HOUSE FINANCE COMMITTEE March 25, 1993 8:37 a.m. TAPE HFC 93-60, Side 1, #000 - end. TAPE HFC 93-60, Side 2, #000 - end. CALL TO ORDER Co-Chair Larson called the House Finance Committee to order at 8:37 a.m. PRESENT Co-Chair Larson Representative Hoffman Co-Chair MacLean Representative Martin Vice-Chair Hanley Representative Navarre Representative Brown Representative Parnell Representative Foster Representative Therriault Representative Grussendorf ALSO PRESENT Representative Brice; Representative Nordland; Representative MacKie; Mike Greany, Director, Legislative Finance Division; Arthur H. Snowden, II, Administrative Director, Alaska Court System; Tam Cook, Director, Legislative Services Division; Gerald J. Dorsher, Veterans of Foreign Wars; Drew Scalzi, Kenai Peninsula Borough Assembly; Vicky Borrego Catholic Community Service; Sherrie Goll, Alaska Women's Lobby; Kent Swisher, Alaska Municipal League; Ruth Gubyas, Older Alaskans Commission. SUMMARY INFORMATION HB 66 "An Act relating to municipal property tax exemptions for certain residences and to property tax equivalency payments for certain residents; and providing for an effective date." CSHB 66 (FIN) was reported out of Committee with"no recommendation" and with two zero fiscal notes by the Department of Community and Regional Affairs and with a zero fiscal note by the Department of Administration and with a fiscal impact note by Department of Education. HB 67 "An Act relating to eligibility for and payments of public assistance; and providing for an effective date." HB 67 was HELD in Committee. 1 HB 151 "An Act relating to payment by indigent persons for legal services and related costs; and providing for an effective date." CSHB 151 was reported out of Committee with a "do pass" recommendation and with a zero fiscal note by the Alaska Court System, dated 2/24/93 and with two zero fiscal notes by the Department of Administration and with a fiscal impact note by the Department of Law. HOUSE BILL NO. 66 "An Act relating to municipal property tax exemptions for certain residences and to property tax equivalency payments for certain residents; and providing for an effective date." Members adopted Work Draft 8-GH1032\R, 3/15/93 during the March 18, 1992 House Finance Committee meeting (Attachment 1). Co-Chair MacLean noted that members had received two amendments from Representative Brown. Amendment 1 adds a new section to create a mandatory low income deferral program for seniors, disabled veterans, and widows on the first $150.0 thousand dollars of the assessed value of real property (Attachment 2). Amendment 2 gives municipalities the option to add hardship language to either the exemption program or the deferral program (Attachment 3). She noted that members also received a memorandum from Tam Cook, Director, Legislative Services Division (Attachment 4). Co- Chair MacLean also referenced a letter from Marjorie Odlund, Assistant Attorney General (Attachment 5). Co-Chair MacLean indicated that she supported Amendment 2. She felt municipalities should be given the option to offer hardship deferments. She explained that Amendment 2 would allow the municipalities to develope local ordinances to defer or exempt senior citizen or veterans from property tax. She relayed that the Legal Services Division advised that the two amendments are incompatible. GERALD DORSHER, VETERANS OF FOREIGN WARS spoke against HB 66. He asked that the Senior Citizen and Veterans Property Tax Exemption Program be kept intact. He emphasized that veterans may lose their state death gratuity. He noted that federal taxes on heating will also hurt veterans and other fixed income persons. Co-Chair Larson noted that Amendment 2 would allow 2 municipalities to continue the tax exemption or institute a deferment. Co-Chair MacLean observed that municipalities would define "hardship" through ordinances. Co-Chair Larson reviewed the Senior Citizen and Veterans Property Tax Exemption Programs. He noted that the programs were begun around 1973. The State fully funded the programs until 1985. Since then the municipalities have had to fund the portion not funded by the State of Alaska. Municipalities have requested that the State fully fund the programs or give them the option to fund the programs. The program cost approximately $9 million dollars in FY 93. Two-thirds of the FY 93 program cost was carried by the municipalities. DREW SCALZI, KENAI PENINSULA BOROUGH ASSEMBLY spoke in support of HB 66. He noted that state funding of the mandatory exemption has been steadily declining each year. He observed that municipalities only received 20 percent of the total amount exempted in 1992. He emphasized that municipalities should be given the opportunity to draft an exemption ordinance. He added that voter