Legislature(2001 - 2002)

02/28/2002 09:08 AM FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                     SENATE FINANCE COMMITTEE                                                                                 
                         February 28, 2002                                                                                    
                              9:08 AM                                                                                         
SFC-02 # 21,  Side A                                                                                                            
SFC 02 # 21,  Side B                                                                                                            
SFC 02 # 22,  Side A                                                                                                            
CALL TO ORDER                                                                                                               
Co-Chair Pete  Kelly convened the meeting at approximately  9:08 AM.                                                            
Senator Dave Donley, Co-Chair                                                                                                   
Senator Pete Kelly, Co-Chair                                                                                                    
Senator Jerry Ward, Vice Chair                                                                                                  
Senator Gary Wilken                                                                                                             
Senator Alan Austerman                                                                                                          
Senator Loren Leman                                                                                                             
Senator Donald Olson                                                                                                            
Senator Lyman Hoffman                                                                                                           
Also Attending:    WILDA RODMAN,  staff to Senator  Therriault;  TIM                                                          
ROGERS, Legislative Program  Coordinator, Municipality of Anchorage;                                                            
KEVIN RITCHIE,  Alaska Municipal League; BARBARA MICKLOS,  Director,                                                            
Child Support  Enforcement  Division, Department  of Revenue;  NANCI                                                            
JONES, Director,  Permanent  Fund Dividend  Division, Department  of                                                            
Revenue; DIANE  WENDLANDT, Assistant  Attorney General, Collections                                                             
and Support  Sections, Civil Division,  Department of Law;  FRANKLIN                                                            
TERRY  ELDER,   Director,  Division   of  Banking,  Securities   and                                                            
Corporations,  Department  of Community  and  Economic Development;                                                             
LISA BELL,  Executive Vice  President and  Chief Operating  Officer,                                                            
Alaska Pacific Bank;                                                                                                            
Attending via Teleconference:   From Anchorage: LINDA WILSON, Deputy                                                          
Director, Public Defenders Agency, Department of Administration                                                                 
SUMMARY INFORMATION                                                                                                         
SB  11 -COMPULSORY SCHOOL ATTENDANCE                                                                                            
The Committee  heard from the sponsor. An amendment  was adopted and                                                            
the bill moved from Committee.                                                                                                  
SB 337-ELIGIBILITY FOR MUNICIPAL TAX EXEMPTION                                                                                  
The Committee  heard from municipal representatives.  The bill moved                                                            
from Committee.                                                                                                                 
SB 338-INELIGIBILITY FOR PFD/ CRIME VICTIMS COMP                                                                                
The Committee  heard from the Department of Revenue,  the Department                                                            
of Law, and the Department of Administration.                                                                                   
HB 106-FINANCIAL INSTITUTIONS                                                                                                   
The Committee  heard from the Department  of Community and  Economic                                                            
Development  and the banking  industry. A  committee substitute  was                                                            
adopted and the bill was held in Committee.                                                                                     
SB 243-CHIROPRACTORS: SUNSET/LICENSING                                                                                          
This bill was scheduled but not heard.                                                                                          
     SENATE BILL NO. 11                                                                                                         
     "An Act relating to the legal age for attending school; and                                                                
     providing for an effective date."                                                                                          
This was  the second  hearing for  this bill in  the Senate  Finance                                                            
AT EASE 9:09 AM / 9:10 AM                                                                                                       
Amendment #2:  This amendment deletes  "the legal age for  attending                                                            
school" and  inserts "required  school attendance"  to the  title of                                                            
the bill to  read, "An Act relating  to required school attendance;                                                             
and providing for and effective date."                                                                                          
This amendment  also deletes the language  in Section 1 and  inserts                                                            
language to read as follows.                                                                                                    
     Section 1. AS 14.30.010 is amended by adding a new subsection                                                              
     to read:                                                                                                                   
                (c) If a parent, legal guardian, or other person                                                                
          having  the responsibility  for  or control  of the  child                                                            
          elects  to enroll a child who is six years of age in first                                                            
          grade  at a public school, after enrollment,  the child is                                                            
          subject to the provisions of (a) and (b) of this section.                                                             
This amendment  also changes the effective date of  this legislation                                                            
from July 1, 2001 to July 1, 2002.                                                                                              
Senator Leman moved for adoption.                                                                                               
Senator Austerman objected for explanation.                                                                                     
Senator  Leman reminded  the Committee  of the  sponsor's intent  to                                                            
address the matter of parents  enrolling their six-year-old children                                                            
in  school then  having  the children  attend  school sporadically.                                                             
Senator Leman noted this  practice requires educators to concentrate                                                            
effort on bringing these  students to the same level as the students                                                            
who attend regularly. He  opined the proposal to lower the mandatory                                                            
attendance age from age  seven to age six would be "a bit of a reach                                                            
and went  too far".  Therefore,  he proposed  this amendment,  which                                                            
requires those  students under the  age of seven, who are  enrolled,                                                            
to attend  school  and allows  law  enforcement to  enforce  truancy                                                            
Senator  Leman  informed that  the  sponsor  and the  Department  of                                                            
Education and Early Development  have no objection to the amendment.                                                            
WILDA RODMAN,  staff to Senator Therriault, testified  to affirm the                                                            
sponsor does not object to adoption of the amendment.                                                                           
Senator Green questioned  the phase "after enrollment" as it appears                                                            
in the amendment.                                                                                                               
Senator Leman  explained this provision  would not apply  unless the                                                            
parent or legal guardian  enrolls the child. He stated this language                                                            
is recommended by the drafter.                                                                                                  
Co-Chair  Kelly asked  if  Senator Green  thought  this changes  the                                                            
intent of the bill.                                                                                                             
