Legislature(2021 - 2022)BUTROVICH 205

05/10/2021 03:30 PM RESOURCES

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03:33:39 PM Start
03:34:15 PM SB84
04:18:30 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Heard & Held
-- Invited & Public Testimony --
+ Bills Previously Heard/Scheduled TELECONFERENCED
**Streamed live on AKL.tv**
                    ALASKA STATE LEGISLATURE                                                                                  
              SENATE RESOURCES STANDING COMMITTEE                                                                             
                          May 10, 2021                                                                                          
                           3:33 p.m.                                                                                            
MEMBERS PRESENT                                                                                                               
Senator Joshua Revak, Chair                                                                                                     
Senator Peter Micciche, Vice Chair                                                                                              
Senator Gary Stevens                                                                                                            
Senator Natasha von Imhof                                                                                                       
Senator Jesse Kiehl                                                                                                             
Senator Scott Kawasaki                                                                                                          
MEMBERS ABSENT                                                                                                                
Senator Click Bishop                                                                                                            
COMMITTEE CALENDAR                                                                                                            
SENATE BILL NO. 84                                                                                                              
"An  Act  relating  to  the  veterans'  land  purchase  discount;                                                               
establishing state land vouchers;  relating to the permanent fund                                                               
dividend; relating  to the duties  of the Department  of Revenue;                                                               
authorizing the  Department of Natural Resources  to accept state                                                               
land  vouchers; relating  to eligibility  for public  assistance;                                                               
and providing for an effective date."                                                                                           
     - HEARD & HELD                                                                                                             
PREVIOUS COMMITTEE ACTION                                                                                                     
BILL: SB 84                                                                                                                   
SHORT TITLE: LAND VOUCHERS; PFDS                                                                                                
SPONSOR(s): RULES BY REQUEST OF THE GOVERNOR                                                                                    
02/12/21       (S)       READ THE FIRST TIME - REFERRALS                                                                        
02/12/21       (S)       STA, RES, FIN                                                                                          
03/02/21       (S)       STA AT 3:30 PM BUTROVICH 205                                                                           
03/02/21       (S)       Heard & Held                                                                                           
03/02/21       (S)       MINUTE(STA)                                                                                            
03/11/21       (S)       STA AT 3:30 PM BUTROVICH 205                                                                           
03/11/21       (S)       Heard & Held                                                                                           
03/11/21       (S)       MINUTE(STA)                                                                                            
03/23/21       (S)       STA AT 3:30 PM BUTROVICH 205                                                                           
03/23/21       (S)       Moved SB 84 Out of Committee                                                                           
03/23/21       (S)       MINUTE(STA)                                                                                            
03/24/21       (S)       STA RPT 2NR 3AM                                                                                        
03/24/21       (S)       NR: SHOWER, COSTELLO                                                                                   
03/24/21       (S)       AM: KAWASAKI, HOLLAND, REINBOLD                                                                        
05/10/21       (S)       RES AT 3:30 PM BUTROVICH 205                                                                           
WITNESS REGISTER                                                                                                              
MIKE BARNHILL, Deputy Commissioner                                                                                              
Department of Revenue                                                                                                           
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Provided an overview  of SB 84 on  behalf of                                                             
the administration.                                                                                                             
MARTY PARSONS, Director                                                                                                         
Division of Mining, Lands, and Water                                                                                            
Department of Natural Resources                                                                                                 
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Answered questions during the  hearing on SB
ED MARTIN, representing self                                                                                                    
Kenai, Alaska                                                                                                                   
POSITION STATEMENT:  Testified during  the hearing  on SB  84 and                                                             
urged the committee to keep it simple.                                                                                          
ACTION NARRATIVE                                                                                                              
3:33:39 PM                                                                                                                  
CHAIR  JOSHUA   REVAK  called   the  Senate   Resources  Standing                                                             
Committee meeting  to order at 3:33  p.m. Present at the  call to                                                               
order were  Senators Stevens, Kawasaki,  Kiehl, and  Chair Revak.                                                               
Senators Micciche and von Imhof arrived soon thereafter.                                                                        
