Legislature(1993 - 1994)

03/26/1993 01:55 PM JUD

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
txt
  SENATOR TAYLOR introduced SB 58  (PHASE OUT LONGEVITY BONUS)                 
  introduced  by request of the  Governor.  He announced there                 
  would be testimony taken from teleconference sites in Sitka,                 
  Dillingham, Kodiak, Tok, Anchorage, and MatSu.                               
                                                                               
  Number 061                                                                   
                                                                               
  JOHN SHAFFER testified both for  the American Association of                 
  Retired Persons and from his experience living in Alaska for                 
  thirty one years.   He praised the policies  put in place to                 
  improve  the  quality of  life  for the  senior  citizens of                 
  Alaska, but he expressed his concern for the change in those                 
  policies. In order  to access  the impact of  the change  in                 
  policy which  would discourage senior citizens  from staying                 
  in the state,  he requested hearings not just on the budget,                 
  but the impact on the quality of life.                                       
                                                                               
  MR.  SHAFFER used the term, elder  business, to identify the                 
  economic benefits from the present policies, and he reviewed                 
  the  support  for the  proposed  annuity program  to benefit                 
  people in  the future.   He described communities  where the                 
  senior  citizens  were  not only  an  economic  benefit, but                 
  through their volunteer  work, they were  an asset to  their                 
  community.                                                                   
                                                                               
  SENATOR TAYLOR returned the  testimony to Juneau to  call on                 
  his friend, ROBERT KALLENBERG.                                               
                                                                               
                                                                               
  Number 108                                                                   
                                                                               
  MR. KALLENBERG, born May 26, 1903, arrived  in Dillingham in                 
  August, 1926, and now  resides in Chugiak.  He  reviewed the                 
  changes  during the 66 years he has  been in Alaska, such as                 
  the  delivery  of  mail nine  times  a  year  when he  first                 
  arrived, as compared to daily delivery now.                                  
                                                                               
  MR. KALLENBERG described  making his  living fishing a  sail                 
  boat in Bristol  Bay, but watching his retired friends leave                 
  Alaska because their retirement compensation would not  meet                 
  the  cost  of living  in Alaska.    he quoted  MR. SHAFFER'S                 
  testimony to explain the policies that permit retired people                 
  to remain in the state, but he claimed the legislation being                 
  considered eroded that policy.                                               
                                                                               
  MR. KALLENBERG explained he was  in this controversy because                 
  he served on the  special committee to solve the  problem of                 
  the longevity bonus.   He  gave some background  information                 
  from committee meetings in 1983 and 1984 when they realized,                 
  before the year 2000, funding the longevity bonus would be a                 
  problem.                                                                     
                                                                               
  After a  year of  study, MR.  KALLENBERG said  the committee                 
  brought recommendations to the governor and the  legislature                 
  that embodied the basic concepts of the annuity  approach to                 
  solving the problem.  He explained  he had considered all of                 
  the solutions that have  been offered in the mean  time, and                 
  he was well aware of the bill being considered today, SB 58.                 
  He continued to explain why he thought  the annuity approach                 
  was the best answer that has been offered to the problem and                 
  why the present legislation is short sighted.                                
                                                                               
  MR. KALLENBERG urged the committee to  be concerned with the                 
  age group from 50 to 65  years of age, who will be  deciding                 
  whether or  not they are going to retire  in Alaska.  He has                 
  talked to  many who are going  to leave the  state when they                 
  quit earning  money and  take their  money with  them, which                 
  will  be  a  considerable  amount.    He   referred  to  the                 
  statistics, calling it a mail box  industry, and said it was                 
  close to $600  million a year.   He asked  the committee  to                 
  consider his  testimony and  thanked them  for listening  to                 
  him.                                                                         
                                                                               
  Number 200                                                                   
                                                                               
  JOE MCGILL  from Dillingham, said  he was co-sponsor  for an                 
  earlier bill for  $200 a  month, and presently  representing                 
  the Dillingham  Senior Center with 138 members,  all of whom                 
  are not in favor of SB  58.  He reviewed the involvement  of                 
  those  65  years and  older in  the  community, and  he gave                 
  himself as an example of someone  heavily committed to local                 
  government  and  to  fishing  organizations.   He  also  got                 
  married at 65 because he could afford to do so.                              
                                                                               
                                                                               
  MR. MCGILL took  on the argument  of many seniors coming  to                 
  Alaska  for  the  longevity bonus,  and  he  explained these                 
  people also brought  other retirement  money such as  social                 
  security  or  other income.   He  thought  it would  be less                 
  expensive to give the seniors $250  so they can take care of                 
  themselves,  and  he described  those  people who  came here                 
  after World War 1, lived off the land, and didn't  have much                 
  retirement.                                                                  
                                                                               
