Legislature(1995 - 1996)
02/13/1995 01:05 PM JUD
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
HOUSE JUDICIARY STANDING COMMITTEE February 13, 1995 1:05 p.m. MEMBERS PRESENT Representative Brian Porter, Chairman Representative Joe Green, Vice Chairman Representative Con Bunde Representative Bettye Davis Representative Al Vezey Representative David Finkelstein MEMBERS ABSENT Representative Cynthia Toohey COMMITTEE CALENDAR Confirmation Hearing: Board of Governors of the Alaska Bar Association; Joseph N. Faulhaber, Fairbanks HB 70:"An Act relating to treatment of permanent fund dividends for purposes of determining eligibility for certain benefits; and providing for an effective date." PASSED OUT OF COMMITTEE HJR 5:Proposing amendments to the Constitution of the State of Alaska relating to terms of legislators. PASSED OUT OF COMMITTEE HJUD - 02/13/95 HB 25:"An Act revising Rule 16, Alaska Rules of Criminal Procedure, relating to discovery and inspection in criminal proceedings, to adopt the comparable federal rule." SCHEDULED BUT NOT HEARD WITNESS REGISTER JOSEPH N. FAULHABER 105 Adak Avenue Fairbanks, AK 99701 Telephone: (907) 452-5186 POSITION STATEMENT: Testified on own behalf for reappointment ROD MOURANT, Administrative Assistant Representative Pete Kott Alaska State Legislature State Capitol, Room 432 Juneau, AK 99811-1182 Telephone: (907) 465-3777 POSITION STATEMENT: Introduced HB 70 ELMER LINDSTROM, Special Assistant Office of the Commissioner Department of Health and Social Services P.O. Box 110601 Juneau, AK 99811-0601 Telephone: (907) 465-3030 POSITION STATEMENT: Testified against HB 70 CURTIS LOMAS, Director Division of Public Assistance Department of Health and Social Services P.O Box 110640 Juneau, AK 99811-0640 Telephone: (907) 465-3347 POSITION STATEMENT: Provided information on HB 70 DEBBIE POE, Anchorage resident 841 North Bliss Anchorage, AK 99508 Telephone: (907) 333-5630 POSITION STATEMENT: Testified against HB 70 RUPE ANDREWS, Executive Coordinator of Legislation American Association of Retired Persons, Alaska Branch 9416 Long Run Drive Juneau, AK 99801 Telephone: (907) 789-7422 POSITION STATEMENT: Testified against HB 70 SHERRI GOLL Alaska Women's Lobby P.O. Box 210685 Anchorage AK 99521 Telephone: (907) 274-2010 POSITION STATEMENT: Testified against HB 70 THOMAS C. WILLIAMS, Director Permanent Fund Dividend Division Department of Revenue P.O. Box 110460 Juneau, AK 99811-0460 Telephone: (907) 465-2323 POSITION STATEMENT: Provided information on HB 70 SARAH FISHER, Legislative Aide Representative Gene Therriault Alaska State Legislature State Capitol, Room 421 Juneau, AK 99801-1182 Telephone: (907) 465-4797 POSITION STATEMENT: Introduced CSHJR 5 ANNE CARPENETI, Aide House Judiciary Committee State Capitol, Room 120 Juneau, AK 99801-1182 Telephone: (907) 465-4990 POSITION STATEMENT: Provided information on CSHJR 5 REPRESENTATIVE GENE THERRIAULT Alaska State Legislature State Capitol, Room 421 Juneau, AK 99801-1182 Telephone: (907) 465-4797 POSITION STATEMENT: Sponsor of CSHJR 5 PREVIOUS ACTION BILL: HB 70 SHORT TITLE: END PERMANENT FUND DIVIDEND HOLD HARMLESS SPONSOR(S): REPRESENTATIVE(S) KOTT,Green,Toohey JRN-DATE JRN-PG ACTION 01/06/95 39 (H) PREFILE RELEASED 01/16/95 39 (H) READ THE FIRST TIME - REFERRAL(S) 01/16/95 39 (H) STATE AFFAIRS, JUDICIARY, FINANCE 01/24/95 (H) STA AT 08:00 AM CAPITOL 102 01/24/95 (H) MINUTE(STA) 01/25/95 135 (H) COSPONSOR(S): GREEN 01/26/95 (H) MINUTE(STA) 01/31/95 (H) MINUTE(STA) 02/01/95 191 (H) STA RPT 1DP 2DNP 3NR 1AM 02/01/95 191 (H) DP: OGAN 02/01/95 191 (H) DNP: ROBINSON, WILLIS 02/01/95 191 (H) NR: JAMES, PORTER, IVAN 02/01/95 191 (H) AM: GREEN 02/01/95 191 (H) FISCAL NOTE (8-DHSS) 2/1/95 02/01/95 191 (H) ZERO FISCAL NOTE (REV) 2/1/95 02/08/95 284 (H) COSPONSOR(S): TOOHEY 02/13/95 (H) JUD AT 01:00 PM CAPITOL 120 BILL: HJR 5 SHORT TITLE: LIMITING TERMS OF STATE LEGISLATORS SPONSOR(S): REPRESENTATIVE(S) THERRIAULT, Rokeberg, Porter, Green, Bunde JRN-DATE JRN-PG ACTION 01/06/95 17 (H) PREFILE RELEASED 01/16/95 17 (H) READ THE FIRST TIME - REFERRAL(S) 01/16/95 17 (H) STATE AFFAIRS, JUDICIARY 01/18/95 73 (H) COSPONSOR(S): GREEN 01/19/95 86 (H) COSPONSOR(S): BUNDE 02/02/95 (H) STA AT 08:00 AM CAPITOL 102 02/02/95 (H) MINUTE(STA) 02/03/95 224 (H) STA RPT CS(STA) 5DP 1NR 02/03/95 224 (H) DP: JAMES, OGAN, WILLIS, ROBINSON,PORTER 02/03/95 224 (H) NR: IVAN 02/03/95 224 (H) FISCAL NOTE (GOV) 2/3/95 02/13/95 (H) JUD AT 01:00 PM CAPITOL 120 BILL: HB 25 SHORT TITLE: CRIMINAL DISCOVERY RULES SPONSOR(S): REPRESENTATIVE(S) PARNELL,Porter,Green,Bunde JRN-DATE JRN-PG ACTION 01/06/95 27 (H) PREFILE RELEASED 01/16/95 27 (H) READ THE FIRST TIME - REFERRAL(S) 01/16/95 27 (H) JUDICIARY, FINANCE 01/18/95 75 (H) COSPONSOR(S): GREEN 01/19/95 89 (H) COSPONSOR(S): BUNDE 01/27/95 (H) JUD AT 01:00 PM CAPITOL 120 01/27/95 (H) MINUTE(JUD) 01/30/95 (H) JUD AT 01:00 PM CAPITOL 120 01/30/95 (H) MINUTE(JUD) 02/01/95 (H) FIN AT 01:30 PM HOUSE FINANCE 519 02/06/95 (H) JUD AT 01:00 PM CAPITOL 120 02/06/95 (H) MINUTE(JUD) 02/08/95 (H) JUD AT 01:00 PM CAPITOL 120 02/08/95 (H) MINUTE(JUD) 02/13/95 (H) JUD AT 01:00 PM CAPITOL 120 ACTION NARRATIVE TAPE 95-11, SIDE A Number 000 The House Judiciary Standing Committee was called to order at 1:05 p.m. on Monday, February 13, 1995. A quorum was present. CHAIRMAN BRIAN PORTER noted that Representative Cynthia Toohey was in an Ethics Committee meeting and would be available if required. He stated that a confirmation hearing for the appointment of Joseph Faulhaber was first on the agenda. There are normally 12 members on the Board, 3 of which are appointed by the Governor, and confirmed by the legislature. The other members are attorneys selected by the Bar Association on a geographically diverse basis. Next on the agenda would be HB 70 and CSHJR 5. HJUD - 02/13/95 CONFIRMATION HEARING: JOSEPH N. FAULHABER TO THE BOARD OF GOVERNORS OF THE ALASKA BAR ASSOCIATION Number 045 JOSEPH FAULHABER noted he had been in a number of businesses over the past 20 years, and while in small business, civil law gets to be a project you spend a lot of time on whether you want to or not. That is where his interest comes from. He had also been recruited to be a mediator and an expert witness in matters regarding business and real