                   SB 84-LAND VOUCHERS; PFDS                                                                                
3:34:15 PM                                                                                                                    
CHAIR REVAK  announced the  consideration of  SENATE BILL  NO. 84                                                               
"An  Act  relating  to  the  veterans'  land  purchase  discount;                                                               
establishing state land vouchers;  relating to the permanent fund                                                               
dividend; relating  to the duties  of the Department  of Revenue;                                                               
authorizing the  Department of Natural Resources  to accept state                                                               
land  vouchers; relating  to eligibility  for public  assistance;                                                               
and providing for an effective date."                                                                                           
3:34:41 PM                                                                                                                    
MIKE  BARNHILL,  Deputy   Commissioner,  Department  of  Revenue,                                                               
Juneau, Alaska, stated SB 84  creates the Permanent Fund Dividend                                                               
(PFD) voucher  program whereby  PFD applicants  may elect  a land                                                               
voucher in  lieu of a cash  dividend. The land voucher,  which is                                                               
worth double the cash value of  the statutory PFD, may be used to                                                               
purchase  state land  from the  Department of  Natural Resources.                                                               
For example, if the statutory PFD  were $2,300, the face value of                                                               
the land voucher would be  $4,600. He described the precedent for                                                               
using  land vouchers  in this  country, which  started after  the                                                               
American  Revolutionary War  to compensate  veterans. In  Alaska,                                                               
land  vouchers were  used  to compensate  World  War II  veterans                                                               
during Territorial Days.  He said the governor's  objective is to                                                               
get more state land into the hands of Alaskans.                                                                                 
3:35:30 PM                                                                                                                    
SENATOR MICCICHE joined the committee meeting.                                                                                  
3:37:23 PM                                                                                                                    
SENATOR   STEVENS  requested   additional   information  on   the                                                               
territorial vouchers.                                                                                                           
MR. BARNHILL confessed  he had not been able to  find any details                                                               
about the  program. He offered to  do a little more  research and                                                               
suggested a member of the committee may have more information.                                                                  
CHAIR REVAK  asked Mr.  Parsons if  he had  any information  on a                                                               
pre-statehood voucher program in Alaska.                                                                                        
3:38:15 PM                                                                                                                    
MARTY PARSONS,  Director, Division  of Mining, Lands,  and Water,                                                               
Department of  Natural Resources,  Anchorage, Alaska,  stated the                                                               
division  does not  have information  on any  voucher program  in                                                               
Alaska either pre-statehood or post-statehood.                                                                                  
CHAIR REVAK  asked Senator  Stevens if  he would  like additional                                                               
SENATOR STEVENS  answered yes;  the information  is germane  if a                                                               
voucher program worked  in the past. He said he  looks forward to                                                               
receiving the information.                                                                                                      
3:38:55 PM                                                                                                                    
SENATOR VON IMHOF joined the committee meeting.                                                                                 
MR. BARNHILL committed to try harder to get the information.                                                                    
3:39:35 PM                                                                                                                    
MR. BARNHILL  reviewed the details  of the land  voucher program.                                                               
Slide 2 read as follows: [Original punctuation provided.]                                                                       
        • Land Voucher Program Details                                                                                          
          •  Vouchers can't  be used to buy  Mental Health                                                                      
          Trust lands                                                                                                           
          •  Parents  can't apply  for vouchers  for their                                                                      
          •  Vouchers can't  be used to pay  rents or fees                                                                      
            just sale price                                                                                                     
          •  Vouchers  only  available to  PFD  applicants                                                                      
          who use the electronic application                                                                                    
          •  PFD   applicants   need  to   be   determined                                                                      
          eligible within the PFD year                                                                                          
          •  Vouchers are transferable and never expire                                                                         
          •  Dept   of   Revenue    will   track   voucher                                                                      
          transfers,  and  will   replace  lost,  stolen  or                                                                    
          destroyed vouchers                                                                                                    
          •  Vouchers may be garnished  up to the value of                                                                      
