Legislature(2001 - 2002)
04/10/2001 08:07 AM House CRA
| Audio | Topic |
|---|
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HB 18-RENTERS' TAX EQUIVALENCY PAYMENT APPROP. Number 2874 CO-CHAIR MEYER announced that the next order of business would be HOUSE BILL NO. 18, "An Act making an appropriation to the Department of Community and Economic Development for renters' tax equivalency payments; and providing for an effective date." Number 2859 PATRICK FLYNN, Staff to Representative Berkowitz, Alaska State Legislature, informed the committee that HB 18 would restart the renters' tax equivalency program that would provide a small stipend to seniors and disabled veterans who rent homes in jurisdictions that levy property taxes. This program came into being because the state allowed $150,000 in tax free property ownership for a senior or disabled veteran's personal home and thus the state felt it appropriate to apply the same concept to those who don't own their own home. He reminded the committee that the property tax exemption is a state mandate that is no longer funded by the state, and therefore the cost falls on the municipalities. Unfortunately, the renters' tax equivalency program was eliminated in the fiscal year 2000 budget. The hope with this bill is to re-implement a worthy and morally correct program. MR. FLYNN addressed how the program would work. The program would be administered by the Department of Community & Economic Development (DCED), who would receive applications. He stressed that this program is not need-based but rather self selected need-based. In other words, people who don't need this money typically don't apply for it. Mr. Flynn explained that the program is not need-based because seniors and disabled veterans find it insulting to have to demonstrate that they have a sufficiently low income to qualify for the program. Furthermore, the program serves only about 1,100 people and thus implementing need-based testing would likely cost more than the occasional abuser of the program. MR. FLYNN explained that the senior or disabled veteran who is 50 percent or more disabled would apply for the program. The credit amount is based on the number of applicants and the funding available and is parsed out on a per capita basis. In the program's last year, fiscal year 1999, the average stipend benefiting program participants was $277. He specified that the $277 stipend went to 993 seniors and 112 disabled veterans. Number 2681 MR. FLYNN, in response to Co-Chair Meyer, specified that about 1,100 people benefited from this program in the last year of its operation. He informed the committee of the following breakdown of participants per year: 1992 - 1,032 participants 1993 - 1,207 participants 1994 - 1,233 participants 1995 - 1,048 participants 1996 - 1,092 participants 1997 - 1,111 participants 1998 - 1,105 participants CO-CHAIR MEYER noted that there was a zero fiscal note for this program. However, he asked if this program would require a person to review the applications. MR. FLYNN interpreted the zero fiscal note to be because the department is intimately familiar with this program and because there is no needs test, the department merely has to verify that the person is 65 years old or older or a disabled veteran with at least a 50 percent disability. CO-CHAIR MEYER agreed that this program would seem to be relatively easy to administer. However, HB 36 would require a position even though there would only be four applications a year. It was further noted that the fiscal note for HB 18, which is zero, was prepared by the same department as the money fiscal note for HB 36. Therefore, Co-Chair Meyer highlighted the inconsistency. Number 2578 CO-CHAIR MEYER acknowledged that the senior citizen property tax exemption program is covered by municipalities, while the program in HB 18 would be covered by the state. Therefore, the programs aren't exactly the same. MR. FLYNN informed the committee that in the program's nascent years, the senior citizens' and disabled veterans' property tax exemption was funded by the state and municipalities were reimbursed for the full amount of that program as part of the municipal assistance and revenue sharing program. As revenues to the state declined, one of the decisions made by the legislature was to fund that program at lower and lower levels until there was no funding. When both programs were new, both were entirely state funded. However, the senior citizens' property tax exemption program continues because there was someone to which to pass the [cost], but there was no such option with the renters' tax program. CO-CHAIR MEYER inquired as to why the renters' tax program couldn't be passed to the municipalities. MR. FLYNN answered that he believes there would be a separation of powers issue if municipalities were told what they had to spend their money. CO-CHAIR MEYER inquired as to the reason this legislation didn't pass when it was introduced in the prior legislature. MR. FLYNN explained that the House Finance Committee declined to hear the bill. Number 2466 REPRESENTATIVE SCALZI turned to the $277 per applicant. He asked if that amount is the amount in taxes on the individual's rent within one year. MR. FLYNN replied, "Yes, essentially." He explained that this money is intended to pay the taxes for the renter so that the renter would receive the same benefit as someone who owns his/her own home. REPRESENTATIVE SCALZI inquired as to what would happen in Anchorage where there is no sales tax, but there is a property tax. He asked if there is a differentiation in the percentage that is paid. MR. FLYNN answered that to his knowledge, there is no differential applied from municipality to municipality. Therefore, each beneficiary of this program would receive the same amount of money. In further response to Representative Scalzi, Mr. Flynn said that it doesn't matter that there is a sales tax. The calculation is based on the number of applications and the amount of money available. Number 2341 REPRESENTATIVE SCALZI restated his question as follows: "As far as the calculation of the tax, that's now being applied to the renter where there is no sales