Legislature(2003 - 2004)
04/03/2003 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
HB 205-PFD: PEACE CORPS VOLUNTEERS & MISC CHAIR WEYHRAUCH announced that the first order of business was HOUSE BILL NO. 205, "An Act relating to service in the peace corps as an allowable absence from the state for purposes of eligibility for permanent fund dividends and to the period for filing an application for a permanent fund dividend; authorizing the Department of Revenue to issue administrative orders imposing sanctions for certain misrepresentations or other actions concerning eligibility for a permanent fund dividend and providing for administrative appeal of those orders; and providing for an effective date." Number 0038 REPRESENTATIVE LESIL McGUIRE, Alaska State Legislature, sponsor of HB 205, told the committee that "the exact form" of the bill was heard [in 2002] and passed the House unanimously, but did not pass the Senate. She stated that in 1982, when the first permanent fund dividend (PFD) was given out, the legislature "took up a list of exemptions that they would allow for permanent fund dividend applications" or allowable absences. The Peace Corp was one of those allowable absences, she noted. REPRESENTATIVE McGUIRE clarified that the bill was passed in 1983, but was retroactive to 1982. For 16 years, she said, Peace Corp volunteers enjoyed an allowable absence to go work oversees to help stabilize nations. She noted that, in 1998, in "a mysterious eleventh-hour political shuffle over in the Senate," Peace Corp volunteers were removed [from the list of exemptions]. Representative McGuire said that HB 205 would put Peace Corp volunteers back on the exemption list. She emphasized that it would not be a new exemption, but a restoration of "a very good, allowable absence." REPRESENTATIVE McGUIRE noted that there currently are approximately 26 Peace Corp volunteers in Alaska who would qualify [for the PFD]. [If those 26 volunteers are paid a dividend], the difference to each dividend [issued to every Alaskan who receives one] would be 4-8 cents. REPRESENTATIVE McGUIRE stated that she thinks the Peace Corp volunteer program is one that works hand in hand with the military service. She noted the current situation in Iraq and said, "We all have an incredibly high regard for our military and what they do for us." She posited that the Peace Corp is a different way to serve the country; it's a way to proactively help countries build water and sewer systems, and provide food sources, for example. She added that it is a way to help stabilize nations so that groups like the Taliban [don't use food and water, for example, as a means of controlling people]. Representative McGuire referred to Maslow's [hierarchy of needs] and said that people can't get to "higher degrees of thinking" until they have the basics of shelter, food, and water, for example. Number 0387 REPRESENTATIVE McGUIRE told the committee that the men and women who volunteer for the Peace Corp do so for a small stipend of approximately $300 a month and for a period of two years. She said that one of her constituents who was a Peace Corp volunteer said that she would have been able to come home for Christmas to see her family [if she had received a PFD]. She said that the application process to join the Peace Corp is involved. People don't enter into [the Peace Corp] lightly. She noted that the only outstanding debt allowed a Peace Corp volunteer is a student loan. She stated that people who enter into the program are making a huge commitment to the nation and to Alaska. Number 0496 REPRESENTATIVE McGUIRE, referring to another aspect of the bill, said that Larry Persily, from the Department of Revenue, informed her that there is a great amount of fraud [in applications] occurring in the PFD program. She explained that, in almost every circumstance where fraud is suspected and a sanction is brought about, a trial is required. When the question is asked whether it is worth the cost of a trial to pursue [a fraudulent application], the answer is no in every case, she stated. The PFD, at its highest [is still much lower than] the minimum cost of $10,000 for a jury trial. REPRESENTATIVE McGUIRE referred to page 3, Section 4, of the bill, which read as follows: * Sec.4. AS 43.23.035(c) is amended to read: (c) In addition to any criminal penalties imposed by state law, if the department finds that an [AN] individual [WHO], in claiming a permanent fund dividend, or an individual [WHO], in certifying another person's eligibility, willfully misrepresents, exercises gross negligence with respect to, or recklessly disregards a material fact pertaining to eligibility, the department may issue an order against the individual for the (1) forfeiture of [FORFEITS] the dividend; (2) imposition of [, IS SUBJECT TO] a civil fine of up to $3,000; [$5,000,] and (3) loss of [LOSES] eligibility to receive the next five dividends following the forfeited dividend [DIVIDENDS. THE COMMISSIONER MAY COMMENCE PROCEEDINGS IN COURT TO ENFORCE THIS SUBSECTION]. REPRESENTATIVE McGUIRE explained that the section allows for forfeiture of the dividend and an imposition of a civil fine, which would be lowered to $3,000. She said that the reason the amount is being lowered is "so we don't have to allow for