Legislature(1999 - 2000)
03/23/1999 08:06 AM House STA
| Audio | Topic |
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE STATE AFFAIRS STANDING COMMITTEE
March 23, 1999
8:06 a.m.
MEMBERS PRESENT
Representative Jeannette James, Chair
Representative John Coghill
Representative Scott Ogan
Representative Jim Whitaker
Representative Bill Hudson
Representative Beth Kerttula
Representative Harold Smalley
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
* SPONSOR SUBSTITUTE FOR HOUSE BILL 96
"An Act relating to deposits to the Alaska permanent fund; and
providing for an effective date."
- MOVED SSHB 96 OUT OF COMMITTEE
* HOUSE BILL 132
"An Act relating to allowable absences from the state for purposes
of eligibility for permanent fund dividends; and providing for an
effective date."
- HEARD AND HELD; ASSIGNED TO SUBCOMMITTEE
* HOUSE BILL 55
"An Act relating to eligibility for the longevity bonus; and
providing for an effective date."
- HEARD AND HELD
(* First public hearing)
PREVIOUS ACTION
BILL: HB 96
SHORT TITLE: DEPOSITS TO THE PERMANENT FUND
SPONSOR(S): REPRESENTATIVES(S) ROKEBERG, Phillips, Green
Jrn-Date Jrn-Page Action
2/17/99 237 (H) READ THE FIRST TIME - REFERRAL(S)
2/17/99 237 (H) STATE AFFAIRS, FINANCE
3/05/99 367 (H) SPONSOR SUBSTITUTE INTRODUCED
3/05/99 367 (H) READ THE FIRST TIME - REFERRAL(S)
3/05/99 367 (H) STA, FINANCE
3/10/99 417 (H) COSPONSOR(S): PHILLIPS
3/15/99 462 (H) COSPONSOR(S): GREEN
3/23/99 (H) STA AT 8:00 AM CAPITOL 102
BILL: HB 132
SHORT TITLE: PERMANENT FUND ALLOWABLE ABSENCES
SPONSOR(S): REPRESENTATIVES(S) COWDERY BY REQUEST
Jrn-Date Jrn-Page Action
3/11/99 428 (H) READ THE FIRST TIME - REFERRAL(S)
3/11/99 428 (H) STA, FINANCE
3/23/99 (H) STA AT 8:00 AM CAPITOL 102
BILL: HB 55
SHORT TITLE: LONGEVITY BONUS ELIGIBILITY
SPONSOR(S): RULES BY REQUEST OF THE GOVERNOR
Jrn-Date Jrn-Page Action
1/22/99 61 (H) READ THE FIRST TIME - REFERRAL(S)
1/22/99 61 (H) STATE AFFAIRS, HES, FINANCE
1/22/99 61 (H) 2 FNS (ADM, DHSS)
1/22/99 61 (H) ZERO FISCAL NOTE (DHSS)
1/22/99 61 (H) GOVERNOR'S TRANSMITTAL LETTER
3/23/99 (H) STA AT 8:00 AM CAPITOL 102
WITNESS REGISTER
REPRESENTATIVE NORMAN ROKEBERG
Alaska State Legislature
Capitol Building, Room 24
Juneau, Alaska 99801
Telephone: (907) 465-4968
POSITION STATEMENT: Sponsor of HB 96.
PETER TORKELSON, Researcher
to Representative Cowdery
Alaska State Legislature
Capitol Building, Room 204
Juneau, Alaska 99801
Telephone: (907) 465-6848
POSITION STATEMENT: Presented HB 132 on behalf of Representative
Cowdery.
BRAD ESARY
3920 Alitak Bay Circle
Anchorage, Alaska 99515
Telephone: (907) 344-1931
POSITION STATEMENT: Testified in Support of HB 132.
DEBORAH VOGT, Deputy Commissioner
Department of Revenue
P.O. Box 110400
Juneau, Alaska 99811-0400
Telephone: (907) 465-2300
POSITION STATEMENT: Provided information on HB 132.
PAM LaBOLLE, President
Alaska State Chamber of Commerce
217 Second Street
Juneau, Alaska 99801
Telephone: (907) 586-2323
POSITION STATEMENT: Suggested that the merchant marines be
included in HB 132.
ALISON ELGEE, Deputy Commissioner
Department of Administration
P.O. Box 110200
Juneau, Alaska 99811
Telephone: (907) 465-2200
POSITION STATEMENT: Presented HB 55, on behalf of the Governor.
DAN KECK, Chairman
State Legislative Committee for AARP
P.O. Box 938
Sitka, Alaska 99835
Telephone: (907) 747-3908
POSITION STATEMENT: Testified in opposition to HB 55.
ACTION NARRATIVE
TAPE 99-16, SIDE A
Number 0001
CHAIR JEANNETTE JAMES called the House State Affairs Standing
Committee meeting to order at 8:06 a.m. Members present at the
call to order were Representatives James, Coghill, Ogan, Whitaker,
Kerttula and Smalley. Representative Hudson arrived at 8:25 a.m.