estate. The reason he was initially appointed to this board, is that he had talked with the Governor's Office about the Federal Rule 82 situation in Alaska (attorney's fees in civil cases), where we are actually progressive, and often times here the prevailing party receives more of their attorney costs than in other states. Number 088 REPRESENTATIVE AL VEZEY moved that the nomination of Joseph Faulhaber to the Board of Governor's Association be forwarded to the Speaker's Office for consideration in the Joint Session. Hearing no objection, it was so ordered. Number 095 CHAIRMAN PORTER announced that HB 25 would not be heard, as the committee substitute was not ready yet. He then announced the first bill heard would be HB 70, sponsored by Representative Kott, who was not available due to a death in the family. His aide, Rod Mourant was available to introduce the bill. HJUD - 02/13/95 HB 70 - END PERMANENT FUND DIVIDEND HOLD HARMLESS Number 130 ROD MOURANT, Administrative Assistant to Representative Kott, offered apologies to the committee for Representative Kott's absence, due to yet another death in the family. He then read the following sponsor statement: "This legislation would eliminate the hold harmless provision relating to receipt of a Permanent Fund Dividend (PFD) by a welfare recipient. "At the present time, a recipient of welfare who receives a PFD fails to qualify for continued welfare benefits. Depending on their personal circumstance the disqualification from welfare benefits may last up to four months. Welfare benefits are then made to the individual under the "hold harmless" program. This program is funded by deducting the amount necessary for welfare benefits and administrative costs of the program from the PFD for all eligible recipients. When the program first started in dividend year 1985 the amount deducted from each dividend was $6.94. In dividend year 1994, the "hold harmless" program cost each PFD recipient $41.45. The Department of Health and Social Services now has eight permanent full-time employees to administer the program. "HB 70 would eliminate the "hold harmless" program. It would mean that Permanent Fund Dividends would be treated as ordinary income for the purposes of determining welfare eligibility. This is the same manner in which the Internal Revenue Service treats dividends. It also means that Permanent Fund Dividend recipients would not continue to fund a program that allows individuals to receive a PFD and still remain on welfare. "I firmly believe that this legislation is a necessary step in the `self-sufficiency process' of accomplishing welfare reform. That is, that all money received is income and should be handled in the same responsible manner. Welfare recipients will learn that there are no bonuses for remaining on welfare. "I urge your support for this legislation." MR. MOURANT felt there should be no bonuses to recipients for remaining on welfare, and the "hold harmless" does exactly that. Certainly the involuntary taxation of the PFD through the deduction takes it one step further. MR. MOURANT pointed out, to demonstrate the need for welfare reform, 61 percent of families currently on Aid to Families with Dependent Children (AFDC), have been on AFDC for longer than 24 months. He said Representative Kott feels a need for some type of incentive program to bring these folks off of the AFDC program. Two years ago, when the comment cards were sent out with everyone's PFDs, the most commonly received comment was people objected to the automatic deduction of the hold harmless dollar amount from their individual PFD. The statute does contain provision for funding the hold harmless program through a calculation of eligible PFD recipients. This legislation is necessary to eliminate that. MR. MOURANT continued, explaining what this legislation does not do, is that if the legislature wants to continue the hold harmless program, it does not stop the possibility of the legislature funding a hold harmless program from the general fund, the earnings reserve account, the permanent fund, or any other funding source chosen. All this legislation does is eliminate the automatic deduction from the permanent fund dividend hold harmless program. Number 260 REPRESENTATIVE DAVID FINKELSTEIN said Mr. Mourant was saying the people need some sort of incentive to get off of welfare, but that this legislation will not end the hold harmless. What is the point? How can both arguments be made at the same time? Number 270 MR. MOURANT explained this legislation does not eliminate the possibility of the legislature appropriating money from other funding sources, for a continuation of the hold harmless. This legislation does not do away with welfare recipient hold harmless. It merely stops the automatic payment from the dividend program for the hold harmless program. Number 277 REPRESENTATIVE FINKELSTEIN expressed extreme concerns for this bill. He felt the arguments were contradictory, to say there are all these people on welfare who need some incentive to get off of it and by denying them their dividend, we are going to do it. Then to say this bill does not deny them their dividend, that is up to the legislature; obviously, that is the point of this legislation, no matter what the sponsor says. The goal here is to remove dividends from people who are on welfare, and that subject has two sides. Number 298 ELMER LINDSTROM, Special Assistant to Commissioner Perdue, Department of Health and Social Services, stated the department is opposed to HB 70. Previous Administrations have considered elimination of the PFD hold harmless program, but have concluded that elimination is neither desirable, nor cost effective. The last legislature apparently reached the same conclusion. Legislation introduced previously, eliminating the hold harmless program, did not pass. Elimination of the hold harmless will lead to additional administrative costs in the Division of Public Assistance. Currently, special interagency agreements exist between the Division of Public Assistance and the federal government, which reduce the amount of case processing required when recipients receive dividends. Elimination of the hold harmless will nullify these agreements. With the elimination of