Legislature(1995 - 1996)
01/24/1995 08:05 AM House STA
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* first hearing in first committee of referral
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+ teleconferenced
= bill was previously heard/scheduled
HSTA - 01/24/95
Number 205
HB 4 - PERMANENT FUND DIVIDEND ELIGIBILITY
REPRESENTATIVE PETE KOTT, SPONSOR OF HB 4, noted that a similar
bill to HB 4 almost passed last year, but died awaiting concurrence
the final night of session. This legislation would remedy a
problem resulting from a court ruling. That ruling suggests that
wives of those eligible to receive the permanent fund, living out
of state, are no longer eligible. It is the piggyback rule. The
wives cannot piggyback on their husband's travel and be considered
eligible. This measure is trying to correct that, and is
retroactive to January 1, 1994, to allow all those last year into
the program. From early indications, the fiscal note will be
approximately $600. He said a representative from the Department
of Revenue was present at the meeting to suggest some changes that
he is in agreement with. Representative Kott said some of the
changes were a result of the new 1995 permanent fund application.
REPRESENTATIVE JOE GREEN questioned the amount in the fiscal note.
REPRESENTATIVE KOTT said the early fiscal note indications, and
this still has to come down from the Governor, is $600. It is an
unofficial version awaiting arrival from the Governor's Office.
CHAIR JAMES noted that the Governor's Office is having a problem
getting geared up to provide fiscal notes. They are behind,
therefore, she recommended lenience on getting these bills passed.
This bill has additional referrals to Judiciary and Finance, so it
will not be passing without a fiscal note. It will be at the will
of committee about what we do.
REPRESENTATIVE KOTT said it was unofficial, but, by June 30, 1995,
the division will mail out 1,300 notices to those who were denied
in 1994, and that is the $600 mailing and processing cost.
Number 265
REPRESENTATIVE GREEN remarked that the $600 is for mailing, but
what about the amount of the money that the permanent fund then is
actually giving to how ever many spouses, dependent children and
other eligible people.
REPRESENTATIVE KOTT estimated the cost for implementing this bill
would be about a $2 per person reduction in the dividend check that
each individual would receive, and this was not coming from general
fund money. Military spouses and other members who accompanied
their husbands out of state were on an eligible absence and were
receiving the permanent fund dividend (PFD) check for about eight
or nine years before the judge ruled on this. The original intent
of the legislature was not to prohibit those eligible wives or
spouses from receiving the dividend check when they were
accompanying their eligible spouse. Currently, the eligible spouse
and eligible children can receive it, but the wife or husband
cannot receive it. This bill corrects a deficiency in a court
ruling that was somewhat inaccurate.
CHAIR JAMES asked if there were any further questions. She
introduced Tom Williams, Director, Permanent Fund Dividend
Division, Department of Revenue.
Number 290
TOM WILLIAMS, DIRECTOR, PERMANENT FUND DIVIDEND DIVISION,
DEPARTMENT OF REVENUE, referred the committee to a handout for his
testimony. He summarized the lengthy document, saying there was
court action, which on December 16, 1993, invalidated a regulation
allowing spouses to piggyback onto their eligible Alaska resident's
absence. As a result of a change in the law that occurred,
effective January 1992, there was a conflict between a statute and
a regulation. With such a regulation, the regulation falls. The
department asked the legislature to fix that problem last year, and
in HB 392 there was language to do that. HB 392 did not pass in
the final minutes of session. The effect was to make the piggyback
absence invalid since January 1, 1992. It affected 1992, 1993 and
1994 applicants. Virtually all of the 1992 and 1993 applicants had
been paid. Some were remaining in appeals. When the department
got ready to pay those remaining in appeals, if they were denied
for another reason and that denial was subsequently overturned,
they could not do it they discovered, because the applicants no
longer had an allowable absence. After consulting with the
Attorney General's Office, the division determined they would not
go back and assess the 1992 and 1993 applicants that had already
been paid. So, the only people that have been affected from 1992
and 1993, were those that had an appeal pending. That denial had
been overturned and they're just waiting to be paid. They pended
those - they did not take any action on them; they held them
awaiting a legislative solution.
MR. WILLIAMS said 1994 was different. He explained none of the
1994 applications have been paid. The division had no basis for
making that allowable absence since it had been struck down. The
division ended up denying all those that had been absent more than
180 days. Mr. Williams said they looked at those who had been gone
less than 180 days and tried to fit them into the general 180-day
discretionary absence where they could. Unfortunately, not many of
those people met that requirement. The total they were required to
deny was 2,690 spouses. There were also some children that were
sponsored by those spouses. These spouses were given the
opportunity to change the sponsorship of those children over to the
other Alaska resident. Some took advantage of that, but not
everybody did. Consequently, if they did not have an eligible
sponsor, the department had to deny them payment. The intent of
the legislation is to retroactively reinstate the piggyback rule to
where it was prior to the court ruling. After discussing the bill
with the Department of Law, there is some question as to whether
the initial draft actually does that. There is a conflict between
two statutes. The conflict arises because absences are a component
of a definition of state residency. This legislation takes what
was once described as an allowable absence by regulation and moves
it into statute. They drafted a committee substitute that will do
what the sponsor has, except it removes all doubt regarding the
technical problem. It removes the allowable absences from the
definition of state resident, moves it to a separate section, and
defines allowable absence as an eligibility criteria. That
eliminates the conflict with the provision that says you cannot
consider the residency of your spouse as not the principal factor.