HB 96-DEPOSITS TO THE PERMANENT FUND
CHAIR JAMES announced SSHB 96, "An Act relating to deposits to the
Alaska permanent fund; and providing for an effective date," is
before the committee.
Number 0015
REPRESENTATIVE ROKEBERG advised the committee members that HB 96
will help close the fiscal gap by a statutory reallocation where
the funds generated from mineral royalties and bonus lease sales
are deposited. House Bill 96 repeals a provision from the 1980
legislation passed in conjunction with the entire rewrite of the
Permanent Fund Corporation's operating procedures and policies. At
that time the amount of general fund revenues was $4.07 billion.
REPRESENTATIVE ROKEBERG said that in the early 80s the state was
"awash in our cash." The legislature directed and allocated more
royalty and bonus revenues into the corpus and principal of the
permanent fund rather than going directly into the general fund.
He pointed out that a reason they were able to do that, is that the
vast majority of oil fields (that were discovered on the North
Slope) were excluded from the calculations as well as those fields
in the Cook Inlet Region (an area that was still having a
substantial contribution to state revenue). Therefore, when the
decision was made to make the reallocation it had a limited impact
on the budget allocation. And frankly, to this day, it has very
little impact. Representative Rokeberg further stated, "That's an
example of what it takes to develop resources in the state -
sometimes literally decades before leases are made, exploration
takes place and with success any revenues flow toward the state and
the other members of the state of Alaska, our citizens."
Number 0095
REPRESENTATIVE ROKEBERG applauded the legislature for making the
statutory changes to the permanent fund and directed the member's
attention to the "History of Alaska's Permanent Fund," Rural
Research Agency, Alaska State Senate and encouraged the members to
read it. [Not included in the packet].
REPRESENTATIVE ROKEBERG referred to Section 15 of the Alaska
Constitution states that:
At least twenty-five percent of all mineral lease rentals,
royalties, royalty sale proceeds, federal mineral revenue
sharing payments and bonuses received by the State shall be
placed in a permanent fund the principal of which shall be
used only for those income-producing investments specifically
designated by law as eligible for permanent fund investments.
All income from the permanent fund shall be deposited in the
general fund unless otherwise provided by law.
Number 0128
REPRESENTATIVE ROKEBERG explained that the legislature is providing
by law the allocation to the statutory or constitutional minimum of
25 percent which the Prudhoe Bay field, and most other fields in
the state, are currently producing.
REPRESENTATIVE ROKEBERG referred to the report "Estimated Impact on
the General Fund if Permanent Fund Contributions Were at 25 Percent
of Mineral Income," Legislative Research, February 16, 1999
[included in the packet]. The spreadsheet lists royalties for most
of the fields that are entered into as leases after December 1,
1979. Approximately $5.5 million would have been realized in this
current fiscal year if HB 96 were in place. He said coal leasing
and other mineral revenues are not listed and believes bonus
amounts were also not included.
REPRESENTATIVE ROKEBERG pointed out that HB 96 has an effective
date of July 1, therefore, it would impact fiscal year 2000. He
said, "And you'll see in column A, that this is current price
projections that are being used for the Legislative Finance
[Committee] and the Governor in calculating our current budget.
And it shows a $12.50 ANS west coast 'basket price' and projects
over on the far-right column to $9.5 million. So, madam chair,
this is a relatively small and minor amount. ... This is one tile
in the whole mosaic and that what we have to do to put together to
recognize the problems that are facing the state's fiscal year
right now."
Number 0181
REPRESENTATIVE ROKEBERG noted the report also indicates, that
during the next 15 years, the revenues derived from this statutory
change will generate $16 million which shows how the revenues would
go up.
REPRESENTATIVE ROKEBERG stated, "I think the important thing about
this particular legislation right now is that number one it's
symbolic in terms of recognizing our needs to have funds in the
general fund. And secondly, any future development that we
undertake to replace the diminishing production at Prudhoe Bay
should be, I believe at the 25 percent level and not the 50 percent
level. ... This includes potential federal revenue. There's the
bill before the U.S. Congress right now to have a multi-state
revenue sharing for ... offshore of the Outer Continental Shelf oil
development. And if any federal royalties are received, for
example into our 90-10 split - so it would be allocated at 25
percent instead of 50 percent. So any future income we could
receive from the federal government would also be at the 25 percent
to the permanent fund and 75 percent to the general fund."
Number 0221
REPRESENTATIVE ROKEBERG said the first area wide lease sale, of
June 1998, generated a net of $53 million in closed bids to the
State of Alaska. Had HB 96 been in place, we would have realized
an additional $13 million into the general fund - now they go into
the permanent fund. He further stated, "I believe the legislature
can make the case that, currently we need the money and in the
future we'll need money for our operating account. And from an
economic standpoint, this does nothing ... more than change the
allocation because I would suggest to the committee that we can't
save our way to prosperity by putting money into the permanent fund
and frankly getting little or no value out of it with the exception
of the permanent fund dividend." Representative Rokeberg said he
thinks making a change in that allocation will have very minimal
(indisc.) impacts.