a jury trial." She explained that "once you start getting up above that $5,000 threshold, plus your dividend, ... you're now getting into an area where a person would be entitled to a jury trial." She mentioned [lines 25-26], regarding the loss of eligibility to receive the next five dividends. REPRESENTATIVE McGUIRE, referring again to Section 4, said that "willfully misrepresents, exercises gross negligence with respect to, or recklessly disregards a material fact pertaining to, eligibility" means serious misrepresentation; it does not mean someone who forgets that one trip taken, for example. Number 0715 REPRESENTATIVE McGUIRE mentioned estimated recovery figures. She noted, "Last year, it was around $100,000 to $200,000, but it may even be higher." She said that it is unfortunate, but when there is "free money out there," there will be people who abuse [the dividend program]. REPRESENTATIVE McGUIRE, in conclusion, said she thinks [HB 205] is a good statement for the Twenty Third Legislature to make to all the young men and women who would commit two years of their lives to live oversees, especially in a time when to do so is dangerous and when the future is uncertain. She said she conducted a survey last year to find out where former [Alaskan] Peace Corp volunteers are and what they are doing. She said that some are coming back to Alaska's school districts and [teaching about] life overseas, for example. Often the skills learned overseas are brought back to the state and "transferred" to the young people of Alaska. REPRESENTATIVE McGUIRE noted that President Bush continues to support the Peace Corp and deemed it important enough to mention in his inaugural address. Number 0882 REPRESENTATIVE DAHLSTROM asked Representative McGuire for her thoughts regarding those people who leave the state to volunteer on religious missions. REPRESENTATIVE McGUIRE responded that if Representative Dahlstrom were to introduce a bill "of that nature," she would be happy to co-sponsor it; however, she wants to focus HB 205 on the one original exemption that was already allowed, to avoid "the Christmas tree effect." She stated that the Peace Corp program is a federally recognized program with definitive boundaries and applications, whereas missionary work is harder to define and its organization varies from group to group. The challenge would be "trying to put a definition on that program, so that you don't have everybody claiming it." Number 1031 REPRESENTATIVE SEATON asked if the bill is identical in all aspects to the form it was in the previous year. REPRESENTATIVE McGUIRE answered yes. Number 1065 REPRESENTATIVE GRUENBERG referred to page 3, lines 23-24. He said that those lines actually take the bill a step backwards. He suggested that what the sponsor intended to do was to allow the [Department of Revenue] either to administratively issue an order up to the maximum of $3,000, or to allow the department to go into court to seek a higher amount. Under the current language of the bill, only the former choice would be possible. He noted that, in some cases, people have perpetrated frauds on the PFDs that are really large, and only allowing a $3,000 fine won't be as meaningful a punishment as if the department was allowed to seek the higher amount in court. He gave an example of a family who has perpetrated fraud and has gotten thousands of dollars from the state. He said that if [the department] does "go the court route," [the sponsor] may want to consider letting [the department] seek a higher civil fine. Number 1216 REPRESENTATIVE McGUIRE told Representative Gruenberg that Mr. Persily drafted the language of the bill. She stated her understanding that it doesn't take away [the department's] ability "to do that," but is "in addition to any criminal penalties imposed by state law." She recommended deferring any additional comments regarding that issue to Mr. Persily. REPRESENTATIVE GRUENBERG added, "And clearly they could still go criminally. I'm not -- that's totally aside." Number 1278 CHAIR WEYHRAUCH said he had heard about a problem where people are receiving the PFD year after year without even being [in the state]. He said he thinks that there has to be "some sort of a signal where if you're going to get a PFD, you have to be in the state." He said that [the state] does not want to be exporting [the PFD]. He noted that the University [of Alaska] wants to attract local people, but students are given a dividend "for going out of state." He asked Representative McGuire for her philosophical views regarding continually granting numerous exceptions to so many people for all different reasons. REPRESENTATIVE McGUIRE said she had anticipated the argument that Chair Weyhrauch made. She said that she thinks it is appropriate to constantly analyze what is being done with [the PFD] program, and whether or not [the legislature] is providing enough incentive for people to live, work, and attend school in Alaska. That is why, she explained, she felt compelled to put the penalties for misrepresentation in HB 205, to give the department more tools [to use]. She referred again to the original policy in 1983, which allowed the PFD exemption to Peace Corp volunteers. She said, "If you really are an Alaskan, [who] chooses to live and work in the