Legislature(1995 - 1996)
01/26/1995 08:03 AM House STA
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HSTA - 01/26/95 HB 70 - END PFD HOLD-HARMLESS Number 131 MIKE SAVILLE, FINANCE MINISTER, HOPE COTTAGES, testified via teleconference from Anchorage. He said we could have a potential effect on three groups of people if we did away with the hold-harmless clause. He said the people affected are, in many cases, very marginally employed or attending school. He stated if the hold-harmless provision of the permanent fund was removed, it would represent a one-to-one reduction in other benefits. He claimed that most of the people affected use this money for their basic needs. He further stated many of the recipients were medically needy and this could potentially mean a direct loss of medical eligibility. He said they were participating more with many federal programs and that a loss of one month's funding could mean a direct loss of a recipient's eligibility in many of these federal programs. "I think that we ought to be very careful about considering this, because what might represent a minor saving could end up costing the state of Alaska a significant amount of money in keeping programs and providers whole," he said. He further stated that on a social level, most citizens consider the permanent fund a nice thing to have, but the individuals they support depend on it for their basic needs. "I would hate to turn a program that most people consider very positive into one that was a penalty," he said. Number 220 ANGELA SALERNO, REPRESENTATIVE, NATIONAL ASSOCIATION OF SOCIAL WORKERS, ALASKA CHAPTER, testified via teleconference from Anchorage. She agreed with many of the statements that Mike Saville made. She said she thought the permanent fund dividend program (PFD) was set up as a universal program for all Alaskans to enjoy. She declared HB 70 to be a very unfair and discriminatory move. She said it restricted benefits. She stated an AFDC recipient must apply for the permanent fund, and so the recipient cannot even choose between the PFD and their other benefits. She said the legislature would be forcing people to lose benefits if they passed HB 70, and urged them not to do so. REPRESENTATIVE OGAN asked Ms. Salerno what would be the net loss to the recipient if the hold-harmless provision was removed. MS. SALERNO replied it would be dependent on the amount of benefits an individual was currently receiving. She said it would range from about $800 a month on up, depending on the size of the family. She further stated that by receiving the permanent fund, the individual becomes ineligible for AFDC and must reapply. She mentioned this could take two to three months to get through the process. "And so it could become a devastating loss of income to the individual," she said. REPRESENTATIVE OGAN asked if there was a provision to prevent this from happening, would that take care of this concern. MS. SALERNO replied any provision that would ease the administrative procedure would be appreciated, but this wasn't the issue. She said the issue was one of unfairness and discrimination against a whole group of people simply because they are disadvantaged. CHAIR JAMES asked for Pudge Kleinkauf to give her testimony. Number 290 PUDGE KLEINKAUF testified via teleconference from Anchorage, and said she agreed with the two previous speakers. She stated that almost from the beginning of the permanent fund program, the state has seen it to be good policy to not discriminate against those who receive public assistance and to set up a program that allowed these people to receive their permanent fund check. She thought the state has always believed that the right to apply for and receive permanent fund dividends should apply to everyone. She also said that under federal law, a recipient of public assistance must apply for any source of income for which they are eligible. And so a public assistance recipient doesn't even have a choice in their decision to apply. She said this was one of the main reasons the hold-harmless program was set up in the first place. She further stressed that a recipient forced off of public assistance loses their Medicaid. This would either devastate the recipient or their family. She commented that not everyone uses their permanent fund to go to Hawaii or Disneyland; many put the money aside for their children's education. She said many seniors use this money to pay for health insurance to supplement their Medicaid. Thus, when you deny recipients their permanent fund dividend, those people would not have the opportunity that the rest of us have to take our permanent fund and put it away for more important or more long-range goals. She claimed it was very difficult to live on public assistance in Alaska, and so many recipients use their permanent fund to buy essential basic needs and this would go away if the hold-harmless program was removed. She urged the committee to look very carefully before they decided to remove the hold-harmless provision of the permanent fund. CHAIR JAMES asked Ms. Kleinkauf how she would respond to the people who felt they were being taxed each year with a designated tax (referring to the hold-harmless provision) and didn't necessarily want to pay for this, but felt they didn't have a choice. MS. KLEINKAUF responded this money was equivalent to the administrative costs that the state would otherwise have to pay taking people off public assistance and putting them back on after they spent their permanent fund. Number 412 CHAIR JAMES