REPRESENTATIVE ROKEBERG said the director of Communications, Alaska
Permanent Fund Corporation, prepared an analysis of the impact on
the dividend for HB 96, which includes the proposed $4 billion
transfer from the corpus of realized earnings (which the Governor
made in the State of the State Address). The director's short
response (March 22, 1999) was that the differential was so minimum
he didn't even make a difference. He said ... based on our
financial analysis, the impact would be less than $10 difference
over five years in either case.
REPRESENTATIVE ROKEBERG indicated that the public may accuse him of
raiding the permanent fund which he is doing nothing of the kind.
He suggested that the legislature use its constitutional mandated
power (indisc.) appropriation. Its right to change statutory
allocations and that's what HB 96 does.
Number 0287
REPRESENTATIVE OGAN referred to an article regarding the use of the
earnings reserve of the permanent fund. He said, "As you know, the
legislature has the authority to appropriate with a simple majority
vote, and it's simply the left over income after we pay dividends
and inflation proof." He indicated that, in every instance, the
press referred to it as "the permanent fund." This money isn't the
permanent fund because it has not been deposited yet. He asked
Representative Rokeberg if HB 96 would get fair play in the press.
REPRESENTATIVE ROKEBERG remarked that HB 96 deals with the
allocation of deposits either in the principal of the permanent
fund or the general fund. It remains to be seen what type of
impact it will have.
REPRESENTATIVE ROKEBERG mentioned he had recently conducted a
survey in his district. He said question 19 shows that people
recognize what type of financial condition the state is in.
Alaska's Constitution mandates that 25% of oil and mineral
leases, royalties and bonuses are deposited into the principal
of the Permanent Fund. In 1980, the Legislature increased
that to 50% of all new leases. If we repealed this law and
went back to the original 25%, an extra $12 million a year
would be generated to help close the fiscal gap. Do you
support changing the law back to the Constitution's 25%?
Yes 164 No 72
REPRESENTATIVE OGAN stated, "I just look at the monies that are
available to us, in the Constitutional Budget Reserve, the Earnings
Reserve which we can spend with a simple majority. We have a
tremendous asset in Alaska Housing [Finance Corporation], AIDA
[Alaska Industrial Development and Export Authority], [Alaska]
Science and Technology [Foundation] - we're talking billions, and
billions, and billions of dollars." He said if his lifestyle was
exceeding his income, he would make adjustments before he started
looking at cutting off the revenue stream into his retirement
account. He indicated that the legislature has basically scratched
the surface with the changed in lifestyle but hasn't done a
fundamental reorganization and reprioritization. Therefore, he has
a hard time supporting HB 96.
Number 0405
REPRESENTATIVE HUDSON said he recalled when the legislature felt so
flush that we decided that we could increase our contributions into
the permanent fund from 25 percent to 50 percent on all new leases.
He also mentioned the state's generosity through the permanent fund
dividend program.
REPRESENTATIVE HUDSON further stated, "We have shown the savings of
this state, something that we should all be very proud of as well
as our predecessors, because I think that when you can put $25
billion aside and still give away billions of dollars to the people
that reside in the state of Alaska, totally eliminate any income
tax in their behalf, have no statewide sales tax or other revenue
generating things, and over the last number of years cut hundreds
of millions of dollars out of your spending plan, I think that
we've probably done a pretty noble thing. And now we are looking
at a billion dollars deficit between what I consider to be largely
essential services and the revenue stream that is coming in from
our taxes and royalties and other receipts. To consider going back
to the 25 percent from the 50 percent in the generous days is not
unrealistic and so, ... I don't see how in the world we cannot look
at something like this as a part of the total fix that we have to
come up with here. So, I for one believe that it is timely and I'm
quite supportive - I want to see the whole plan before I make my
final decision."
Number 0446
REPRESENTATIVE SMALLEY stated that hundreds of millions of dollars
in cuts have also led to some increased taxes at the local level
which is due to reductions in revenue sharing and municipal
assistance. He said he agreed with Representative Hudson and would
probably support HB 96 as well.
REPRESENTATIVE ROKEBERG said he agrees with Representative Ogan
about the necessity for making reductions in state spending and
that his survey shows overwhelmingly that the people of the state
of Alaska desire reductions in spending. Representative Rokeberg
further stated that, "And I support that and will continue to
support that. The point in fact, madam chair, is that we can't cut
$1.1 billion out of our budget. It's absolutely impossible.
Anybody who thinks otherwise is dreaming. So we need to look at
all areas and all avenues in order to build a long range plan -
that the state is sustainable and have public acceptance. And, I
think this bill is only one small part of that because it doesn't
have a major impact now but will have in the future - I think for
future fuel development". If future legislators want to change
that, they have a right to do that.
