Legislature(1997 - 1998)
05/05/1998 01:10 PM House JUD
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
CSSB 254(FIN) - LEVY ON PERMANENT FUND DIVIDEND Number 0001 CHAIRMAN GREEN announced the first order of business to be CSSB 254(FIN), "An Act relating to the exemption from levy, execution, garnishment, attachment, or other remedy for the collection of debt as applied to a permanent fund dividend." Number 0054 ANNETTE KREITZER, Legislative Assistant to Senator Loren Leman, Alaska State Legislature, stated that CSSB 254(FIN) will significantly enhance the ability of Alaska businesses and other private parties to collect from debtors who are in a state of default on their financial obligations. She explained that existing state law provides that 45 percent of a person's annual permanent fund dividend check is exempt from collection to pay an outstanding debt. Therefore, even if a person had a court judgement stipulating that they owe a certain amount of money, almost half of their dividend check is exempt from collection, at least when a private party is seeking to collect. She pointed out that there are exceptions to this; child support obligations, student loans and any debts owed to the agency of the state. In those cases the state can garnish 100 percent of a dividend check to satisfy that financial obligation. She stated that small businesses and other private parties do not enjoy that same right. She stated that the original bill proposed to eliminate the 45 percent exemption but an amendment restored the exemption but lowered it to 20 percent. She explained that the percentage of a dividend available for garnishment by private parties would increase from 55 to 80 percent and state agencies would still collect at a rate of 100 percent. Number 0189 REPRESENTATIVE CON BUNDE stated that the dividend is not a huge amount of money and asked what the reasoning was behind going from collecting 100 percent to 80 percent. Number 0227 MS. KREITZER replied that there is a fear that people would not apply for their dividends. Number 0247 REPRESENTATIVE ERIC CROFT asked if the child care debt would come before business debts. MS. KREITZER replied that is correct. Number 0271 REPRESENTATIVE BRIAN PORTER asked, "Why are we taking out the -- if this exemption applies to eligible individual's permanent fund dividend (PFD) both before and after payment?" Number 0284 MS. KREITZER replied that it was something that was requested by the Department of Law but she is not certain. She thought that maybe Nancy Jones could answer that question. Number 0330 NANCY JONES, Director, Permanent Fund Dividend Division, Department of Revenue, stated that in regards to Representative Porter's question there are things that operate on a person's account once it becomes their asset in their bank account. She stated that when the exemption was 55/45, once it when into a person's joint asset account there were different rules that applied, as to who can actually garnish a person's bank account. Therefore, the "before and after payment" was keeping the same ratio of 55/45 all the way into the commingling of a person's assets. She explained that the Department of Law is no longer saying it is applicable and suggested that language be taken out. Number 0404 CHAIRMAN GREEN asked what prevents the person from not filing when the state is going garnish the dividend. Number 0426 MS. JONES replied that she could not give out the numbers because there are not statistics on what is not there. She stated that it is felt in regards to child support because the dividend is going to be garnished that people actually do not file. Number 0457 CHAIRMAN GREEN asked what about in the case of the state collecting. MS. JONES replied that it is the same scenario. Number 0482 CHAIRMAN GREEN stated that he just received a note that states that in some cases a judge may order a person to file for their PFD. MS. JONES stated that there are assignments in the court restitutions of what they can do to get a dividend. She stated that it is still a disincentive for a person to file if in fact punitively, the dividend is going to be taken away. Number 0504 REPRESENTATIVE BERKOWITZ stated that in regards to the hierarchy of payment the Child Support Enforcement Division (CSED) would get it first and then the Department of Law would come about.... MS. JONES replied that the courts would come about fifth. She stated that the highest priority is trustee and bankruptcy, then child support, after that is the state agencies, then IRS and then court offered restitutions. She stated that after that comes the civil cases that are referred to in this bill. REPRESENTATIVE BERKOWITZ asked if this would come co-equal with a civil judgement. MS. JONES relied that is correct and that is what these are. Number 0576 REPRESENTATIVE BERKOWITZ asked if in order to attach the permanent fund one would have to go through a court proceeding. MS. JONES replied that is correct because it has to be deemed by a judgement as a legal debt. One can't come up off the street and demand someone's dividend, it has to go through a court proceeding. Number 0610 REPRESENTATIVE BERKOWITZ stated that if there was a $1,000 dividend and there are no other incumbencies on it, $800 would be what is available for collection. If there was a CSED garnishment of $300, the available amount would be $500. He asked if there was a way to protect the privacy of that person. MS. JONES replied yes there is. All the division tells the party that is seeking to garnish the dividend, even a state agency, is that either the