approval should be included. Mr. Scalzi supported a January 1, 1994 effective date and exclusion for full value determination. Co-Chair MacLean observed that under CSHB 66 (FIN) municipalities have the option to exclude full value determination. She added that the effective date of CSHB 66 (FIN) is January 1, 1994. KATE SWISHER, ALASKA MUNICIPAL LEAGUE expressed support for HB 66. He spoke in support of Amendment 2. He emphasized that the Alaska Municipal League will assist local governments in creating programs. He reiterated that municipalities are paying 80 percent of the program. He stated that the Alaska Municipal League would prefer that the program be fully funded by the State of Alaska. Representative Brown asked if the Alaska Municipal League could live with the mandatory deferral. Mr Swisher felt that the majority of municipalities would be able to institute the mandatory deferral. Representative Martin asked if the assess value should be a formula to allow for area differentials and inflation. Mr. Swisher stated that the Alaska Municipal League would prefer that no specific level be established. He noted that municipalities could exempt more than the first $150.0 thousand dollars. Representative Martin MOVED to ADOPT, Amendment 2. 3 Co-Chair MacLean reiterated that Amendment 1 and Amendment 2 are not compatible. Representative Brown questioned the amendments incompatibility. PAM COOK, DIRECTOR, LEGISLATIVE SERVICES DIVISION clarified that Amendment 1 would provide a mandatory deferral with an income cap in lieu of an optional deferral. Municipalities would have an obligation to provide a deferral for low income seniors and veterans. In addition, municipalities would have the option of exempting property for categories of individuals without the income test. The optional deferral portion of CSHB 66 (FIN) is deleted by Amendment 1. She noted it would be possible to layer an optional deferral on Amendment 1. Representative Martin asked if Amendment 1 should be split. Ms. Cook explained that she could reconcile Amendments 1 and 2 if both are adopted. Representative Brown asked if the deletion of "Page 3, lines 9 - 31: Delete all material" would allow an optional deferral, a mandatory deferral and an optional exemption. Ms. Cook agreed that such an amendment to Amendment 1 would allow an optional deferral, a mandatory deferral and an optional exemption. Representative Hanley noted that Amendment 1 would determine the income level for deferrals. He asked if municipalities could deferral assessed property at a higher value than $150.0. Ms. Cook explained that under Amendment 1, municipalities would not be able to change the level of deferral or the classification of qualified individuals. If an optional deferral is added, municipalities could defer seniors and veterans whose income is above the mandatory level. Under Amendment 2 municipalities would have flexibility to defer at any level they wished seniors and disabled veterans. Representative Brown stated that a mandatory exemption must be accompanied by a dollar amount. Ms. Cook agreed that municipalities must be told specifically what they are mandated to defer. Representative Martin asked if a formula could be used. Ms. Cook agreed that a formula could be devised. Representative Martin expressed his concern that rural areas could feel they were being discriminated against. Ms. Cook emphasized that tax codes use the same specific dollar amounts across the board, statewide. Representative Martin WITHDREW HIS MOTION. There being NO 4 OBJECTION, the motion was withdrawn. Representative Brown MOVED to AMEND, Amendment 1, to delete "Page 3, lines 9 - 31: Delete all material." She explained that Amendment 1, as amended, would provide a mandatory floor for defer of low income seniors and veterans and an optional exemption or deferral of others. There being NO OBJECTION, it was so ordered. Representative Hanley expressed support for Amendment 2. Representative Grussendorf felt that municipalities would have difficulty instituting programs unless guidelines are provided. Representative Brown emphasized that the over-riding consideration is to provide a safety net to the poorest people. She urged the Committee to not force individuals out of their homes. She stressed that a new property tax will be a problem to many individuals on a fixed income. She acknowledged that many municipalities are moving in the direction of providing deferrals. Mr. Swisher, in response to a question from Co-Chair Larson, stated that the Alaska Municipal League preference is for a minimum of mandates and maximized flexibility. He acknowledged that Amendment 1 is less onerous than other options. Representative Grussendorf noted that he has been a member of the Alaska Municipal League. He observed