REPRESENTATIVE ROKEBERG said his number one goal is finding a
solution to the state's problems but avoiding taxation both at the
state and local levels. He reiterated that the impact of HB 96
will be minimal because we're just shifting an allocation, we're
going from savings to appropriations.
Number 0491
REPRESENTATIVE ROKEBERG said he disagrees with Representative Ogan
characterization of the permanent fund as a retirement account
because the permanent fund is for all generations and future
generations of Alaskans.
CHAIR JAMES mentioned no one had signed up to testify on HB 96.
REPRESENTATIVE OGAN said a better clarification of the permanent
fund would be a "rainy day account." The permanent fund was set up
in case the state ran out of money or that it couldn't pay for
services. He said Senator Stevens indicated that the Pacific Rim
is recovering faster than anyone expected. The day after OPEC
(Organization of Petroleum Exporting Countries) decides to cut back
production, Alaska's prices could jump significantly.
REPRESENTATIVE OGAN concluded that the legislature needs to be
careful in planning because of possible short-term glitches in the
oil prices. He said the state has enough savings accounts that the
legislature doesn't need to make drastic changes to policy.
Number 0546
CHAIR JAMES stressed that the state needs a long-term spending plan
before we can have a long-term funding plan - and we're working on
that as we speak. Chair James said, "In putting together a long-
term spending plan, it is much easier to start at 2.2 than it is to
start at 3 because I don't know how, without some magic, that we
could cover an escalating $3.3 billion budget at this time. So, I
think we can be real pleased with ourselves that we've been able to
curb our spending and our appetite for money". She said she
believes the legislature also needs to look at every little pot of
money to see whether it should be put into one big pot.
CHAIR JAMES referred to Representative Rokeberg's survey. She
said, "I think it's up to us to be able to provide the public with
the explanation of reality because we absolutely cannot cut
ourselves clean and we cannot tax ourselves enough to solve this
problem. So, it's going to take a combination of things and this
is one of them. ... I like to avoid taxes as long as possible, and
when we do put in taxes, I want to know that that is going to fill
the gap."
Number 0596
REPRESENTATIVE HUDSON moved to report SSHB 96 out of committee with
individual recommendations and the accompanying zero fiscal note.
There being no objection, it was so ordered.
HB 132-PERMANENT FUND ALLOWABLE ABSENCES
CHAIR JAMES announced HB 132, "An Act relating to allowable
absences from the state for purposes of eligibility for permanent
fund dividends; and providing for an effective date," is before the
committee.
Number 0617
PETER TORKELSON, Researcher, presented HB 132 on behalf of
Representative Cowdery. He said the essential issue is equity.
If state employees are allowed to work out-of-state for more than
180 days and still receive their dividend, why not private
employees. Mr. Torkelson further stated that, "We believe that
private employees are truly the backbone of our state's economy and
should be afforded the same privileges and protection under law as
state employees. These equity concerns we believe are addressed in
HB 132."
MR. TORKELSON explained that HB 132 is structured to only apply to
a private employee who works instate at least part of the year, and
one in which their employer certifies in writing that the employee
was required to work outside of Alaska as a condition of
employment. The intent is to only qualify people who really do
live in Alaska and work out-of-state. He noted that Mr. Bradley
Esary is a prime example because he works hard and brings his money
back to Alaska. He is exactly the kind of productive citizen our
economy needs to stay healthy. [Mr. Esary testifies later].
MR. TORKELSON pointed out that last year the Permanent Fund
Dividend Division had 918 people who checked absence codes on their
application which may indicate that they would fall into this
category. Mr. Torkelson indicated that the application isn't
specific enough to know exactly how many people were out for work
or for other issues. Other than the 918 people, if we just assumed
that 1,000 people got their dividends next year because of HB 132,
all dividends statewide would only be reduced by $2.62. He said
that it's a small expense for giving private employees the same
status under the law that public employees now enjoy.
Number 0659
REPRESENTATIVE KERTTULA announced that she may have a conflict due
to the broadness of the bill. She reported that her sister is an
out-of-state employee and benefits by this.
REPRESENTATIVE OGAN pointed out that he has a constituent who is a
merchant marine and is at sea more than 180 days a year. He asked
if his constituent would be eligible under this provision.
MR. TORKELSON replied that it is his understanding that the
merchant marines would be eligible as long as he worked instate at
least part of the year. And, if that means pulling into port and
getting off the ship in Alaska, it is his understanding that he
would be covered. He said it is the intent of HB 132 it to include
merchant marines.
REPRESENTATIVE OGAN implied that, if a person messes with the
residency requirement, the Legal and Research Services Division
(Legislative Affairs Agency) gets their dander up. He said he
rewrote Title 16 "residency," which turned out to be a long and
arduous process because there are a lot of people who would love to
scam this money. He asked if there are safeguards to keep people
from doing that if HB 132 is expanded.
