Legislature(2001 - 2002)

04/10/2001 08:07 AM CRA

Audio Topic
* first hearing in first committee of referral
+ 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.                                                                        

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