the program, the administrative efforts to process hold harmless entitlement, would be supplanted by additional case processing efforts to suspend public assistance payments when dividends are distributed. MR. LINDSTROM explained the net general fund cost to the state is calculated to be in excess of a half million dollars if the hold harmless program is eliminated. Elimination of the hold harmless provision would also result in increased demands on the general relief program, which is funded entirely by the state. The division has calculated this additional general fund cost to be in excess of $1 million. In short, while the elimination of the hold harmless will show a net reduction of public assistance payments to individuals, there will be a net increase in cost in state general funds, because the cost of the hold harmless program is born, not by the general fund, but by the earnings of the permanent fund itself. MR. LINDSTROM continued to inform the committee that the department is extremely concerned about the elimination of the hold harmless on individual clients. All of the recipients are poor. The hold harmless funds replace federal and state funds which go only to persons who meet strict eligibility requirements. These individuals are poor families with dependent children, the aged, the blind, and the disabled. It is important to note that over the past several years, all recipients of hold harmless funds have already seen a reduction in their benefits. Two years ago, legislation was passed which reduced payments to clients of the Aid to Families with Dependent Children, and of the Adult Public Assistance program. The same legislation eliminated the automatic cost of living adjustments for these programs. No cost of living adjustment has been made since that time, nor is one included in the budget bill released in December. MR. LINDSTROM noted, also a number of bills have been introduced and passed this session, which have a substantial impact on persons currently eligible for hold harmless funds. At least one of these bills proposes a further reduction in the basic benefits provided to families with dependent children, the aged, the blind, and the disabled. The cumulative impact of past reduction of benefits, elimination of the hold harmless program, and possible further reductions of benefits, would simply be too great. MR. LINDSTROM said it has been suggested that elimination of the hold harmless program is the first step in welfare reform. If you believe welfare reform consists of simply cutting benefits, then perhaps this is the case. If, on the other hand, you believe the issue of welfare dependency is more complicated than just cutting benefits, then real reform requires consideration of a number of complex issues, including the lack of employment opportunities in many areas of the state, lack of health care for marginally employed Alaskans, failure of absent parents to provide support for their dependent children, and a host of federal requirements which may encourage dependency, you will conclude, just as the department has concluded, that elimination of the hold harmless program contributes absolutely nothing to genuine welfare reform. In fact, the general fund cost of eliminating the program may actually make real welfare reform more difficult by diverting skills and resources away from productive activities that could reduce welfare dependency in favor of additional paperwork, which would benefit no one. MR. LINDSTROM said finally, when considering HB 70, it is important to remember the basic premise of the hold harmless program. All Alaskans are entitled to share in the benefits of the PFD program. Elimination of the hold harmless provision would have the practical effect of denying the most needy of all Alaskans (poor families with dependent children, the aged, the blind, and the disabled), the benefits of the PFD program. MR. LINDSTROM stated that according to a 1989 survey conducted by the Division of Public Assistance, which describes how clients make use of their PFD check, the pattern that emerges is one of expenditures on basic expenses, including food, clothing, household expenses, and payment on bills. Elimination of the hold harmless program will mean the poor individuals and families on assistance will have fewer resources to meet their basic needs. Number 400 REPRESENTATIVE CON BUNDE asked what would happen if a minor child's sponsor did not apply for the child's PFD. Would it have an impact on that family's ability to apply for assistance? Does that income that is just not realized in real life have an impact? Number 415 MR. LINDSTROM said the Department of Health and Social Services does not administer the dividend program, so he spoke off the top of his head. He believed if a parent does not apply for a minor's dividend, that minor would have an opportunity, subsequently, within a year, or two years, after their eighteenth birthday, to apply for those dividends which were not applied for previously. Secondly, no one is compelled to apply for the permanent fund dividend. Number 425 REPRESENTATIVE BUNDE said they agreed on those points, but his question was, "Would a sponsor not applying for this dividend that could be collected by the child in the future, impact that family's application for assistance that month?" MR. LINDSTROM said if that dividend is not applied for, and therefore not received, there is no income, and there is no impact on eligibility, even though the child has potential for receiving that income after turning 18. Number 435 CHAIRMAN PORTER understood while there might be an IRS consideration, there is not a state consideration. MR. LINDSTROM said, on the point of the IRS income, for people who are on public assistance, the IRS does not treat a dividend any differently than it would any other income. This hold harmless is solely for the purpose of the public assistance. The IRS has a regulation that gets into the area of available revenue you do not choose to take. They will get you anyway, sometimes, but probably not in this case. REPRESENTATIVE FINKELSTEIN recalled a number of years ago, a discussion of one of their state entitlement programs. Under federal requirements, if you have some benefit due to you, that