Legislature(2007 - 2008)SENATE FINANCE 532
07/24/2008 09:00 AM Senate FINANCE
| Audio | Topic |
|---|---|
| Start | |
| SB4002 | |
| SB4003 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | SB4002 | TELECONFERENCED | |
| += | SB4003 | TELECONFERENCED | |
SENATE FINANCE COMMITTEE
July 24, 2008
9:08 a.m.
CALL TO ORDER
Co-Chair Stedman called the Senate Finance Committee meeting
to order at 9:08:17 AM.
MEMBERS PRESENT
Senator Bert Stedman, Co-Chair
Senator Charlie Huggins, Vice-Chair
Senator Kim Elton
Senator Donny Olson
Senator Joe Thomas
Senator Fred Dyson
MEMBERS ABSENT
Senator Lyman Hoffman, Co-Chair
ALSO PRESENT
Randall Ruaro, Special Assistant, Office of the Governor;
Karen Rehfeld, Director, Office of Management and Budget;
Stacy Kraly, Assistant Attorney General, Department of Law;
Jerry Burnett, Director, Division of Administrative
Services, Department of Revenue
PRESENT VIA TELECONFERENCE
None
SUMMARY
SB 4002 "An Act establishing the Alaska resource rebate
program and relating to the program; and providing
for an effective date."
SB 4002 was heard and HELD in Committee for
further consideration.
SB 4003 "An Act making supplemental appropriations to the
Alaska Energy Authority for power cost
equalization; making special appropriations to the
Department of Revenue and to the Department of
Health and Social Services for the Alaska resource
rebate program; making a special appropriation to
the Department of Revenue for the payment of
certain shared taxes relating to aviation fuel;
and providing for an effective date."
SB 4003 was heard and HELD in Committee for
further consideration.
SENATE BILL NO. 4002
"An Act establishing the Alaska resource rebate program
and relating to the program; and providing for an
effective date."
9:09:06 AM
Co-Chair Stedman commented on the problem of the high cost
of energy in Alaska. SB 4002 and SB 4003 address this issue
in the form of a rebate.
RANDALL RUARO, SPECIAL ASSISTANT, OFFICE OF THE GOVERNOR,
related that SB 4002 is an important bill for Alaskans
because it would allow the state to share part of its wealth
on a one-time basis, with a $1,200 payment to Alaskan
residents. There are three main advantages to the bill.
All Alaskan residents would share equally regardless of
where they live. He referred to Article 8 which states that
Alaskans own the state's resources.
Mr. Ruaro said that the second advantage of the bill is that
the rebate could be paid quickly. The third important point
is that the bill includes payments to veterans and holds
them harmless from financial offsets.
9:13:10 AM
Mr. Ruaro noted a disadvantage of the bill in that the
payments are taxable income; however, they would not reduce
benefits from federal programs.
Senator Huggins asked for a definition of resident. Mr.
Ruaro related that the residency definition for the
permanent fund dividend is being used. Also used is a
definition for those who have recently moved to Alaska and
can prove residency.
Senator Huggins asked if any non-residents would be
included. Mr. Ruaro said the second group is not eligible
for a PFD and have not applied for a PFD, but have lived in
Alaska for a six-month period and intend to remain.
9:16:38 AM
Senator Olson inquired what options those who qualify for
public assistance have. Mr. Ruaro replied that those
individuals could elect not to receive the rebate for
various reasons.
Co-Chair Stedman asked about the title "Alaskan Resource
Rebate". He also wanted to know if the program was for
energy relief or if it was a way to pay excess revenue to
citizens. Mr. Ruaro replied that at the end of the fiscal
year there was an excess of $740 million and spending
priorities had been met in FY 08. The basis of the bill is
to share the wealth in the form of a rebate. There are no
restrictions as to how the rebate can be spent. It is
expected that many will use the funds to pay for energy-
related costs.
9:20:32 AM
Co-Chair Stedman recalled years of building up the capital
budget, catching up on deferred maintenance expenses, and
then years to increase savings. He requested information as
to why the direction has changed.
Co-Chair Stedman noted the passage of a bill directing the
state toward a long-term fiscal plan. He wondered how this
bill fits into that plan.
9:22:01 AM
KAREN REHFELD, DIRECTOR, OFFICE OF MANAGEMENT AND BUDGET,
said the administration is committed to producing a long-
range fiscal plan enacted in HB 125. She spoke of
Department of Revenue goals and the plan to put excess
dollars into savings, but also to allow for future capital
expenses. She said she could not detail a picture of that
today. She described the philosophy behind the bill, which
is to help Alaskans meet high energy costs now, while
working on a long-term solution to reduce statewide energy
costs.
Co-Chair Stedman thought that dispersing excess savings was
different than trying to help with heating homes.
