04/04/2019 01:30 PM Senate STATE AFFAIRS

             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
.                                                                                                                             
                                                                                                                                
     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.