will go into your calculation of your welfare benefits. If you fail to go and get a benefit you are entitled to, that is still factored into the consideration of your other benefits. Number 475 CURTIS LOMAS, Program Officer, Division of Public Assistance, said that question comes up from time to time. In the PFD program, there is no requirement that applicants apply for it. There are rules in some programs, that require a benefit received on a regular basis, at least quarterly, would have to be applied for - something that is available for support, on a year-round basis, has to be applied for. The best example he could think of is unemployment insurance, social security, and the longevity bonus. Because the dividend fund comes in an annual lump sum, those rules do not fit. REPRESENTATIVE FINKELSTEIN asked if that applied to all state administered programs, such as Adult Public Assistance and Aid to Families with Dependent Children. Is that equally applicable to all of them? MR. LOMAS replied that it applies to all Division of Public Assistance programs, all the ones Representative Finkelstein had named, but he did not know about the programs administered by other state agencies. MR. LINDSTROM added it does apply to Medicaid, as well. CHAIRMAN PORTER said right under the laws that are being suggested to be amended by this bill, is a general provision that says, "A program administered by the state or any of its instrumentalities or municipalities, the eligibility for which is based on financial need, may not consider a PFD as income, or resource, unless required to do so by federal law or regulation." He asked if it is not necessary to amend this law to accomplish what it is that this bill purports to want to do? MR. LINDSTROM said suggesting this simply eliminates the requirement that the PFD account funds be used for the hold harmless. The bill eliminates the mechanism by which they replace the dividend funds. It was conceivable that the legislature could make a general fund appropriation, and a title that says dividend hold harmless. But in this area, that would be very problematic and difficult for administration, if the framework is removed by repeal. He said it would be a possible and valid appropriation. Number 565 DEBBIE POE, democrat from Anchorage, said as a disabled person, this hold harmless program keeps her state disability aid benefits coming in. Otherwise, they would be over income, and would not receive Medicaid, food stamps, and social security disability checks. They use the money to have their car worked on, to buy clothes for the kids, things they cannot do any other time of year, because their money is so budgeted to going out to bills. Without the hold harmless, they would have to use their dividends to pay for things that they would be eliminated from, because of being over income. The hold harmless prevents that from happening. It keeps them on line with all their benefits, and gives them this extra money they need but cannot afford any other time of the year. She said it is not that she does not want to work; she cannot work, and does not feel they should punish people that cannot work, that are disabled, or elderly; trying to encourage people that cannot work, to go to work. The money is spent only on things that they need, and she felt the bill would hurt a lot of people. She would like to see the legislature make two categories. One, including those who can work; and one including the disabled, the handicapped, and the elderly, because they cannot work. Number 600 RUPE ANDREWS, Representing the American Association of Retired Persons, stated they are opposed to this legislation. It will cost the Department of Health and Social Services about a half million dollars extra out of the general fund, and they fail to see how this is logical. The program has worked for about 13 years, in its present state. Rather than throw the whole program out, they would like to see the amount capped. He understood this to be increasing over the years to now be $21. They did not feel this to be a good step towards welfare reform. He felt everyone would like to see a level playing field, and the poor are ready to pull their fair share, but that is the key word, fair share. A lot of people will be impacted and are concerned about that. We are talking about children, too, because of the Aid to Dependent Families with Children; people on medicare. He also understood it to be an administrative nightmare. When people go off, they need to reapply, and in the meantime, lose benefits up to four months. It is really disruptive; so, if you are looking at this as a welfare reform issue, then look at welfare reform as a total package, rather that just a piecemeal effort. Number 635 SHERRI GOLL, representing Alaska Women's Lobby and KIDPAC, said they were very much in opposition to this bill. This kind of legislation has been around since the inception of the PFD hold harmless program. The idea of the program was to assure that every person in the state has an equal opportunity to share in the oil wealth of this state. They certainly do not believe that one person is any more deserving of getting their PFD than any other person. This particular legislation is actually taking from the poor, to give more to the rich. It strikes her as one of the most mean spirited pieces of legislation she has seen being seriously considered. A few years ago, you cut the poor by 1/2 percent in the budget, and what you are proposing to do here is actually something more like an 8 percent cut. You have heard from the disabled people and the elderly. You could try to separate the deserving poor from the undeserving poor, and say, okay, if you are disabled, then we will let you have your permanent fund and stay on, but if you are just a poor child, you will not be able to, if you judge that their parents are not deserving enough of support. It is completely unfair to say people who have high incomes should be able to keep their PFDs, and people who are poor should have to give their's up. Number 670 REPRESENTATIVE BETTYE DAVIS said she was not ready to move the bill. She was opposed to the bill, and felt it was a waste of the committee's time to be hearing the bill at this point; particularly