Number 0692
MR. TORKELSON replied that the legislature increased the penalty
for fraudulent applications beyond simple fraud statutes. If
someone makes a fraudulent application for the permanent fund, they
are liable to lose all future permanent fund dividends and are
required to repay all dividends they have received to date. This
would also apply to an employer who fraudulently certifies in
writing for the purpose of validating a fraudulent claim. Mr.
Torkelson said they believe that those are substantial penalties to
preclude this from being disproportionately abused.
REPRESENTATIVE KERTTULA asked if HB 132 makes it retroactive to
include 1997, 1998 and 1999.
MR. TORKELSON noted that Section 2 makes it retroactive to 1997,
1998 and 1999.
Number 0727
BRAD ESARY testified in support of HB 132 via teleconference from
Anchorage. He said that he and his wife have been residents of
Alaska for 23 years, they have raised three children and have four
grandchildren, all of whom are residents. He mentioned that he
pays taxes, has a CDL [commercial drivers license], served on a
jury, purchased a vehicle and handgun permit.
MR. ESARY explained that in 1997 his employer, of 18 years, lost
the contract at Prudhoe Bay. Instead of traveling to the North
Slope oil fields, Mr. Esary traveled for the same employer for
short periods of time at various locations outside of Alaska and
performed the same duties. He explained that his checks were
directly deposit to Alaska and that all his living expenses were
paid by his employer. Mr. Esary said he was astonished to learn
that he was denied the 1998 permanent fund dividend because he was
absent from the state over 180 days. To be exact, it was 191 days.
MR. ESARY said, "I do not think that my need to work for a living
is any different from that of a state employee. And, to treat a
private sector - Alaskan resident any differently, I think needs to
be corrected."
REPRESENTATIVE HUDSON asked Mr. Esary if his family remains in
Alaska when he works out-of-state.
Number 0779
MR. ESARY replied that his family does remain in Alaska.
Number 0791
DEBORAH VOGT, Deputy Commissioner, Department of Revenue, said that
the legislature has taken away the commissioner's discretion in
establishing additional allowable absences that are not on the
statutory list.
MS. VOGT stated that the Department of Revenue has the issue of
administrative feasibility. She asked that the legislature draw
lines that are clear and that are easy to administer. But, with
the massive number of applications the department needs to be able
to program the computer in a way that deals with recurring
situations in a reasonable way, and temporary employees need to be
able to handle these kinds of things. Ms. Vogt said, "So we're for
clear lines - not fuzzy lines. And, unfortunately, I believe that
the lines set up by this proposal [HB 132] are quite fuzzy."
MS. VOGT noted that HB 132 will create more inequities than it
cures. For example, some of the folks that she has seen (that have
spent more than 180 days out-of-state) are self-employed. A
poignant case is a fisherman, due to the collapse of the fishing
industry, took a job fishing on a boat that was out-of-state for
more than 180 days, but he didn't have an Alaskan employer who sent
him out. Ms. Vogt said, "On the other hand, there may be people
that this legislation doesn't intend to benefit - that can make a
very strong argument that they would be entitled. We have a lot of
multi-state employers, Alaska Airlines, BP [British Petroleum],
folks that have businesses in many different parts of the world."
Number 0830
MS. VOGT pointed out that the issue of where a person's true home
is, is not always easy to discern. For example, folks may not have
a family. An employee of Alaska Airlines may have an apartment in
Anchorage and Seattle, he or she may be required to work in
Anchorage for one month and to work in Seattle for ten months, and
then is given a month off. She asked, what are we to determine
about that person.
MS. VOGT explained the department proposed 180-day rule (which was
adopted), to provide a clean line that helped them distinguish
between those folks that spend enough time in the state. The
legislature has chosen to say it doesn't matter how long the
military personnel and higher education staff are outside. But for
the vast group of people who do travel, for a reason that's not on
the list, the department needed some way to distinguish - among the
many reasons that people are gone and to draw a line that could be
defended. Ms. Vogt noted that this type of discretion is hard to
administer.
MS. VOGT said she recognizes, with all due respect to
Representative Kerttula's sister, the inequity between state
employment and public employment. She said she agrees that that's
an issue that the legislature might want to pay attention to,
however, she is not sure that HB 132 helps draw that line in the
way that removes all the inequities.
Number 0864
CHAIR JAMES said, "I really appreciate your concerns. And even
though I've made the statement that, 'when we started walking down
this road of allowing absences, we've walked ourselves into this
big pit.' I've been told that most of the work in the Permanent
Fund Dividend Division is dealing with appeals and almost every
appeal is based on some absence - it doesn't necessarily fall into
the issue. Would it be, that in the beginning we wouldn't have
allowed any and that we would have said, 'To be here you get it,
you don't be here you don't get it! But, one of the things is you
can't go backwards."