Senator Green did not, but found it confusing.                                                                                  
Co-Chair  Donley opined that  given the "on-going  problems  and the                                                            
threats  of this Administration  against  home schooling,"  specific                                                            
language that  could not be interpreted  differently, is  preferred.                                                            
He relayed  concerns  raised at a  recent meeting  of the  Anchorage                                                            
caucus about the Administration's  actions regarding home schooling.                                                            
Senator  Hoffman   suggested  the   same  arguments  for   mandatory                                                            
attendance  should  apply  to  kindergarten  students  as  well.  He                                                            
suggested lowering  the mandatory  attendance age to five  years for                                                            
those children enrolled in school.                                                                                              
Co-Chair  Kelly understood  the sponsor's intent  is to address  the                                                            
specific  problems of certain  schools: the  sporadic attendance  of                                                            
some   six-year-old   students.  He   surmised   the  inclusion   of                                                            
kindergarten would go "beyond the scope".                                                                                       
Ms. Rodman affirmed.                                                                                                            
Senator Hoffman  spoke to  the larger problem  of children  skipping                                                            
school  in that there  is insufficient  authority  and resources  to                                                            
enforce attendance rules.                                                                                                       
Co-Chair  Kelly, for  Senator Austerman's  benefit,  summarized  the                                                            
discussions  of the first  hearing,  as he was  not present  at that                                                            
A roll call was taken on the motion to adopt Amendment #1.                                                                      
IN FAVOR: Senator  Austerman, Senator Green, Senator  Leman, Senator                                                            
Olson, Senator  Ward, Senator Wilken,  Co-Chair Donley and  Co-Chair                                                            
OPPOSED: Senator Hoffman                                                                                                        
The motion PASSED (8-1)                                                                                                         
The amendment was ADOPTED.                                                                                                      
Co-Chair  Donley offered a  motion to "move  the new Senate  Finance                                                            
committee  substitute for  Senate Bill  11 from  Committee with  the                                                            
accompanying zero fiscal note."                                                                                                 
There was  no objection and  SB 11 (FIN)  MOVED from Committee  with                                                            
accompanying  indeterminate  fiscal note #1  from the Department  of                                                            
Education and Early Development.                                                                                                
AT EASE 9:21 AM / 9:22 AM                                                                                                       
     SENATE BILL NO. 337                                                                                                        
     "An Act relating to eligibility for an exemption from                                                                      
     municipal property taxes for certain seniors and disabled                                                                  
This  was the first  hearing  for this  bill in  the Senate  Finance                                                            
Co-Chair  Donley, sponsor,  testified  this bill  would allow  local                                                            
governments  to  adopt eligibility  requirements  for  the  existing                                                            
senior  citizens  and veterans  property  tax  exemption,  that  are                                                            
parallel  to eligibility  requirements  for receipt  of a  permanent                                                            
fund dividend.                                                                                                                  
Co-Chair Donley  stated the public  policy of the existing  mandated                                                            
exemption, which  he noted is an unfunded mandate  by the State upon                                                            
local  governments,  is to  encourage  senior  citizens  to live  in                                                            
Alaska  and to  assist  disabled  veterans.  He explained  the  same                                                            
criteria as used  for qualification for the permanent  fund dividend                                                            
is proposed  for the tax  exemption because  senior citizens  who do                                                            
not qualify  for the  dividend are  also not residing  in the  State                                                            
long  enough to  make  significant  economic  and community-service                                                             
contributions necessary to warrant the exemption.                                                                               
Co-Chair   Donley   explained  this   legislation   provides   local                                                            
governments "a tool" for managing the tax exemption program.                                                                    
TIM  ROGERS,  Legislative   Program  Coordinator,  Municipality   of                                                            
Anchorage testified in  Juneau in support of the bill. He noted this                                                            
legislation is  a result of recommendations of the  Anchorage Senior                                                            
Citizens  Advisory   Commission  made  in  1997.  He   detailed  the                                                            
recommendations identified a "loophole" in existing law.                                                                        
Mr.  Rogers listed  that  the Municipality  of  Anchorage  currently                                                            
exempts   $18.2  million   worth  of  property   taxes  for   86,000                                                            
participants through  this program. He continued that  approximately                                                            
five-percent  of those  participants  do not  qualify  to receive  a                                                            
permanent  fund dividend.  He clarified this  legislation would  not                                                            
automatically exclude these participants.                                                                                       
Mr.  Rogers added  that this  legislation  would  also simplify  the                                                            
application   process  both  for   the  participants  and   for  the                                                            
Co-Chair Kelly asked the amount of funds that would be "saved".                                                                 
Mr.  Rogers  answered  the  Municipality  of  Anchorage  would  save                                                            
between $100,000 and $200,000.                                                                                                  
Senator Leman  asked the percentage  of property owners who  receive                                                            
this exemption.                                                                                                                 
Mr. Rogers replied that  approximately 16 percent participate, which                                                            
has increased approximately five percent a year.                                                                                
KEVIN RITCHIE,  Alaska Municipal  League,  testified in Juneau  that                                                            
the League's  Revenue Finance  subcommittee  discussed and  endorsed                                                            
this bill.  He thanked  the Committee for  considering granting  the                                                            
municipalities  the authority  to make these  decisions. He  relayed                                                            
the fairness  issue was also  discussed and  it was agreed  that the                                                            
purpose  of  the senior  citizens  property  tax  exemption  program                                                            
should encourage Alaskans  to remain in the State as they get older.                                                            
He  continued,  however,  that  if these  senior  citizens  are  not                                                            
residents,  the  tax  exemption  might  not  be  a  benefit  to  the                                                            
Senator Green offered a  motion "move Senate Bill 337 from Committee                                                            
with individual recommendations."                                                                                               
There was no  objection and SB 337  MOVED from Committee  with a new                                                            
zero fiscal  note, dated 2/26/02,  from the Department of  Community                                                            
and Economic Development.                                                                                                       
     SENATE BILL NO. 338                                                                                                        