with what is going on in the nation now, and with all the federal people talking about leaving welfare reform to the states, and allowing them to spend their money as they see fit. There will be a bill passed sometime in March, perhaps, and if that be the case, there would be no need for the committee to even take the $41 out of each individual PFD check to hold harmless so that everyone would be able to receive the money; because we would be able to say it is not income, and everybody would get it. There would be no need for any of this. She said they should talk about this later. She felt sadly about the possibility of this bill passing, because it could hurt children, and they all needed to be concerned about that. REPRESENTATIVE DAVIS stated this is not the way to provide an incentive for people to get off of welfare. Even if the facts show that 60 percent of people who are on welfare have been on it more than 2 years, that is no way to get them off of it. If you want them off of welfare, you educate them, train them, get them jobs, and give them the benefits they need, such as Medicaid, day care assistance, and child care, so that they will be able to work, and stay off of the rolls. Most people who go off of welfare and get a job have to get back on it, because they do not make enough money to meet the household needs, and they do not have any health insurance, nor do they have money for child care. We are saying people on welfare cannot get the PFD, but those people that qualify for day care assistance can get their PFD check, because that money is administered by the state; and therefore, the state can say that is not income. Those people are in a different category than the people on AFDC; the aged, the blind, the people who cannot work, are not going to get their benefits. This would cause us to pay more money than we are paying. We might be able to give the $41 back to each individual so they can have an increase in their permanent fund, but it would increase the general fund, and boost our budget. That is not what we want, because we are talking about cutting the budget. REPRESENTATIVE DAVIS felt the bill should be held somewhere until they could determine there is no need for it. She thought the bill was mean spirited, and not an incentive of income. When she runs into people on the street and they ask her why the $41 was taken out of their check, and she explains it; almost every person says they would like to have that $41. First of all, they did not work for that money. This is money we are paying back to everybody who is a citizen of this state, which means we should not take one group and tell them to make a decision between taking the permanent fund or the benefits. They should not have to make that decision. We as legislators are down here to make decisions that are going to be helpful to people, not harmful to people; and this is definitely harmful to compare one person against another. Amongst her constituency, 9 out of 10 opposed this bill. The remaining 10 percent were concerned about receiving their $41. If they had not decided to put this program in place, they would not be getting the permanent fund, so they do not have anything to lose. We need to take that into consideration when getting ready to move or not move this bill on. We should not forget about the children, and if we pass this bill, we will hurt children. She stated she would not be voting to move this out of committee. Number 740 REPRESENTATIVE FINKELSTEIN said this bill begs the question of what they really intend as use of the permanent fund, because we do have to make the decision on how the money derived from the permanent fund income is spent. We have made a decision in the past that they want to take the benefits from the permanent fund, and give them to the residency of the state. Some argument has been made that somehow, the current system takes away this money from the others. All this is, is a calculation. No one has any inherent right to some set amount of money from the permanent fund. Someone decided on the way, to lay it out in a format making it appears that this money is being taken from these individual's dividends. The bottom line is, anything they get is a gift from the state. It is money we are giving them, and we have made a decision that we want to take the benefits of the permanent fund and give it to all the residents of the state. In order to do that, it requires us to adjust for those people who would get no benefit from it if there was not a hold harmless provision. That formula happens to result in a loss to the others, but only if you think it is some inherent right that everyone gets these. The permanent fund dividend is not that, and he predicted in not so many years, they would see a variety of other changes in the expenditures of the permanent fund because we will not be able to afford them anymore. Very tough choices are ahead of us, but if we were to try to limit the dividend program - if we were to decide that we have 600,000 people in the state, and we are giving them close to $1,000 each; a half billion dollars in distribution each year - what we would look at if we were looking at it in a fair way, is the cost of the things being needs based. REPRESENTATIVE FINKELSTEIN said there has been a theme in recent years that some of these entitlement programs, and some of our distributions are going to have to be needs based. But this approach is the opposite of needs based. This is to say that people who are the neediest, people at the very bottom, are the ones who are not going to get a benefit from our oil wealth. And the people who are millionaires, and whose role in the state is very large, that money means very little to, they are going to get it. He could not think of a more illogical and unfair basis for distribution of the permanent fund wealth. He could not imagine that is what we had in mind when we established the dividend program; that it is only going to go to the portion of the state that needs it the least. REPRESENTATIVE FINKELSTEIN explained the other reason we have a dividend program, and certainly one of the stated goals of the supporters of the program, is to try to get money back into the economy. It serves a purpose in sort of