called Elmer Lindstrom to testify. ELMER LINDSTROM, SPECIAL ASSISTANT TO COMMISSIONER PURDUE, DEPARTMENT OF HEALTH AND SOCIAL SERVICES, apologized for not having the fiscal note to the committee before the meeting and announced that it should be ready later that day. He stated the Department of Health and Social Services is opposed to the passage of HB 70. He said the department will provide the committee with a detailed fiscal analysis of the bill by the end of the week. He apologized for not being able to provide the committee with this material prior to the meeting, but said the bill requires extensive analysis, involving six separate detailed fiscal notes and coordination between two divisions in the department. He said, "Previous administrations have considered elimination of the permanent fund dividend hold-harmless program; but have concluded that elimination is neither desirable nor cost effective. The last legislature apparently reached the same conclusion - legislation eliminating the hold-harmless program introduced in the previous legislature did not pass. Elimination of the hold-harmless will lead to additional administrative costs in the division of public assistance. Currently, special interagency agreements exist between the division of public assistance and the federal government which reduce the amount of case processing required when recipients receive dividends. Elimination of the hold-harmless will nullify these agreements and the administrative efforts to process hold-harmless entitlements would be supplanted by additional case processing efforts to suspend public assistance payments when dividends are distributed. Last year, the net general fund cost to the state was calculated to be in excess of one-half million dollars if the hold-harmless program were eliminated and I believe that will be reflected in the new fiscal notes this year, as well. Elimination of the hold-harmless provisions would also result in increased demands on the general relief program which is funded entirely by the state. Last year, the division calculated this additional general fund cost to be $871,000. "In short, while the elimination of the hold-harmless will show a net reduction in public assistance payments to individuals, there will be a net cost in state general funds. This is because the cost of the hold-harmless program is borne, not by the general fund, but by the earnings of the permanent fund itself. The department is also extremely concerned about the impact of the elimination of the hold-harmless on individual clients. All of the recipients are poor. The hold-harmless funds replace federal and state funds, which go only to persons who meet strict eligibility requirements. These individuals are poor families with dependent children, the aged, the blind and the disabled. It's important to note that over the past several years, all of these groups have already seen a reduction in their benefits. Two years ago, legislation was passed which reduced payments to clients in the aid to families with dependent children and adult public assistance programs. The same legislation eliminated the automatic cost-of-living adjustments for these programs. No cost-of-living adjustment has been made since that time, nor is one included in the budget bill introduced last week. The savings to the state generated by the legislation passed two years were, and continue to be, significant. Also, a number of bills have been introduced this session which, if passed, would have a substantial impact on persons currently eligible for hold-harmless funds. At least one of these bills proposes a further reduction in the basic benefits provided families with dependent children, the aged, the blind and the disabled. The cumulative impact of past reductions to benefits, elimination of the hold-harmless program and possible further reduction in benefits would simply be too great. "Finally, when considering HB 70, it is important to remember the basic premise of the program. That premise is that all Alaskans are entitled to share in the benefits of the Alaska permanent fund dividend program. Elimination of the hold-harmless provision would have the practical effect of denying the most needy of all Alaskans - poor families with dependent children, the aged, the blind and the disabled - the benefits of the permanent fund dividend program." He said he was willing to answer any questions and announced that Kurt Lomas from the Division of Public Assistance could answer more technical budget questions. Number 480 REPRESENTATIVE GREEN asked if there could be an innovative application process for the permanent fund which would allow recipients of public assistance to receive the permanent fund without losing their benefits, by either having it spread out over a period of time, and either dispersed by the permanent fund division or the Department of Health and Social Services. MR. LINDSTROM said he assumed that it was possible, but would like to defer that question to Kurt Lomas, who was shaking his head. CHAIR JAMES asked Kurt Lomas to step forward and testify. Number 500 KURT LOMAS, DIVISION OF PUBLIC ASSISTANCE, stated there had been such legislation proposed in the past, but the fiscal analysis showed that either a monthly dispersal or a quarterly dispersal would increase the cost of the hold-harmless program. He said under the current system of one annual payment of the permanent fund, recipients lose only one month of eligibility for their benefits, but if you spread the payment of the permanent