that if there is legislation that is "too wide open, then there is a tendency for nothing to happen." He felt that it would be easy to ignore the need without specific guidelines. Mr. Swisher felt that seniors and veterans groups would pressure local governments to address the issue. (Tape Change, HFC 93-60, Side 2) Representative Brown MOVED to ADOPT Amendment 1. A roll call vote was taken on the motion. IN FAVOR: Brown, Foster, Grussendorf, Hoffman, Navarre OPPOSED: Hanley, Martin, Parnell, Therriault, MacLean, Larson The MOTION FAILED (5-5). Representative Brown MOVED to ADOPT Amendment 2. There being NO OBJECTION, it was so ordered. Representative Brown referred to the effective date. She asked how the effective date relates to the fiscal notes. 5 She noted that the State would be responsible for half a year of support to the exemption. Representative Martin noted that taxes are collected on the calendar year. Representative Brown asked what is the intention for the first half of FY 94 in regards to reimbursing municipalities. Co-Chair Larson emphasized that the legislature must decide if they are going to appropriate for a half a year. Representative Brown asked for an explanation of the zero fiscal notes. Co-Chair Larson noted that fiscal notes reflect the Governor's proposed zero funding. Representative Navarre asked if the tax exemption is prospective or retrospective. Representative Martin MOVED to report CSHB 66 (FIN) out of Committee with individual recommendations and with the accompanying fiscal notes. Representative Brown OBJECTED. She emphasized that the bill should stay in Committee until an option is developed which will protect poor persons. She stressed that programs aiding low income people are receiving reductions in other areas of the budget. She asserted that the State will incur other costs as a result of the legislation. She maintained that individuals will "fall threw the cracks" as a result of the legislation. A roll call vote was taken on the motion. IN FAVOR: Grussendorf, Hanley, Martin, Parnell, Therriault, MacLean, Larson OPPOSED: Navarre, Brown The MOTION PASSED (7-9). Representatives Foster and Hoffman were absent from the vote. CSHB 66 (FIN) was reported out of Committee with"no recommendation" and with two zero fiscal notes by the Department of Community and Regional Affairs and with a zero fiscal note by the Department of Administration and with a fiscal impact note by Department of Education. HOUSE BILL NO. 151 "An Act relating to payment by indigent persons for legal services and related costs; and providing for an effective date." House Bill 151 was in a subcommittee consisting of Chair Representative Hanley with members Representatives Parnell, 6 MacLean and Hoffman. Representative Hanley explained changes made by the subcommittee. Changes were made to ensure that indigent people would not be charged for facilities not paid for by non-indigent. Co-Chair Larson MOVED to ADOPT, Work Draft 8-LS061\J, dated 33/17/93. Members discussed the meaning of "facilities". There being NO OBJECTION, Work Draft 8-LS061\J, dated 33/17/93 was adopted. ARTHUR H. SNOWDEN, II, ADMINISTRATIVE DIRECTOR, ALASKA COURT SYSTEM explained the Supreme Court asked that legislation be introduced to recover costs incurred by indigent. He asserted that indigent are protected by language in the legislation allowing deferment for "manifest hardship." The Court maintains that "upon the person's conviction" should be deleted. Representative Hanley pointed out that enforcement of judgments can be stayed. He emphasized that extra protection has been added for indigent people. Representative Brown stressed that the provision which would delay repayment for three years after incarceration has been deleted. She asked if persons should have more time to reestablish themselves after release. She emphasized the difficulty of individuals to transition back into society. Mr. Snowden noted that some individuals will only serve 30 to 90 days. He stressed that the collection delay would cause difficulties in the Department of Law. He maintained that some individuals may have money at the time of trail that is hidden from the court. Representative Therriault stressed that due to civil exclusion a judge could not go after an individuals "last penny". He felt that there is no reason the State should wait three years to recoup the costs of some one who spent 30 days in jail for a DWI. Representative Grussendorf spoke in support of maintaining "upon the person's conviction". Mr. Snowden clarified, in response to a question from Representative Parnell, that a "no contest" plea would be considered a conviction in regards to cost recover. Representative Navarre MOVED to TABLE CSHB 151 (FIN). Representative Martin OBJECTED. Representative