boosting the economy up when the dividends are given out. We had plenty of evidence of that throughout the state when a variety of vendors take up special programs during that period. Every time you give a dividend to someone like me, 28 percent of that money goes to the federal government. If you give that money to a poor person, very few, if any pay federal taxes; so all of the money is locally available. That alone is a switch that is going to mean more money to the federal government, and less money to the people of Alaska. When Representative Finkelstein gets a dividend, he is more likely to take a trip out of state, and spend money there. Based on the previous testimony and things he has seen in the past, it is fair to conclude that a poor person is more likely to pay local bills, meet local debts, make local purchases; whereas, a more wealthy person is likely to buy something, such as a trip out of state, that would have less benefit to our local economy. He did not see any reason they would want to pass this bill. Number 800 REPRESENTATIVE BUNDE heard from a number of his constituents who do not like this tax, which has not gone through the legislative process. So he did not know if this would be called "mean spirited" but they just want it to go through the process - not just have some bureaucrat somewhere be determining taxes. We do not need to debate the merits of the permanent fund here. That is money that belongs to us. It is not that we, the legislature, in our great largess, are giving that money out to the people. The people are letting government use $9,000 or $10,000 of their money, and we are passing $1,000 back to them when we get through with our spending spree. So, whether it is a gift or a tax is the question that is in debate here. He agreed with Representative Davis in thinking about the future and how changes come about. Poor people who are used to getting the permanent fund better get used to the idea that the permanent fund will not be around forever. In the foreseeable future, that may be history. While money is often spent on necessities, there is another case of a family with eight children who received permanent fund checks, and $4,000 of the $8,000 was spent on a one-night drug spree. There are stories back and forth about how the money is spent. He was not opposed to deciding who are the deserving and the undeserving, and would like to see some differentiation. There should be a difference between the disabled, and the more traditional welfare recipient. Number 840 REPRESENTATIVE FINKELSTEIN noted this legislation is necessary because the legislature enacted the program under AS 43.23.070, and therefore the legislature should repeal that now. Number 847 CHAIRMAN PORTER mentioned that it is an agency who determines how much money will be put in and taken out. He then explained why he intends to support this bill. As has been characterized, this is not welfare reform. It certainly is not the beginning and end of welfare reform, but it does provide an element of the beginning of welfare reform. TAPE 95-11, SIDE B Number 000 CHAIRMAN PORTER explained they were trying to create a situation encouraging people to get off of welfare. He intends to support those efforts that would set up some reasonable transition off of welfare. In other words, some of the existing welfare regulations are ridiculous provisions that have been set up with the wrong philosophy in mind, and should be addressed. Recipients are only allowed to make so much money; after which, if you make five cents too much, you cannot get your welfare or you lose your medical benefits. There are some bills coming forth that will address these regulations. If we are trying to motivate people to get off of welfare and get on employment, providing additional money from the state, whether it is a right or a privilege or however you want to characterize the PFD, is not an incentive to get off; it is an incentive to get on. The impact to the department that is net $500,000, presumes that recipients will continue to apply and receive the PFDs. It would be incumbent upon the department, if this legislation passed, to immediately inform their welfare and public assistance clients that if they do that, they will have greater problems than benefits by applying for the PFD. These people would then be advised to consider whether or not they want to apply. Most rational people would make the appropriate decision to take $5 rather than $3. CHAIRMAN PORTER continued, in addition, there has been a lot of consideration to what really does happen to PFDs paid to children. There are many situations where it is very beneficial to the overall family, and then there are others where it gets frittered away. There is serious consideration among some members to consider saying that money should not be paid out until the child reaches majority, so they have the option in deciding what to do with that money. That provision is still available, and would even be aided by this piece of legislation to encourage parents not to apply now for that money. A child could and most certainly would be encouraged to apply for it after they reach 18, and would receive all of that money. CHAIRMAN PORTER explained this bill is being characterized as a reverse Robin Hood; stealing from the poor and giving to the rich. There is a large group of people in the middle who need encouragement, not discouragement. Those are the people who are working, although very close to the poverty level. Because they are doing what it is we say we are encouraging people to do, they are not entitled to any of these other kinds of benefits; but we are taking $41 out of their check, and the wife's check, and the kids' checks. They could use that money too, and they would not be going to Hawaii on it. For all those reasons, he intended to support this legislature. Number 100 REPRESENTATIVE FINKELSTEIN felt there would be a transition period of a year and a half, until the new provisions took effect. The Administration is committed, as is the legislature, to taking up this subject. What we are really talking about is interim provisions. Do we, in the meantime, and before next year, go and eliminate dividends for the poorest people in Alaska? That