It still retains the allowable absence provision, and it allows it
to reinstate the historically allowable absences that has been on
the books since the beginning of the program. Another difference
is that in Section IV of the proposed version, it would ensure that
the 1992, 1993 and 1994 applicants are made whole again. He said
that would allow the division to pay those 1992 and 1993
piggybacking spouses that are currently pending. In Section V, it
takes a different approach to an extension of an application
period. In the original bill there is a provision saying that 1994
and 1995 applicants have until September 1 to resubmit an
application if they were affected by this legislation. The
division believes that piggybacking spouses who applied in the past
have already applied for the 1994 dividend, and those applications
are on file. So this is an extension of the appeal deadline up to
September 1, as opposed to the reapplication period. While the
division had denied 2,690 applicants, they only received appeals
from 1,373 applicants. Those have been pended. The other 1,300
that have not appealed would benefit by having an extended appeal
period. With regard to 1995, the proposed substitute doesn't have
anything to do with them as far as an extended filing period. The
reason for that is contained in the last two pages of the
information before the committee. He indicated that the division
has put an important notice in the 1995 dividend application to
spouses absent from Alaska, which is that they should go ahead and
apply for the 1995 dividend by the application deadline.
Number 435
MR. WILLIAMS said the fiscal note covers preparing and doing a
mailout to those people we want to target, letting them know the
law has changed and they can appeal or reapply, whichever the
legislature chooses. He also referred to a question asked by
Representative Green about the fiscal note, saying they have not
included any fiscal impact related to the total amount of the
dividend because, by formula, there is a certain amount that will
be distributed. It doesn't change the amount of dividend payments,
it will change who it goes to. Assuming there were 2,690 people
paid, it would calculate to a little over $2.6 million.
Number 465
REPRESENTATIVE GREEN asked if eligibility is automatic for persons
from another state who are married to someone in the military, who
is an Alaskan resident because of their military service and is
then shipped out.
MR. WILLIAMS said the piggybacking spouse rule only applies to
individuals who accompany an eligible Alaska resident. It doesn't
apply to individuals accompanying a resident from another state.
Both spouses have to be Alaska residents and they have to take the
steps to initiate their own Alaska residency prior to the
qualifying year. So for them to get the 1994 dividend, both
spouses would have had to establish Alaska residency through normal
means, declaring that they are an Alaska resident registering to
vote, prior to the beginning of the qualifying year that would have
been prior to January 1, 1993.
Number 494
REPRESENTATIVE BRIAN PORTER asked how many more eligible people
this version of the bill would incorporate in the past and in the
future. There are some applications pending for 1992 and 1993,
that the new wording would provide the division a better way of
providing money. He wondered if they could do it anyway with
Representative Kott's version.
MR. WILLIAMS answered no. Under Representative Kott's version
there is no relief for 1992 and 1993. That is why they suggested
that they make sure it goes back to...effective for 1992 and 1993.
He did not how many there are, he did not have a number, but
probably fewer than 100.
REPRESENTATIVE PORTER wondered if there were any other categories
of individuals who would be eligible under his version, besides the
100, as opposed to the original bill.
MR. WILLIAMS answered "No. They are not opening it up beyond the
piggybacking spouse. Another important issue is that they included
in the committee substitute, a modifier that you must accompany an
`eligible Alaskan resident' as opposed to just an `Alaska
resident.'"
Number 520
REPRESENTATIVE SCOTT OGAN asked if moneys have been set aside on
the pending applications, and where the revenues will come from if
it is not set aside.
MR. WILLIAMS said moneys were not originally calculated in to cover
that. It was originally estimated there would be 535,000 payable
as of December 31, 1994. Our actual payables were 531,000. There
should be money there to pay those. The worse case scenario is
that the pending applicants would have to wait until July 1,
because there is a provision under AS 43.23.025 which has the
calculation of the dividend. Every year you put all the money that
is left in one pot, slice off what is necessary to pay prior year
dividends, including these, then you calculate the remaining
dividends. There is a method by which people can be paid, if they
can be paid now, because there are sufficient funds in the pot. He
said they would do that just as soon as the legislation passed. If
there was not, they would wait until July 1, at which time there
would be, assuming the dividend program continues.
REPRESENTATIVE OGAN asked if people's PFD checks will not be
reduced next year, if these pending applications are paid.
MR. WILLIAMS said there is a possibility that will occur. It will
depend on the number of other appeals that are overturned and
whether we come up to that actual 535,000. It is possible there
will be virtually no effect.
