SB 92-PFD CONTRIBUTIONS TO GENERAL FUND  1:57:40 PM CHAIR SHOWER reconvened the meeting and announced the consideration of SENATE BILL NO. 92, "An Act relating to contributions from permanent fund dividends to the general fund." 1:57:53 PM SENATOR DAVID WILSON, Alaska State Legislature, Juneau, Alaska, sponsor of SB 92, introduced the legislation speaking to the following sponsor statement: [Original punctuation provided.] Senate Bill 92 would give Alaskans the option of donating all or a portion of their Permanent Fund dividends (PFDs) directly to the state's general fund. Many Alaskans have told me they wouldn't mind giving up a portion of their dividends to pay for state government. This bill creates a simple mechanism for them to do so. If you want to donate your dividend, that's your choice. If you want to keep your dividend, you're free to do so. Senate Bill 92 is about the freedom to make your own decision. Participants will be able to contribute $25, $50, $75, $100, or more, in increments of $50, up the total amount of the PFD. A donation to the state's general fund, in some cases, can be counted as a charitable donation for federal tax purposes. It's advised, however, that Alaskans consult with a tax professional to verify how this may apply [to] them individually. PFD donations are subject to a seven percent administrative fee paid to the Permanent Fund Dividend Division. Currently, PFD applicants can donate directly to the Crime Victim Compensation Fund, the Peace Officer and Firefighter Survivors' Fund, or one or more of the educational organizations, community foundations, or charitable organizations that appear on the contribution list contained in the application. The bill would add the state's general fund to that list. Thank you for your consideration of Senate Bill 92. 1:59:04 PM SENATOR WILSON delivered the following sectional analysis for SB 92. Section 1: Amends AS 43.23.130(a) to include "the general fund" in the list of funds and organizations who electronic Alaska permanent fund dividend applicants may direct contributions to. (page 1, lines 3-15 continuing on page 2, lines 1-6) Section 2: Amends AS 43.23.130(b) to add "the general fund" to the list of organizations, community foundations, or charitable organizations eligible to be added to the contributions list. (page 2, lines 8- 17) Section 3: Amends AS 43.23.130(j) to include "and funds" to the contributions report. (page 2, lines 19- 22) Section 4: Amends AS 43.23.130(m) by adding "the general fund" to the list of funds which the department may not withhold a coordination fee. (page 2, lines 24-31 continuing on page 3, lines 1-6) Section 1: Amends AS 43.23.130(a) to include "the general fund" in the list of funds and organizations who electronic Alaska permanent fund dividend applicants may direct contributions to. (page 1, lines 3-15 continuing on page 2, lines 1-6) SENATOR WILSON stated that he would like the committee to adopt an amendment or clarify the intent to have a separate button from the Pick.Click.Give. button and that there would be a seven percent administrative fee to implement the online application process. He noted that a revised fiscal note was forthcoming. He summarized that SB 92 gives the people of Alaska the opportunity to support the services they want and need with all or part of their dividend. "Before we plan to cut the dividend, let's see how many Alaskans are willing to put forth their contribution to the State of Alaska." He noted who was available to answer questions. 2:04:15 PM SENATOR COGHILL commented that he thought about starting a nonprofit called the "general fund." He asked if the bill should specify the general fund of the State of Alaska. SENATOR WILSON answered no; the intent is for the state general fund and there is also the statement that the donations are subject to a seven percent administrative fee. SENATOR COGHILL asked what the current process is to return a dividend. SENATOR WILSON offered his understanding that Alaskans can write a check to the Division of the Treasury. More importantly, when somebody decides not to apply for a dividend, their share does not go back to the general fund. Instead, the dividend is recalculated and all applicants receive a little larger dividend. 2:05:58 PM ANNE WESKE, Director, Permanent Fund Dividend Division, Department of Revenue, Juneau, explained that when people ask how they can return their dividend to the state, the division suggests they write a check to the Department of Revenue and it will then be routed to the general fund. This option isn't well known and SB 92 will help get the word out. CHAIR SHOWER asked if not filing for a dividend at all would be a better way. MS. WESKE clarified that opting not to file a dividend application does not benefit the state. It would increase everyone else's dividend a little. 