is a bad idea. He offered an amendment changing the effective date on page 2, line 26 from 1996 to January 1, 1997. Then we could at least honestly say it fits into some sort of welfare reform, because that would be a point in time at which those provisions might be going into effect, where they may want to be including hold harmless dividends as part of the benefits being paid out. In the meantime, we would not be eliminating the dividends just for the poorest people in the state. REPRESENTATIVE VEZEY objected, so there was a roll call vote. Representatives Bunde, Vezey, Green and Porter voted no. Representatives Finkelstein and Davis voted yes. The amendment failed 4 to 2. REPRESENTATIVE DAVIS asked what the implications would be with the effective date of 1996, when people apply for their permanent fund. REPRESENTATIVE VEZEY answered that without an effective date, this bill would take effect 90 days after it was signed. If the effective date is 1996, then we know it would not affect anybody this year. MR. LINDSTROM explained the January effective date in any year is a problematic month for the department. The dividends come out in October, and then for some months after that, the effect on your eligibility for public assistance is two months after you receive the dividend. So the January effective date would make half of the people in a given year fall on one side of the line, while the other half would fall on the other side of the line. If it is the wish of the committee for the next round of dividends, those that start going out in October of 1995, not be subject to hold harmless; an effective date prior to October 1, 1995, would be appropriate for administrative purposes. He felt the best date for changing the hold harmless would be July 1, 1996. REPRESENTATIVE DAVIS moved to amend the bill to make the date July 1, 1996, on page 2, line 26. There was further discussion on the proposed amendment. Number 235 REPRESENTATIVE GREEN asked about the modifications in the applications, since the applications would be coming out before July 1, 1996. TOM WILLIAMS, Director, Permanent Fund Dividend Division, Department of Revenue, explained that the application for the 1996 dividend would need to be available from January 1 through March 31, 1996. Should this legislation pass, there could be something in the application that would advise applicants of the change in law. We routinely do that. CHAIRMAN PORTER asked if there was objection to moving the amendment. Seeing none, the amendment was adopted. REPRESENTATIVE VEZEY made a motion to move HB 70, as amended out of committee, with individual recommendations. REPRESENTATIVE FINKELSTEIN objected so a roll call vote was taken. Representatives Bunde, Vezey, Green and Porter voted yes. Representatives Finkelstein and Davis voted no. The bill was moved, as amended, with attached fiscal notes. MR. LINDSTROM informed the committee that the amendment to the bill would require new fiscal notes. HJUD - 02/13/95 CSHJR 5 - LIMITING TERMS OF STATE LEGISLATORS Number 365 SARAH FISHER, Aide to Representative Gene Therriault, introduced the State Affairs Committee Substitute for HJR 5. The following sponsor statement was provided: "It proposes to limit terms by limiting the number of regular legislative sessions a person may serve. The resolution proposes that a person may not serve consecutively more than 12 full regular sessions in the legislature. The person may not again serve in the legislature as a result of an election or appointment to fill a vacancy until two consecutive sessions have elapsed. Also for the purposes of tabulating the number of sessions served, special sessions shall not be counted nor shall time served as a result of an appointment to fill a vacancy. "Term limits are a positive legislative reform, guaranteeing a flow of new legislators with new ideas. The popularity of term limits demonstrates that career politicians are not desirable. Term limits will also level the playing field for challengers facing long time incumbents, whose power is often times derived primarily from seniority. "Placing a constitutional amendment limiting the terms of state legislators on the ballot is a measure that is long overdue." MS. FISHER said she has been working with committee staff for a proposed committee substitute, dated 2/13/95, that makes just a few changes. There are three minor changes. On page 1, line 9 of the work draft, we took out the word "full" and changed the sentence to say, "A person may not serve consecutively during more than twelve regular sessions." The concern there was when you use the term "full", if someone for some reason after they are elected does not show up in Juneau at the start of the regular session on the first day, if they arrive on the second day, they are not serving a full legislative session. Periods served in the legislature as a result of appointment under this draft do not count towards the tabulation of a term limit. But what Representative Therriault wanted to make sure did count is if, in a situation which did happen in recent history, where a person resigned their position in the House, and then was appointed to fulfill a term in the Senate, those terms, because they are still serving consecutively, but because of the resignation, they are all of a sudden not under this. Under the first version, they would not be serving consecutively, so we wanted to make it a situation where, if you are fulfilling another appointment in another body, that did count towards your term limit. CHAIRMAN PORTER clarified if you had served half of your session in the House, and the other half in the Senate, that would be considered one session. MS. FISHER explained the second change proposed in the committee substitute. On page 2, line 5, paragraph (c), because of the concerns raised in the State Affairs Committee, we wanted to make sure a person who has served, or on their tenth year, is elected to the Senate, would not have to resign after 12 years. That would be an exception where they would be serving 13 or 14 years, possibly. Number 440 REPRESENTATIVE VEZEY felt the wording was too detailed, in Sections 2, 3 an 4. He felt they were not really necessary to be included in legislation, but perhaps just part