740  million  and  spending                                                                   
priorities had been  met in FY 08.  The basis  of the bill is                                                                   
to share the  wealth in the form  of a rebate.  There  are no                                                                   
restrictions  as to  how  the rebate  can  be spent.   It  is                                                                   
expected that many will use the funds to pay for energy-                                                                        
related costs.                                                                                                                  
                                                                                                                                
9:20:32 AM                                                                                                                    
                                                                                                                                
Co-Chair Stedman  recalled years  of building up  the capital                                                                   
budget,  catching up  on deferred  maintenance expenses,  and                                                                   
then years to increase savings.   He requested information as                                                                   
to why the direction has changed.                                                                                               
                                                                                                                                
Co-Chair Stedman  noted the passage  of a bill  directing the                                                                   
state toward a  long-term fiscal plan.  He  wondered how this                                                                   
bill fits into that plan.                                                                                                       
                                                                                                                                
9:22:01 AM                                                                                                                    
                                                                                                                                
KAREN  REHFELD, DIRECTOR,  OFFICE OF  MANAGEMENT AND  BUDGET,                                                                   
said the  administration  is committed  to producing  a long-                                                                   
range  fiscal  plan  enacted   in  HB  125.    She  spoke  of                                                                   
Department  of  Revenue goals  and  the  plan to  put  excess                                                                   
dollars into  savings, but also  to allow for  future capital                                                                   
expenses.   She said she could  not detail a picture  of that                                                                   
today.  She  described the philosophy behind  the bill, which                                                                   
is  to  help  Alaskans  meet high  energy  costs  now,  while                                                                   
working on  a long-term solution  to reduce statewide  energy                                                                   
costs.                                                                                                                          
                                                                                                                                
Co-Chair Stedman  thought that dispersing excess  savings was                                                                   
different than trying to help with heating homes.                                                                               
                                                                                                                                
Senator  Thomas  wondered  how  the rebate  changed  from  an                                                                   
energy rebate  to a  resource rebate.   He wondered  why only                                                                   
the permanent fund list was used.   He questioned why someone                                                                   
who has  only lived in Alaska  six months should  qualify for                                                                   
the rebate.                                                                                                                     
                                                                                                                                
9:26:05 AM                                                                                                                    
                                                                                                                                
Mr. Ruaro  addressed the question  regarding the  renaming of                                                                   
the rebate.  He recalled that  the basis of the bill to share                                                                   
the wealth  with Alaskans  has  always been  present.   In an                                                                   
earlier  effort, the  focus was  directed toward  energy-only                                                                   
expenses.   A debit  card approach would  have worked  for 90                                                                   
percent of Alaskans,  but some communities would  not be able                                                                   
to use debit cards, especially  in rural Alaska.  The idea of                                                                   
payment to utilities  brought up tax issues.   The underlying                                                                   
principle to "share the wealth" has remained.                                                                                   
                                                                                                                                
Mr. Ruaro  spoke to the  approach to  use only the  PFD list.                                                                   
He  said he  is not  opposed to  that method.   Creating  the                                                                   
second group of eligible persons  was designed to accommodate                                                                   
veterans  and others  whose  benefits would  be  offset by  a                                                                   
rebate.                                                                                                                         
                                                                                                                                
9:29:46 AM                                                                                                                    
                                                                                                                                
Senator  Thomas did  not disagree  with that  idea.  He  said                                                                   
that  now, however,  people no  longer  see it  as an  energy                                                                   
relief payment.  There are questions  of fairness now that it                                                                   
is not considered  energy relief.  He gave, as  an example, a                                                                   
family of eight  receiving eight rebates, which  have nothing                                                                   
to do  with the amount  of energy consumed.   There  are many                                                                   
concerns about fairness.                                                                                                        
                                                                                                                                
9:32:11 AM                                                                                                                    
                                                                                                                                
Senator  Huggins  agreed  with  the concerns  brought  up  by                                                                   
Senator  Thomas.   He  recommended in  the  future that  more                                                                   
attention  be paid to  defining the  rebate before  the media                                                                   
release  is  offered.    The messages  were  confusing.    He                                                                   
inquired who in the administration was working on the bill.                                                                     
                                                                                                                                
Mr.  Ruaro listed  those working  on the  bill: himself,  Mr.                                                                   
Burnett, Ms.  Rehfeld, representatives from Health  and Human                                                                   
Services, and employees of the  Division of Finance.  Senator                                                                   
Huggins asked  if there  are any  "energy people" working  on                                                                   
it.    Mr.   Ruaro  said  that  Steve   Haagenson,  Executive                                                                   
Director, Alaska  Energy Authority,  is working on  the bill.                                                                   
Senator Huggins suggested including  legislative personnel in                                                                   
the mix.                                                                                                                        
                                                                                                                                
