Legislature(1999 - 2000)
02/22/2000 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
February 22, 2000
8:06 a.m.
MEMBERS PRESENT
Representative Jeannette James, Chair
Representative Joe Green
Representative Jim Whitaker
Representative Bill Hudson
Representative Hal Smalley
Representative Scott Ogan
MEMBERS ABSENT
Representative Beth Kerttula
OTHER HOUSE MEMBERS PRESENT
Representative Gail Phillips
Representative Lisa Murkowski
Representative John Coghill
Representative Jerry Sanders
COMMITTEE CALENDAR
HOUSE BILL NO. 335
"An Act relating to information contained in retirement system
records; relating to retirement boards; relating to procedures
and hearings under state retirement systems; relating to benefits
for reemployed retired members of retirement systems; relating to
eligibility for normal retirement for members of the teachers'
retirement system who have Alaska BIA credited service; relating
to disability benefits for members of state retirement systems;
relating to deduction of premiums from retirement benefits;
relating to protection of, and assignment and transfer of,
amounts held in retirement systems; relating to retirement
benefits for certain employees earning high salaries; relating to
qualified domestic relations orders in state retirement systems;
relating to the definition of 'retirement fund' in the teachers'
retirement system; relating to membership of state employees in
the teachers' retirement system; relating to refund of
contributions made to the judicial retirement system or to the
former elected public officers retirement system and repayment of
refunded contributions in those systems; relating to self-
insurance and excess loss insurance for persons receiving
benefits from a state retirement system; relating to
participation of elected officials in the public employees'
retirement system; relating to reinstatement of credited service
in the public employees' retirement system after a refund because
of certain levies; relating to the level income option benefit
under the public employees' retirement system; relating to
participation of employees of political subdivisions and public
organizations in the public employees' retirement system;
relating to penalties for attempts to defraud the public
employees' retirement system; relating to the definition of
'pension fund' in the public employees' retirement system;
relating to calculation of years of service and of benefits under
the public employees' retirement system for non certificated
employees of certain educational employers; and relating to
individual accounts maintained for members of the former elected
public officers retirement system."
- MOVED CSHB 335(STA) OUT OF COMMITTEE
HOUSE BILL NO. 337
"An Act relating to claims against permanent fund dividends to
pay certain amounts owed to state agencies and to fees for
processing claims against and assignments of permanent fund
dividends; and providing for an effective date."
- MOVED CSHB 337(STA) OUT OF COMMITTEE
HOUSE BILL NO. 380
"An Act relating to contributions to the Alaska Fire Standards
Council and to an insurer tax credit for those contributions; and
providing for an effective date."
- MOVED CSHB 380(STA) OUT OF COMMITTEE
HOUSE BILL NO. 411
"An Act relating to the market value of the permanent fund and to
distribution of income of the permanent fund; and providing for
an effective date."
- HEARD AND HELD
HOUSE BILL NO. 367
"An Act providing for the revocation of driving privileges by a
court for a driver convicted of a violation of traffic laws in
connection with a fatal motor vehicle or commercial motor vehicle
accident; and amending Rules 43 and 43.1, Alaska Rules of
Administration."
- SCHEDULED BUT NOT HEARD
HOUSE BILL NO. 292
"An Act adopting the National Crime Prevention and Privacy
Compact; making criminal justice information available to
interested persons and criminal history record information
available to the public; making certain conforming amendments;
and providing for an effective date."
- SCHEDULED BUT NOT HEARD
PREVIOUS ACTION
BILL: HB 335
SHORT TITLE: STATE RETIREMENT SYSTEMS AND BENEFITS
Jrn-Date Jrn-Page Action
2/04/00 2091 (H) READ THE FIRST TIME - REFERRALS
2/04/00 2092 (H) STA, FIN
2/04/00 2092 (H) REFERRED TO STATE AFFAIRS
2/17/00 (H) STA AT 8:00 AM CAPITOL 102
2/17/00 (H) Heard & Held
2/17/00 (H) MINUTE(STA)
2/22/00 (H) STA AT 8:00 AM CAPITOL 102
BILL: HB 337
SHORT TITLE: CLAIMS AGAINST PERM FUND DIVIDENDS
Jrn-Date Jrn-Page Action
2/04/00 2094 (H) READ THE FIRST TIME - REFERRALS
2/04/00 2094 (H) STA, JUD, FIN
2/04/00 2094 (H) FISCAL NOTE (LABOR)
2/04/00 2094 (H) GOVERNOR'S TRANSMITTAL LETTER
2/04/00 2094 (H) REFERRED TO STATE AFFAIRS
2/22/00 (H) STA AT 8:00 AM CAPITOL 102
BILL: HB 380
SHORT TITLE: INSURER TAX CREDIT:FIRE STANDRDS COUNCIL
Jrn-Date Jrn-Page Action
2/16/00 2213 (H) READ THE FIRST TIME - REFERRALS
2/16/00 2213 (H) STA, L&C, FIN
2/16/00 2213 (H) REFERRED TO STATE AFFAIRS
2/22/00 (H) STA AT 8:00 AM CAPITOL 102
BILL: HB 411
SHORT TITLE: DISTRIBUTION OF PERMANENT FUND INCOME
Jrn-Date Jrn-Page Action
2/16/00 2221 (H) READ THE FIRST TIME - REFERRALS
2/16/00 2221 (H) STA, FIN
2/16/00 2221 (H) REFERRED TO STATE AFFAIRS
2/18/00 2240 (H) COSPONSOR(S): DAVIES
2/22/00 (H) STA AT 8:00 AM CAPITOL 102
WITNESS REGISTER
MELINDA HOFSTAD, Legislative Assistant
to Representative Bill Hudson
Alaska State Legislature
Capitol Building, Room 108
Juneau, Alaska 99801
POSITION STATEMENT: Provided information on HB 335.
GUY BELL, Director
Division of Retirement and Benefits
Department of Administration
PO Box 110203
Juneau, Alaska 99811-0203
POSITION STATEMENT: Provided information and answered questions
regarding HB 335.
RON HULL, Deputy Director
Division of Employment Security
Department of Labor & Workforce Development
PO Box 25509
Juneau, Alaska 99802-5509
POSITION STATEMENT: Provided department's position and answered
questions regarding HB 337.
DWIGHT PERKINS, Deputy Commissioner
Department of Labor & Workforce Development
PO Box 21149
Juneau, Alaska 99802-1149
POSITION STATEMENT: Provided department's position and answered
questions regarding HB 337.
NANCI JONES, Director
Permanent Fund Dividend Division
Department of Revenue
PO Box 110460
Juneau, Alaska 99811-0460
POSITION STATEMENT: Answered questions regarding HB 337.