person did not file or that there are no funds available. They do not disclose what agencies have already garnished the dividend. Number 0664 REPRESENTATIVE BERKOWITZ asked if in the civil format, can a creditor compel an individual to file. MS. JONES replied that no one can compel an individual to file an application and the division can not intercede and collect the dividend as if the person has filed, if they do not in fact file. Number 0702 CHAIRMAN GREEN asked if Representative Berkowitz's example was discussed in any other committee. For example, if $500 was left of the dividend after a garnishment, is that next party entitled to $300 or would they be able to file for 80 percent of the remainder. Number 0730 MS. JONES replied that it would be 80 percent of the remainder of the dividend would be available to the collector after the levies. "So it goes down in order, the first thing that comes out is the $2 PFD fee for levies, so if it is 5 levies that is $10 right off the top for PFD, whether it hits or not. The computer then looks at the order of who is doing the levying and then it takes out in order. If it is a 100 percent then the first five bankruptcies CSED, post secondary state agencies, or IRS a 100 percent -- the rest of the check is taken. If the debt in any one those agencies that's capable of $100 percent is less then 100 percent then the 80 percent would be applied -- 80/20 in this situation." Number 0790 REPRESENTATIVE BUNDE asked if someone has a debt greater then the PFD they would get 80 percent but if there were three small debts each one would only get 80 percent of the remainder in sequence of order. MS. JONES replied that would be correct. She stated that each time the levy is placed on the dividend the calculation of 80/20 would apply to each specific collector. Everyone is independent it would not be lumped together, each levy is looked at as if it is the only one. Number 0862 CHAIRMAN GREEN asked if a person was trying to collect $300 that would be within the 80 percent but they would not get $300. Number 0865 MS. JONES replied, "Right, it depends on what the debt is. They do not just take 80/20 it depends of what the debt is. So if the debt is less then that, they are not going to get the entire check. They still get whatever the particular debt is and it looks at a 80/20 ratio." CHAIRMAN GREEN asked "What if there weren't the other two in sequence -- would they only get $240." MS. JONES replied that they would only get 80 percent. CHAIRMAN GREEN stated "Yes but the accumulated amount could not exceed 80 percent -- first in lines gets $300, second gets $300, third only get $200." MS. JONES replied no, that is not correct. Number 0926 REPRESENTATIVE PORTER stated that if that is the way it is being administered then there are regulations written that are inconsistent with the statute. He stated that the bill reads that 20 percent of the annual PFD is exempt from levy, not that each levy can only obtain 80 percent of its value. He stated that if the division is administering it that way they are administering it inconsistent with the statute. Number 0957 MS. JONES replied that this bill is proposed legislation. REPRESENTATIVE PORTER stated that he is referring to the statute that is in place. MS. JONES stated that it is currently 55/45 and it is not to the capacity of the debt, it is on the person's entire dividend but each time that a person comes to levy the dividend the division has to look at 80/20 ratio. REPRESENTATIVE PORTER stated that if there is a $1,000 dividend and there is a $300 levy and that is the only levy he asked what would that person would get. Number 1001 MS. JONES replied that he would get $300. CHAIRMAN GREEN stated that is not what she said to him. MS. JONES stated that is what she meant to say. She stated that Chairman Green was talking about multiple levies and she stated that she answered the ratio of 80/20 would have to be applied. Number 1012 CHAIRMAN GREEN asked, "The first $300 in, gets $300. The next $300 gets his $300, the third one is only going to be able to get $200 because there is already $600 that has been paid out and the maximum that can be paid out is $800, but they don't all get $240 $240 and $240?" MS. JONES replied that is correct. Number 1040 REPRESENTATIVE BERKOWITZ stated that he reads it a little differently. The first person is looking at $1000 that he can take from and the second is looking at $700 that he can take from and the third person is looking at $400. This is because one is allowed the percent of the dividend payable to the individual. He explained that it is not payable if there is an incumbency on it. He stated that the second person would get up to 80 percent of the $700. Number 1121 CHAIRMAN GREEN stated that it does not protect the person's 20 percent. He said, "The $800 is always attachable, $300 now drops to $500 and 80 percent of $500 is $400 that could be attached." REPRESENTATIVE PORTER stated under this bill and under a $1,000 dividend, the recipient of the dividend would be able to obtain $200, if there were more than $800 worth of levies. Number 1155 CHAIRMAN GREEN stated that the committee is trying to figure out how it would be administered when there is more than $800 to be paid out. Number 1179 MS. JONES stated it is "first in time, first in line." On a $1,000 dividend $800 is available so if the first in line collection is $400 that will be paid out. If the next one depletes what is left the third party will not receive anything. She stated that it is first come first serve with the ceiling of 80/20 split. CHAIRMAN