TAPE 99-16, SIDE B
Number 0001
CHAIR JAMES continued, "We have to recognize that different people
make their living different ways and so it shouldn't make any
difference whether they have an employer or not. So, I agree
that's an inequity that we wouldn't want to encourage here." She
asked Ms. Vogt if she had any suggested language that would make it
more encompassing or more fair.
MS. VOGT responded, "I have thought about it a fair amount and I
really can't figure out how to define it in a way that our folks
can implement that reaches who you want to reach." It's often a
very difficult determination to make. It's easy for a person who
has lived in Alaska for 30 years and has a home and pays taxes. ...
But a lot of people don't fit in that category, we've got folks who
don't own homes in Alaska, who rent and who might rent during their
employment outside as well. Ms. Vogt further stated, "And we
really can't really look at the fact that someone has lived here
for 25 years because that really discriminates against the person
who came to Alaska last year and really has established, and
intends to remain an Alaskan resident but also travels outside."
She agreed with Chair James that we've started down a road with a
lot of unintended consequences.
CHAIR JAMES noted an inequity needs to be fixed. She said she
believes there has been a piece of legislation introduced every
year to make more people eligible for the permanent fund dividend.
Number 0101
REPRESENTATIVE HUDSON asked if spouses, minor dependents, or
disabled dependants, would also be eligible if he, she, or they
decided to accompany this worker.
MS. VOGT responded, "That's certainly the way it would work - the
way the statutes and regulations are currently drafted. An
accompanying family, of a person on an allowable absence is also
eligible."
REPRESENTATIVE HUDSON indicated that if a worker is out-of-state
for greater than 180 days we don't know to what extent, it could be
200, 240 days, possibly up to one year.
Number 0217
REPRESENTATIVE WHITAKER commented that if the question is truly
equity, rather than open "Pandora's box" even wider, item 10 could
be eliminated.
serving as an employee of the state in a field office or other
location;
REPRESENTATIVE OGAN stated that the definition of "eligibility"
(you are a state resident on the date of the application, was a
state resident during the entire qualifying year) seems a little
ambiguous. He indicated that people had houses in Alaska but were
residents of another state, that they maintained their residency in
order to obtain no-cost hunting tags and what not. He said, "It
doesn't have anything in there about domicile. ... Domicile is a
much tighter description. It says that, a domicile and residency
is usually the same place, they're frequently used if they have the
same meaning but they're not identical terms. Residence means
living in a particular locality, but domicile means living in that
locality with intent to make it a fixed and permanent home. And
there's no reference to either in the language change here that
we're proposing or any where in the eligibility requirements of
domicile."
MS. VOGT agreed that the word domicile is more restrictive than
residency. She pointed out that the residency definition is
located in the definition section of (indisc.--noise) 23 and it
refers to residency definition in Title 1 which does have the
element of intent. The definition of domicile implies that a
person can only have one residence and cannot be a resident of more
than one place at the same time.
Number 0297
MS. VOGT also noted that it would be a per say disqualified if a
person accepted to benefit in another state by a resident fishing
license or resident tuition. Registering to vote or voting in
another state is also a disqualification. She indicated that the
department has trouble with welfare benefits because of the
constitutional issues. It's very difficult to find a definition
that you can easily apply without a lot of case-by-case analysis.
Some of the Alaska Marine Highway employees have residences in both
states and it's difficult to tell the difference in those folks.
CHAIR JAMES said we could create equity, as Representative Whitaker
said, by deleting number 10.
REPRESENTATIVE KERTTULA asked Ms. Vogt if other exemptions have
been made retroactive.
Number 0357
MS. VOGT noted that the retroactivity provisions in HB 132 are
quite troublesome - largely because they would allow folks to
essentially come into the program whether they have applied or not
in those past years. Last year the legislature adopted HB 2
[Permanent Fund Dividend Eligibility] which came about because the
Permanent Fund Division had by regulation - always had an allowable
absence for the spouse of a person who was allowably absent.
However, the court decision said they couldn't do that because they
couldn't infer the intent of one adult by the intent of that
person's spouse. Ms. Vogt said, "So we were faced with a situation
where we could pay the student or the military member and we could
pay the kids, but we couldn't pay the spouse and that's an inequity
that HB 2 intended to address. Because there were several versions
of HB 2, we had been telling applicants over the years to make sure
they kept their applications in because they might get legislation
that would allow us to pay them. So HB 2 was retroactive in the
sense that (indisc.--coughing) had applied the year before could be
paid. But essentially those people were kind of all on notice."
MS. VOGT further explained that, although Representative Cowdery's
office has made attempts to determine the number of people that
would be affected, the division didn't know how many didn't apply
because they know that being out-of-state more than 180 days is too
long.
Number 0391
CHAIR JAMES remarked, "We're not supposed to do retroactive law
anyway."
MS. VOGT said that it would be very problematic.