REPRESENTATIVE GENE THERRIAULT
Alaska State Legislature
Capitol Building, Room 511
Juneau, Alaska 99801
POSITION STATEMENT: Testified as sponsor of HB 380.
MICHAEL McGOWAN
Fire Chiefs' Association
Fairbanks, Alaska
POSITION STATEMENT: Testified in support of HB 380.
SCOTT WALDEN, Assistant Chief
Kenai Fire Department
Kenai, Alaska
POSITION STATEMENT: Testified in support of HB 380.
STEVE O'CONNOR, Assistant Chief
Central Emergency Services
Soldotna, Alaska
POSITION STATEMENT: Testified in support of HB 380.
ACTION NARRATIVE
TAPE 00-8, 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, Green, Whitaker,
Smalley and Ogan. Representative Hudson arrived as the meeting
was in progress. Representative Kerttula was excused.
HB 335-STATE RETIREMENT SYSTEMS AND BENEFITS
Number 0020
CHAIR JAMES announced the first order of business is HOUSE BILL
NO. 335, "An Act relating to information contained in retirement
system records; relating to retirement boards; relating to
procedures and hearings under state retirement systems; relating
to benefits for reemployed retired members of retirement systems;
relating to eligibility for normal retirement for members of the
teachers' retirement system who have Alaska BIA credited service;
relating to disability benefits for members of state retirement
systems; relating to deduction of premiums from retirement
benefits; relating to protection of, and assignment and transfer
of, amounts held in retirement systems; relating to retirement
benefits for certain employees earning high salaries; relating to
qualified domestic relations orders in state retirement systems;
relating to the definition of 'retirement fund' in the teachers'
retirement system; relating to membership of state employees in
the teachers' retirement system; relating to refund of
contributions made to the judicial retirement system or to the
former elected public officers retirement system and repayment of
refunded contributions in those systems; relating to self-
insurance and excess loss insurance for persons receiving
benefits from a state retirement system; relating to
participation of elected officials in the public employees'
retirement system; relating to reinstatement of credited service
in the public employees' retirement system after a refund because
of certain levies; relating to the level income option benefit
under the public employees' retirement system; relating to
participation of employees of political subdivisions and public
organizations in the public employees' retirement system;
relating to penalties for attempts to defraud the public
employees' retirement system; relating to the definition of
'pension fund' in the public employees' retirement system;
relating to calculation of years of service and of benefits under
the public employees' retirement system for non certificated
employees of certain educational employers; and relating to
individual accounts maintained for members of the former elected
public officers retirement system."
Number 0100
MELINDA HOFSTAD, Legislative Assistant to Representative Bill
Hudson, Alaska State Legislature, offered Amendment 1, 1-
LS1217\H.1, Cramer, 2/21/00, which read:
Page 7, lines 17-29:
Delete all material.
Renumber the following bill sections accordingly.
Page 24, lines 812:
Delete all material.
Renumber the following bill sections accordingly.
Page 24, line 30, through page 25, line 3:
Delete all material.
Renumber the following bill sections accordingly.
Page 33, line 26:
Delete "sec.30"
Insert "sec.29"
Page 33, line 29:
Delete "sec. 30"
Insert "sec. 29"
MS. HOFSTAD requested that Guy Bell come forward and discuss the
amendments.
Number 0178
GUY BELL, Director, Division of Retirement and Benefits,
Department of Administration, reminded the committee that last
week the proposed committee substitute (CS) [Version H] had been
discussed section by section, and questions were asked that he
would answer today. He suggested that Sections 9, 44, and 46
regarding recovery from disability be dropped entirely from the
proposed CS; the amendment was written accordingly.
MR. BELL, in response to a question from Chair James, explained
that since the proposed CS discusses technical cleanup issues and
not policy issues, it would be advisable to handle Sections 9,
44, and 46 in a different manner. Through the hearing process he
now understands recovery from disability to be a policy issue.
Number 0350
CHAIR JAMES made it clear that the proposed CS is a technical
cleanup, not to change policy; Amendment 1 removes policy issues
from the proposed CS.
Number 0417
REPRESENTATIVE SMALLEY made a motion to adopt Amendment 1. There
being no objection, Amendment 1 was adopted.
Number 0470
REPRESENTATIVE GREEN made a motion to move CSHB 335, version 1-
LS1217\H, Cramer, 2/13/00 [as amended] out of committee with
individual recommendations and attached fiscal notes. There
being no objection, CSHB 335(STA) moved from the House State
Affairs Standing Committee.
HB 337-CLAIMS AGAINST PERM FUND DIVIDENDS
Number 0550
CHAIR JAMES announced the next order of business is HOUSE BILL
NO. 337, "An Act relating to claims against permanent fund
dividends to pay certain amounts owed to state agencies and to
fees for processing claims against and assignments of permanent
fund dividends; and providing for an effective date."
Number 0620
REPRESENTATIVE SMALLEY made a motion to adopt the proposed
committee substitute (CS), version 1-GH2060\G, Cook, 2/17/00, as
a work draft. There being no objection, Version G was before the
committee.
RON HULL, Deputy Director, Division of Employment Security,
Department of Labor & Workforce Development (DOLWD), said
currently the only method the DOLWD has to attach a permanent
fund dividend is by voluntary assignment, judgment through a
small-claims action, or through a criminal prosecution judgment.
The proposed CS would speed recovery. He explained that federal
law prohibits the offset of unemployed insurance (UI) benefits to
collect money, which, if recovered, is deposited into the general
fund. Estimated recovery of penalties in the first year is
approximately $750,000, and $400,000 each year thereafter.
MR. HULL pointed out that Section 2 amends AS 43.23 by adding a
new section .072, in which subsection (a) adds procedures
allowing DOLWD to make a claim against the permanent fund
dividend for money owed to the state agency and establishes
procedure for execution of the same. Subsection (b), he
indicated, establishes procedures for notification of the
individual, and subsection (c) makes an exception to notification
when an individual requests a hearing. Furthermore, if DOLWD
has a notification or hearing procedure established in statute,
the department may use that procedure. Subsection (e) allows
DOLWD to adopt regulations to implement or interpret this section
by the same procedure under which it adopts regulations to a
program. Subsection (f) allows DOLWD to include fines, fees,
penalties, overpayments, attorney fees, costs and other amounts
owed the department under state law. Section 3 is a transitional
provision that allows DOLWD to adopt regulations to interpret
Sections 1 and 2 of this proposed CS. Section 4 specifies that
Section 3 takes place immediately, and Section 5 says Sections 1
and 2 take effect on January 1, 2001.