GREEN asked if it would not be pro-rated at any time. MS. JONES replied that is correct. REPRESENTATIVE ERIC CROFT asked if it mattered that all the collections are civil judgements. He stated that if CSED had an $800 dollar judgement would the $200 left, go to a civil judgement. MS. JONES stated that it would be on the 80/20 ratio. She stated first there was 100 percent of the dividend available to CSED, the balance left would then under a civil collection order would apply the 80/20 ratio, to what is left. REPRESENTATIVE CROFT asked if it the 80/20 ratio is on the original amount of the dividend or on the amount that is left. MS. JONES replied that it is her understanding that it is on the amount that is left. Number 1301 CHAIRMAN GREEN stated that if this became law, if the first $800 went to a 100 percent entitled collector, the bill stated that 20 percent of the dividend is exempt. He stated that the civil action collector would then be out of luck. REPRESENTATIVE BERKOWITZ stated that he would disagree. The bill referred to the PFD payable to the individual. He stated that there would be $200 left over after the first payment and 20 percent of that $200 is protected, therefore, the civil judgement could go to the extent of $160. Number 1345 CHAIRMAN GREEN stated that he disagreed. He said, "It states the annual permanent fund dividend payable that's the $1000 -- 20 percent of that full amount is exempt and what ever is paid out of the 80 percent is not leaving $200, which then is subject to this because it says the annual permanent fund dividend payable." Number 1368 REPRESENTATIVE CROFT referred to Section 1 (b) which lists all the exemptions. Number 1390 DEBRA VOGT, Deputy Commissioner, Department of Revenue, stated that it was her understanding that when a person or any combination of people, who is not entitled to take 100 percent of the dividend, under this bill, 20 percent would be exempt and it stays exempt unless a person who is entitled to take all of it takes it. She stated that if it is a $1000 dividend and it is paid off to collectors that person will still have to pay tax on that money because it is still his. She stated that she understand Representative Berkowitz's point but they have interpreted it to be that the dividend belongs to the recipient even if some of it is paid off to creditors. Number 1455 CHAIRMAN GREEN asked if there is verbiage that may avoid this confusion. MS. VOGT stated that as she understood the legislation, all it does is change the percentage from 45 percent to 20 percent and it really isn't going to change the way the department has to administered it. Number 1482 REPRESENTATIVE PORTER stated that to him the optimum word is annual permanent fund dividend and that is what the person gets to keep 20 percent of, not what may be left after a small levy. He asked if she knew why the attorneys said it is not necessary to have the before and after payment language in the bill. Number 1507 MS. JONES replied that the Department of Law took it out because there is a separate priority of assets once they are co-mingled. She stated that it was superfluous to have that language in there because once it is paid to a person and it goes to their account there is not any control over who can levy on that bank account. Number 1535 REPRESENTATIVE BUNDE stated that the money can only be taken before it goes into possession of the person. MS. JONES replied that is correct and that is what they do. Number 1551 REPRESENTATIVE CROFT asked if it was correct that in 1997, CSED received over $11 million and there were about 100,000 attachments. He asked if there were about 600,000 people who get the dividend. MS. JONES replied that is correct and there are about 550,000 people that get the dividend. REPRESENTATIVE CROFT asked if 20 percent of the dividends have attachments on them. MS. JONES replied yes, they are either voluntary or involuntary. Number 1585 REPRESENTATIVE CROFT stated that businesses collected over $5 million. Number 1591 MS. JONES stated that they did well because the Internal Revenue Service withdrew. Number 1655 REPRESENTATIVE JEANETTE JAMES asked "Does the agency have the ability to garnish the permanent fund for people who the money does go to the agency on CSED because there is a lot of CSED collections that are for the children but because the parent is on welfare they do get the money." Number 1676 MS. VOGT replied that the dividend goes to the Department of Health and Social Services. It does not stay with CSED. REPRESENTATIVE JAMES stated that she understood that and asked if doesn't a large percent of it go through Division of Family and Youth Services (DFYS). MS. VOGT stated that is correct a large percent of it does go through DFYS but it does not pass through the operating expenditure et cetera. Number 1710 REPRESENTATIVE JAMES stated that she has mixed feelings on the legislation. She stated that she believes people should pay their bills but there is money coming out of the permanent fund every year to hold people harmless who are on welfare. She stated that they might be getting the people who are going to lose their dividend after they have already been held harmless. Number 1769 REPRESENTATIVE NORMAN ROKEBERG made a motion to move CSSB 254(FIN), 0-LS1371\H, out of committee with the attached zero fiscal note and with individual recommendations. Number 1784 CHAIRMAN GREEN asked if there was an objection. Hearing none, CSSB 254(FIN), 0-LS1371\H, moved out of the House Judiciary Standing Committee.
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