          the cash PFD                                                                                                          
          •  Cash from  PFDs not  paid in cash  because of                                                                      
          voucher election lapses to General Fund                                                                               
          •  DHSS   and  other   benefits  programs   must                                                                      
          consider  voucher   as  income  or   resources  in                                                                    
          determining benefits eligibility                                                                                      
3:43:05 PM                                                                                                                    
SENATOR  STEVENS commented  on  the potential  for  abuse if  the                                                               
vouchers  were   transferable,  and  questioned  the   wisdom  of                                                               
allowing the vouchers  to be bought and sold.  He also questioned                                                               
the reasoning  for allowing the  voucher to be garnished  only to                                                               
the cash  value of the  statutory PFD.  He suggested it  might be                                                               
best to  base the value  of both  the voucher and  garnishment on                                                               
the cash value of the PFD.                                                                                                      
3:43:44 PM                                                                                                                    
MR.  BARNHILL stated  the garnishment  would  be up  to the  cash                                                               
value of  the PFD in  all cases. He cited  the example of  a land                                                               
voucher that  has a  face value  of $4,600;  only $2,300  of that                                                               
could be  garnished. This ensures that  for garnishment purposes,                                                               
all  PFD applicants  are treated  equally.  More importantly,  he                                                               
said implementing it this way  would require the division to make                                                               
the least adjustment to the PFD program.                                                                                        
3:44:32 PM                                                                                                                    
SENATOR STEVENS asked him to address the transferability issue.                                                                 
MR.  BARNHILL answered  he did  not  see that  allowing the  land                                                               
vouchers to be transferred would  create the potential for abuse.                                                               
He  offered  his perspective  that  the  land vouchers  plausibly                                                               
would be worth  more than the cash  value of the PFD  at the time                                                               
they are issued. He posed the following hypothetical:                                                                           
     Let's  assume for  the sake  of argument  that somebody                                                                    
     knows they can tender it  for $4,600 and somebody wants                                                                    
     to  sell it,  but  they're willing  to  take less  than                                                                    
     $4,600, and  somebody knows they  can get  $4,600 worth                                                                    
     of land  from the  Department of Natural  Resources. If                                                                    
     it  gets transferred  for $2,301,  that's $1  more than                                                                    
     the  cash value  of the  PFD. That  person's $1  to the                                                                    
     good.  By  electing  that land  voucher,  they  end  up                                                                    
     having  more value  in their  pocket  even though  they                                                                    
     transferred it at less than face value.                                                                                    
MR.  BARNHILL   acknowledged  the  possibility  of   somebody  in                                                               
distress transferring  the land  voucher for  less than  the cash                                                               
value of  the PFD. Nevertheless,  he said the  administration was                                                               
not proposing to regulate transfers in any way.                                                                                 
3:46:51 PM                                                                                                                    
SENATOR MICCICHE stated support for  the idea of the land voucher                                                               
program  but  expressed  concern  about  whether  it  protects  a                                                               
disadvantaged  family from  going without  when the  only support                                                               
they may get from  a parent is the value of their  PFD when it is                                                               
MR. BARNILL  said he  misspoke earlier  because the  land voucher                                                               
could only  be garnished up  to the actual  value of the  PFD for                                                               
that  year.  Thus, a  family  who  is  relying on  child  support                                                               
payments  would be  no better  or worse  off with  this proposal.                                                               
Somebody who  elects a  cash PFD  could have  it garnished  up to                                                               
$1,000 and the land voucher is  also subject to garnishment up to                                                               
$1,000.  He opined  that the  family, through  the legal  system,                                                               
could garnish the  residual paper land voucher.  In this example,                                                               
the  voucher would  be worth  $3,600  and the  spouse could  sell                                                               
that.  He  acknowledged  that  was  not  a  very  straightforward                                                               
process  for   the  family.  He  offered   another  scenario  and                                                               
acknowledged it was unlikely.                                                                                                   
3:50:42 PM                                                                                                                    
SENATOR KIEHL asked if somebody  could use multiple land vouchers                                                               