Number 0882
CHAIR JAMES directed Mr. Hull's attention to page 3, line 29,
where it reads "fines, fees, penalties, overpayments, attorney
fees, costs, and other amounts owed the department." With the
exception of overpayment, she asked, what due process does an
individual have to determine if the fines, fees and so forth are
factual? And how does the department determine that an
individual owes money?
MR. HULL answered that page 3, line 29, refers to cases that have
already gone to court, such as a small claims action. Small
claims actions carry a 10.5 percent interest penalty on overdue
benefits, and such a penalty is awarded to DOLWD by small claims
court. The criminal court awards fines and penalties to DOLWD,
but DOLWD itself does not levy fines except for benefit
overpayments.
Number 0991
CHAIR JAMES asked if the proposed CS only allows the collection
of fines, fees, penalties, attorney fees and costs as deductions
from the permanent fund dividend, providing that due process has
already been experienced in the court.
MR. HULL answered in the affirmative.
CHAIR JAMES asked if DOLWD can collect on overpayments without
going to court.
MR. HULL answered that DOLWD can collect by means of an
administrative hearing, which he considers to be due process.
CHAIR JAMES replied that an administrative hearing is not the
same as going outside DOLWD to court. She reiterated that she
does not want to skip due process for the individual while making
it simple and less expensive for DOLWD to collect money.
Number 1064
REPRESENTATIVE OGAN said he is concerned about due process. He
cited Governor Knowles' letter [of February 2, 2000] to Speaker
Porter, which says "most state agencies still need to use a time
consuming and costly court action to attach an individual's
permanent fund dividend." In his opinion, that phrase refers to
due process. He explained that the proposed CS appears to bypass
the court process.
CHAIR JAMES commented that Governor Knowles' letter is written to
the original HB 337 draft, and therefore does not apply to this
proposed CS. However, she is concerned that the due process
problem still exists in the proposed CS.
Number 1131
REPRESENTATIVE OGAN indicated the proposed CS turns due process
into an administrative hearing process. Further, he added, an
administrative hearing process simply amounts to an in-house
administrative hearing officer who works for the commissioner and
is accountable to the commissioner for the amount of collections
he/she accomplishes, so there is concern that an individual will
not get an unbiased hearing. He emphasized that he sees a
constant erosion of people's rights in the name of government
expediency.
CHAIR JAMES acknowledged that every citizen should have the right
to due process. She also agreed with Representative Ogan
regarding the possible bias of administrative hearings. However,
she said overpayments seem to be quite clear: either there is an
overpayment or there is not. She also recognized that it is not
easy for people to pay back an overpayment. She stated that she
is definitely concerned about the proposed CS apparently
circumventing due process by adding the words "fines, fees,
penalties, overpayments, attorney fees, costs, and other amounts
owed." She asked Mr. Hull if the proposed CS circumvents due
process.
Number 1270
MR. HULL replied in the negative. He acknowledged that a DOLWD
administrative hearing is not the last resource for an individual
who is in contention for alleged money owed. He reiterated that
a claimant could choose to file a lawsuit in an outside court;
thus due process continues. Fines and penalties mentioned in the
proposed CS are part of due process because those are determined
by a court of law.
CHAIR JAMES said she understood, then, that fines, penalties,
attorney fees and costs all must be court-approved.
MR. HULL answered in the affirmative.
CHAIR JAMES noted that the proposed CS, then, makes it
unnecessary to go to an outside court to authorize a deduction
from an individual's permanent fund dividend. She commented that
she understood DOLWD had made an assessment through court
procedure and at that point would use the proposed CS to make a
collection.
Number 1380
MR. HULL replied in the affirmative. He reminded the committee
that there is a two-level, in-house appeal process available to
an individual: (1) a lower-level appeal and (2) an appeal to the
commissioner. If DOLWD prevails at both levels, then the debt is
established.
CHAIR JAMES asked if there is a difference between overpayments
and the other charges that the proposed CS addresses in that
overpayments do not have to be determined by a court.
MR. HULL replied in the affirmative.
CHAIR JAMES asked what "fees" are referred to in the proposed CS.
Number 1414
MR. HULL answered that he did not know what the fees were for or
why they were in the proposed CS.
Number 1421
REPRESENTATIVE OGAN asked if the fees are established by
regulation.
MR. HULL replied in the affirmative.
CHAIR JAMES said she is not happy with the word "fees" in the
proposed CS unless someone can tell her what they are for.
DWIGHT PERKINS, Deputy Commissioner, Department of Labor &
Workforce Development, said the word "fees" will be removed from
the proposed CS.
REPRESENTATIVE WHITAKER noted that he is concerned with the
notion of overpayment. He asked if overpayment is the result of
(indisc.) claim or of a mistake by the agency. He requested a
percentage breakdown of mistakes.
Number 1483
MR. HULL answered that an overpayment could be a result of both
reasons, as stated by Representative Whitaker. He reiterated
that DOLWD breaks collection into two categories: fraudulent
claims and error. For the latter, there could be error on the
part of both DOLWD and the claimant.
REPRESENTATIVE WHITAKER asked if DOLWD could show a percentage of
errors as opposed to fraudulent claims.
MR. HULL replied that he was not prepared to answer that question
but that DOLWD does produce a monthly report with those figures
and he will provide it to the committee.
CHAIR JAMES offered to help answer Representative Whitaker's
question. Every month, she said, DOLWD sends a request to
employers asking for information and verification as to when
employees were working. Then, when an employee files for
unemployment insurance, the dates between what an employee claims
and what an employer reports may not agree because of a time
lapse in the method of reporting. Another problem with
unemployment insurance dates occurs because work is counted when
an employee gets paid, not when the employee actually worked.
She acknowledged that generally when someone receives an
overpayment, that person is aware of the overpayment but in her
long career as a payroll person, she has not seen anyone
deliberately cause an overpayment.
Number 1615
MR. HULL recognized that a time-lapse problem as Chair James had
just described happens quite often in DOLWD, but the department
does not consider that to be fraud, especially if the employee
reports the overpayment.
REPRESENTATIVE WHITAKER stated that even though DOLWD would not
label an overpayment as fraudulent, the overpayment is still
classified as an overpayment, and the employee's permanent fund
dividend would be subject to garnishment according to the
proposed CS.
CHAIR JAMES said she understood that money collected from both
fraud and overpayment judgments would be deposited in the [UI]
trust fund.
Number 1667
MR. HULL specified that by statutory authority DOLWD assesses a
50 percent penalty on all fraud cases; the money collected is
deposited in the general fund. Money collected for overpayment
is deposited in the UI trust fund.