  RUPE ANDREWS, representing  the Capital City Task  Force for                 
  the AARP, said some  of his comments had already  been made,                 
  but he wanted to let people  know the Governor was convening                 
  a meeting with people representing organizations or agencies                 
  dealing with  senior citizens  in the  state.   He said  the                 
  governor  was  aware  the bill  would  eliminate  a standing                 
  policy of some 20 years which has created economic stability                 
  for seniors, allowing them to remain in their own homes, and                 
  to make the  choice to remain in  Alaska.  He hoped,  out of                 
  the meeting, would  come some policy that  would replace the                 
  policy changed by  SB 58.   He suggested postponing a  final                 
  decision  on the  bill  until  the  results of  the  meeting                 
  becomes available.                                                           
                                                                               
  Number 279                                                                   
                                                                               
  SENATOR    TAYLOR    introduced    the    Commissioner    of                 
  Administration, COMMISSIONER NANCY USERA,  to testify, after                 
  which he would be returning to the teleconference network.                   
                                                                               
  COMMISSIONER USERA reviewed the provisions of the bill:                      
                                                                               
       a.  Grandfathers in  all  recipients  currently on  the                 
       program.                                                                
                                                                               
       b. Provide a three  year stepped down phase out  at the                 
       rate of $200, $150, and $100 per month for life.                        
                                                                               
  COMMISSIONER USERA  indicated interest at  the comments with                 
  regard to  the public  policy represented  by the  longevity                 
  bonus, and  she  remembered  listening  to  previous  crisis                 
  budget meetings, where  doing away with the  longevity bonus                 
  was discussed.   She reviewed  the fiscal  problems at  that                 
  time  with  the  drop  in  oil  prices  and the  suggestions                 
  presented  at the committee  meetings was always  to cut the                 
  longevity bonus.  She described these as a crisis management                 
  approach.                                                                    
                                                                               
  COMMISSIONER USERA talked  about the original design  of the                 
  longevity bonus,  which  was  declared  unconstitutional  in                 
  1982. Consequently, she said each  year there is a financial                 
  crisis,  this program  becomes  vulnerable,  and she  quoted                 
  concerns from the governor that the current recipients would                 
  be affected by some sort of  a last minute crisis management                 
                                                                               
                                                                               
  approach to balancing the state's budget.                                    
                                                                               
  COMMISSIONER USERA reviewed  a variety of proposals  to deal                 
  with the program for the past seven years, but there has not                 
  been the collective  will to  fix it.   She agreed with  the                 
  governor this would provide a  window of opportunity for the                 
  next three or four years to pay for the bonus and to provide                 
  a reasonable transition for the people receiving the bonus.                  
                                                                               
  COMMISSIONER USERA explained the fatal  flaws in the annuity                 
  program.  First, if it was an incredibly successful program,                 
  it would remove from the local economy a significant portion                 
  of the permanent  fund dividends,  that are currently  being                 
  circulated. She explained  how the removal of  the dividends                 
  would impact the businesses in the communities.                              
                                                                               
  Number 333                                                                   
                                                                               
  COMMISSIONER USERA described what  would become a government                 
  banking bureaucracy invested  similar to the  permanent fund                 
  in a mix  of equities and bonds outside the State of Alaska.                 
  It would  only served  a small  number of  people who  could                 
  afford to  invest their  permanent fund  dividends into  the                 
  programs, and the state could  become liable for taking care                 
  of long term  annuity accounts for  a few people, who  might                 
  retire to Florida, for about 40 years.  She suggested people                 
  do  their  own investing  in  monetary institutions  such as                 
  I.R.A's, annuity programs, and investment houses.                            
                                                                               
  COMMISSIONER USERA agreed with the seniors that testified on                 
  the success for the longevity bonus, but she didn't think it                 
  was a  sustainable program.  She explained she had solicited                 
  solutions from the senior groups for  two years, but she had                 
  not  found  an  adequate  solution  that meets  all  of  the                 
  considerations.                                                              
                                                                               
  SENATOR  TAYLOR  opened  the  discussion  to  the  committee                 
  members.                                                                     
                                                                               
  SENATOR LITTLE expressed her concern as to whether SB 58 was                 
  constitutional  and defensible.  She reviewed the provisions                 
  of the three year phase out.                                                 
                                                                               