to purchase a piece of land.                                                                                                    
MR. BARNHILL answered yes.                                                                                                      
SENATOR KIEHL  mentioned the possibility  of a  secondary market,                                                               
and asked how the taxable gain  is calculated when a land voucher                                                               
is sold.                                                                                                                        
3:51:30 PM                                                                                                                    
MR. BARNHILL replied his understanding  is that the capital gains                                                               
rate  would apply  to  the sale  price of  the  voucher less  the                                                               
$1,000 basis.                                                                                                                   
SENATOR  KIEHL  asked  if  there  would be  a  taxable  event  if                                                               
somebody with a $1,000 tax basis  in a $4,600 voucher were to use                                                               
it to purchase land.                                                                                                            
MR. BARNHILL answered no; the  taxable event would occur upon the                                                               
sale of the land.                                                                                                               
MR. BARNHILL issued the disclaimer that  he was not a tax expert.                                                               
He offered to provide an expert upon request.                                                                                   
3:53:03 PM                                                                                                                    
SENATOR KIEHL asked if somebody could  get cash back if the value                                                               
of the  vouchers they had were  worth more than the  price of the                                                               
land they were buying.                                                                                                          
MR. BARNHILL answered no, the department will not make change.                                                                  
SENATOR  KIEHL noted  he mentioned  a parent  cannot apply  for a                                                               
land voucher  for their  child, and recalled  that a  child whose                                                               
parent does not apply  for a PFD on their behalf  is able to file                                                               
for those PFDs  once they reach the age of  majority. He asked if                                                               
a young  adult could go back  and apply for the  appropriate land                                                               
vouchers if  their parents  had not  applied for  a PFD  on their                                                               
MR. BARNHILL  answered he was  unaware whether the  bill provided                                                               
for that or not, but he believes it should.                                                                                     
3:54:42 PM                                                                                                                    
SENATOR MICCICHE said  his only concern with the  bill relates to                                                               
the  garnishment potential  for parents  who are  in arrears  for                                                               
child  support payments.  He noted  the  supplemental option  Mr.                                                               
Barnhill  suggested  for families  to  use  the legal  system  to                                                               
garnish the  remaining value  of the voucher  and said  he wished                                                               
that had  been designed into the  bill. He asked Mr.  Barnhill if                                                               
he would be  willing to take that back to  the administration for                                                               
MR. BARNHILL  replied the concern  is fair  and he would  take it                                                               
back to the policy team to discuss and consider.                                                                                
3:56:18 PM                                                                                                                    
MR.  BARNHILL returned  to the  presentation and  paraphrased the                                                               
policy objectives on slide 5, which read as follows:                                                                            
     • Lands in Alaskan Hands                                                                                                   
       Help fulfill the Alaska Constitution's mandate to                                                                        
     develop state resources to benefit the public.                                                                             
MR.  BARNHILL opined  it was  fair to  argue that  the U.S.  is a                                                               
leading economy because of the way  it got land into the hands of                                                               
      Make Alaska land more accessible to all by making it                                                                      
     easier for Alaskan's to purchase land.                                                                                     
       No other state has less land in private hands than                                                                       
     The PFD Land Voucher Bill is a response to the demand,                                                                     
    by   helping   individual    Alaskan's   realize   land                                                                     
     The PFD Land Voucher Bill would be a win-win for both                                                                      
     the individual Alaskan and the state treasury.                                                                             
3:58:07 PM                                                                                                                    
SENATOR  STEVENS asked  for an  explanation of  the process  once                                                               
someone  has  the  voucher in-hand.  He  posed  the  hypothetical                                                               
situation where  he and  Senator Micciche  both want  to purchase                                                               
the same piece of land.                                                                                                         
MR. BARNHILLL  deferred to Mr.  Parsons to explain  DNR's process                                                               
when there is competition for the same parcel.                                                                                  
3:58:46 PM                                                                                                                    
MR. PARSONS answered the department  conducts sealed bid auctions                                                               