CHAIR JAMES asked if DOLWD had a dollar figure of what is
currently owed to the department in overpayments.
MR. HULL answered that $4.5 million is owed for fraud, $3.5
million in statutory penalties and $1.5 million for overpayments.
REPRESENTATIVE WHITAKER asked how many cases are involved in the
stated figures.
Number 1736
MR. HULL surmised that several thousand cases are involved.
CHAIR JAMES offered her belief, from her experience, that people
on unemployment are not financially secure; when a check arrives
in the mail, they cash it, whether it is right or wrong to
receive it, just because they need the money. Therefore, it is
not easy for people on unemployment to pay back an overpayment,
and she sees the proposed CS as an involuntary way for people to
return overpayments.
Number 1772
REPRESENTATIVE GREEN said the DOLWD fiscal note states that in
the first year of collection DOLWD would recover $1.5 million,
most of which would be fraud overpayments. In the second year,
collection by DOLWD drops to about half of that amount. He asked
if the proposed CS was designed to scare people with the threat
of losing their permanent fund dividends.
MR. HULL answered that the motive is the huge uncollected balance
of fraud money owed to DOLWD, which assesses two or three million
dollars per year for fraud but is successful in collecting only
50 to 55 percent of money owed. However, DOLWD does collect 90
percent of overpayments assessed. Collection of $1.5 million in
the first year and the subsequent drop to half that collection in
following years is because of the five- or six-year accumulation
of old debt. He commented that $1.5 million of money owed does
not accrue in one year.
Number 1844
CHAIR JAMES asked if DOLWD had matched debtors with their
permanent fund dividends, and if it was likely that those people
had left the state.
MR. HULL replied in the affirmative to both parts of the
question. He mentioned that DOLWD sends a letter to debtors,
many of whom voluntarily assign their permanent fund dividends to
DOLWD. Debtors who have left the state are another problem.
REPRESENTATIVE GREEN expressed concern about the fraud. He asked
whether the drop in collections after the first year indicates a
collection decrease each year, and whether there would be about
$2 million or $3 million that DOLWD would never recover.
Number 1871
MR. HULL answered, "Probably."
REPRESENTATIVE GREEN asked if collection of the non-fraud
overpays would also decrease since Mr. Hull had said $1.5 million
is owed, yet DOLWD only expects to collect $400,000.
MR. HULL answered that DOLWD does much better with collection of
non-fraud money than with fraud collection, collecting as much as
90 percent of that. However, DOLWD does poorly on collecting
penalties because the department cannot use UI trust fund dollars
to offset it. If a person claims benefits at a later date, after
paying off the overpayments but not the statutory penalties, the
department cannot collect that penalty [from UI trust fund
money].
REPRESENTATIVE GREEN noted that the ratios, however, indicate the
same sort of trend. He asked whether that is because it is a
ballpark guess.
MR. HULL answered that it is based not on what the department is
doing on a yearly basis, but on the fact that there is a large
balance out there.
Number 1937
CHAIR JAMES asked whether anyone else wanted to testify; there
was no response.
CHAIR JAMES then requested a motion for Amendment 1, to remove
the word "fees" from page 3, line 30, of the proposed CS.
REPRESENTATIVE HUDSON made a motion to adopt the foregoing as
Amendment 1. There being no objection, Amendment 1 was adopted.
REPRESENTATIVE OGAN noted that the entirety of Section 1 talks
about fees for processing claims and assignments.
CHAIR JAMES proposed having the drafter remove "fees" wherever
that wording exists in Section 1.
Number 2062
REPRESENTATIVE OGAN answered that he would feel more comfortable
if it dealt strictly with fraudulent claims and was not so heavy-
handed with people after the department had made a mistake. He
felt that people should not pay for DOLWD's mistakes.
REPRESENTATIVE WHITAKER echoed Representative Ogan's concern,
saying he is very concerned about the appearance or perception
that individual rights are being subjugated to state agency
expediency. He specified that he could support the proposed CS
if it related only to fraudulent claims.
Number 2188
CHAIR JAMES explained that in the proposed legislation,
fraudulent claims must go through a court process. Whereas a
small number of overpayments are due to departmental error, it
seems the majority would be either an employee's or an employer's
error. She asked Mr. Hull to respond.
MR. HULL said Chair James is correct because DOLWD tracks
overpayment errors and assigns a code for each source of error;
one code designates departmental error, which is a fairly rare
cause. Many times when the department makes the error, the
department tends to treat it differently.
Number 2273
CHAIR JAMES commented that she believes most overpayments are not
fraudulent; therefore, they should be put in a different
category. She added that fraudulent claims are already
authorized to levy fees and fines through a court process.
MR. HULL agreed fees and fines are assessed by the court, not by
the department.
REPRESENTATIVE OGAN asked Mr. Hull to clarify his statement that
most of the money owed is due to benefit overpayments but the
Governor's letter states that $4.5 million is due to fraud.
Representative Ogan emphasized that the numbers in the sponsor
statement and the letter do not match.
Number 2373
MR. HULL replied that the fraudulent collection amount [owed] is
so large is because of difficulty in collection. The DOLWD has
been trying to collect this money for five or six years, and as
each year goes by, the amount to be collected increases.
REPRESENTATIVE GREEN asked why DOLWD is reluctant to act on the
concern expressed by Representatives Ogan and Whitaker regarding
overpayments if the bulk of outstanding money owed is for fraud.
He suggested that perhaps the committee would be doing a service
to DOLWD by limiting the proposed CS to fraudulent claims only.
Number 2438
MR. HULL answered that if passage of the proposed CS depended
upon separation of fraud from overpayments, then he would accept
the proposed CS for fraud only. He agreed that DOLWD is
successful on collection of overpays.
CHAIR JAMES asked how much money DOLWD is supposed to collect
from overpayment cases.
MR. HULL replied that around $1.6 million is owed for
overpayments. A good bit of that is money that DOLWD cannot
collect. When asked to provide an example of why DOLWD could not
collect that money, Mr. Hull answered that partly it because of
the cost of going to small claims court. On a non-fraud case, if
a person who has been overpaid reapplies for benefits, the DOLWD
can offset the money. Otherwise, it is a matter of collection;
the department gets a judgment in small claims court, and if it
is a large enough amount of make it worthwhile, the department
uses that judgment to go back and get the person's permanent fund
dividend.
REPRESENTATIVE WHITAKER said he was having difficultly aligning
the 2 percent mentioned earlier with the $1.6 million.
MR. HULL noted that the 2 percent may be wrong "by a percent or
two." He then said the percentage refers to the percentage of
overpayments that might be caused by departmental error.