     "An  Act  making   certain  individuals  convicted   of  crimes                                                            
     ineligible  for  permanent   fund  dividends  and  relating  to                                                            
     certain   payments  of  compensation  from  the   crime  victim                                                            
     compensation fund; and providing for an effective date."                                                                   
This  was the first  hearing  for this  bill in  the Senate  Finance                                                            
Co-Chair  Donley  testified  this  bill  modifies   the eligibility                                                             
requirements  for the permanent fund  dividend for people  convicted                                                            
of a crime.  He noted that under current  law, after two  years of a                                                            
violent criminal's  "release", the  offender could begin  to receive                                                            
dividends.  He added that  current law  stipulates, "individuals  do                                                            
not qualify for  a dividend if, during the qualifying  year they are                                                            
convicted of  a felony or, if during  all or part of the  qualifying                                                            
year they are incarcerated  as a result of a felony or a misdemeanor                                                            
[conviction],  and   they  have  a  prior  felony  or  two  or  more                                                            
misdemeanor   [convictions]."  He   explained  this  provides   that                                                            
regardless of the offence  committed, a felon is eligible to receive                                                            
a dividend two years after release from prison.                                                                                 
Co-Chair  Donley stated this  legislation  would change the  current                                                            
provisions  to stipulate that individuals  convicted of a  felony or                                                            
misdemeanor  would lose their permanent  fund dividend for  at least                                                            
two  years,  regardless   of  whether  or  not  they  have  a  prior                                                            
conviction.  He qualified this would  apply to those convicted  of a                                                            
crime and are incarcerated for that offense.                                                                                    
Co-Chair  Donley  added  this  legislation  establishes  a  "sliding                                                            
scale"  whereby offenders  convicted  of  more serious  and  violent                                                            
crimes would be  ineligible to receive dividends for  longer periods                                                            
of time.  He also  noted that  offenders convicted  of unclassified                                                             
felonies would  lose their dividend  forever. He informed  these are                                                            
the most serious  class of felonies  in Alaska, and include  murder,                                                            
attempted  murder, solicitation  and  conspiracy  to commit  murder,                                                            
kidnapping, rape,  sexual abuse of a minor and misconduct  involving                                                            
a  controlled  substance,  i.e.  drug  dealers.    He  listed  those                                                            
convicted  of a Class A,  B or C felony  crime of violence  would be                                                            
ineligible  to receive a dividend  for 20 years; those convicted  of                                                            
lesser,  non-violent,  felonies  would be  ineligible  to receive  a                                                            
dividend for  ten years; those convicted  of a violent misdemeanor,                                                             
Class A or  B, would lose their dividend  for five years;  and those                                                            
convicted of a nonviolent  misdemeanor, and who are incarcerated for                                                            
that offense,  would  be ineligible  to receive  a dividend for  two                                                            
years following release.                                                                                                        
Co-Chair  Donley noted  that an  individual convicted  of a  violent                                                            
misdemeanor,  but  not  incarcerated  for  that  offense,  would  be                                                            
ineligible  to receive  a dividend  for two years,  rather than  the                                                            
five years  stipulated  for those  receiving a  prison sentence.  He                                                            
described   the   "double   threshold"   applied    to  misdemeanor                                                             
convictions,   of  determining  whether  the  crime   committed  was                                                            
violent,  and whether the  Court determined  jail time is  warranted                                                            
for the offense.                                                                                                                
Co-Chair Donley noted the  final provision applies to the offense of                                                            
First   Degree   Criminal   Mischief   under   AS  11.46.480(a)(3),                                                             
intentional damage  to an oil or gas facility, which  stipulates the                                                            
person  convicted of  this crime would  be ineligible  to receive  a                                                            
dividend  for  20  years.  He stated  the  public  policy  for  this                                                            
provision relates  to the recent shooting  of a hole in the  Alyeska                                                            
Pipeline.  He emphasized  the  expense for  repair  and cleanup,  in                                                            
addition to the  millions of dollars of lost revenue  of the spilled                                                            
oil. He stressed that a  person who inflicts such "malicious damage"                                                            
to the  facilities that generate  the funds  in which the  dividends                                                            
are  derived, should  not  be entitled  to  collect  a dividend.  He                                                            
qualified  the  existing statute  contains  a  significant  monetary                                                            
"threshold"  of the amount  of damage inflicted  that is applied  to                                                            
this provision.                                                                                                                 
Co-Chair   Donley   predicted  this   legislation   would   generate                                                            
significant  revenue,   as  the  denied  dividend   funds  would  be                                                            
available for  State expenditure in  the same manner current  inmate                                                            
dividends  are diverted for  use by the  Department of Corrections,                                                             
the  Violent Crimes  Compensation  Board,  the Council  on  Domestic                                                            
Violence  and Sexual  Assault, and  grants for  non-profit  victim's                                                            
advocacy groups.  He noted  this legislation also stipulates that if                                                            
a victim of a crime has  received a judgment or order of restitution                                                            
against the  offender, the victim  would receive first priority  for                                                            
the dividend funds.                                                                                                             
Co-Chair  Donley acknowledged  that  some municipalities  and  other                                                            
entities  garnish permanent  fund dividends  from offenders  for the                                                            
purpose  of offsetting  expenses.  He asserted  the "more  important                                                            
public policy  call," that  permanent fund  dividends should  not be                                                            
awarded to  people who commit  serious crimes  and who "break  their                                                            
social contract  with their neighbors".  He asserted that  the right                                                            
to vote is revoked and  yet money is given to these offenders by the                                                            
State of Alaska.                                                                                                                
Co-Chair Donley noted the  high operating expenses of the Department                                                            
of Corrections  and remarked it is  reasonable to deny the  funds to                                                            
those who incur  the costs, and instead utilize the  funds to assist                                                            
in covering their expenses.                                                                                                     
Senator  Austerman  asked  how  this  affects  municipalities   that                                                            
practice garnishment  and whether they would receive  dividend funds                                                            
under this legislation.                                                                                                         
Co-Chair  Donley understood  municipalities  utilize  the  "dividend                                                            