and the  face value of  the voucher would  be applied to  the bid                                                               
for the parcel.  For example, if the voucher is  worth $4,300 and                                                               
the  high bid  for the  parcel is  $10,300, the  individual would                                                               
have to  assume a contract  for $6,000. Competition for  the same                                                               
parcel  is  sorted  out  through  the auction.  If  a  person  is                                                               
purchasing  the  parcel  through an  over-the-counter  sale,  the                                                               
first person to put in a  bid in the online process purchases the                                                               
parcel.  He  said  the  department  envisions  the  land  voucher                                                               
program will  run in the  regular competitive land  sales process                                                               
and the voucher will serve as a piece of the payment.                                                                           
4:00:15 PM                                                                                                                    
SENATOR KIEHL  asked if there  are any limitations on  land types                                                               
that can  be purchased. Specifically,  is it  solely recreational                                                               
land or  could it also  be agricultural or some  other commercial                                                               
MR. PARSONS  answered the  vouchers could  be used  as a  form of                                                               
payment  on any  land that  has been  classified for  disposal as                                                               
part of the land sale program.                                                                                                  
4:01:15 PM                                                                                                                    
SENATOR MICCICHE  referenced the cash flow  hypothetical on slide                                                               
5 where  the PFD was $1,000  and the statutory PFD  for that year                                                               
was  $2,300.  He  asked  the   logic  for  using  the  two  times                                                               
multiplier on  the statutory PFD  rather than on the  $1,000 that                                                               
was actually paid.                                                                                                              
MR.  BARNHILL replied  the governor's  consistent policy  is that                                                               
the legislature  should appropriate  to the  statute for  the PFD                                                               
and as  long as  the original  formula is in  law, the  two times                                                               
multiplier for the  value of the land voucher  should be computed                                                               
against that formula.                                                                                                           
SENATOR MICCICHE  asked the reason  for valuing the  land voucher                                                               
at 200 percent of the statutory formula.                                                                                        
MR.  BARNHILL  answered  he  believes  that  policy  call  is  to                                                               
generate interest and provide an  incentive to participate in the                                                               
program as well as to accelerate  the rate at which state land is                                                               
sold and placed in the hands of Alaskans.                                                                                       
4:03:51 PM                                                                                                                    
SENATOR KIEHL  referenced the cash  flow hypothetical on  slide 5                                                               
and the notion that the land  ultimately sold would be worth $300                                                               
million in a year or about  twice the value of the land vouchers.                                                               
He asked what assumptions were used.                                                                                            
4:04:18 PM                                                                                                                    
MR. BARNHILL stated  the numbers are purely  hypothetical and are                                                               
only intended to  demonstrate where the money goes.  There was no                                                               
intention  to   suggest  that  40,000  Alaskans   actually  would                                                               
participate in  the program  and purchase  $300 million  in state                                                               
land. The assumptions have no basis.                                                                                            
SENATOR  KIEHL posed  a hypothetical  scenario  where his  entire                                                               
family  pools their  vouchers to  purchase  a parcel  to build  a                                                               
cabin with  a minimum cash  outlay. He questioned the  reason the                                                               
state  would go  through this  process when  the result  could be                                                               
very little  money going into  the general fund. He  suggested it                                                               
might be  easier to instead  giving all PFD applicants  a onetime                                                               
coupon that  allows the purchase  of state  land at a  77 percent                                                               
MR.   BARNHILL  answered   the   administration  suggested   this                                                               
straightforward  proposal  to  incentivize Alaskans  to  purchase                                                               
state  land. The  transfer feature  adds value  and is  a benefit                                                               
that would not be available with a land discount program.                                                                       
4:07:04 PM                                                                                                                    
SENATOR KIEHL  asked if  somebody could  donate their  voucher to                                                               
the Sierra Club,  for example, and write off the  entire 4,600 on                                                               
their federal income tax.                                                                                                       
MR. BARNHILL  replied he did  not know but  he would try  to find                                                               
the answer.                                                                                                                     
