Legislature(2017 - 2018)SENATE FINANCE 532
04/07/2017 09:00 AM Senate FINANCE
Note: the audio ![]()
and video ![]()
recordings are distinct records and are obtained from different sources. As such there may be key differences between the two. The audio recordings are captured by our records offices as the official record of the meeting and will have more accurate timestamps. Use the icons to switch between them.
| Audio | Topic |
|---|---|
| Start | |
| SB6 | |
| HB16 | |
| SB45 | |
| SB78 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | SB 45 | TELECONFERENCED | |
| + | SB 78 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | SB 6 | TELECONFERENCED | |
| += | HB 16 | TELECONFERENCED | |
SENATE BILL NO. 78
"An Act creating the education endowment fund and the
dividend lottery fund; authorizing contributions from the
permanent fund dividend to the dividend lottery fund;
relating to transfers from the dividend lottery fund and
the education endowment fund; relating to the definition of
'gambling'; and providing for an effective date."
10:16:52 AM
Vice-Chair Bishop introduced SB 78. He offered a brief
overview of the legislation. He spoke of a past mentor that
had highlighted the Education Head Tax taken out of his
first paycheck at 16 years old. He stated that SB 78 would
set up an education lottery as a fun way to raise money for
education. He believed that the bill would provide stable
funding for education while supporting economic
diversification in the state.
10:20:01 AM
PETE FELLMAN, STAFF, SENATOR CLICK BISHOP, relayed that the
bill proposed a voluntary program that allowed for the
option of donating to education via the permanent fund
dividend application. He added that the option would be
limited to applicants over 18 years old. He continued that
95 percent of the donated funds would be immediately used
for education or would be held for education in the future.
He relayed that half of all the donations would go directly
to the Public Education Fund for the respective year.
Additionally, 25 percent of the funds would go to establish
the Public Education Endowment, where it would grow through
investment. The remaining 25 percent would go into the
Education Lottery Fund, which would pay out a percentage
for prizes. Of the 25 percent of total donations, 20
percent would be used to pay lottery prizes through a
drawing, every year. He specified that 80 percent of the
lottery fund would remain and grow. He related that the
fund would grow and feed itself overtime.
10:24:13 AM
Mr. Fellman discussed the Sectional Summary for SB 78 (copy
on file):
Section 1: Amends the definition of "gambling" in AS
11.66.280(3) to exclude the permanent fund dividend
drawing in AS 43.23.064.
Section 2: Adds new sections to AS 43.23:
Sec. 43.23.063: Creates an education endowment
fund in the general fund. The fund consists of
contributions to the fund from permanent fund
dividends (dividends) under AS 43.23.064(b),
transfers to the fund under AS 43.23.064(c),
interest, and any other money appropriated to the
fund. Makes the commissioner of revenue the
fiduciary of the fund. Sets the requirements for
the commissioner to manage the fund. When the
average market value of the fund exceeds
$1,000,000,000, 4.5 percent of the average
fiscal-year-end market value of the balance of
the fund for the last five fiscal years is
transferred to the public education fund, subject
to appropriation.
Sec. 43.23.064: Creates the dividend lottery fund
as an account in the general fund. Requires the
commissioner of revenue to manage the fund. The
fund consists of appropriations from dividends,
interest and income earnings shall also be
appropriated to the fund. This section allows the
commissioner to use the fund without further
appropriation to pay for prizes and to pay the
cost of administering the fund. When the balance
of the dividend lottery fund exceeds $500,000,000
at the end of the fiscal year, the commissioner
transfers the amount above $500,000,000 to the
education endowment fund. Allows a person to
contribute all or a portion of the person's
dividend in increments of $100 or more. 25
percent of the contributions may be appropriated
to the education endowment fund, 25 percent of
the contributions may be appropriated to the
dividend lottery fund, and 50 percent of the
contributions may be appropriated to the public
education fund. Entitles each $100 contribution
to one entry into the drawing. The prizes are
based on a percentage of the balance of the
lottery fund.
Section 3: Provides an effective date of January 1,
2018.
10:25:34 AM
Senator Micciche extrapolated that if 50,000 residents
participated in the first year then $5 million would be
generated. He continued that $2.5 million would go directly
into the Public Education Fund, with 25 percent going into
the endowment and 25 percent would go into the lottery
fund. The lottery find would pay out at 20, 15, 10, and 5
percent. He understood that once the lottery fund reached
$1 billion, the POMV would be deposited into the education
fund.
Mr. Fellman answered in the affirmative. He furthered that
once the lottery fund reached the $500 million mark,
everything above that mark would be deposited into the
education fund.
10:27:19 AM
Co-Chair MacKinnon wondered about the determination of
adult status for 18-year-old residents.
Mr. Fellman replied that he did not know the answer.
Co-Chair MacKinnon expressed concern that parents could use
a child's dividend inappropriately on the raffle. She
wondered how many adult applications were received each
year.
10:28:41 AM
JERRY BURNETT, DEPUTY COMMISSIONER, TREASURY DIVISION,
DEPARTMENT OF REVENUE, stated that the Permanent Fund
Dividend Annual Report would break down the number of
application between children and adults. He said that in
2016 there were approximately 493,000 adult applications.
He clarified that any resident over the age of 18 would
fill out an adult application. He stressed that
applications for children could not be used for a person
who was over 18 years of age.
Co-Chair MacKinnon wondered whether any transitional
language was necessary for an individual who would reach
the age of 18 by the time of distribution but not 18 at the
time of the application.