Senator Thomas wondered how the rebate changed from an
energy rebate to a resource rebate. He wondered why only
the permanent fund list was used. He questioned why someone
who has only lived in Alaska six months should qualify for
the rebate.
9:26:05 AM
Mr. Ruaro addressed the question regarding the renaming of
the rebate. He recalled that the basis of the bill to share
the wealth with Alaskans has always been present. In an
earlier effort, the focus was directed toward energy-only
expenses. A debit card approach would have worked for 90
percent of Alaskans, but some communities would not be able
to use debit cards, especially in rural Alaska. The idea of
payment to utilities brought up tax issues. The underlying
principle to "share the wealth" has remained.
Mr. Ruaro spoke to the approach to use only the PFD list.
He said he is not opposed to that method. Creating the
second group of eligible persons was designed to accommodate
veterans and others whose benefits would be offset by a
rebate.
9:29:46 AM
Senator Thomas did not disagree with that idea. He said
that now, however, people no longer see it as an energy
relief payment. There are questions of fairness now that it
is not considered energy relief. He gave, as an example, a
family of eight receiving eight rebates, which have nothing
to do with the amount of energy consumed. There are many
concerns about fairness.
9:32:11 AM
Senator Huggins agreed with the concerns brought up by
Senator Thomas. He recommended in the future that more
attention be paid to defining the rebate before the media
release is offered. The messages were confusing. He
inquired who in the administration was working on the bill.
Mr. Ruaro listed those working on the bill: himself, Mr.
Burnett, Ms. Rehfeld, representatives from Health and Human
Services, and employees of the Division of Finance. Senator
Huggins asked if there are any "energy people" working on
it. Mr. Ruaro said that Steve Haagenson, Executive
Director, Alaska Energy Authority, is working on the bill.
Senator Huggins suggested including legislative personnel in
the mix.
9:34:44 AM
Senator Elton referred to page 3, line 1, of the bill where
it talks about if a person is eligible if they were
voluntarily and physically present in the state when they
applied for the rebate. He wondered if that excluded
military personnel, which he did not classify as being
present voluntarily. Mr. Ruaro said the intent was to allow
military who qualify for the PFD to be eligible, as well as
those overseas. He noted a pending amendment that clears up
the ambiguity.
Senator Elton referenced page 5, line 14, of the bill. He
asked if the bill establishes a mandate directly to local
control; to political subdivisions as well as to native
organizations. He wondered why that was necessary.
STACY KRALY, ASSISTANT ATTORNEY GENERAL, DEPARTMENT OF LAW,
related that the purpose of the part of the bill Senator
Elton was referring to was to address potential hold
harmless issues. The hold harmless provisions included in
the bill address public assistance and veteran benefits.
The intent was to avoid new programs that would be developed
in order to qualify for this rebate.
Senator Elton believed that those decisions are best made by
municipalities. Ms. Kraly responded that the intent was to
ensure that municipalities did not create new needs-based
programs. Senator Elton said the premise of the bill is
that it is not an on-going program and the payment would go
out in September, therefore that kind of language is
unnecessary. Ms. Kraly said it was a stop gap measure.
9:40:39 AM
Senator Elton assumed that the bill was put together with a
consideration for risk assessment. One potential risk is
unintended consequences. He voiced concern of consequences
in Washington, DC, where it could be said that Alaska is
getting rich off of its resources. There could be
ramifications. He gave an example. He questioned if there
was a possibility for a backlash.
Mr. Ruaro said that Senator Ted Stevens thought that members
of Congress would see it as a positive that the state is
assisting its citizens in a time of energy crisis. It is
possible that it could be seen the other way.
Senator Olson asked if Senator Stevens is in favor of this
proposal. Mr. Ruaro said Senator Stevens supported it at a
press conference in July.
9:44:58 AM
JERRY BURNETT, DIRECTOR, DIVISION OF ADMINISTRATIVE
SERVICES, DEPARTMENT OF REVENUE, indicated that Senator
Stevens was in favor of the rebate.
Co-Chair Stedman spoke of the legislature's protection of
the permanent fund. He wondered if the philosophy had
changed. Mr. Ruaro didn't think there was a shift. He
believed that this was a one-time event.
9:46:33 AM
Senator Huggins reported that there are 620,000 permanent
fund recipients. He wondered if this rebate could be
included in the permanent fund payment.
Mr. Burnett said it is a matter of timing. It could be
included in the PFD amount; however, the intent is to do an
earlier distribution in August or September.
Senator Huggins asked how much it would cost. Mr. Burnett
said the cost to send out the check would be about $500,000.
Senator Huggins questioned if normal postage is the correct
way to do it. Mr. Burnett clarified that expenses include
computer services, check stock, envelopes, and so forth.
Costs have been fully allocated.