tax, how is that tax calculated that we're trying to reimburse. Or, is there a tax there?" REPRESENTATIVE HALCRO explained that there is no tax but rather there is basically a stipend regardless of the rent or sales tax. The stipend is based on the number applicants divided into the amount of dollars available for the reimbursement. This is basically a subsidy. MR. FLYNN agreed with Representative Halcro and noted that this program is commonly known as the renters' rebate. In further response to Representative Scalzi, Mr. Flynn agreed that this is how the program was structured before. REPRESENTATIVE SCALZI surmised then that there is no way to quantify the equivalent of the tax. MR. FLYNN informed the committee that it would require approximately $1.2 million to fully fund this program. However, in the interest of fiscal responsibility, HB 18 includes a more modest proposal of $300,000. REPRESENTATIVE HALCRO recalled that the funding level of this program in its last year, 1998, was $275,000. Number 2200 MR. FLYNN agreed with Co-Chair Meyer that funding the program at $300,000 for approximately 1,100 participants would result in $277 per person. However, he suspected that the participation for the first year would be a bit lower since the program hasn't been in existence for a year. He noted that municipalities do actively solicit applicants from their economically depressed seniors and disabled veterans. In further response to Co-Chair Meyer, Mr. Flynn reiterated that the program is not need-based because there is concern that it is insulting to have to demonstrate the economic need for this program. Furthermore, if this program was need-based, then he suspected there wouldn't be a zero fiscal note. CO-CHAIR MEYER remarked that if the program isn't need-based, then it is tantamount to giving the senior citizens a permanent fund dividend. MR. FLYNN acknowledged that there are probably unscrupulous individuals that would take advantage of this program. However, he generally believes in the goodness of humanity and that those that don't need this program won't apply. REPRESENTATIVE KERTTULA mentioned that when this legislation first came about she [reviewed] the Juneau recipient list for this program. She knew almost all the people on that list, all of whom she considered lower income people. Number 2095 REPRESENTATIVE MURKOWSKI inquired as to how a veteran would be determined to have a 50 percent disability, which would qualify that veteran for this program. MR. FLYNN pointed out that disabled veterans qualify for the property tax exemption and this program uses the same process. REPRESENTATIVE MURKOWSKI surmised then that there must be some paperwork that the disabled veteran must file. MR. FLYNN also pointed out that [the property tax exemption] is also administered by the department and thus would lend support to why this program can be added. REPRESENTATIVE MURKOWSKI referred to Representative Whitaker's bill regarding not needing to file [the senior property tax exemption] on an annual basis. However, Representative Murkowski assumed that under HB 18 one would have to file and establish that the individual is a renter in a particular neighborhood and that the individual is a disabled veteran and a senior. MR. FLYNN specified that a senior is an individual who is 65 years old or older. REPRESENTATIVE MURKOWSKI expressed her annoyance with DCED issuing a fiscal note for HB 36 to handle four applications, while it issues a zero fiscal note for this program. Number 1822 REPRESENTATIVE MURKOWSKI remarked that this program should be part of the budget rather than being part of a stand-alone bill. However, she understood why it has been introduced as such. Representative Murkowski mentioned that the $300,000 for this program doesn't fund the program to the degree at which it would make a difference, although it would probably make a difference to the individuals. REPRESENTATIVE MURKOWSKI expressed her concern that the senior portion is not need-based. However, she didn't believe that there would be the abuse with this program that would occur with other exemption programs. She didn't foresee extensive abuse with this program that is going to offer $277. Still, she expressed concern that it would cost as much to set up the program as it will to provide the exemption. REPRESENTATIVE HALCRO agreed with Representative Murkowski. He related his belief that this is part of a larger question. For instance, the legislature can't go much longer without facing the [ability to fund] the senior citizens' property tax exemption. He related the projection that in the year 2006, the senior citizens' property tax exemption will cost Alaskan communities over $50 million. These communities have to absorb that cost because the legislature won't fund the program or make it a local option. He didn't believe that Alaskan communities could carry the burden much longer without help from the state. Representative Halcro noted his support of HB 18. Number 1608 REPRESENTATIVE GUESS noted her agreement with the previous two speakers. She then turned to the abuse of the program and agreed with Mr. Flynn that having a need test is not worth it when compared to the cost of the program. CO-CHAIR MEYER agreed that there will be some abuse. However, he agreed with the intent of the legislation. Co-Chair Meyer expressed his concern that the fiscal note isn't accurate because reviewing 1,200 people and verifying the age and disability of the participant will cost some money. Furthermore, the $300,000 that breaks down to $277 per individual isn't much, although it is better than nothing. REPRESENTATIVE KERTTULA recalled that when this cut happened many people contacted her because that small amount of money did make a difference in people's lives. Therefore, she felt this program is a small step towards rebuilding something that was lost. Number 1441 REPRESENTATIVE HALCRO moved to report HB 18 out of committee with individual recommendations and the accompanying fiscal note. There being no objection, HB 18 was reported from the House Community and Regional Affairs Standing Committee.
| Document Name | Date/Time | Subjects |
|---|