Legislature(2001 - 2002)
02/28/2002 09:08 AM Senate FIN
| Audio | Topic |
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
MINUTES
SENATE FINANCE COMMITTEE
February 28, 2002
9:08 AM
TAPES
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.
PRESENT
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
Committee.
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
rules.
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
meeting.
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
Kelly
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
veterans."
This was the first hearing for this bill in the Senate Finance
Committee.
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
municipality.
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
municipalities.
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
Committee.
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
annually.
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
dividend.
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
sources.
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
obligations.
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
provisions."
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
you."
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
offenders.
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
Law.
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
Committee.
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
Act.
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
functions.
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
partner.
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.
ADJOURNMENT
Co-Chair Pete Kelly adjourned the meeting at 11:08 AM
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