CHAIR JAMES asked, if a person is denied one year, he or she
doesn't receive the dividend the next year.
MS. VOGT said HB 2 [1998], did in an oblique way address that
because it took these allowable absences out of the definition of
residency and put them into the eligibility statute. She said that
the result of that is a fairly technical analysis, and that the
division now relies on the definition of residency in Title 1. If
a person was out-of-state for more than 180 days, but did not
establish residency somewhere else, that person will be eligible
next year if he or she is in the state [HB 2].
CHAIR JAMES asked if HB 132 wasn't retroactive, would Mr. Esary be
eligible for 1998.
MS. VOGT replied that if Mr. Esary was already denied, he can't
reopen his claim.
Number 0459
REPRESENTATIVE OGAN said to use the definition of residence is not
synonymous with domicile. He read the following statement,
"Although the two terms are clearly closely related, a person may
have only one legal domicile at one time but he may have more than
one residence." If domicile was included in statute that says that
the domicile was in the state would it clear the ambiguity about
who's in and who's out?
MS. VOGT noted that it would help her on a motion for
reconsideration of a formal hearing denial. She said she is not
sure it would help the person who's processing the applications.
Domicile is more in line with what folks believe as appropriate for
dividend eligibility. However, it doesn't necessarily distinguish
between those "fuzzy cases."
CHAIR JAMES remarked that it doesn't affect the issue of 180 days
because the specific language states that more than 180 days is not
acceptable.
MS. VOGT agreed with Chair James.
Number 0487
PAM LaBOLLE, President, Alaska State Chamber of Commerce, appeared
before the committee. She stated that over the last few years,
U.S.-flag vessel operators have made great efforts to train and
recruit Alaskans for employment aboard U.S. merchant vessels
serving in Alaska, coastwise, and in international trade. This
undertaking includes raising a substantial endowment for
scholarships to Alaskans attending the California Maritime Academy,
securing a maritime union hiring hall in Anchorage, and developing
a public/private partnership to offer maritime training and
apprenticeship for Alaskans interested in a seagoing career. This
undertaking has led to several dozen Alaskans finding high
skill/fair-wage training and employment in the U.S.-flag merchant
marine.
MS. LaBOLLE said the permanent fund dividend issue is a problem for
the merchant mariners because they are frequently absent from the
state for more than 180 days. She pointed out that the Alaska
State Chamber of Commerce would like dividend eligibility for
merchant mariners who qualify for the permanent fund under the
statute of the state regarding state citizenship and distribution
of permanent fund dividends not withstanding their documented
employment aboard merchant vessels in domestic or foreign waters.
MS. LaBOLLE further stated, "Since Alaskans are proponents of local
hire, and quality professional skill development, their efforts to
provide this are hampered by the disqualification. Too often the
fact this some times encourages them to just go ahead and relocate
and stay out-of-state, and we feel that there's too much of an
export already of Alaska talent. And, so we would like to do all
we can to encourage these talented individuals to remain in the
state."
Number 0538
MR. TORKELSON noted the Department of Administration indicated that
there are 18 out-of-state employees, which is a small number. He
said, "Our position is essentially though that one is too many, I
believe in the point we are making. The inequity is the issue and
we would be more than happy to work with the committee to develop
different language."
CHAIR JAMES said she would like to assign HB 132 to a subcommittee.
REPRESENTATIVE COGHILL told Mr. Torkelson that that number is going
to be hard to substantiate because the State of Alaska also pays
people to do fire suppression in the states of California and
Oregon and could be out-of-state for a whole season.
MR. TORKELSON noted there are 62 employees working for the Alaska
Marine Highway, and that they reside in the Bellingham, Washington
area. That they may, or may not claim to be residents.
Number 0582
CHAIR JAMES assigned Representatives Ogan, Coghill and Smalley to
the HB 132 subcommittee. [Representative Ogan will serve as
Chairman].
HB 55-LONGEVITY BONUS ELIGIBILITY
CHAIR JAMES announced that HB 55, "An Act relating to eligibility
for the longevity bonus; and providing for an effective date," by
request of the Governor, is before the committee. She mentioned
she does not intend to move HB 55 out of committee today.
Number 0600
ALISON ELGEE, Deputy Commissioner, Department of Administration,
explained that HB 55 provides an income-cap in application for a
longevity bonus program. It would allow people who made, as single
people, less than $60 thousand, or as a married couple less than
$80 thousand to continue to qualify for receipt of the longevity
bonus. Individuals making an excess of that amount would be
suspended from the program. They would not be disqualified forever
if there was a change in the economic circumstances, they would be
eligible if they had maintained every other residency provision of
longevity bonus to get back on the program at whatever their
suspended bonus amount was.
MS. ELGEE pointed out that the Governor introduced HB 55 in an
attempt to provide another means to reduce state spending. She
said over half of the state's general fund spending is in pass-
through programs that provide aid to individuals and local
governments. These are formula programs because they're driven by
statutory construct which dictates how much money is spent. To
make an amendment to the longevity bonus program, the state would
need a statutory change.