Number 2526
REPRESENTATIVE OGAN asked if DOLWD had thought about reporting it
to a credit bureau or hiring a collection agency. He noted that
most reasonable people do not want their credit records put in
jeopardy, which a collection agency threatens to do.
MR. HULL answered that the department had looked at that.
However, there were problems regarding how to pay for it because
there is a fee attached to it. However, the biggest problem is
that collection agencies do not want to deal with old debt; they
prefer 30-90 day debt. The department can collect new debt
easily itself; the problem is in collecting old debt.
Number 2576
REPRESENTATIVE OGAN asked if DOLWD had looked at statistics of
people who owe old debt in order to ascertain if they are still
receiving permanent fund dividends.
MR. HULL answered in the affirmative but said he cannot provide
percentages. He estimated that about 50 percent of [people who
owe] fraud debt are located out of state.
CHAIR JAMES asked where DOLWD would stand in the hierarchy of
permanent fund dividend lien authority if the proposed CS passed.
Number 2626
MR. HULL replied that he thinks DOLWD is number five.
NANCI JONES, Director, Permanent Fund Dividend Division,
Department of Revenue, said the proposed CS is a request for
administrative levy powers. If the proposed CS separates fraud
collection from overpayment collection, then DOLWD's [place in
the] payment hierarchy changes; one levy has a higher priority
than the other. If the proposed CS authorized levy power to
DOLWD for both types of collections, that would give DOLWD a
higher priority in permanent fund dividend levies. She
emphasized that it is an administrative nightmare for the
Permanent Fund Dividend Division to impose the levy if the areas
to be levied are cut up into little pieces.
Number 2705
REPRESENTATIVE HUDSON inquired of Ms. Jones as to the
hierarchical position of DOLWD if the proposed CS were to pass as
it stands now. He also asked who the other agencies are that
have authority to garnish permanent fund dividends.
MS. JONES replied that if the committee kept the proposed CS
intact, then DOLWD would have the same standing as other state
agencies except for the Alaska Commission on Postsecondary
Education, the Child Support Enforcement Division in the
Department of Revenue (DOR), and the Division of Public
Assistance in the Department of Health and Social Services. She
agreed that DOLWD's standing is about in fifth place.
Number 2750
CHAIR JAMES referred to Section 1 and asked whether the "fees for
processing claims and assignments" are the same as the fees under
discussion on page 3, line 30.
MR. HULL answered that fees addressed in Section 1 are DOR
charges for processing permanent fund dividend levies.
MS. JONES acknowledged that DOR charges a $2 fee against a
permanent fund dividend account each time a dividend is levied;
for example, if a dividend account has six agency levies against
it, DOR charges $12 to the account before giving the levy to the
corresponding agency.
Number 2797
CHAIR JAMES said she understood, then, that the DOR
administrative fee deduction against a permanent fund dividend
account is paid by the permanent fund dividend recipient in
addition to what the recipient may owe DOLWD.
MS. JONES concurred.
REPRESENTATIVE HUDSON noted that Section 1 is existing
[statutory] language regarding fees; therefore, when considering
the new section .072, page 3, line 30, those fees are essentially
the same as the fees in Section 1.
Number 2832
REPRESENTATIVE SMALLEY mentioned that page 3, line 31, and page
4, line 1, say "and other amounts owed the department under other
provisions of state law under which the claim for payment is
being made." He asked if that includes Section 1 fees.
Number 2851
MR. HULL offered his belief that paragraph (f) of the proposed CS
means DOLWD fees.
CHAIR JAMES agreed. She said although she does not want DOLWD to
collect any fees, she does agree that DOR should collect their
administrative fee. She does not see any difference between
collecting overpayment for welfare or collecting overpayment for
unemployment insurance, she said, since she believes unemployment
insurance is a benefit, as is welfare. Nevertheless, it
distresses her to see agencies make mistakes that cause repayment
problems for people. She emphasized that based on Amendment 1,
she feels comfortable with the proposed CS.
TAPE 00-8, SIDE B
Number 2963
REPRESENTATIVE WHITAKER expressed concern about the practicality
of the proposed CS. He said he understands the expediency
benefit for DOLWD and that $1.6 million is at stake, half of that
perhaps being collectible. However, he is very concerned for the
citizen who receives a mailed notice from DOLWD that funds are
owed. At that point, the citizen has to work his/her way through
the bureaucracy and try to figure out what happened, who
garnished his/her permanent fund dividend, for what reason, and
then defend himself/herself against the alleged claim. He
reiterated that the legislature is putting agency governmental
expediency above the rights of the individual, and he will oppose
the proposed CS.
CHAIR JAMES commented that she did not believe Representative
Whitaker's picture was accurate. First of all, there is an
administrative hearing, so to say that the person does not know
that he/she owes DOLWD is not true. Second, the person will have
received several overpayment notices before an administrative
hearing is scheduled. She observed that in her experience
someone who does not receive a permanent fund dividend knows why,
and sometimes a garnished permanent fund dividend is the easy way
out of a required payment situation. She does recognize
individual rights, she said, but also has a legislative
responsibility to manage state funds in a correct manner. Under
the proposed CS, she sees a huge amount of money that can be
collected at less cost to the state. She feels comfortable with
the proposed CS, she concluded, because DOLWD will not collect
fees, fines, and so forth without a court decision, and
overpayments will result in an opportunity for administrative
hearing. She said she will not sacrifice $1.6 million for a few
people who know very well that they have been overpaid.
Number 2783
REPRESENTATIVE WHITAKER said he disagrees with Chair James on
this issue.
REPRESENTATIVE OGAN agreed with Representative Whitaker. He said
the issue reminds him of the Internal Revenue Service (IRS)
philosophy that one is guilty until proven innocent: the IRS
will take a citizen's money first and then the court case begins.
Under what the justice system is supposed to be, however, a
person has the right to due process and is supposed to be
innocent until proven guilty. He emphasized that he is going to
support the side of the people on the proposed CS. However, he
is willing to support the proposed CS if it is modified to
include fraudulent claims only. He reminded the committee that
Mr. Hull had said that DOLWD was willing to make that
modification to gain passage of the proposed CS.
Number 2709
REPRESENTATIVE SMALLEY agreed with Chair James in that the money
is owed to the state and he is confident that DOLWD will make the
collection in a correct manner. He reiterated that he will
support the proposed CS along with Amendment 1.
REPRESENTATIVE OGAN noted that the state constitution says
"privacy and security must be safeguarded against arbitrary
invasions like governmental officials." He concluded that this
statement supports due process.