fund over the year, recipients generally see a dollar-for-dollar reduction in their benefits from receipt of their permanent fund payment and this usually adds up to more than the loss of one month's benefits. He said this would actually drive up the costs of the hold-harmless program. Number 517 REPRESENTATIVE PORTER asked if such a proposal would keep recipients eligible for their Medicaid benefits. MR. LOMAS responded that although it would if it were below the level required for eligibility of Medicaid. Although he wanted to point out that, in fact, most recipients will not lose their eligibility for Medicaid under the provisions of HB 70. He said federal law allows that cash assistance benefits be suspended for a month and Medicaid be continued during that month of suspension. He said if this bill passed, the Department of Health and Social Services would do everything it could to protect the Medicaid eligibility of its clients. REPRESENTATIVE ROBINSON asked if Mr. Lomas could speak to the general relief part of public assistance, saying that as she understood it, if people were removed from the program, there would be kind of a bulge later. She said she knew that the fiscal note would probably display the costs better, but asked if he could speak generally as to what they might be. MR. LOMAS replied that because of the way public assistance is budgeted, income received in one month actually impacts benefits a couple of months later. He said their projections of increased general relief costs are based on their belief that a proportion of their recipients would spend their permanent fund and then experience a loss of their benefits later. He said then they would face basic need costs and come to the department for general relief assistance. REPRESENTATIVE ROBINSON asked what the number might actually be in costs to the agency, because of increased administrative costs. MR. LOMAS stated he couldn't remember the details of the fiscal note, but it was a question of workload. He said the department projected a small proportion of recipients would apply for general relief assistance, largely because the department would advise people to set aside a portion of their dividend for when they saw a loss of their benefits. CHAIR JAMES asked if someone who received their dividend one month was reinstalled in the program the next month, and then found employment the following month, if they would have to pay back the benefits they had received the same month as they received their dividend. MR. LOMAS said she raised an interesting question. He said in the eyes of the federal government, the department would be required to pursue the recovery of that payment as an overpayment to the recipient, but this was a point of contention between the department and the federal government and the agency does not currently pursue the recovery of such payments. CHAIR JAMES said she was assuming that the reason it took so long for recipients to feel the loss of benefits due to receiving their permanent fund, was it took that long to process the paperwork and stop the payment, similar to Social Security. She further stated she would like to think there are a lot of recipients that do get off public assistance because they find employment, as that was one of their goals. MR. LINDSTROM said the department had consulted with the sponsor of HB 70, after finding that the listed effective date of this bill was January 1, 1996. They asked the sponsor if his intent was that this legislation would apply to the next round of permanent fund dividends, to which the sponsor replied yes. Mr. Lindstrom noted that this creates a problem, as the effective date falls right in the middle of the time when the department is processing applications for the hold-harmless provision. Conceivably, some applications would be affected, while others were not. He said it would be the desire of the department if this bill did move forward, that it have an effective date of prior to October 1995, if it was the intent that it apply to the next round of permanent fund dividends. REPRESENTATIVE WILLIS asked for some historical perspective of the hold-harmless act. MR. LINDSTROM stated it was his understanding the hold-harmless provision was part of the original permanent fund program. He said it had really been an integral part of the permanent fund program from the beginning. He stated he was sure there was some initial opposition at the beginning, and there certainly has been numerous attempts by legislators to remove the provision, but it was part of the original permanent fund program. REPRESENTATIVE WILLIS asked if there was any legal reasons for including the hold-harmless provision in the permanent fund program, or what was the impetus for including it. MR. LINDSTROM said he thought the impetus was simply the belief that the dividend program should benefit all Alaskans. He said the fact was that if this bill passed, that although welfare recipients would still receive dividends, they wouldn't see the practical benefit of it as they would lose eligibility for their other benefits. He thought it was further recognition that the public assistance program was based on need. He said it was simply a matter of equity as to why the program was formed. Number 622 CHAIR JAMES asked if there was any calculation as to the amount of federal income tax that the recipient would have to pay on the permanent fund dividend. MR. LINDSTROM deferred the question to Kurt Lomas. MR. LOMAS said there was no such calculation. CHAIR JAMES