9:34:44 AM                                                                                                                    
                                                                                                                                
Senator Elton referred  to page 3, line 1, of  the bill where                                                                   
it  talks  about  if  a  person  is  eligible  if  they  were                                                                   
voluntarily  and physically  present in  the state when  they                                                                   
applied  for  the  rebate.   He  wondered  if  that  excluded                                                                   
military  personnel,  which  he  did not  classify  as  being                                                                   
present voluntarily.  Mr. Ruaro  said the intent was to allow                                                                   
military who qualify  for the PFD to be eligible,  as well as                                                                   
those overseas.  He noted a pending  amendment that clears up                                                                   
the ambiguity.                                                                                                                  
                                                                                                                                
Senator Elton  referenced page 5, line  14, of the bill.   He                                                                   
asked if  the bill  establishes a  mandate directly  to local                                                                   
control;  to political  subdivisions  as  well  as to  native                                                                   
organizations.  He wondered why that was necessary.                                                                             
                                                                                                                                
STACY KRALY,  ASSISTANT ATTORNEY GENERAL, DEPARTMENT  OF LAW,                                                                   
related  that the  purpose of  the part of  the bill  Senator                                                                   
Elton  was  referring  to  was   to  address  potential  hold                                                                   
harmless issues.   The hold  harmless provisions  included in                                                                   
the  bill address  public  assistance and  veteran  benefits.                                                                   
The intent was to avoid new programs  that would be developed                                                                   
in order to qualify for this rebate.                                                                                            
                                                                                                                                
Senator Elton believed that those  decisions are best made by                                                                   
municipalities.   Ms. Kraly responded that the  intent was to                                                                   
ensure  that municipalities  did not  create new  needs-based                                                                   
programs.   Senator  Elton said  the premise  of the bill  is                                                                   
that it is not  an on-going program and the  payment would go                                                                   
out  in  September,  therefore   that  kind  of  language  is                                                                   
unnecessary.  Ms. Kraly said it was a stop gap measure.                                                                         
                                                                                                                                
9:40:39 AM                                                                                                                    
                                                                                                                                
Senator Elton assumed  that the bill was put  together with a                                                                   
consideration  for risk  assessment.   One potential  risk is                                                                   
unintended consequences.   He voiced concern  of consequences                                                                   
in Washington,  DC,  where it  could be said  that Alaska  is                                                                   
getting  rich  off   of  its  resources.     There  could  be                                                                   
ramifications.  He  gave an example.  He questioned  if there                                                                   
was a possibility for a backlash.                                                                                               
                                                                                                                                
Mr. Ruaro said that Senator Ted  Stevens thought that members                                                                   
of Congress  would see  it as  a positive  that the  state is                                                                   
assisting its  citizens in  a time of  energy crisis.   It is                                                                   
possible that it could be seen the other way.                                                                                   
                                                                                                                                
Senator Olson  asked if Senator  Stevens is in favor  of this                                                                   
proposal.  Mr.  Ruaro said Senator Stevens supported  it at a                                                                   
press conference in July.                                                                                                       
                                                                                                                                
9:44:58 AM                                                                                                                    
                                                                                                                                
JERRY   BURNETT,   DIRECTOR,   DIVISION   OF   ADMINISTRATIVE                                                                   
SERVICES,  DEPARTMENT  OF  REVENUE,  indicated  that  Senator                                                                   
Stevens was in favor of the rebate.                                                                                             
                                                                                                                                
Co-Chair  Stedman spoke  of the  legislature's protection  of                                                                   
the  permanent  fund.   He  wondered  if the  philosophy  had                                                                   
changed.   Mr.  Ruaro didn't  think there  was a  shift.   He                                                                   
believed that this was a one-time event.                                                                                        
                                                                                                                                
9:46:33 AM                                                                                                                    
                                                                                                                                
Senator  Huggins reported  that there  are 620,000  permanent                                                                   
fund  recipients.    He  wondered if  this  rebate  could  be                                                                   
included in the permanent fund payment.                                                                                         
                                                                                                                                
Mr. Burnett  said  it is  a matter of  timing.   It could  be                                                                   
included in the  PFD amount; however, the intent  is to do an                                                                   
earlier distribution in August or September.                                                                                    
                                                                                                                                
Senator Huggins  asked how much  it would cost.   Mr. Burnett                                                                   
said the cost to send out the  check would be about $500,000.                                                                   
Senator Huggins  questioned if normal postage  is the correct                                                                   
way to  do it.  Mr.  Burnett clarified that  expenses include                                                                   
computer  services, check  stock,  envelopes,  and so  forth.                                                                   
Costs have been fully allocated.                                                                                                
                                                                                                                                