of the explanation of the amendment when placed before the voters. Would it be interpreted by the courts as having a reasonable intent of the legislature, and a reasonable understanding of the people that supported it? There is nothing wrong with filling the Constitution up with a lot of verbiage, but if we had this kind of explanation on every paragraph in our Constitution, it would be a rather unruly document. Number 460 ANNE CARPENETI, Aide, House Judiciary Committee, stated she had asked that very question of Tam Cook about writing such great detail in the Constitution. Tam said you need to have term limits in the Constitution if they are to be upheld, and if you want to ensure that those limits would not be changed from year to year. You could put term limits in the Constitution and leave it up to legislation to flush out the details; but then again, what you would be dealing with is something that would be easier to change year in and year out. Number 475 REPRESENTATIVE VEZEY had no problem with the verbiage in Section 1. We have verbiage in Article 3 of the Constitution now, limiting the Governor to eight years. That constitutional amendment does not go into three paragraphs of verbiage explaining what two terms are. Number 490 MS. CARPENETI mentioned that leaving the language vague could result in running the risk of the legislative intent not being followed by a court. Number 505 CHAIRMAN PORTER said it comes down to the traditional debate on how detailed your Constitution should be made. He felt a constitutional amendment ought to be pretty straightforward and simple; but the difference between a Governor's 8 years, and 12 sessions for a legislator, is that you can get a lot more of a variation in those 12 sessions than you can in 8 years for a Governor. REPRESENTATIVE BUNDE reminded the committee if this were left as a letter of legislative intent, any Governor could veto it, as governors do quite frequently. MS. CARPENETI mentioned that the wording limiting the terms of a Governor state that no person who has been elected Governor for two full successive terms shall be, again, eligible for that office until one full term has intervened. She suggested the committee could provide that the legislature would adopt statutes or regulations to interpret this, which would make it a matter of legislation. CHAIRMAN PORTER said the problem with that is then we do not really have it immortalized; we have it at the whim of the legislature. MS. CARPENETI noted it has to be in the Constitution for the fact of establishing term limits. Doing it by statute would not survive a challenge, based on the fact that term limits are not in the Constitution. CHAIRMAN PORTER stated that the things left for interpretation by statute could be changed. Leaving all of the language in here, leaves no more "what if" questions. Number 700 REPRESENTATIVE FINKELSTEIN described his amendment. He felt eight years in one body was fair. That would lead to the best public policy, and he wanted to offer that as an alternative. CHAIRMAN PORTER felt 12 years was a compromise between what some felt was fair and what others thought was fair. If it were left at 16 years, that would be pretty close to a career. REPRESENTATIVE FINKELSTEIN then made the motion to amend his own amendment to say, "either body" rather than "one body" on page 1, line 10. REPRESENTATIVE BUNDE wanted to clarify that now they were talking about a total of eight years. CHAIRMAN PORTER asked Representative Finkelstein if his intent was to take his original amendment of 16 years back to 8 years total. REPRESENTATIVE FINKELSTEIN said that was correct. You would have to sit out a term after eight years, at which time you would be able to run again. After a little discussion, he decided to take out the word either, which could be misinterpreted to mean one or the other; but for the sake of clarity, he wanted to scratch the part of his amendment that changes page 1, line 10; leaving the change to page 1, line 9, deleting the word "twelve", and replacing it with the word "eight". CHAIRMAN PORTER asked Representative Finkelstein to hold his motion while he made a motion to first adopt the committee substitute as described. Seeing no objection, it was so ordered. Number 740 REPRESENTATIVE FINKELSTEIN again offered his amendment to change page 1, line 9, as described above. REPRESENTATIVE BUNDE asked if they could hear the bill sponsor speak. Number 770 REPRESENTATIVE GENE THERRIAULT explained what went into selecting 12 as the number of years. It was just coming up with a number that was devisable by Senate and House terms, leaving 12. Over the past 2 years, some people had desired 8 years, and other desired 16 years. Knowing this was a constitutional amendment requiring 27 votes, he had to ask himself what he could get 27 votes for. Number 800 REPRESENTATIVE FINKELSTEIN moved to adopt his amendment as described. There was objection, so a roll call vote was taken. Representatives Davis, Finkelstein and Bunde voted yes. Representatives Vezey, Green and Porter voted no. The amendment failed 3 to 3. TAPE 95-12, SIDE A Number 000 REPRESENTATIVE FINKELSTEIN then made the motion to amend Section 3 of the bill to say the effective date applying to the next legislature, which would be the Twenty-first Alaska Legislature. This would ensure that the elections for the Twentieth Legislature would not be affected. CHAIRMAN PORTER said it could still result in a Senator losing two years of a four year term. REPRESENTATIVE FINKELSTEIN wanted to re-craft Section 3 to say that any person elected in the 1996 election would be allowed to serve out their term. It is very hard to write constitutional language off the cuff, and felt the bill drafters could interpret it better. REPRESENTATIVE VEZEY objected to the amendment and a roll call vote was taken. Representatives Finkelstein and Davis voted yes. Representatives Bunde, Vezey, Green and Porter voted no. The amendment failed 4 to 2. Number 125 REPRESENTATIVE GREEN made a motion to move the draft committee substitute, version M, from committee, with individual recommendations and the zero fiscal note. Seeing no objection, the bill was moved. ADJOURNMENT The House Judiciary Committee adjourned at 2:55 p.m.