  COMMISSIONER USERA referred to an  opinion from the Attorney                 
  General's  office,  JOHN  GAGUINE, and  she  summarized  the                 
  constitutional provisions  from MR. GAGUINE,  which she felt                 
  protected the legislation.   She  explained how the  program                 
  could  end in a  positive fashion, while  meeting the public                 
  good, the public purpose, and the legislative intent.                        
                                                                               
  SENATOR LITTLE and COMMISSIONER USERA discussed the original                 
  intent of the longevity bonus, which was to be a self-ending                 
  program.                                                                     
                                                                               
                                                                               
  Number 389                                                                   
                                                                               
  SENATOR HALFORD was concerned the  legislature had created a                 
  program that tells a life-long Alaskan that after 1997  they                 
  get nothing, but  someone close to  65, who moves here  from                 
  another state close to the cut-off  date, can get money from                 
  the state treasury.   He  said the original  purpose of  the                 
  legislation was to address those  inequities, and he thought                 
  the inequity is easy to see.                                                 
                                                                               
  COMMISSIONER USERA shared SENATOR HALFORD'S frustration at a                 
  program originally designed for  life-long Alaskans, who had                 
  lived here.  She said, had  the annuity program been adopted                 
  in 1986,  the annuity  would have  been in  place for  seven                 
  years   and   probably  be   successful.     She   said  the                 
  administration was still amenable to alternative suggestions                 
  on  the  phase-out  approach,  but  she  reminded  committee                 
  members there were still a large number of persons who would                 
  qualify under the original criteria.   She said there was no                 
  constitutional way  to deliver  a  program specifically  for                 
  those people.                                                                
                                                                               
  SENATOR HALFORD asked  permission from the chair  to discuss                 
  the annuity as an  alternative to the bill, and  he referred                 
  to the annuity bill.  He gave a scenario where each  annuity                 
  share,  in  the  60 to  65  age,   was  matched  by  a state                 
  contribution to the permanent fund dividend, thus making the                 
  annuity steps  twice  as  big.   Under  this  scenario,  the                 
  longevity bonus would  be phased out  in 7 years, and  there                 
  would be a substantial  cost saving due to the  small number                 
  of participants.                                                             
                                                                               
  Number 439                                                                   
                                                                               
  COMMISSIONER USERA clarified  the notion  the annuity  would                 
  replace the longevity bonus as much as it is a trade-off for                 
  the permanent fund dividends.  She continued to describe the                 
  annuity  in  which  a  person would  invest  100%  of  their                 
  permanent fund for at least  fifteen years.  She  reiterated                 
  her  offer  to  assist  with  any  alternate  idea  that was                 
  proposed, but she  expressed concerns with the  annuity bill                 
  introduced this session.                                                     
                                                                               
  Number 488                                                                   
                                                                               
  SENATOR TAYLOR explained there were  suggestions made on how                 
  to solve the  entire problem up front  through the refunding                 
  of  income  taxes  for  those   long-term  tax  payers  from                 
  territorial days, and  he gave  some legislative history  on                 
  this possible  solution.  He also explained it wouldn't have                 
  paid a permanent dividend check  to people on welfare during                 
  that time, but he blamed the  administration at the time for                 
  using the program to build a constituency.                                   
                                                                               
                                                                               
  SENATOR  TAYLOR  said the  records  for those  original tax-                 
  payers was still  available, so the state  could create that                 
  fund, pay the people who were  here before statehood and had                 
  paid taxes until 1978.   He voiced objections to  paying the                 
  newly arrived seniors  for the  programs that are  currently                 
  available  to  them, although  he  didn't argue  with MILLIE                 
  TERWILLIGER that seniors  generate a  large chunk of  money.                 
  He  wanted COMMISSIONER USERA to know  there were people who                 
  felt differently about the longevity bonus.                                  
                                                                               
  SENATOR TAYLOR returned to the  teleconference sites to hear                 
  from EVELYN MORTIMER from Kodiak.                                            
                                                                               
  MS.  MORTIMER  identified herself  as  the president  of the                 
  Senior Center Board representing about 180 seniors, who feel                 
  that SB  58 is  fair in  that it  does not  put the  current                 
  recipients in jeopardy.  She said they had not discussed the                 
  annuity, nor any of the details referenced in the meeting.                   
                                                                               
  SENATOR DONLEY, testifying  from the LIO in  Anchorage, said                 
  he had listened to  the testimony from around the  state and                 
  did not support  the legislation.   (SENATOR DONLEY was  not                 
  able to vote on HB 58 from of Anchorage.)                                    
                                                                               