state, but wants to take advantage of an opportunity that will benefit your country and your state - I think those are the kinds of exemptions that we really ought to be allowing." REPRESENTATIVE McGUIRE noted that an estimated 83 percent of [Peace Corp volunteers] have come back to live and work in Alaska. She said that there may be a broader philosophical question to analyze later, but she doesn't think it is appropriate to single out Peace Corp as "the place to start." Number 1500 CHAIR WEYHRAUCH agreed and hinted that he may be introducing a bill to address [that broader philosophical] issue. Number 1544 REPRESENTATIVE BERKOWITZ asked if [the Department of Revenue] tracks the number of people who are receiving out-of-state PFDs, and for how many years each of those people have been receiving a PFD. LARRY PERSILY, Deputy Commissioner, Office of the Commissioner, Department of Revenue, answered the previously stated questions of the committee as follows: First, he said that HB 205 does not change state criminal statutes. He indicated that [the department] could still prosecute someone for fraud, under criminal statutes. He explained that [the bill] would just change the dividend statute to allow [the department] the option, within dividend laws, to penalize someone for fraud, administratively. REPRESENTATIVE GRUENBERG referred to the current language on page 3, lines 16-24, that read "[$5,000]". He said that the way he interprets that, legally, is that the department can file a civil case against the person. He said he thinks that is an extremely important option, whether or not it is exercised. He continued as follows: In a criminal case, you have to prove the case beyond a reasonable doubt, and all sorts of criminal rights attach. In this case, you could simply go into small claims court and go after the person, with a preponderance of the evidence, and get up to $5,000. [A] simple procedure, relatively. And legally, under the current language, you have that option. REPRESENTATIVE GRUENBERG stated that he would hesitate to take away [the department's] right to pursue the other option. He suggested one way to retain that option would be to keep the original language with the new language, and to add a subjunctive "or". MR. PERSILY responded that [the department] worked on [the bill] with the attorney general's office and the collective wisdom was to keep the value of the fine, plus the dividend, under $5,000, so [the department] could deal with it administratively. If it was a serious case involving a lot of money, he said, [the department] would still have the option [of a criminal trial]. REPRESENTATIVE GRUENBERG asked, "So, you don't want the option of being able to go civilly for a higher amount in to court." MR. PERSILY answered as follows: We don't use it now. I guess the feeling is, looking at a more efficient government, ... we can keep the fines a little smaller, do it administratively, and when we get a really bad case, we can go criminal with it. Number 1785 CHAIR WEYHRAUCH asked if it wouldn't make sense, in Section 4, [line 22], to have a "death penalty for dividends" if there is fraud or criminal intent to deceive. REPRESENTATIVE McGUIRE referred to [page 3], line 25, regarding the loss of eligibility to receive the next five dividends. She said that there was discussion regarding whether to make it five or ten years. She said, "Again, it came back to the attorney general's opinion that we had to keep the overall punitive impact low enough that you could do it administratively. CHAIR WEYHRAUCH asked, "What's the threshold on this?" MR. PERSILY explained that [the department] was trying to balance what's reasonable, versus what could be considered excessively punitive, and it thought that five years would be best. He added that the legislature could make it a lifetime ban, if it wanted to. Number 1900 CHAIR WEYHRAUCH asked what the legal reason would be for not including the forfeiture of the dividend or all future dividends - to have the discretion of having the dividend death penalty. Number 1920 REPRESENTATIVE McGUIRE mentioned a case from "our" supreme court that seemed to indicate that when sanctions are imposed that are serious enough to rise to the level of a criminal sanction, when they do so, [the person involved] is entitled to a jury trial. She added, "And that's the problem." She said that weeks were spent trying for the right language in the bill and someone could still challenge it; however, she said that she thinks, "We're sticking within a reasonable realm here, for an administrative action." CHAIR WEYHRAUCH noted that "the statute says in the amendment" that, in addition to any criminal penalties enforced by state law, the legislature could impose a dividend death penalty. It could allow that discretion, he added. He opined, "If somebody wants to steal the people's dividend, then maybe they shouldn't receive it again." REPRESENTATIVE McGUIRE noted that [Section 4, subsection (c)] only deals with those actions that are taken administratively, within the dividend program. She added, "Criminally, I don't know that that couldn't be imposed." MR. PERSILY offered to speak with the attorney general's office and report back to the committee. Number 1954 REPRESENTATIVE BERKOWITZ suggested making the