2:07:32 PM SENATOR MICCICHE asked if the portion an individual donates back to the state would be exempt from taxation. SENATOR WILSON answered that tax would be due. He also recommended consulting a tax professional. SENATOR MICCICHE asked Ms. Weske to research whether or not it would be possible to contribute the entire dividend to the state tax free since the money never leaves state control. He acknowledged that donations through Pick.Click.Give. are not tax free. MS. WESKE said she'll look into whether a contribution that never reaches your bank account would be tax free. SENATOR WILSON recalled a discussion in Senate Finance last year on this topic and there didn't seem to be a way around paying the tax on the contribution. 2:12:10 PM CHAIR SHOWER asked the sponsor or Ms. Weske to talk about the constitutional and legal issues associated with designating all or part of the dividend to a specific department or division. SENATOR WILSON confirmed that there is a constitutional prohibition against designating funds that are donated to the state. He said he also looked for a mechanism for that within the Pick.Click.Give. program but the programing was cost prohibitive. CHAIR SHOWER asked what the difference is between an individual donating for a specific purpose and the legislature appropriating for a specific purpose. MS. WESKE said she'd need to research it more before giving an answer. SENATOR WILSON said he believes the dedicated funds prohibition is the same for a person and the legislature, but the legislature has the power of appropriation. 2:15:20 PM SENATOR KAWASAKI said he looks forward to receiving more information from DOR about the tax implications about donating all or part of the dividend. He then asked Ms. Weske how much the state received from the education [raffle] and if it diluted the amount of money for charitable giving. MS. WESKE reported that the education raffle received just under $1 million and the Pick.Click.Give program received just under $3 million. Everyone was pleased and probably a little surprised that the education raffle didn't affect the number of donors or the dollar amount of the Pick.Click.Give. program. It seemed to be a different audience that gave to the education raffle, she said. SENATOR MICCICHE asked, if breaking it out by department isn't possible, why does AS 43.23.130 specifically talk about contributions from dividends to the crime victim compensation fund and the peace officer and firefighter survivors' fund. 2:17:36 PM EMILY NAUMAN, Deputy Director, Legislative Legal Services, Legislative Affairs Agency, Alaska State Legislature, Juneau, related her understanding that while the legislature retains the power of appropriation the amount of those funds are considered designated program receipts. They are among the long list of things that the legislature considers to be designated and while they are subject to appropriation, they usually do go to those sources. SENATOR MICCICHE commented that means you probably could designate to a department. He said he asked about the tax because it makes a difference. If he didn't have to pay tax on his donation, he'd probably donate through the state program. If he did have to pay tax on his donation, he'd give the money to the PTA in his kid's school. He added that he didn't believe the question about dedicated funds fits here but it would be interesting to know the cost if other departments were included. CHAIR SHOWER asked Ms. Nauman to respond. MS. NAUMAN asked Senator Micciche to repeat the question. SENATOR MICCICHE asked if she agrees that since donations to the crime victim compensation fund and the peace officer and firefighter survivors' fund is in statute, it would be possible to expand the scope of donations to other departments without compromising the dedicated fund clause. MS. NAUMAN replied her current understanding is that it would be possible to attempt to direct a donation to a specific purpose. It would be subject to appropriation but the money would likely be earmarked in a certain way like the other program receipts. 2:20:31 PM CHAIR SHOWER asked Senator Wilson if he wanted to talk about the cost and what he found out last year. SENATOR WILSON responded that he was trying to get a bill passed that wouldn't be challenged in court. CHAIR SHOWER asked if he had any information on costs. SENATOR WILSON said he dealt with Ms. Weske last year when he introduced a similar bill. At that time he learned that changes in programing and adding features to the website is costly. MS. WESKE advised that startup for each program is about $10,000 per year plus between $1,200 and $1,800 for upkeep, which includes reporting and updates to the application. SENATOR WILSON said he wanted the record to reflect that according to AS 47.10.115, kids in state custody have their dividends held in trust until they either leave state custody or reach age 18. 2:22:47 PM CHAIR SHOWER found no further questions and opened public testimony on SB 92. 2:23:05 PM MIKE PRAX, representing self, Fairbanks, encouraged the committee to pass SB 92. He said it should be as easy as possible for people to return their dividend to the state if that's what they want to do. It's important to get the program going and fix any issues that arise next year, he said. 2:24:18 PM CHAIR SHOWER found no one else who wished to comment and closed public testimony on SB 92. 2:24:39 PM CHAIR SHOWER held SB 92 in committee.