Number 0624
MS. ELGEE further stated that, "The estimate of savings for this
bill, is that we have approximately 8 percent of the seniors on the
program that would end up losing the receipt of their longevity
bonus as a result of this legislation. This is only an estimate.
We do not collect income information in this state in any way to be
able to absolutely verify that. What we are using is census data
that is now 10 years old - looking at household incomes by age
level in order to come up with that particular estimate." In
addition to the savings that would accrue to the longevity bonus
program, the department also pays close to $2 million in hold-
harmless payment to recipients of SSI, supplemental social security
income. The federal supplemental social security income program is
written in such a way that if there is any kind of needs (indisc.),
of a program like longevity bonus, the state would no longer have
to pay the hold-harmless provision on the SSI side. They don't
define what constitutes needs, so it is any kind of an income
(indisc.), and would potentially save the state approximately $2
million in the hold-harmless payment.
MS. ELGEE explained that the level was selected where the longevity
bonus was not critical to an individual's ability to maintain
financial independence.
CHAIR JAMES announced a conflict because she is a longevity bonus
recipient.
[A majority of the other members declared a conflict in one way or
another.]
Number 0662
REPRESENTATIVE HUDSON asked how many people would lose their
eligibility.
MS. ELGEE replied there would be approximately 24 or 25 thousand
individuals on the bonus program.
REPRESENTATIVE HUDSON remarked that 4,000 to 5,000 Alaskans would
be denied - anywhere from 250 down to 100 without regard of how
long they lived here.
MS. ELGEE replied that is correct, it would not make any judgement
on residency whatsoever, it would just be based on income, income
as reported on taxes. So, individual assets do not weigh into this
calculation.
REPRESENTATIVE HUDSON noted that the difficulty in assessing the
needs of an elderly person is often not predicated strictly by
their income, it can be that they may need dialyses or special
medication for example.
CHAIR JAMES mentioned the longevity bonus program is phased-out and
is going down every year. The attitude of the folks on the
longevity bonus program is that it is not a welfare program.
Therefore, having to submit their financial data to qualify is
objectionable and insulting to them. Probably those, who have been
here the longest, are the ones with the highest income. They
worked hard to get that, so they shouldn't be denied on that basis.
Number 0714
DAN KECK, Chairman, State Legislative Committee for AARP testified
in opposition to HB 55 via teleconference from Sitka. He said this
is not a new issue. AARP feels that HB 55 is not in the best
interest to the state of Alaska and most certainly not to the
seniors of our state.
MR. KECK said, "Back in 1993, we sat in a number of meetings
discussing the idea of phasing this out and a lot of our people
didn't agree, but the majority of us said, 'Well, looking at the
best interest of the state in a long run, maybe we should go ahead
and phase it out,' and we agreed to that. And we feel the phase-
out program was working very well and should be left intact and let
it go ahead and phase the program out over a period of years. We
never thought of it as being a relief program or welfare program,
and if we start putting a means test in this, then that's what it
will wind up to be."
MR. KECK concluded, "And, someone making $60 thousand or so might
have problems that would give them less money than someone in the
lower income that qualifies for welfare programs. So we don't want
to put those people all in the same boat. So, we would just like
to go on record as opposing this program, we'd like for you to keep
us aware of what's going on. I didn't know about this until almost
10 o'clock last night ... or we would have had a lot of people
across the state ready to testify. So, in the future, if this
comes up again, we will rally the forces and let you know how we
all feel about it."
CHAIR JAMES informed Mr. Keck that HB 55 will be heard again on
Thursday.
Number 0745
MS. ELGEE stated that this provision would be administered as
simply as possible. The longevity bonus program is pretty much on
an honor system in terms of residence verification at this time.
She said the department occasionally matches longevity bonus
recipients to permanent fund dividend applicants or works with
Legislative Audit to do spot checking.
MS. ELGEE said if this legislation were to pass, the department
would operate the financial eligibility in the similar fashion.
People would be asked whether or not they had income in excess of
the levels that were set by statute. They would have to make their
records available on audit, but they would not have to submit their
records as a part of the verification of that eligibility.
CHAIR JAMES noted that the scary part for folks is that:
The commissioner of Administration may by, by regulation,
in order to verify gross income amounts, provide for access to
records of a person who is applying for or receiving a bonus;
and establish procedures for auditing gross income statements
made by a person who is applying for or receiving a bonus;
establish appropriate procedures for a hearing at the request
of a person determined under this section to be ineligible for
the bonus.
CHAIR JAMES mentioned that when she was doing taxes she always made
the comment that, "Next to their marital relationship, their money
was next in their serious concerns of privacy."
[HB 55 was heard and held].
Number 0785
ADJOURNMENT
There being no further business before the committee, the Committee
meeting was adjourned at 9:35 a.m.
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