MR.  BARNHILL  continued  the presentation  with  the  cash  flow                                                               
hypothetical on slide 5. He  said the assumptions are a statutory                                                               
PFD  of $2,300  per person;  a  PFD appropriation  of $1,000  per                                                               
person, and a  land voucher of $4,600  per person. Hypothetically                                                               
600,000 people will elect the cash  PFD and 40,000 will elect the                                                               
land  voucher. The  money moves  as follows:  $600 million  moves                                                               
from the Earnings Reserve Account  (ERA) to the general fund (GF)                                                               
and then  to the Permanent  Fund Dividend Fund. The  $600 million                                                               
in cash  PFDs are paid to  Alaskans and the $40  million that was                                                               
not  paid out  for a  cash PFD  lapses to  the general  fund. The                                                               
40,000 Alaskans who did not  elect the $1,000 PFD instead receive                                                               
land  vouchers that  in total  amount to  $184 million  ($4,600 X                                                               
40,000  vouchers). The  hypothetical  further  assumes that  $300                                                               
million  in land  is ultimately  sold. The  $184 million  in land                                                               
vouchers  is applied  to the  $300 million  leaving a  balance of                                                               
$156  million  that   the  holders  of  the   land  vouchers  are                                                               
hypothetically  required  to  tender  in cash  to  buy  the  $300                                                               
million in land  sold ($184 + $116 = $300).  The $40 million that                                                               
lapsed into  the general fund and  the $116 million in  cash paid                                                               
into the  general fund from  the land sales brings  an additional                                                               
$156 million into the general  fund. He highlighted that the bill                                                               
has a  mechanism for DNR  to ask for some  of that money  to keep                                                               
the voucher program going.                                                                                                      
4:10:34 PM                                                                                                                    
MR. BARNHILL  directed attention  to the  final slide  showing an                                                               
image of what the State of  Alaska $4,600 land voucher could look                                                               
like. There is a serial number  in the upper right corner and the                                                               
back will have a transfer record.                                                                                               
CHAIR REVAK asked Mr. Parsons if he had anything to add.                                                                        
MR.  PARSONS stated  DNR supports  SB  84 as  an opportunity  for                                                               
Alaskans to purchase more state land.                                                                                           
4:12:11 PM                                                                                                                    
CHAIR REVAK opened public testimony on SB 84.                                                                                   
4:12:22 PM                                                                                                                    
ED  MARTIN,  representing  self,   Kenai,  Alaska,  informed  the                                                               
committee that  he came up  with the  original idea for  the land                                                               
voucher during  the Knowles administration  and it has  changed a                                                               
lot  since then.  His  vision  was for  a  parent  to help  their                                                               
children realize the American dream  with land in trust for them.                                                               
He  asked what  in the  proposed program  would prevent  a parent                                                               
from transferring  their land  to their children  in a  trust. He                                                               
said he  wants to make sure  the land can be  transferred only to                                                               
Alaskans. He  offered his  belief that  the government  will make                                                               
out  very well  in  the  proposed voucher  program  He urged  the                                                               
committee to keep  the program simple. He concluded,  "Open it up                                                               
for our  children and let's  create a  tax base in  perpetuity to                                                               
4:16:44 PM                                                                                                                    
CHAIR REVAK  discerned no one  else wished to comment  and closed                                                               
public testimony on SB 84.                                                                                                      
SENATOR MICCICHE clarified  that SB 84 had not  been amended. The                                                               
only difference between  this bill and the one  introduced in the                                                               
last legislature is the vouchers can now be tracked.                                                                            
4:17:38 PM                                                                                                                    
CHAIR  REVAK  agreed  and  announced  he  would  hold  SB  84  in                                                               
committee for further consideration.                                                                                            
4:18:30 PM                                                                                                                    
There being no further business to come before the committee,                                                                   
Chair Revak adjourned the Senate Resources Standing Committee                                                                   
meeting at 4:18 p.m.                                                                                                            

Document Name Date/Time Subjects
SB 84 A.PDF SRES 5/10/2021 3:30:00 PM
SB 84
SB 84 Fiscal Note DOR 2.10.21.PDF SRES 5/10/2021 3:30:00 PM
SB 84
SB 84 Fiscal Note DHSS 2.9.21.PDF SRES 5/10/2021 3:30:00 PM
SB 84
SB 84 Fiscal Note DNR 2.10.21.PDF SRES 5/10/2021 3:30:00 PM
SB 84
SB 84 Presentation-DOR 5.8.21.pdf SRES 5/10/2021 3:30:00 PM
SB 84
SB 84 Sectional Analysis 5.8.21.pdf SRES 5/10/2021 3:30:00 PM
SB 84
SB 84 Sponsor Statement 02.11.21.pdf SRES 5/10/2021 3:30:00 PM
SB 84