9:49:20 AM
Co-Chair Stedman called it a resource rebate, not an energy
rebate. He asked why the rebate should be shared with those
who moved to the state seven months ago. Mr. Ruaro said the
intent was to find a mechanism to allow long-time Alaskans
who do not apply for the PFD to qualify for the rebate.
Co-Chair Stedman asked if the residency requirement is six
months or a year. Mr. Ruaro said six months - with an
intent to remain in Alaska.
9:51:53 AM
Senator Thomas asked if there was a legal reason to change
from an energy rebate to the current resource rebate. He
suggested tax issues might have been the reason. He
inquired about the considerations used for qualification.
He questioned the language on page 2, line 25, "is not
ineligible".
Mr. Ruaro said difficulties were found with tax issues
regarding payments to utilities and co-ops, which are exempt
under federal law if 85 percent of their income derives
solely from membership payments.
AT-EASE: 9:54:24 AM
RECONVENE: 9:59:52 AM
Mr. Ruaro continued to respond to questions by Senator
Thomas. He explained that outside income could count
against the tax exempt status of co-ops. He explained that
residency eligibility of 6 months was selected in order to
stay within the legal boundaries of a residency period.
Mr. Burnett addressed the question regarding page 2, line
25. He explained that the language provides that
incarcerated felons and multiple misdemeanants are not
eligible for a PFD.
10:02:06 AM
Senator Thomas asked if reducing costs to cooperatives and
electrical suppliers was reviewed as a supplement, as
opposed to providing support to an across-the-board
situation.
Mr. Ruaro could not recall looking at the specific mechanism
outlined by Senator Thomas.
10:03:39 AM
Senator Elton referred to page 5, line 14. He concluded
that the rebate would apply only to past actions by a
municipality, not what it might do in the future, as far as
implementing social service programs.
Ms. Kraly explained that, in terms of the public assistance
benefit arena, what is considered resource or income for
purposes of eligibility is wide-ranging. The intent is to
limit the ability to use this as income for purposes of
eligibility. It limits the ability of programs to calculate
benefits as income which would render individuals ineligible
for certain programs.
10:05:41 AM
Senator Elton questioned why something that has been already
done would be voided.
Ms. Kraly clarified that the intent was to guarantee hold
harmless provisions. Senator Elton felt the provision
needed further review.
Senator Elton observed that statute currently prevents the
use of the Governor's picture on permanent fund dividend
checks. He questioned if the administration would be
supportive of prohibiting a picture of the Governor on the
energy check. Mr. Ruaro could not respond.
10:08:26 AM
Senator Huggins asked what legal challenges the program
might present in the future. Ms. Kraly could not address
the legal risks.
Senator Huggins inquired about the size of the pool of those
that do not apply for a PFD, but would be eligible.
Mr. Ruaro reported that there are approximately 400
veterans, and spouses and children of veterans that receive
VA benefits.
Senator Huggins asked how the PFD and the rebate would be
handled differently as they apply to veterans.
Mr. Ruaro explained that federal statutes and rules affect
veterans' benefits. In the PFD, there is no hold harmless
provision for veterans. The rebate bill does extend hold
harmless provisions to veterans. The reduction would occur
by federal law, but the state would step in and pay the
difference, so that they would receive the entire benefit.
10:12:27 AM
Senator Olson asked if the benefit would be subject to
garnishing. Mr. Burnett noted that it would not be subject
to garnishment.
Co-Chair Stedman asked if thought had been given to the
resulting workload due to appeals. He observed the amount
of inquires received by legislators for similar issues.
Mr. Burnett acknowledged the concern and that there would be
additional appeals. He did not know how the cost of the
appeals would be absorbed.
10:15:19 AM
Co-Chair Stedman observed that changes in oil taxation
resulted in raising the marginal tax rate of oil companies.
He asked how he could reconcile the additional tax burden to
industry. He suggested using the revenue to help the state
build roads, airports, hospitals, and support education and
transportation through the state appropriation process, vs.
increasing a tax burden on the industry and then
distributing a check to each resident.
Ms. Rehfeld acknowledged that a balance needs to be reached
between infrastructure, industry, and savings. Both
opportunities exist and the philosophy is not dissimilar.
10:18:02 AM
Senator Thomas brought up the concept of changing from
energy relief to a fair distribution rebate. He voiced
concern about page 3, line 5: "intends to maintain a home in
the state." He maintained that the rebate does not
encourage energy conservation.
Mr. Ruaro observed that the basis of the payment is to share
state resources. The difference is that it was determined
to be difficult to restrict the support to energy expenses.
There are taxation issues. He pointed out that the funds
could be used to purchase more efficient fuel systems, as
well as paying electric bills. He acknowledged that page 3,
line 5, could be reworked to stress that residency must be
maintained, not just a home.