Number 2645
CHAIR JAMES indicated she understood that Representatives Ogan
and Whitaker believe that [having the] court adjudicate issues
regarding overpayments is sufficient, but if DOLWD has not gone
to court, then overpayment collection is not acceptable. She,
however, believes overpayment is prima facie evidence.
Therefore, neither the individual nor DOLWD should be obliged to
go to court to collect money owed. She emphasized that she does
not believe it is a good financial decision to go to court in any
case. Her summary is, she added, either drop the proposed CS
entirely or spend general fund money to collect monies owed as
DOLWD is currently doing. She reminded members that the
individual has been notified of overpayment, an administrative
hearing has taken place, and the overpayment is prima facie
evidence that the person owes money. She reiterated that she
understands Representative Ogan's and Whitaker's argument but she
does not agree.
Number 2556
REPRESENTATIVE WHITAKER reminded Chair James that prima facie
evidence is determined by a court of law, not by the committee or
by the legislature. He said the committee is talking about small
claims actions that do not ordinarily incur costs associated with
a full-blown trial. Again, in his opinion, this is a question of
individual rights as opposed to states' rights. If the
legislature does nothing else but stand on the line between
individual rights and states' rights and say "you may not cross
the line," he feels the legislature has done its job.
REPRESENTATIVE OGAN made a motion to table the proposed CS. A
roll call vote was taken. Representatives Green, Ogan, and
Whitaker voted for it. Representatives Hudson, Smalley and James
voted against it. Representative Kerttula was absent.
Therefore, the motion to table the proposed CS failed by a vote
of 3-3.
Number 2369
REPRESENTATIVE HUDSON made a motion to move version 1-GH2060\G,
Cook, 2/17/00, as amended, out of committee with individual
recommendations and attached fiscal notes; he asked unanimous
consent.
REPRESENTATIVE OGAN objected. A roll call vote was taken.
Representatives Green, Hudson, Smalley and James voted in favor
of moving the bill. Representatives Ogan and Whitaker voted
against it. Representative Kerttula was absent. Therefore, CSHB
337(STA) moved from the House State Affairs Standing Committee by
a vote of 4-2.
HB 380-INSURER TAX CREDIT:FIRE STANDRDS COUNCIL
Number 2363
CHAIR JAMES announced the next order of business is HOUSE BILL
NO. 380, "An Act relating to contributions to the Alaska Fire
Standards Council and to an insurer tax credit for those
contributions; and providing for an effective date."
REPRESENTATIVE GENE THERRIAULT, Alaska State Legislature, sponsor
of HB 380, explained that HB 380 is an attempt to follow through
on actions of the legislature in passing HB 473, which created
the Alaska Fire Standards Council (AFSC) but had a delayed
effective date. He noted that the date of implementation is
approaching and a funding mechanism has to be found. When he was
approached by the fire chiefs organization about funding, they
had discussed a few ideas and had decided to invite certain
insurance companies to contribute because the insurance companies
would benefit from the training of firefighters. The AFSC
proposes to train fire suppressant personnel and the public in
general as far as losses from fires, primarily structure fires,
in Alaska.
REPRESENTATIVE THERRIAULT indicated he had information from the
Division of Insurance, Department of Community & Economic
Development, that shows substantial fire-related losses in Alaska
are $9 million. He and the ASFC had determined to invite
insurance companies that do business in the state to make a
contribution to the AFSC to cover operational costs. He remarked
that the fiscal note relating to HB 473 was for $166,000 a year,
but AFSC wants to come up with at least $150,000 a year to pay
for AFSC operational costs.
REPRESENTATIVE THERRIAULT explained how HB 380 will work. An
insurance company would make a contribution to the AFSC and, in
return, receive a 50 percent tax reduction on the first $100,000
on insurance premium tax owed to the state. If an insurance
company contributed more than $100,000, any money over $100,000
would result in a 100 percent tax reduction, or the insurance
company could elect a 50 percent tax reduction on its total tax
owed to the state, whichever is less. The legislature would
control the total amount that is raised by the tax-break
mechanism by making an appropriation to the AFSC. He noted that
any surplus money that was raised which the legislature did not
appropriate to the AFSC would lapse into the general fund. The
plan is to entice insurance companies to help fund the AFSC but
still maintain legislative control on the total amount
appropriated for yearly operation.
Number 2130
REPRESENTATIVE GREEN asked whether a contribution to AFSC would
affect insurance companies' actuarial figures.
REPRESENTATIVE THERRIAULT answered no because the contribution is
just a tax offset and the money contributed does not enter into
the actuarial computation.
CHAIR JAMES requested some numbers to demonstrate how HB 380
would work, assuming the insurance company donates $25,000 to
AFSC. She said she understood that the company's insurance
premium tax would be reduced by $12,500, half of the donation.
She asked if the $25,000 comes first through the legislature for
appropriation to AFSC, and whether the money would be considered
non-general funds. If that is the case, then the general fund
loses $12,500.
Number 2023
REPRESENTATIVE HUDSON asked if the $25,000 flows first into the
general fund and then the legislature appropriates it to AFSC.
REPRESENTATIVE THERRIAULT explained that the money comes in as a
statutory designated program receipt. If the legislature did not
make an appropriation on a yearly basis, the money donated by
insurance companies for fire training would lapse into the
general fund. There is a similar mechanism for contributions
made to the university, he noted, which only one insurance
company in the state has ever used. A section in HB 380 says a
credit can only be given under one section of statute; therefore,
someone cannot make a donation and make it count in different
areas.
Number 1909
CHAIR JAMES asked if a charitable-type mechanism has also been
used in corporation taxes. She noted that HB 380 serves as a
loss-payable incentive for the insurance companies to contribute.
MICHAEL McGOWAN, past president of the Alaska Fire Chiefs'
Association, testified via teleconference from Fairbanks. He
said his organization is committed to improving the state's
record for fire and fatality loss. Alaska has the worst fire
loss record in the United States, he reported; therefore, he
supports HB 380. He noted that the Representative Therriault's
sponsor statement presents the best option of funding AFSC. The
bill appears to be a win-win situation for the insurance industry
and fire departments throughout Alaska. He explained that AFSC
is needed, and it is about time because the Police Standards
Council has been in force for 22 years.
MR. McGOWAN informed members that right now the only training
standards available in Alaska for the fire service come from the
National Fire Protection Association as adopted by the
Occupational Safety and Health Administration (OSHA). He
indicated that urban fire departments find those standards to be
difficult to achieve, but for many rural volunteer fire
departments the training standards have proven unrealistic due to
[Alaska's] unique environment and economic conditions. If HB 380
provides a mechanism for funding AFSC, he noted, AFSC would adopt
minimum training standards for firefighters and instructors. He
pointed out that local entities do have the option to choose not
to become a member of AFSC; instead, they may choose to adopt the
national fire standards. He envisions increased firefighter
safety and a reduction of fire loss and fatalities through
efficient operations as the end result of HB 380.