9:49:20 AM                                                                                                                    
                                                                                                                                
Co-Chair Stedman  called it a resource rebate,  not an energy                                                                   
rebate.  He asked why the rebate  should be shared with those                                                                   
who moved to the state seven months  ago.  Mr. Ruaro said the                                                                   
intent was  to find a mechanism  to allow long-time  Alaskans                                                                   
who do not apply for the PFD to qualify for the rebate.                                                                         
                                                                                                                                
Co-Chair Stedman  asked if the  residency requirement  is six                                                                   
months  or a  year.   Mr. Ruaro  said  six months  - with  an                                                                   
intent to remain in Alaska.                                                                                                     
                                                                                                                                
9:51:53 AM                                                                                                                    
                                                                                                                                
Senator Thomas  asked if there  was a legal reason  to change                                                                   
from an  energy rebate  to the current  resource rebate.   He                                                                   
suggested  tax  issues  might  have  been  the  reason.    He                                                                   
inquired  about the  considerations  used for  qualification.                                                                   
He  questioned the  language  on  page 2,  line  25, "is  not                                                                   
ineligible".                                                                                                                    
                                                                                                                                
Mr.  Ruaro  said  difficulties  were found  with  tax  issues                                                                   
regarding payments to utilities  and co-ops, which are exempt                                                                   
under  federal law  if  85 percent  of  their income  derives                                                                   
solely from membership payments.                                                                                                
                                                                                                                                
AT-EASE:       9:54:24 AM                                                                                                     
                                                                                                                                
RECONVENE:     9:59:52 AM                                                                                                     
                                                                                                                                
Mr.  Ruaro  continued  to respond  to  questions  by  Senator                                                                   
Thomas.    He  explained  that  outside  income  could  count                                                                   
against the tax  exempt status of co-ops.   He explained that                                                                   
residency eligibility  of 6 months  was selected in  order to                                                                   
stay within the legal boundaries of a residency period.                                                                         
                                                                                                                                
Mr. Burnett  addressed  the question regarding  page  2, line                                                                   
25.     He  explained   that  the   language  provides   that                                                                   
incarcerated  felons  and  multiple   misdemeanants  are  not                                                                   
eligible for a PFD.                                                                                                             
                                                                                                                                
10:02:06 AM                                                                                                                   
                                                                                                                                
Senator Thomas  asked if reducing  costs to cooperatives  and                                                                   
electrical  suppliers  was  reviewed   as  a  supplement,  as                                                                   
opposed   to  providing   support   to  an   across-the-board                                                                   
situation.                                                                                                                      
                                                                                                                                
Mr. Ruaro could not recall looking  at the specific mechanism                                                                   
outlined by Senator Thomas.                                                                                                     
                                                                                                                                
10:03:39 AM                                                                                                                   
                                                                                                                                
Senator  Elton referred  to page  5, line 14.   He  concluded                                                                   
that  the  rebate would  apply  only  to  past actions  by  a                                                                   
municipality, not what  it might do in the future,  as far as                                                                   
implementing social service programs.                                                                                           
                                                                                                                                
Ms. Kraly explained  that, in terms of the  public assistance                                                                   
benefit  arena, what  is considered  resource  or income  for                                                                   
purposes of  eligibility is wide-ranging.   The intent  is to                                                                   
limit  the ability  to use  this  as income  for purposes  of                                                                   
eligibility.  It limits the ability  of programs to calculate                                                                   
benefits as income which would  render individuals ineligible                                                                   
for certain programs.                                                                                                           
                                                                                                                                
10:05:41 AM                                                                                                                   
                                                                                                                                
Senator Elton questioned why something  that has been already                                                                   
done would be voided.                                                                                                           
                                                                                                                                
Ms. Kraly  clarified that  the intent  was to guarantee  hold                                                                   
harmless  provisions.    Senator  Elton  felt  the  provision                                                                   
needed further review.                                                                                                          
                                                                                                                                
Senator Elton  observed that  statute currently prevents  the                                                                   
use  of the  Governor's picture  on  permanent fund  dividend                                                                   
checks.    He  questioned  if  the  administration  would  be                                                                   
supportive of  prohibiting a picture  of the Governor  on the                                                                   
energy check.  Mr. Ruaro could not respond.                                                                                     
                                                                                                                                
10:08:26 AM                                                                                                                   
                                                                                                                                
Senator  Huggins  asked  what legal  challenges  the  program                                                                   
might present  in the  future.  Ms.  Kraly could  not address                                                                   
the legal risks.                                                                                                                
                                                                                                                                
Senator Huggins inquired about  the size of the pool of those                                                                   
that do not apply for a PFD, but would be eligible.                                                                             
                                                                                                                                
Mr.  Ruaro   reported  that   there  are  approximately   400                                                                   
veterans, and  spouses and children of veterans  that receive                                                                   
VA benefits.                                                                                                                    
                                                                                                                                