verified that recipients were paying the same amount of income tax as everyone else and the state was not reimbursing them for this cost. Number 630 REPRESENTATIVE WILLIS asked if there was a compilation of the numbers this bill would affect, breaking down various categories such as senior citizens in Pioneer Homes, disabled veterans, and other categories of people who were disabled or had special needs. MR. LOMAS responded that the department didn't have the ability to do such a breakdown of effected people. He said they did have the numbers of people who would be affected by categories of public assistance programs. CHAIR JAMES asked if that response was because we had a lot of people on adult public assistance who were not eligible for the permanent fund dividend. MR. LOMAS said this was not the case. He said they did not have that kind of cross-match of data about their caseloads. He pointed out that people who were in Pioneer Homes were not eligible for public assistance so were not affected by this legislation. CHAIR JAMES called for Sherrie Goll to testify. Number 650 SHERRIE GOLL, ALASKA WOMEN'S LOBBY, said she was there to speak for the Alaska Women's Lobby, adding their comments to those who had testified via teleconference. She said they were opposed to this legislation. She said they had been for many years. She said this program was part of the original permanent fund program, and almost every year since 1982, a piece of legislation had been introduced to repeal the hold-harmless program. She said each previous legislature had decided not to repeal the program. She said this would not be a cost saving measure but, in fact, what they were doing was taking costs that were not general fund costs, but coming out of the permanent fund, and making a program that will incur general fund costs of well over $1 million. She said the Lobby agreed there was a discriminatory side to this bill, in that we were saying the only people who could benefit from the permanent fund dividend were the people who could afford to - those people of moderate to high income. She claimed that a person on public assistance didn't have the opportunity to save their permanent fund or use it for pleasure because they weren't allowed to have any assets such as savings accounts. She said the department had reviewed how people on public assistance spent their permanent fund and found that the vast majority of those people were using this money for their basic needs. She said the Lobby would hope that the committee would closely consider this bill, and that if it moved forward, the Finance Committee would consider the ramifications on the general fund, and try to include all Alaskans in the benefits of the permanent fund program. CHAIR JAMES verified there was no one else that wished to testify. She called for the bill sponsor to come back to the table and answer committee questions. Number 692 REPRESENTATIVE PETE KOTT, SPONSOR OF HB 70, commented he wanted to clarify some misunderstandings about the hold-harmless program. He said that recipients of public assistance were not, according to his discussions with the Department of Revenue, required to apply for the permanent fund. This, he said, would be a determination of the individual. He thought that most recipients would choose their benefits over receiving the permanent fund. He said the program mainly applied to Alaska families with dependent children, adult public assistance, and the food stamp program. He said it was not a huge administrative process to place recipients, who were removed from public assistance due to receiving the permanent fund, back on to the program. It was simply a matter of hitting a key on the computer. He commented that he didn't see this bill as discriminatory, and if it was, we had been discriminating for a long time in that we urged people to get off of welfare and were reducing the benefits. He thought these reductions acted as incentives to cause people to seek employment. He said this program was not doing what it was intended to do. He said when this program was first started, we were paying about $6.00 per dividend check, and because of the growth of welfare recipients in the state, we were now paying about $40.00 per dividend check. As a side note, he said this was actually one more attraction to people from other states to come up here and apply for our extravagant welfare benefits. He said that additionally, when someone came up here as a recipient of food stamps, the state gave them a warrant, cash, and he thought we might actually be paying for a federal program with state money. He said he would be happy to answer any questions from the committee. TAPE 95-4, SIDE A Number 000 REPRESENTATIVE ROBINSON asked how Representative Kott saw this as a step in self-sufficiency, in that this only knocks recipients off for a month and then they are reinstalled in the program. She understood this might also apply to the child support enforcement agency; that the repeal of the hold-harmless provision would result in most aid for dependent children cases becoming ineligible for at least one month per year, and the child support division would be required to process each case as a change. She thought this was another place where they would have to look at the impact. She said they already knew they had another overburdened system over there and the state had over $3 million in back income owed to the children of this state. She said she also understood that under the housing program, this would be another area