flow"  to offset  some  costs, although  he  was unfamiliar  of  the                                                            
details of the programs.  He suggested an amendment could be offered                                                            
to the bill to make provisions for municipalities.                                                                              
Senator  Austerman   anticipated   administrative  difficulties   in                                                            
tracking the  ineligibility periods  of all offenders in  the State.                                                            
Co-Chair  Kelly   referenced  the  fiscal  note  submitted   by  the                                                            
Department of Public Safety, which addresses this issue.                                                                        
Senator  Austerman referenced  Section  2(d)(1) on  page 2, lines  5                                                            
through 7, which reads as follows                                                                                               
                     (1) during the qualifying year, the individual                                                             
          was  sentenced as a result of conviction  in this state of                                                            
          a  felony or  misdemeanor  and the judgment  has not  been                                                            
          reversed or vacated;                                                                                                  
Senator Austerman  commented that  under this language, a  jaywalker                                                            
could lose their dividend.                                                                                                      
Co-Chair  Donley corrected  that  jaywalking  is a  violation not  a                                                            
misdemeanor.  He explained  a misdemeanor is  a crime in which  jail                                                            
time  of  less than  one  year  could  be required.  He  noted  that                                                            
offenders  are  often convicted  of  "simple  assault"  and are  not                                                            
incarcerated, particularly if it is a first offense.                                                                            
Co-Chair  Kelly pointed  out  this legislation  would  pertain to  a                                                            
conviction  of Forth  Degree  Assault, which  could  result from  an                                                            
offender who "takes a swing at someone and miss[ed]".                                                                           
Co-Chair  Donley  commented  it  would  be  difficult  to  obtain  a                                                            
conviction for such an event.                                                                                                   
Co-Chair  Kelly agreed,  but qualified  that if  the offender  was a                                                            
youth,  the juvenile  justice system  could impose  a sentence  at a                                                            
youth facility  because the probation  officer determines  the youth                                                            
should spend  the night  in jail in  order to  "teach a lesson."  He                                                            
asserted  there is a different  threshold in  this situation  as the                                                            
intent  is to impose  punishment,  but rather  to discourage  future                                                            
behavior.  He asked  if this legislation  would  apply to Title  47,                                                            
which governs the juvenile justice system.                                                                                      
Co-Chair  Donley responded  the  intent of  this  legislation is  to                                                            
apply  only to those  convicted  and subsequently  incarcerated.  He                                                            
informed he  would consult with the  Division of Legal and  Research                                                            
Services on  the possible relationship  this bill would have  to the                                                            
juvenile justice system.                                                                                                        
Co-Chair   Kelly   and  Co-Chair   Donley   discussed   methods   of                                                            
distinguishing  between the  adult criminal  justice system  and the                                                            
juvenile justice system.                                                                                                        
Senator Austerman  referenced the charge of Minor  in Possession. He                                                            
noted  that the  driver's  license  of a  juvenile charged  of  this                                                            
offense, even if found not guilty, is still revoked.                                                                            
Co-Chair  Donley  replied  that  most  juveniles  are  not  formally                                                            
adjudicated  but  rather referred  to  a  diversion system  and  are                                                            
therefore never  formally convicted  of the crime. He repeated  that                                                            
he would research  the matter further and investigate  whether Minor                                                            
in  Possession is  considered  a serious  misdemeanor,  which  could                                                            
qualify under this legislation.                                                                                                 
Senator  Wilken,   pointing  out  there  are  different   levels  of                                                            
felonies, asked if there are different levels of misdemeanors.                                                                  
Co-Chair Donley  answered there are  Class A and Class B  degrees of                                                            
misdemeanors in Alaska.                                                                                                         
Senator Wilken wanted to  ensure "the punishment fits the crime" and                                                            
asked for  the definition  of offenses  that qualify  as Class  A or                                                            
Class B Misdemeanors.                                                                                                           
Co-Chair Donley agreed  to provide a list of the offenses classified                                                            
as Class A and Class B Misdemeanors.                                                                                            
Senator  Leman  shared his  main  concern  is that  victims  receive                                                            
restitution and that child  support and student loan obligations are                                                            
paid.  He  pointed  out this  legislation  does  not  address  child                                                            
support and student loan payments.                                                                                              
Co-Chair  Donley  understood   other  statutes  address   collection                                                            
authority  for  child support  and  student  loan debts.  He  agreed                                                            
payment is made easier through permanent fund dividends.                                                                        
Senator Leman restated  that current law allows the State to garnish                                                            
the dividends  of those  owing child  support or  student loans.  He                                                            
asked  if under this  legislation,  whether the  funds would  remain                                                            
available for payment of these debts.                                                                                           
BARBARA  MICKLOS,  Director,  Child  Support  Enforcement  Division,                                                            
Department of  Revenue, testified that under current  statute, child                                                            
support receives  the highest priority for garnishment  of dividends                                                            
with only  bankruptcy receiving  a higher  priority. She noted  this                                                            
legislation  does  not  change  this  priority  system.  She  raised                                                            
concern however  that increasing the number of people  ineligible to                                                            
receive a  dividend and  subsequently reducing  the amount  of funds                                                            
available, would result in less money paid to the families.                                                                     
Ms. Micklos  explained for Senator  Leman's benefit, that  diversion                                                            
of the funds is not automatic  as is the case with the Department of                                                            
Corrections receiving the  dividend funds of incarcerated offenders.                                                            
She detailed that the Child  Support Enforcement Division could only                                                            
garnish a  dividend from  those who have  applied for the  dividend.                                                            
She added that in some  instances, the Division has obtained a court                                                            
order  requiring  the debtor  to  apply  for  the dividend  for  the                                                            
purpose of garnishment.                                                                                                         
Senator  Leman  stressed  this  is  his concern.  He  spoke  to  the                                                            
necessity for  a mechanism whereby the Division could  apply for the                                                            