Senator Huggins  asked how  the PFD and  the rebate  would be                                                                   
handled differently as they apply to veterans.                                                                                  
                                                                                                                                
Mr. Ruaro  explained that federal  statutes and  rules affect                                                                   
veterans' benefits.   In the PFD,  there is no  hold harmless                                                                   
provision  for veterans.   The rebate  bill does extend  hold                                                                   
harmless provisions  to veterans.  The reduction  would occur                                                                   
by  federal law,  but the  state would  step in  and pay  the                                                                   
difference, so that they would receive the entire benefit.                                                                      
                                                                                                                                
10:12:27 AM                                                                                                                   
                                                                                                                                
Senator  Olson  asked if  the  benefit  would be  subject  to                                                                   
garnishing.  Mr.  Burnett noted that it would  not be subject                                                                   
to garnishment.                                                                                                                 
                                                                                                                                
Co-Chair  Stedman asked  if  thought had  been  given to  the                                                                   
resulting workload  due to appeals.   He observed  the amount                                                                   
of inquires received by legislators for similar issues.                                                                         
                                                                                                                                
Mr. Burnett acknowledged the concern  and that there would be                                                                   
additional  appeals.  He  did not  know how  the cost  of the                                                                   
appeals would be absorbed.                                                                                                      
                                                                                                                                
10:15:19 AM                                                                                                                   
                                                                                                                                
Co-Chair  Stedman  observed  that  changes  in  oil  taxation                                                                   
resulted in raising  the marginal tax rate of  oil companies.                                                                   
He asked how he could reconcile  the additional tax burden to                                                                   
industry.  He  suggested using the revenue to  help the state                                                                   
build roads,  airports, hospitals, and support  education and                                                                   
transportation through  the state appropriation  process, vs.                                                                   
increasing   a  tax   burden   on  the   industry  and   then                                                                   
distributing a check to each resident.                                                                                          
                                                                                                                                
Ms. Rehfeld acknowledged  that a balance needs  to be reached                                                                   
between  infrastructure,   industry,   and  savings.     Both                                                                   
opportunities exist and the philosophy is not dissimilar.                                                                       
                                                                                                                                
10:18:02 AM                                                                                                                   
                                                                                                                                
Senator  Thomas  brought  up the  concept  of  changing  from                                                                   
energy  relief to  a  fair distribution  rebate.   He  voiced                                                                   
concern about page 3, line 5:  "intends to maintain a home in                                                                   
the  state."    He  maintained   that  the  rebate  does  not                                                                   
encourage energy conservation.                                                                                                  
                                                                                                                                
Mr. Ruaro observed that the basis  of the payment is to share                                                                   
state resources.   The difference  is that it  was determined                                                                   
to be difficult  to restrict the support to  energy expenses.                                                                   
There are  taxation issues.   He pointed  out that  the funds                                                                   
could be  used to  purchase more  efficient fuel systems,  as                                                                   
well as paying electric bills.   He acknowledged that page 3,                                                                   
line 5,  could be reworked to  stress that residency  must be                                                                   
maintained, not just a home.                                                                                                    
                                                                                                                                
Senator  Thomas added  that there are  already programs  that                                                                   
pay  directly for  heat,  particularly in  rural  areas.   He                                                                   
suggested that  the rebate could have been  incorporated into                                                                   
an existing program.                                                                                                            
                                                                                                                                
10:23:21 AM                                                                                                                   
                                                                                                                                
Senator Huggins  observed that  on page  3, lines 27-28,  the                                                                   
language  "non-residents  of   the  "country"  might  not  be                                                                   
accurate.                                                                                                                       
                                                                                                                                
Mr. Burnett  clarified  that under the  dividend program  and                                                                   
this  program,  individuals  that  are not  citizens  of  the                                                                   
United States, but are residents  of the state, would receive                                                                   
the benefit.                                                                                                                    
                                                                                                                                
Senator Huggins questioned the  popularity of the program and                                                                   
asked how $1,200 was selected.                                                                                                  
                                                                                                                                
10:25:19 AM                                                                                                                   
                                                                                                                                
Co-Chair  Stedman  noted  that during  the  regular  session,                                                                   
previous bills dealing  with an energy rebate  were not acted                                                                   
upon.  He wondered  if that was a factor when  designing this                                                                   
bill.                                                                                                                           
                                                                                                                                
Ms. Rehfeld explained that discussions  began with a $100 per                                                                   
month debit card,  which then transferred to  $1,200 a month.                                                                   
She  did not  think the  previous  bills were  administration                                                                   
bills.                                                                                                                          
                                                                                                                                
SB  4002  was  heard  and  HELD   in  Committee  for  further                                                                   
consideration.                                                                                                                  
                                                                                                                                
10:27:06 AM                                                                                                                   
                                                                                                                                

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