where there would be an adjustment of around 2000 families. She was confused as to how he really perceived this. She said she saw this as a kind of temporary knock out of the system. A program she saw with the welfare reform under President Reagan, would be one that helped recipients move on. She also noted there was an option on the permanent fund form for selecting a fund for education, and she thought by doing this, we would be telling the poorest people in our state that they didn't have this option. She said she would encourage Representative Kott to consider amending his bill to allow recipients of public assistance to keep their permanent fund if they chose to put it in the education fund option. REPRESENTATIVE KOTT replied he was sure that in some cases this wouldn't be helpful to some recipients, who, no matter what you cut, would not actively go out and seek employment. He said he thought that when you started to reduce benefits and bonuses, you encouraged these recipients to go out and actively seek self-sufficiency. He said in considering education, this could be a bit of a problem. But when you weighed things out, you had to ask how many of the recipients who receive public assistance, actually check off the education option for their permanent fund. He said he thought it was relatively very few. He said you could always theorize how these recipients were spending their permanent fund, but he would submit that after traveling through his district, they were not using their dividends for basic needs. He said there was no conclusive support for any one theory. REPRESENTATIVE ROBINSON said she had a study from the Department of Health and Social Services dated March 25, 1993, that she would try and get to the rest of the committee. She said it showed that public assistance recipients don't spend frivolously. Sixty percent buy clothing for their children, fifty-eight percent buy food, forty-four percent buy household goods, and forty percent pay bills. She said most of their money goes back to stimulating the economy. She said they might want to check education, but they were just trying to make ends meet. She also said many of the recipients were a result of domestic abuse and this was, in many cases, a temporary situation. She said as the rest of us get the windfall of the permanent fund, she thought they deserved it also. CHAIR JAMES asked the department to come back to testify and to verify whether the parents were required to apply for their children's dividends, and if they don't, that that child can upon turning eighteen, go back and apply for their back dividends. She also asked if it was true that an underage child of a public assistance recipient who gets any income which is reserved in some type of trust situation, whether that money is counted as income in determining the parent's eligibility for public assistance or aid for families with dependent children. MR. LOMAS responded he wasn't that knowledgeable in the rules of the permanent fund, but he could say that no recipient of public assistance in any program, was required to apply for the permanent fund. He said he didn't know the rules about a parent who doesn't apply for the permanent fund on behalf of their minor child. REPRESENTATIVES PORTER AND GREEN pointed out that Tom Williams, Director, Permanent Fund Dividend Division, Department of Revenue, was in the audience. Number 208 TOM WILLIAMS, DIRECTOR, PERMANENT FUND DIVIDEND DIVISION, ALASKA DEPARTMENT OF REVENUE, said that any child whose sponsor did not file for their permanent fund dividend on their behalf, could upon reaching eighteen years old or the age of majority, apply within that first year for missed dividends, providing they could show they had an eligible sponsor during the time period in question. REPRESENTATIVE ROBINSON asked if all departments impacted could have their fiscal notes available before they met to discuss this bill at the next meeting. CHAIR JAMES verified with Mr. Lindstrom of the Department of Health and Social Services that it could be ready by the next meeting scheduled for January 31, 1995. MR. LINDSTROM replied theirs should be ready by that afternoon, but he wasn't sure that other departments, such as child support, had even been notified of the need. He offered to check on this for the committee. CHAIR JAMES said she thought that it might be better for Representative Robinson to consult with the bill sponsor; that as Chair, she wasn't planning to make it a function of the committee. She offered to allow Representative Kott, sponsor of the bill, to make a closing comment before the meeting adjourned. Number 245 REPRESENTATIVE KOTT closed by saying that he was not privy to the study that Representative Robinson was referring to, but he would have to verify the study's integrity and validity before he could comment on it. He said you could make studies to reflect whatever you wanted. He said we had plenty of studies sitting on shelves collecting dust and he would not believe that a recipient who was asked how they spent their money, would suggest they spent it on alcohol, drugs, or any other non-essential item. He said he wouldn't suggest they are, but if they did, he wouldn't believe they would admit to it. He said he had information which documented that only 6,500 people statewide chose the option of funding future education; so there was a very few people who chose this option, and he would imagine that most of those individuals were children.
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