dividend  funds on behalf  of the party owed  child support  from an                                                            
ineligible  offender.  Otherwise,  he surmised  the  funds would  be                                                            
redistributed to the qualifying dividend recipients.                                                                            
Co-Chair Donley corrected  the funds would be allocated to the "four                                                            
statutory  suggested  uses":  the  Department  of  Corrections,  the                                                            
Victims  Compensation Board,  the Council  on Domestic Violence  and                                                            
Sexual Assault, and grants  to non-profit organizations. He asserted                                                            
the funds  would be utilized  for "a very  high public purpose".  He                                                            
suggested  the  statutory  suggested  uses  could  be  increased  to                                                            
include the Child Support Enforcement Division.                                                                                 
Senator Hoffman  pointed out the Department  of Revenue fiscal  note                                                            
addresses  this issue specifically.  He cited  that in FY 05,  child                                                            
support collections  would  be reduced by  $1.1 million; the  amount                                                            
would increase to $1.7  in FY 08, and continue to increase in future                                                            
years.  He furthered  that  the  amount the  Division  collects  and                                                            
deposits  into   the  general  fund   as  reimbursement   to  public                                                            
assistance  benefits,  would  be reduced  approximately  $4  million                                                            
Senator  Hoffman   shared  Co-Chair   Donley's  concerns   regarding                                                            
dividends paid to felons.                                                                                                       
SFC 02 # 21, Side B 09:57 AM                                                                                                    
Senator  Hoffman continued  suggesting  that the  length of time  an                                                            
offender is ineligible  to receive a dividend could be increased but                                                            
that the current allocation system should remain unchanged.                                                                     
Senator  Austerman requested  further explanation  of the  provision                                                            
that  stipulates  a  convicted  felon is  ineligible  to  receive  a                                                            
NANCI JONES, Director,  Permanent Fund Dividend Division, Department                                                            
of  Revenue,  testified that  the  dividend  is "not  a  one to  one                                                            
relationship" as the ineligible  offenders are not allowed to submit                                                            
an application. She detailed  the process of the Division matching a                                                            
list of inmates  against residency  and other eligibility  criteria.                                                            
She noted  that an inmate,  who would not  have otherwise  qualified                                                            
for a dividend due to residency  requirements, would not be included                                                            
in these  calculations.  She continued  that the  number of  inmates                                                            
ascertained  to  otherwise  be eligible  to  receive a  dividend  is                                                            
multiplied  by  the  amount  of  the  dividend,  and  the  total  is                                                            
appropriated to the aforementioned statutorily suggested uses.                                                                  
Co-Chair Donley  stated that although the fiscal notes  indicate the                                                            
amount of dividend  funds the State  "accesses for other  purposes,"                                                            
the State would not actually  lose revenue because the revenue would                                                            
be garnered "in  a different way", although it remains  accounted as                                                            
general funds.                                                                                                                  
Ms. Micklos  affirmed, "There  is a wash in  terms of a loss  to the                                                            
State."  However, she  stressed that  currently,  90 percent of  the                                                            
Division's collections  are paid to families and that permanent fund                                                            
dividends comprise  a major portion of collected funds.   She listed                                                            
$16.7 million  of a total $90 million, was collected  from dividends                                                            
the prior year.                                                                                                                 
Co-Chair  Donley  asked  how much  of  the predicted  loss  of  $1.1                                                            
million would  be collected if the dividends were  not available. He                                                            
assumed this  amount would  be recouped by  salary and other  income                                                            
Ms. Micklos  reiterated the Division  could garnish a dividend  only                                                            
if  the  recipient   is  delinquent   in  child  support   payments.                                                            
Therefore, she  informed, the Division attempts to  collect the debt                                                            
from other sources. She  emphasized, however that in some instances,                                                            
the dividend  is the only asset a  debtor has. She also pointed  out                                                            
the dividends are only  available for garnishment in October of each                                                            
year  and that  during  the  remainder  of the  year,  the  Division                                                            
attempts to secure funds from other income sources.                                                                             
Co-Chair  Donley requested  the witness prepare  proposal whereby  a                                                            
list of  those owing child  support could  be cross-referenced  with                                                            
those who  are ineligible  to receive  a dividend  to determine  the                                                            
amount  of  funds  that would  otherwise  be  collected  from  these                                                            
individuals.  He furthered  these funds could  then be allocated  to                                                            
the Division  for payment  to the  families due  child support.   He                                                            
surmised this process could  protect the mission of the Division and                                                            
also increase funding for the four statutorily suggested uses.                                                                  
Ms. Micklos agreed to this undertaking.                                                                                         
Senator Leman  remarked his concerns  would be alleviated  if such a                                                            
method were  implemented.  He realized that  student loan  repayment                                                            
and other obligations are  important but stressed they are of lesser                                                            
priority than child support.                                                                                                    
Senator Hoffman  requested figures  reflecting the predicted  losses                                                            
to student  loans, court  ordered restitutions,  municipalities  and                                                            
private businesses.                                                                                                             
Co-Chair Donley  noted court ordered restitutions  would continue to                                                            
have access to  the dividend funds through the Victims  Compensation                                                            
Board. He  asserted that  although he is  "real sensitive"  to child                                                            
support issue,  he is not as concerned  with "every little  judgment                                                            
or claim  the State has"  because the funds  are deposited  into the                                                            
State treasury.                                                                                                                 
Senator  Hoffman was  concerned about  the affect  this legislation                                                             
would have on the viability of the student loan program.                                                                        
Co-Chair  Donley questioned  the number of  student loan  recipients                                                            
who have committed a serious  crime. He surmised there are very few.                                                            
Senator Leman  agreed child support is the highest  priority in this                                                            
matter, although  the other dividend  uses are worth consideration.                                                             
He  noted that  recent  statutory  changes  enabling  businesses  to                                                            
recover  losses  by  garnishing  up  to 80  percent  of  a  debtor's                                                            
dividend,  has  been  effective.  He  assumed  people  convicted  of                                                            