Number 1650
SCOTT WALDEN, Assistant Chief, Kenai Fire Department, testified
via teleconference from Kenai, saying he is in full support of HB
380. It is essential that a mechanism be developed to fund AFSC
for the safety of fire personnel across the state and improved
efficiency to communities for fire protection. The end result of
HB 380 would be reduced fire loss, injuries and death.
STEVE O'CONNOR, Assistant Chief, Central Emergency Services,
testified via teleconference from Soldotna. He informed the
committee that he views HB 380 as being extremely important and
encourages the committee to use it as a mechanism to fund AFSC so
that standards can be established for fire service.
Number 1645
REPRESENTATIVE THERRIAULT said there is concern that the language
of HB 380 is written tightly. There are two functions to be
covered: actual operations of AFSC and training programs that
AFSC administers. He noted that page 1, line 6, is worded as
follows: "For cash contributions made for fire services training
programs"; therefore, there is concern that those words are not
broad enough to cover the operation expense of AFSC itself. He
noted that the legal drafters had suggested dropping the word
"training" and then HB 380 would be broad enough to cover AFSC
personnel and functions, plus training programs that AFSC would
provide.
Number 1554
REPRESENTATIVE GREEN made a motion to adopt that as Amendment 1
to HB 380. There being no objection, it was adopted.
REPRESENTATIVE HUDSON made a motion to move HB 380, as amended,
out of committee with individual recommendations and the attached
zero fiscal note; he asked unanimous consent. There being no
objection, CSHB 380(STA) moved from the House State Affairs
Standing Committee.
HB 411-DISTRIBUTION OF PERMANENT FUND INCOME
Number 1485
CHAIR JAMES announced the next order of business is HOUSE BILL
NO. 411, "An Act relating to the market value of the permanent
fund and to distribution of income of the permanent fund; and
providing for an effective date."
Number 1450
REPRESENTATIVE HUDSON read the sponsor statement as follows:
House Bill 411 was introduced to give the permanent
fund strength, security and stability far into the
future. This legislation allows for distributing
income from the permanent fund as a percent of market
value, rather than the current realized return formula.
Arguments in support of distributing fund income as a
percent of market value were first suggested by then
permanent fund trustee Hugh Malone in the late 1980s.
The Commission on the Future of the Permanent Fund
advised further study of this concept in 1990. In
1995, the Long-Range Financial Planning Commission
recommended the market value approach for a long-term
investment strategy. This year, Commonwealth North
also recommended this blueprint for strengthening the
fund.
This legislation fits in with the permanent fund's
long-term investment horizon. While not necessarily
endorsing HB 411, the Permanent Fund Board supports a
percent of market value approach, recognizing that
continuing the present realized return formula could
lead to distortions in distributions due to gain taking
and asset allocation decisions made as part of good
investment policy. Passage of HB 411 would allow the
permanent fund to hold investments that historically
need more time to mature. Another unique feature of
the market value approach is that it produces a
distribution program that is inherently more level.
This is consistent with accepted methods of measuring
permanent fund performance and with the market value
accounting requirement now mandated by the Governmental
Accounting Standards Board.
First and foremost, HB 411 protects the principal of
the permanent fund. Additionally, this approach
maximizes the predictability and stability of annual
distributions. This proposal is but one possible
element of a long-range fiscal plan. It is, however,
an essential element if we are to close the troublesome
fiscal gap, by most accounts, approximately $800
million short annually.
House Bill 411 preserves and grows the permanent fund
through statutorily required inflation proofing and
actually maintains the permanent fund dividend at the
status quo over the next 10 years of projected growth.
After inflation proofing the fund, the total amount of
money available for distribution would be calculated.
Out of this amount, HB 411 allocates 80 percent to the
dividend and 20 percent to the general fund. It
produces stability in the fund management and clearly
affords a first ever contribution for payment of
essential services provided to the people of Alaska,
while at the same time holding the dividend harmless.
It may be politically convenient to simply eat the
public's savings as we have done since 1992, but that
practice could easily lead to a full collapse of
Alaska's economy.
REPRESENTATIVE HUDSON referred to the [permanent fund advisory]
vote that occurred September 14, 1999. He said HB 411 is
appreciably different than the September vote because HB 411 does
not attempt to solve all of our fiscal gap problems solely from
the assets of the earnings of the permanent fund. He recognized
from the September vote that the legislature had to hold the
permanent fund dividend harmless, which he feels that HB 411
seeks to do. He further stated that Alaska does not have a steady
revenue source to address the fiscal need, which is now at $2.1
billion. He acknowledged that he does not recommend HB 411 as a
stand-alone solution to the fiscal gap and is glad that other
people are looking at alternative revenue sources.
Number 0509
REPRESENTATIVE HUDSON reminded members that the legislature has a
constitutional responsibility to deliver not only a spending plan
but also a revenue plan that shows source of the money. He
emphasized that the legislature cannot constitutionally present
an unbalanced budget plan. He acknowledged that since 1992 the
budget has been balanced annually almost exclusively by draw-
downs on the constitutional budget reserve fund. He emphasized
that if the legislature does not develop additional revenues, the
constitutional budget reserve fund money is gone by 2004. He
predicted that after 2004 the legislature will face a $990
million deficit. He envisions that the 2004 deficit could be
paid for by the earnings reserve account of the permanent fund,
which the legislature has never touched.
REPRESENTATIVE HUDSON recognized that until now the legislature
has always added permanent fund earnings back into the corpus of
the fund to the extent of $5 billion in order to inflation proof
the fund. He noted that HB 411 will continue to inflation proof
the fund. He reiterated that it is the legislature's mandate to
produce a series of fiscal plans in an effort to close the fiscal
gap in a responsible manner. If HB 411 passes, $272 million of
permanent fund earnings would be available in 2001. As it is,
the constitutional budget reserve fund earns $100 million a year
in interest, which could be added to the $272 million permanent
fund earnings. Therefore, even though those two pots of money
cannot close the fiscal gap, the use of that money could allay
the need for onerous tax measures.
Number 0114
CHAIR JAMES said she is distressed about how the permanent fund
and its earnings are counted together in one lump sum. She
suggested that the public has been led astray because they
believe there is $27 billion in the permanent fund, which is not
true. In the future, the legislature should make a separation
between the permanent fund itself and the earnings. She noted
that the original constitutional amendment regarding the
permanent fund made that separation clear. In fact, she added,
if the legislature presented any plan that ate into the permanent
fund itself, it would have to pass a constitutional amendment to
so.