Number 550
REPRESENTATIVE IVAN IVAN had questions about the committee
substitute. On page 3 of the proposed committee substitute, the
new language inserted reads, "Maintains and demonstrates at all
times an intent to return to the state." He questioned what the
division uses as the criteria to show that intent when determining
eligibility.
MR. WILLIAMS said first they basically assume that the applicant is
honest in telling them they have the intent to return to the state.
They will believe them. They look for indicators that would be
inconsistent with that intent. In fact, they adopted by regulation
a series of steps or actions that clearly are inconsistent with the
individual's intent. As long as an individual does not take an
action inconsistent with maintaining that intent they will tend to
believe them. They look for indications, such as the individual
routinely coming back to the state after an absence, and if they
maintain any ties here, or show some sort of connection to the
state. They look for hard evidence to prove out their intent, but
they start with the premise that their intent is valid.
REPRESENTATIVE IVAN asked if the language appears in other statutes
relating to the permanent fund.
MR. WILLIAMS assured Representative Ivan that it is consistent with
Title I, AS 01.10.055, which generally is the general residency
description for the permanent fund.
REPRESENTATIVE IVAN asked about the appeal period that is in place
in retroactive payments to persons who are found eligible for the
program. He asked about constituents who have missed a year, due
to the inability to read languages. Representative Ivan asked if
they would still be eligible to get the dividend check they missed
the prior year if they failed to submit an application, or it was
lost enroute. He asked how they handle that.
MR. WILLIAMS said there is no provision for adult individuals who
have missed or failed to file an application. There is a provision
in law for children for whom an adult did not file an application
to come back within one year of their eighteenth birthday or within
one year of emancipation, to file for missed dividends. If an
application was lost in the mail individuals can resubmit an
application by a particular deadline. They have to provide a
variety of proofs that they did submit a timely application.
REPRESENTATIVE CAREN ROBINSON referred to two of her constituents,
whose spouses have gone out to further their education, and they
own property in Juneau. Also, one of the constituents returns to
do business. She wanted to reaffirm that these are the types of
people we are trying to get to who are deserving of the PFD. They
clearly show long term residency, own property, and clearly have
intent of coming back and only went temporarily to get further
education or other kinds of military reasons.
MR. WILLIAMS agreed. He said the piggybacking absence applies to
any spouse that is piggybacking onto any legitimate absence. It is
not just military. There are students, our congressional
delegation, and service on the staff. Military and students are
probably the highest category where piggybacking would apply.
Number 615
CHAIR JAMES determined there were no further questions from the
committee and no one waiting on the teleconference, so she called
Judy Erickson to testify.
Number 618
JUDY ERICKSON, BUSINESS OWNER, CAPITAL INFORMATION GROUP, and
Juneau resident. She gave testimony in support of the bill. She
testified that a personal experience made her aware of this issue
when her ex-husband required long-term medical treatment outside of
Alaska. Ms. Erickson explained that her ex-husband and his wife
have lived in Alaska for 20 years, they maintain a home in Juneau.
They have children whom they try to get down to see him as often as
possible, for emotional support. The financial burden is great and
it is important for them to have the dividend. She wanted to
encourage the committee to change the law on this issue to allow
people in this situation to receive the PFD.
Number 640
CHAIR JAMES asked if there was anyone else from the floor who
wanted to give testimony.
REPRESENTATIVE JOHN DAVIES wished to add his voice in support for
this particular bill stating that PFD problems are common among his
constituents. He thinks the bill is long overdue and ought to be
passed. He suggested adding two other categories that they might
want to consider. They are included in HB 5 and fit in the
structure of HB 4. The categories are: (1) Services of Volunteers
of the Red Cross; and (2) Services of Volunteer of the
International Executive Service Corps. It is slightly different in
that it is a private nonprofit organization and does things
essentially the same as the Peace Corps, which is an allowable
absence. The Executive Service Corps matches up predominately
retired executives in the U.S. with a business in a developing
country or foreign country, where our business techniques can help
advance the operation of a similar business in another country. It
is by invitation of the other governments. It functions as the
Peace Corps does in principle, but it is directed at making
businesses more productive. It benefits all of us, because it is
international trade and a good thing to do morally.
Number 685
CHAIR JAMES rolled HB 4 over to the next calendar meeting, asking
the sponsor for a committee substitute with changes in the original
bill. Representatives Porter and Robinson agreed the bill could
not be passed as it was, that changes were necessary.
TAPE 94-1, SIDE B
Number 022
CHAIR JAMES stated they should pass bills in the best condition
they think they ought to be. She suggested the bill be brought
back with amendments to the original bill so they could see the
changes they are proposing, including the suggestions made by
Representative Davies. The committee would try to get back to it
Thursday and pass it.
Number 065
CHAIR JAMES brought the meeting back to order after a five minute
break and asked the record to reflect that Representative Ivan Ivan
was still out.
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