Navarre WITHDREW HIS MOTION. Representative Brown MOVED to TABLE 7 CSHB 151 (FIN). A roll call vote was taken on the motion. IN FAVOR: Grussendorf, Navarre, Foster, Hanley, Martin, Parnell, Therriault MacLean, Larson OPPOSED: Brown Representative Hoffman was absent from the vote. The MOTION FAILED (9-1). Representative Martin MOVED to report CSHB 151 (FIN) out of Committee with individual recommendations and with the accompanying fiscal notes. Representative Brown OBJECTED. A roll call vote was taken on the motion. IN FAVOR: Grussendorf, Navarre, Foster, Hanley, Martin, Parnell, Therriault MacLean, Larson OPPOSED: Brown Representative Hoffman was absent from the vote. The MOTION FAILED (9-1). CSHB 151 (FIN) was reported out of Committee with a "do pass" recommendation and with a zero fiscal note by the Alaska Court System, dated 2/24/93 and with two zero fiscal notes by the Department of Administration and with a fiscal impact note by the Department of Law. HOUSE BILL NO. 67 "An Act relating to eligibility for and payments of public assistance; and providing for an effective date." VICKY BORREGO, LEGISLATIVE LIAISON, CATHOLIC COMMUNITY SERVICE spoke in opposition to HB 67. She stressed that HB 67 would: * Reduce the amount of public assistance grants Alaskan families may receive. * Take out any cost of living allowances available through the law beginning January 1, 1994. * Rollback public assistance benefit levels to what was in effect on January 1, 1990. Ms. Borrego noted that the most needy senior citizens and disabled adults will be affected. Seniors will lose as much as $36 dollars a month. An estimated 23,000 dependent children will be affected. She maintained that HB 67 does not promote greater self-sufficiency, independence or 8 empowerment but reduces an already spartan monthly benefit. She felt that other options should be sought before taking away basic benefits. RUTH GULYAS, OLDER ALASKANS COMMISSION spoke against HB 67. She stressed that poor seniors and disabled adults will loose $36.00 dollars a month. The Older Alaskans Commission (OAC) is concerned about the bill's effects on poor Alaskans, Children and disabled adults. She stressed that nearly 14 percent of Alaskans over the age of 65 are recipients of old age assistance. she observed that many seniors and all disabled adults under age 65 are not covered by Medicare. She noted that Alaska has a high percentage of persons who are not eligible for social security benefits. The Commission feels that seniors are not likely to be able to reverse their current economic situations. SHERRIE GOLL, ALASKA WOMEN'S LOBBY spoke in opposition to HB 67. She asserted that HB 67 contains the "most sweeping set of cuts to public assistance that has ever been considered by the Alaska Legislature." She maintained that HB 67 contains everything that can be done to reduce benefits to poor people. She noted that testimony in previous hearings have been overwhelmingly against HB 67. She asserted that HB 67 will be particularly devastating to rural Alaskans. Ms. Goll reiterated statistics noted by the previous two speakers. She noted that there are 5,438 disabled and 89 blind adults that will be affected. She denied that people move to Alaska to receive higher AFDC benefits. She maintained that the growth in caseload for public assistance programs has remained constant in comparison to population growth. She noted that an additional growth in caseload resulted from federally mandated changes in program eligibility. She stressed that the standard of need is the standard of basic decency and health. She maintained that the basic standard of decency and health will no longer be met if HB 67 is passage. Ms. Goll noted that AFDC is designed to help parents of children to get back into the job market. She asserted that adult public assistance clients have little chance of improving their financial picture. She stressed that the alternative to assistance is institutionalization. She noted that one in five children are dependent on AFDC. Eighteen percent of Alaskan children are involved in the program. She emphasized that other assistance programs are also being reduced. There is a three year waiting list for assisted housing in Juneau. The poor spend 70 percent of their income on housing. They will pay 78 percent if HB 67 passes. She asserted that Permanent Fund Dividend checks 9 are not spent on luxuries. Ms. Goll stated that unemployed parents should be targeted by jobs programs. She urged the Committee to consider the Adult Public Assistance Program separate from AFDC. She stressed that CSHB 67 (HESS) goes further than the Administration planned. She maintained that the Administration did not intend to delete the COLA. ADJOURNMENT The meeting adjourned at 10:12 p.m. 10