  Number 537                                                                   
                                                                               
  SENATOR  TAYLOR  next   moved  to  Tok  to  hear   from  MS.                 
  TERWILLIGER.                                                                 
                                                                               
  MS.  TERWILLIGER  testified  in  support  of SB  6  (ANNUITY                 
  PROGRAM AMENDMENTS)  because it  had been  supported by  the                 
  voters  in  the  State  of  Alaska,  and  she  reviewed  the                 
  provisions of the bill.   She described the Alaska tradition                 
  of taking  care of  the old  timers, and  she discussed  her                 
  belief in  an old  timers pension.   She  explained how  the                 
  longevity  bonus  had allowed  old-timers  to live  in their                 
  homes longer instead of going to  the pioneer homes, and she                 
  gave  some statistics  on the  amount that  would have  been                 
  spent on the current seniors moving into the pioneer home.                   
                                                                               
  Number 555                                                                   
                                                                               
  JERRY MCCUTCHEON  from Anchorage testified in agreement with                 
  the solution outlined by SENATOR TAYLOR to refund the income                 
  tax to those  who earned  it before  1978.   He thought  the                 
  state  could still divide up  a collected amount among those                 
  who  are still here  from that era.   He thought  that would                 
  answer the claims of the military and the new comers.                        
                                                                               
  MS.  ALICE OATES  from  Tok  testified  in  support  of  the                 
  longevity bonus and thought there should be a tobacco tax to                 
  support the bonus.                                                           
                                                                               
  SENATOR  TAYLOR next called on ROSE PALMQUIST from the MatSu                 
                                                                               
                                                                               
  Valley to testify.                                                           
                                                                               
  MS. PALMQUIST said she was going  to testify in reference to                 
  previous testimony, with  which she agreed.   She gave  some                 
  background information on the longevity bonus in relation to                 
  the economy of  the state, which  she though was a  positive                 
  impact.                                                                      
                                                                               
  TAPE 93-32, SIDE B                                                           
  Number 001                                                                   
                                                                               
  MS.  PALMQUIST  listed  all  of  the  programs  or  pensions                 
  received by seniors,  and she said  the state received  more                 
  money  from seniors  that from  tourism.  She  addressed the                 
  demographic mix which has given the state a balance of youth                 
  and  elderly,  and she  agreed with  the testimony  from MS.                 
  TERWILLIGER on the annuity plan.                                             
                                                                               
  MS. PALMQUIST referred  to testimony on  the reason for  the                 
  longevity bonus, which was to  encourage people to remain in                 
  the state, and she continued  her support for the  proposals                 
  of the annuity  plan.  She  claimed the legislature had  not                 
  supported it  adequately to put  it across, and  she claimed                 
  the state could afford the annuity  plan.  She quoted recent                 
  surveys done with the help of  the Republican Party in which                 
  the money could be salvaged from oil field operations in the                 
  amount of $2.5 million.                                                      
                                                                               
  MS. PALMQUIST expressed dismay that anyone in the government                 
  would commit another legislature to keep the promises of the                 
  present one, and she  thought it was a shame and  a crime to                 
  tell the current recipients they were grandfathered into the                 
  program.                                                                     
                                                                               
  MS.  PALMQUIST  expressed  interest  in  SENATOR   HALFORD'S                 
  remarks, which  she considered  sensible proposals, and  she                 
  suggested using  the BP  settlement money  to carry out  his                 
  proposals.                                                                   
                                                                               
  SENATOR TAYLOR noted  that ROBERT BERRYHILL from  Juneau was                 
  in attendance to listen only.                                                
                                                                               
  Number 064                                                                   
                                                                               
  SENATOR  TAYLOR explained  he was  one  of the  original co-                 
  sponsors along with  SENATOR BILL RAY,  of the only  annuity                 
  bill that  was passed and  vetoed by GOVERNOR  STEVE COWPER.                 
  SENATOR  TAYLOR  said  he  still  strongly believed  in  the                 
  concept of that annuity  bill and would like to see it work,                 
  but  he doubted  there  was presently  any  support for  the                 
  concept.                                                                     
                                                                               
  SENATOR  DONLEY  spoke  from  Anchorage  in  agreement  with                 
  SENATOR  TAYLOR on his support for the original annuity plan                 
                                                                               
                                                                               
  since the people voted  in favor of it in 1986.   He thought                 
  it could be saving the state money now.                                      
                                                                               
  (Since there  was not  a  quorum, no  additional action  was                 
  taken on the bill.)                                                          

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