serious  crimes also  are probably  not satisfying  other  financial                                                            
Senator Green  remarked that  if this legislation  is proposed  as a                                                            
penalty  for  the  offender,  she  questioned  the  continuation  of                                                            
dividends for  the purpose of satisfying  that individual's  debt of                                                            
"sweet  issues". She  stated it  would be  unfair for  the State  to                                                            
receive  payment of a  debt if a  private debt  holder is unable  to                                                            
collect payment.                                                                                                                
Senator Hoffman opined  that once an offender has paid their debt to                                                            
society, the  individual should be  eligible to receive a  dividend.                                                            
Senator Leman countered  that the State is investing funds each year                                                            
to  incarcerate  the  offender  and there  is  an  accumulated  debt                                                            
regardless  that the offender has  served the time of the  sentence.                                                            
He commented  the offender  would  likely never  pay off the  actual                                                            
cost that society  has invested in  the incarceration. He  suggested                                                            
the dividend is a "token  amount" that could be utilized to pay some                                                            
of the investment.                                                                                                              
Senator  Hoffman asserted  Senator Leman's  comments might  be true,                                                            
but  cautioned if  this  legislation  passes into  law  it could  be                                                            
challenged in court using the same argument.                                                                                    
Senator  Green asked  if there  was  concern that  this legislation                                                             
could  result courts  considering the  number of  years an  offender                                                            
would be ineligible to  receive a dividend as part of the punishment                                                            
and therefore imposing shorter prison sentences.                                                                                
Co-Chair Donley replied  this could occur but stressed the intent of                                                            
sentencing  statutes  prohibits  judges  from  considering  dividend                                                            
eligibility in  sentencing. He surmised this legislation  could have                                                            
some impact  in the  cases of minor  crimes of  violence. He  stated                                                            
that because  of the graduating  scale based  on the seriousness  of                                                            
the  crime committed,  this  bill  meets  equal protection  and  due                                                            
process considerations.  He pointed out that no other state offers a                                                            
dividend and therefore  Alaska "reserves the authority to be able to                                                            
withhold it and set the  criteria for it, so long as it does so in a                                                            
reasonable    manner   that's   consistent    with   constitutional                                                             
Co-Chair Donley expressed  his intent to work with the Child Support                                                            
Enforcement Division  to develop an alternate funding  mechanism for                                                            
child support  obligations.  He agreed with  Senator Green  that the                                                            
offenders incurred the  debt and it should not be the responsibility                                                            
of  the State  to cover  those  debts.  However, he  emphasized  the                                                            
circumstances  are different "in the unique case of  child support,"                                                            
because  the State currently  intervenes  and acts  as an agent  for                                                            
private parties,  "because children are so important  to the State."                                                            
He also noted  the burden returns  to the State if children  are not                                                            
properly supported by their parents.                                                                                            
Senator  Green commented,  "I  agree with  you and  I disagree  with                                                            
Senator  Austerman  asked about  the  logistics of  determining  the                                                            
amount  of dividend  funds available.  He questioned  how, after  an                                                            
offender completes probation,  the State would know if residency and                                                            
other criteria  would otherwise  be met,  because the offender  does                                                            
not submit an application.                                                                                                      
Co-Chair  Donley posed  the question  to Ms. Jones,  asking her  how                                                            
offenders who leave the State are currently tracked.                                                                            
Ms. Jones  responded that  offenders who  qualified for a  dividend,                                                            
before serving  their sentence would  qualify for at least  one year                                                            
following  release, because  they remained  Alaska residents  during                                                            
their imprisonment.  She  noted a  new system would  be required  to                                                            
calculate  the residence  eligibility for  the otherwise  ineligible                                                            
Co-Chair   Donley  suggested   this  could   be  done  using   voter                                                            
registration records, driver license records and other methods.                                                                 
Senator Ward  asked about collection  of dividends for offenders  on                                                            
probation in Alaska.                                                                                                            
Ms. Jones  answered the  Department of Corrections  could provide  a                                                            
list of those  on probation, which would be cross-referenced  in the                                                            
same manner as the current inmate lists.                                                                                        
Senator  Austerman   reiterated  his   concern  of  the   "maze  and                                                            
nightmare" of  creating a program to accurately track  the offenders                                                            
and  their residency  qualification.  He  noted that  while  serving                                                            
probation,  the offender's  residency  would be  accounted for,  but                                                            
questioned how this could be done after probation is complete.                                                                  
Co-Chair  Donley  suggested  establishing  a "standard"  to  include                                                            
dividend funds  for those offenders who register to  vote, obtain an                                                            
Alaska  drivers  license   or are  under   the  supervision  of  the                                                            
Department of Corrections.                                                                                                      
Senator  Hoffman pointed  out drivers  licenses are  valid for  five                                                            
years and  suggested an offender  could leave  the state after  only                                                            
one year. He recommended utilizing census data instead.                                                                         
Senator Austerman  supported the concept  of utilizing dividends  as                                                            
financial restitution to the State.                                                                                             
DIANE  WENDLANDT,   Assistant  Attorney  General,  Collections   and                                                            
Support Sections,  Civil Division, Department of Law,  testified via                                                            
teleconference   from  Anchorage,   that  she  is  responsible   for                                                            
supervision  the collections, which  includes: criminal fines,  cost                                                            
of  incarceration,  cost  of  appointed  council,  forfeited  bonds,                                                            
penalties, and  restitution for victims. She stated  the Collections                                                            
Section collects  an average of $3.5 million annually,  with a small                                                            
portion of that  amount used to fund the collection  efforts and the                                                            
majority of the  funds deposited into the general  fund or allocated                                                            
to other departments.                                                                                                           
Ms.  Wendlandt   stated  that  approximately   85  percent   of  the                                                            