Mr. Burnett replied that he had not fully reviewed the bill
language but believed that the bill specified an adult
application should be used. He thought it was possible for
adjustments in the language to accommodate for retroactive
entrance into the lottery if a resident turned 18 after the
application date but before the distribution date.
10:30:57 AM
Senator Dunleavy asked whether the lottery would be limited
to Alaskans that qualified for the permanent fund dividend.
Mr. Fellman affirmed that the bill proposed a limited
lottery.
Senator Dunleavy referred to a document "SB 78 - Education
Lottery,"(copy on file) which indicated prize levels. He
questioned the prize value 10 years out.
Mr. Fellman replied that by year 10 the grand prize would
be $15 million.
10:32:18 AM
Senator Dunleavy appreciated the magnitude of the prizes.
He thought that the prize levels could be cause for the
lottery to be opened to non-residents.
Co-Chair MacKinnon agreed with Senator Dunleavy's concerns.
She thought that smaller prizes, spread to more people,
could be more beneficial to Alaskans.
Senator Dunleavy countered that he appreciated the current
prize structure.
10:34:06 AM
AT EASE
10:35:34 AM
RECONVENED
Co-Chair MacKinnon noted that under the legislation if the
lottery fund were to grow to $500 million there would be
one winner at $50 million when the maximum number was hit.
She added that it would take a very long time for the fund
to grow to that size, even with high participation. She
asked how the public would be informed of participation in
the lottery.
Vice-Chair Bishop deferred to Mr. Fellman.
10:37:32 AM
Mr. Fellman hoped that Department of Revenue would
contribute funds for advertising in the initial years and
thought that in subsequent years the program would
advertise itself. He noted that 2 percent of the fund would
be used for advertising. He believed that the odds were
very good, there would be four winners each year. He said
that if the cap were reached there would be winners at $50
million, $25 million, $12.5 million, and so on. He stressed
that 95 percent of the donations would go directly into
education in one form or another.
Co-Chair MacKinnon thought that the likelihood of winner
would be greater if there were more winners overall.
Mr. Fellman agreed.
10:39:22 AM
Co-Chair MacKinnon noted that the current Pick.Click.Give
option was offered when finalizing the permanent fund
application. She wondered whether there would be cost to
modifying the application process to incorporate the
lottery.
Mr. Burnett stated that there was an $8,000 fiscal note
from the permanent fund division that estimated the one-
time cost of making the change to the application process.
He said that the department would add the extra lottery
information to the advertising efforts already established.
He stated that additional advertising could be added but
the exact costs would be hard to determine at this point.
He assured the committee that getting the information out
to the public would be of minimal cost.
10:41:45 AM
Co-Chair MacKinnon related that the current program
required a 501, a tax deductible, charitable donation. She
probed the how the relationship with donations and gambling
would work in the legal sense.
Mr. Burnett replied that 25 percent of the donation would
not be tax deductible because that would be the percentage
entrance into the lottery. He related that donations to the
state would be tax deductible, or the remaining 75 percent
of the donation, voluntary payments to government would be
deductible.
Co-Chair MacKinnon asked whether the consumer would be
informed that only $.75 on each dollar would be tax
deductible.
Mr. Burnett thought that it would be easy to inform the
public; the 1099 form would show the donated amount and the
breakdown of that donation.
Co-Chair MacKinnon thought that the administrative fee
could come out of the other fund.
Mr. Burnett agreed.
10:44:27 AM
Senator von Imhof queried the maximum limit a person could
participate in the lottery per year.
Mr. Fellman indicated that it was possible to give your
entire permanent fund dividend in $100 increments.
Senator von Imhof wondered whether how the state would make
more than it paid into the lottery from year to year.
Mr. Fellman clarified that of the 25 percent donated to the
lottery fund, only 20 percent was used to pay for the
prizes. He explained that 80 percent would sit in the fund.
He furthered that 25 percent of all the donations received
in the following year would be added to the 80 percent;
there would always be 80 percent from the previous year to
build on in subsequent years.
Senator von Imhof asked how the annual payout would be
calculated. She wondered whether the payout was based on
the money invested per year and not the value of the fund
at $500 million.
Mr. Fellman replied in the affirmative. He stated that if
no bets were placed, there would be no payout.
She questioned what would happen if there were no
participants in a given year.
Mr. Fellman replied that if no one participated, there
would be no payout.
10:48:08 AM
Co-Chair MacKinnon opined that the issue remained unclear.
She relayed that a 10 percent winner would not qualify for
$50 million; if only 20 percent of the $500 million fund
was available for distribution, the maximum payout would be
approximately $10 million and not $50 million.
Mr. Fellman replied that if there was $500 million in the
fund, the state would pay out 20 percent of the $500
million in prizes.
Co-Chair MacKinnon clarified that $50 million was the total
payout, but not to one individual.
Co-Chair MacKinnon OPENED public testimony.
10:49:44 AM
PAUL KENDALL, SELF, ANCHORAGE (via teleconference),
testified in opposition to the bill. He lamented that the
legislative process was difficult for the public to
navigate. He felt that the legislature was dysfunctional.
He felt that the "education sector" of Alaska was hording
the state's money. He was in opposition to the cost of
education.
Co-Chair MacKinnon CLOSED public testimony.
10:55:23 AM
Vice-Chair Bishop expressed appreciation for the committee
hearing the bill. He emphasized that the bill proposed a
donation to the future of Alaska's children.
SB 78 was HEARD and HELD in committee for further
consideration.