TAPE 00-9, SIDE A
CHAIR JAMES reminded the committee that all money taken out of
the constitutional budget reserve must be repaid. Furthermore,
the practice of drawing down on the budget reserve does not allow
the reserve fund to earn interest for future use. She remarked
that she believes that constitutional budget reserve fund monies
should be added in either to the permanent fund or its earnings
so that money is all in one place.
Number 0237
REPRESENTATIVE OGAN referred to Representative Hudson's handout
regarding the constitutional budget reserve fund. He had heard
Representative Hudson say that since 1992 the budget has been
funded almost entirely from the constitutional budget reserve,
Representative Ogan said, but the handout showed that in 1996 the
legislature drew upon the constitutional budget reserve fund in
the amount of $173 million; in 1997 it was $83 million; in 1998
it was $325 million; and there is a projection for 1999 of $1,104
million. He suggested it is an overstatement that the
legislature has funded a $2.2 million budget almost entirely from
budget reserves.
REPRESENTATIVE HUDSON clarified that he was talking about the
fiscal gap and unrestricted funds.
Number 0340
REPRESENTATIVE OGAN added that he had heard Representative Hudson
say that the legislature always puts the earnings back into the
corpus, but he himself recalls that the legislature has not
deposited earnings back into the corpus in the last two years,
nor has it done so this year. So there is almost $3 million that
has not been deposited.
REPRESENTATIVE HUDSON answered that in his many years in the
legislature, the legislature has always deposited residual money,
outside of dividends, back into the corpus of the permanent fund.
However, Representative Ogan is right in that the legislature has
not always deposited money into the corpus of the permanent fund.
Number 0410
REPRESENTATIVE OGAN asked what is "broken" in regard to the
existing formula for distributing dividends from the permanent
fund.
Number 0436
REPRESENTATIVE HUDSON answered that he does not think the
permanent fund formula is broken but does believe that it can be
managed in a more long-term, level-based methodology. He said HB
411 essentially advocates the same process that the permanent
fund has now but HB 411 defines the process a little differently.
He added that HB 411 still uses a five-year-average basis, but it
is used on percent-of-market value as opposed to annual-earnings
value.
REPRESENTATIVE OGAN reiterated that HB 411 allegedly seeks
stabilization, but the bill attempts to move the permanent fund
to a market-based evaluation; therefore, HB 411 seems to make the
permanent fund even more susceptible to the market.
REPRESENTATIVE HUDSON replied that the permanent fund investment
people had assured him that a market-based evaluation is a better
process.
Number 0557
CHAIR JAMES said when determining payout based on earnings of the
fund, the possibility exists of making investment decisions based
on maintaining a sufficient amount of money to cover a calculated
income. The $3 billion constitutional budget reserve fund still
includes some unrealized gains - the calculation of money to be
spent. She emphasized that unrealized gains would eat into the
earnings and investments would have to be sold to obtain cash to
pay the dividends.
REPRESENTATIVE OGAN interpreted the September 14, 1999 [permanent
fund advisory] vote as sending a clear message that voters did
not want the permanent fund dividend touched. He said it seems
to him that people mistrust the motivations of anyone who tries
to change the permanent fund structure. He said the legislature
does not seem to be able to adjust its lifestyle to accommodate
less revenue. He asked whether Representative Hudson thought the
"no" [advisory] vote meant "take another shot at it."
Number 0754
REPRESENTATIVE HUDSON acknowledged that he had heard the public's
voice but had presented HB 411 because of the continued erosion
of constitutional budget reserve earnings, which he believes will
lead to the ultimate destruction of the permanent fund program.
He emphasized that the legislature needs to curtail its appetite
for spending or find other sources of revenue to eliminate
erosion of budget reserves. He reminded the committee that
Governor Knowles has recommended that the legislature take some
unrealized gains (paper assets) of the permanent fund and deposit
them into the constitutional budget reserve. Thus, interest
earned from an increased constitutional budget reserve could be
deposited into the general fund to help decrease the budget
deficit.
REPRESENTATIVE HUDSON explained that in drafting the questions
for the September [advisory] vote, the drafters had thought that
the public's fear of income taxes would be greater than their
fear of putting a minor restriction on the permanent fund
dividend. However, he recognized that the public disagreed and
had voted resoundingly against the plan.
REPRESENTATIVE HUDSON mentioned that he had met with former
Governor Hammond a few weeks ago, who had said the legislature
needs to pass a measure that guarantees 50 percent of the
permanent fund earnings will be distributed as dividends and any
surplus earnings after inflation proofing can be spent on state
government. Representative Hudson indicated HB 411 follows that
direction by depositing 80 percent of the earnings to permanent
fund dividends after inflation proofing, with 20 percent
deposited to pay for state government.
Number 1200
REPRESENTATIVE OGAN said the only way he believes the public will
have confidence in the legislature and accept some use of
permanent fund earnings is to take the dividend program issue off
the table.
REPRESENTATIVE HUDSON acknowledged that HB 411 has a long way to
go. He reminded the committee that HB 411 is not an individual
effort, however, but is a result of cooperation between himself
and Representatives Austerman, Phillips and Murkowski. The
public needs to understand that there is a fiscal gap of $900
million, but he acknowledged that the public is sick of taxes
because they are taxed heavily at the local level, at least in
regard to property taxes.
Number 1383
CHAIR JAMES said as soon as the legislature starts using
permanent fund earnings in accordance with the calculation of 20
percent of a five-year average or one-half of the earnings
reserve, whichever is smaller, at some point one-half of the
earnings reserve will become the determining number on which the
dividend payment is based. She reminded the committee that there
is no guarantee over the next few years of what the inflation
rate will be, which has to be considered in calculating permanent
fund earnings. She emphasized that the current calculation of
the dividend does not work to figure payouts in the future.
CHAIR JAMES added that she, too, had heard the loud "no" of the
people on September 14. Since then, she has conversed with
thousands of people and found that the one main factor which led
to the "no" vote was that there was no fence around how much
money the legislature could spend; there was no limit and no
plan. She emphasized that the legislature needs an overall plan
that establishes by statute a healthy dividend that can be
protected over the long term. She added that she is not sure if
she will support HB 411 and recognizes that more work needs to be
done on this issue. She reminded the committee that the
legislature has three more years to come to grips with the budget
deficit, and then time is up. [HB 411 was held over.]
ADJOURNMENT
Number 1714
There being no further business before the committee, the House
State Affairs Standing Committee meeting was adjourned at 10:00
a.m.
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