collections  are against  criminal  defendants who  would likely  be                                                            
affected  by this legislation.  She informed  that approximately  90                                                            
percent of  funds the Section collects  are permanent fund  dividend                                                            
attachments. She  described the 80,000 unpaid judgments,  which vary                                                            
from $40 to several  thousand dollars, noting that  10,000 to 15,000                                                            
judgments are  satisfied each year. She stressed the  Section "deals                                                            
on a  very large  scale, but very  small amounts  per judgment"  and                                                            
therefore the  cost effectiveness of the collection  efforts must be                                                            
considered.  She stated the effort  involved in dividend  attachment                                                            
is  significantly   less  than  required  for  income  withholding,                                                             
property  seizures and other  methods. She  continued to detail  the                                                            
collection efforts as they pertain to dividend attachment.                                                                      
Ms. Wendlandt  pointed out  this legislation  provides for  dividend                                                            
funds to be used  for compensation to victims of violent  crimes but                                                            
not to victims of nonviolent crimes.                                                                                            
Co-Chair  Kelly interjected  to request  the witness  work with  Co-                                                            
Chair Donley to address these issues.                                                                                           
Co-Chair  Donley noted the  witness is  "rightfully expressing"  the                                                            
impacts  on the Section.  However,  he disagreed  the extent  of the                                                            
impact because the State  would automatically receive the funds that                                                            
the Section  currently must employ  staff to collect. He  also noted                                                            
there would be no impact  on restitution because of the authority of                                                            
the Victims Compensation Board.                                                                                                 
Co-Chair  Donley commented  that the collected  funds are  currently                                                            
accounted as program receipts  and reiterated this legislation would                                                            
account  the funds  as general  funds.  He understood  the  agencies                                                            
would therefore  be required to compete  for the general  funds, but                                                            
stressed there would be a net gain to the State.                                                                                
LINDA WILSON,  Deputy Director, Public Defenders Agency,  Department                                                            
of Administration,  testified via  teleconference from Anchorage  in                                                            
opposition  of the  bill.  She stated  that  this would  impact  the                                                            
Agency's clients,  who are indigent people. She spoke  to the fines,                                                            
restitutions and other  debts imposed on the clients, and emphasized                                                            
that  if unable  to  pay these  debts,  the  offenders  could be  in                                                            
violation of the conditions of their probation or parole.                                                                       
Ms. Wilson  informed  that the Agency  received  $190,000 in  FY 99,                                                            
$190,000  in FY 00, and $430,000  in FY 01,  from the Department  of                                                            
Co-Chair  Donley commented,  "It's  pretty amazing  that some  State                                                            
bureaucracies  are so entrenched" as to assert the  State should pay                                                            
offenders'  criminal fines. He emphasized  the need to "look  at the                                                            
big picture."  He stressed this legislation  is a revenue  generator                                                            
to  the  entire  State  with  the  exception  of  those  who  commit                                                            
offenses.  He stated  this would  facilitate  the prioritization  of                                                            
State  programs,  as they  would compete  for  funding  on "a  level                                                            
playing  field" "and  not just  because one  department happened  to                                                            
have access to these off-budget funds and another one didn't."                                                                  
Co-Chair  Donley reiterated  his  intent to  establish  a method  to                                                            
utilize the  ineligible dividend funds  for child support  payments.                                                            
Co-Chair Kelly ordered the bill HELD in Committee.                                                                              
     SENATE CS FOR CS FOR HOUSE BILL NO. 106(JUD)                                                                               
     "An  Act  relating  to the  authorizations  for  certain  state                                                            
     financial  institutions  of  certain  powers  and limitations;                                                             
     relating  to confidential records  of depositors and  customers                                                            
     of certain financial  institutions; relating to the examination                                                            
     of  certain institutions  subject  to  AS 06;  relating to  the                                                            
     Alaska  Banking Code,  Mutual  Savings Bank  Act, Alaska  Small                                                            
     Loans  Act, and  Alaska Credit  Union Act;  relating to  credit                                                            
     cards; amending Rule 45, Alaska Rules of Civil Procedure,                                                                  
     Rules 17 and 37, Alaska Rules of Criminal Procedure, and Rule                                                              
     24, Alaska Bar Rules; and providing for an effective date."                                                                
This  was the first  hearing  for this  bill in  the Senate  Finance                                                            
AT EASE 10:42 AM / 10:48 AM                                                                                                     
Co-Chair Kelly spoke to  two proposed committee substitutes, Version                                                            
"R" and  Version "B".  He stated  Version "R"  contains an "opt  in"                                                            
provision,  which offers  more privacy protection  than federal  law                                                            
provides  and would  comply with the  federal law.  Version "B",  he                                                            
continued, addresses  the privacy issue in an "opt  out" manner.  He                                                            
noted both  versions have omitted  a provision pertaining  to credit                                                            
cards that had previously raised concern.                                                                                       
FRANKLIN TERRY ELDER, Director,  Division of Banking, Securities and                                                            
Corporations,  Department  of Community  and  Economic Development,                                                             
explained "opt  out" is a procedure by which financial  institutions                                                            
could  share private  information  about  an individual  unless  the                                                            
individual  directs  otherwise.  He  continued  that  the  "opt  in"                                                            
procedure   allows   financial   institutions   to   share   private                                                            
information about an individual  only if permission is obtained from                                                            
that individual.                                                                                                                
Co-Chair Kelly  asked for a description  of the private information                                                             
in question  and an explanation  of the  federal Gramm-Leach-Bliley                                                             
SFC 02 # 22, Side A 10:52 AM                                                                                                    
Mr.  Elder  responded  that  the  Gramm-Leach-Bliley   Act  requires                                                            
financial  institutions to  provide customers  the details  of their                                                            
privacy  policy, as well  as "an  opportunity to  opt out" by  mail,                                                            
telephone,  Internet,  etc.  notification.  He  furthered  that  the                                                            
federal  law  also  allows  states   the  option  to  adopt  a  more                                                            
restrictive privacy policy.                                                                                                     
Mr.   Elder  defined   the  private   information   as  "personally                                                             
identifiable,  nonpublic  information."   He noted  that  names  and                                                            