Senator Thomas added that there are already programs that
pay directly for heat, particularly in rural areas. He
suggested that the rebate could have been incorporated into
an existing program.
10:23:21 AM
Senator Huggins observed that on page 3, lines 27-28, the
language "non-residents of the "country" might not be
accurate.
Mr. Burnett clarified that under the dividend program and
this program, individuals that are not citizens of the
United States, but are residents of the state, would receive
the benefit.
Senator Huggins questioned the popularity of the program and
asked how $1,200 was selected.
10:25:19 AM
Co-Chair Stedman noted that during the regular session,
previous bills dealing with an energy rebate were not acted
upon. He wondered if that was a factor when designing this
bill.
Ms. Rehfeld explained that discussions began with a $100 per
month debit card, which then transferred to $1,200 a month.
She did not think the previous bills were administration
bills.
SB 4002 was heard and HELD in Committee for further
consideration.
10:27:06 AM
SENATE BILL NO. 4003
"An Act making supplemental appropriations to the
Alaska Energy Authority for power cost equalization;
making special appropriations to the Department of
Revenue and to the Department of Health and Social
Services for the Alaska resource rebate program; making
a special appropriation to the Department of Revenue
for the payment of certain shared taxes relating to
aviation fuel; and providing for an effective date."
Ms. Rehfeld noted that SB 4003 was the appropriation
legislation for SB 4002. The legislation appropriates
nearly $820 million, $800 million of which is for the one-
time payment to eligible individuals for the resource rebate
program. It does include the associated administrative
costs. There is also $10.7 million included in the hold
harmless provisions.
Ms. Rehfeld noted there is also a request for $9.6 million
for the Power Cost Equalization (PCE) program. Of that
amount, $600,000 is to fully fund the FY 08 appropriation
and cost for PCE so there would be no proration required.
The Alaska Energy Authority has estimated a potential $9
million shortfall in the PCE program for FY 09 based on
estimates of increased fuel costs.
Ms. Rehfeld concluded that an additional $150,000 would be
requested to hold harmless municipalities that have
municipal owned airports.
10:29:51 AM
Senator Elton asked for clarification about the interplay
between SB 4002 and SB 4003. In SB 4002, Section 1 provides
that "subject to appropriation and availability of funds for
the program, individuals eligible for the program may
receive a payment in the amount of $1,200". In SB 4003, on
page 2, line 22, it says, "the sum necessary, estimated to
be at $800 million". He inquired which bill was primary.
Mr. Burnett said that the $1,200 would go to everyone.
Should the legislature chose a different amount, it would be
pro-rated. As the bills are currently written, it would
allow for $1,200 to each person.
10:32:29 AM
Senator Elton thought that in January a supplemental may be
required. Mr. Burnett said the bill, as currently written,
would allow for spending beyond $800 million.
Senator Huggins posited a scenario whereby fuel costs remain
the same and next July the expectation by Alaskans is that
they receive another rebate.
Ms. Rehfeld did not disagree with the scenario, but
emphasized that the bill is a one-time payment.
Senator Huggins asked how the administration will keep this
to one year. Ms. Rehfeld hoped that the current legislation
would provide some relief, but she could not say what might
happen in the future. Senator Huggins suggested that an
expectation is being created.
10:36:08 AM
Senator Olson asked about page 3 regarding municipality
airports. He wondered who would be the beneficiaries of the
subsection. Mr. Burnett reported that taxes are not shared
with anyone besides municipal airports in this program. The
largest amount to a municipality is to Juneau. Senator
Olson wondered if the bias is towards municipal or rural
airports. Mr. Burnett replied that Fairbanks and Anchorage
have state-owned airports. This program is designed for
sharing with municipal airports around the state.
Co-Chair Stedman wondered if it was a resource rebate or an
energy rebate. He questioned if there should be a trigger
amount before the state steps in to help. Ms. Rehfeld had
not heard of information regarding that.
Co-Chair Stedman wondered about the ramifications when this
rebate is discontinued. Ms. Rehfeld understood the concern.
She reiterated that the rebate is intended to be a one-time
payment.
10:39:52 AM
Senator Elton referenced the section on aviation tax and
requested more information about how much revenue would be
lost. He did not see a problem with the benefits from a tax
suspension. He wondered how much of a benefit the
commercial industry would be getting.
Mr. Burnett said there is no way to know who is purchasing
the fuel.
Senator Thomas believed that the price of oil was not going
to go down. He thought the programs should be in place for
3 - 5 years.
SB 4003 was heard and HELD in Committee for further
consideration.
10:45:22 AM
Co-Chair Stedman spoke of discussions on longer-term
solutions to the energy problems in Alaska.
ADJOURNMENT
The meeting was adjourned at 10:45 AM.
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