addresses could  be considered public  information if listed  in the                                                            
telephone directory. However,  he qualified that a list of names and                                                            
addresses  of customers  created  from the  financial institution's                                                             
database using  a "screen" or "filter"  of nonpublic information  is                                                            
considered private information.                                                                                                 
Co-Chair  Kelly referenced  a memorandum to  the Committee  from the                                                            
Division of  Legal and Research Services,  dated 2/28/02,  regarding                                                            
Version "B"  [copy on file]. He cited  Terri Lauterbach,  drafter of                                                            
this  legislation,  states   that  this  version  may  provide  more                                                            
consumer  protection than  the federal act,  "however, I cannot  say                                                            
for sure that  the federal government would reach  that conclusion."                                                            
Co-Chair  Kelly asked  if the Division  of Banking,  Securities  and                                                            
Corporations share this opinion.                                                                                                
Mr. Elder affirmed  and further detailed  the two-line reference  to                                                            
the Gramm-Leach-Bliley  Act, which pertains to disclosure of private                                                            
information. He  noted that the Federal Trade Commission  acts as an                                                            
arbitrator in  the event there is a question of whether  a state has                                                            
adopted a more restrictive privacy policy.                                                                                      
Co-Chair  Kelly asked if the  current law in  Alaska is "opt  in" or                                                            
"opt out".                                                                                                                      
Mr. Elder answered  the banking code  requirement has been  "opt in"                                                            
for  over  30  years.  He  stated,  however,  there  is  no  privacy                                                            
provision in  the codes governing  other financial institutions.  He                                                            
added  that the  Gramm-Leach-Bliley  Act is  the  first federal  law                                                            
addressing  these  privacy   issues,  which  has  resulted  in  this                                                            
legislation  to instill privacy provisions  in AS 06.01 rather  than                                                            
the statute governing banking activities.                                                                                       
Mr. Elder  added  that Version  "R" contains  "compromise"  language                                                            
reflecting agreement reached  by the Division and the Alaska Bankers                                                            
Association. This language,  he stated, achieves the Division's goal                                                            
to "continue  the tradition of Alaska  of protecting the  privacy of                                                            
individuals"  but  also  allows  for  the  "extension  of  financial                                                            
services" among different financial institutions.                                                                               
Co-Chair Donley clarified the Division supports Version "R".                                                                    
Mr. Elder affirmed.                                                                                                             
Senator  Green  asked if  this  legislation  would impose  the  same                                                            
prohibitions  on insurance  companies  that are  performing  banking                                                            
Mr. Elder answered it does  and informed that the Gramm-Leach-Bliley                                                            
Act essentially  "breaks down those  walls" between different  types                                                            
of financial institutions.                                                                                                      
Senator  Green  understood   the  need  to  share  information   for                                                            
liability purposes  in the insurance industry is different  then the                                                            
need for information sharing in the banking industry.                                                                           
Mr. Elder furthered  there is no restriction on information  sharing                                                            
among  affiliates  and  that the  Gramm-Leach-Bliley  Act  and  this                                                            
legislation only  apply to non-affiliates. The federal  law and this                                                            
bill, he continued,  pertain to information sharing  for the purpose                                                            
of providing  services  of the  financial institution  or  marketing                                                            
Co-Chair  Donley moved  to adopt  SCS CS  HB 106,  22-GH1026\R  as a                                                            
working draft.                                                                                                                  
Senator Hoffman  asked if because of the events involving  the Enron                                                            
Corporation,   whether  more  states   are  considering   "opt  out"                                                            
provisions to provide greater consumer protection.                                                                              
Mr. Elder  clarified the  "opt in" method  provides more  protection                                                            
for consumers.                                                                                                                  
There was no  objection and the committee  substitute, Version  "R",                                                            
was ADOPTED as a working draft.                                                                                                 
LISA BELL,  Executive Vice  President and  Chief Operating  Officer,                                                            
Alaska  Pacific Bank,  testified  on behalf  of the  Alaska  Bankers                                                            
Association in support  of the committee substitute. She opined that                                                            
Version   "R"  contains   a  "workable  compromise"   and   that  it                                                            
"modernizes  the State  banking  code in  two important  ways."  She                                                            
explained the  committee substitute  provides parody between  State-                                                            
chartered and federal-chartered  financial institutions operating in                                                            
Alaska,  and   that  it  allows  small   Alaska  banks  to   compete                                                            
effectively with larger banks.                                                                                                  
Ms.  Bell  qualified  the  original  position   of  the Association                                                             
supported  complete  compliance  with  the Gramm-Leach-Bliley   Act.                                                            
However,  she stated a  reasonable compromise  was reached  when the                                                            
bill was under  consideration by the  House of Representatives.  She                                                            
emphasized the  Association's goal is to allow small  banks to offer                                                            
financial-related products  and services to their customers and that                                                            
the committee substitute allows this.                                                                                           
Ms. Bell predicted  rural Alaska residents  would benefit  most from                                                            
this  legislation,   as  it  would   allow  them  to  receive   more                                                            
information on available products and services.                                                                                 
Senator  Ward  requested  an  analysis  of  the  provisions  in  the                                                            
committee  substitute  that  are required  for  conformance  to  the                                                            
Gramm-Leach-Bliley Act and the provisions that are not required.                                                                
Mr. Elder referred  to sectional comments  prepared by the  Division                                                            
[copy on  file]. He gave  as an example,  insurance activities  that                                                            
are currently  allowed under the Gramm-Leach-Bliley  Act,  but would                                                            
be prohibited under this legislation.                                                                                           
AT EASE 11:07 AM / 11:07 AM                                                                                                     
Co-Chair Donley shared that he requested from the sponsor, an                                                                   
opportunity to review the Version "J" committee substitute.                                                                     
Co-Chair Kelly ordered the bill HELD in Committee.                                                                              
Co-Chair Pete Kelly adjourned the meeting at 11:08 AM                                                                           

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