penalty a loss of five dividends, rather than a loss of five [consecutive] years of dividends, because he said there might be a year when there is no dividend. In response to Representative Weyhrauch, he clarified that five dividends could extend for a period far in excess of five years. Number 2025 REPRESENTATIVE GRUENBERG noted that the aforementioned case to which Representative McGuire referred is Baker v. Fairbanks, 471 P.2d 386 (Alaska 1970). He continued as follows: It says, "If you're faced with imprisonment, a substantial fine, or loss of a valuable license, you're entitled to a jury trial." That was the seminal case and there have been some cases since that. REPRESENTATIVE GRUENBERG said he thought there could be a civil penalty, with only a preponderance of the evidence and, perhaps, without a jury trial, although a jury trial would be warranted for a penalty forfeiture of the dividend forever. He said he thought that would be possible, because he doesn't believe that the dividend is a right; it's an entitlement. In a civil context, he added, the constitutional protections required are different. Regarding a civil penalty, he stated that it would be much easier, with the preponderance of the evidence, to make the case. Number 2107 MR. PERSILY told the committee that he has been around for six years and it was before that that anyone was prosecuted criminally. He suggested that the committee consider that it might make more sense to err on the side of caution, adopt the bill, give the dividend division a few years to see how the administrative penalties work and how the district attorney responds to any criminal cases which might be found, and reconsider the legislation in a few years. He added, "Because we have no experience to report to you on fraud." Number 2152 CHAIR WEYHRAUCH referred to Section 2, on page 3. He said that that section "amends to incorporate the Peace Corp provision." He added that it also states that [the Peace Corp volunteers] have to have been a resident of the state for at least six consecutive months. He asked what the policy problem would be if that were increased to 12 consecutive months. REPRESENTATIVE McGUIRE responded that she doesn't have [a problem with that]. MR. PERSILY offered the following example: If you moved here and established residency on December 31, 2001, then 2002 is going to be your eligibility year for the 2003 dividend. So, if you established residency in ... December 2001, you have to then have remained in Alaska for at least six months in 2002, before you leave for military, or for school, to retain your eligibility. You have to be here for at least six months before you leave on an allowable absence. If you're here, you've got to be here the whole year, but you can't leave on an allowable absence, before you've been here six months in that year. MR. PERSILY, in response to follow-up questions by Representative Weyhrauch, stated the following: The "six-month" only applies to the dividend and only applies to that first year of eligibility. For example, if a new family moves here in the fall of 2001, ... buys a home, registers to vote, [and] does everything to establish residency, ... then 2002 is their eligibility year, [and] they'll get their first check in 2003. They have a son who transferred here as a senior, graduated high school in May of 2002, and went to college. That six months allows that high school senior to start qualifying for the dividend, because he or she left on an allowable absence. If you didn't have that six-month ... rule, ... that college student would never get a dividend, because he or she would be gone all the time, until he or she returned. So, it applies only to people who then leave on an allowable absence, where they're still considered a resident, they're just not physically residing here. Number 2291 REPRESENTATIVE GRUENBERG mentioned that there is a case regarding divorce that states that a person can become a resident if he/she touches down with the intent to remain. He asked if the term resident, "in this body of law," means "physically present as a resident," or can people come into the state, touch down, claim residency, and then "go off" and continue to claim residency? MR. PERSILY answered no. He explained that people have to physically be [in the State of Alaska], not only to establish residency the day they touch down, but also for at least half the next calendar year if they leave on an allowable absence and retain ties to the state - for example, their families still live in the state, or they have belongings in storage. MR. PERSILY, in regard to a previously stated question by Representative Berkowitz, said that the department includes in its annual report how many of those people who apply for the PFD are claiming an allowable absence. He listed the following people claiming exemptions on the 2002 dividend applications: 50 members of congressional delegation or staff, 200 who left to settle the estate of a deceased direct relative, 300 who were out caring for a direct relative with a life-threatening illness, 500 caring for a terminally ill relative, 700 who received continuous medical treatment, 6,000 military service personnel, almost 9,000 full-time college university students, and approximately 10,000 who were accompanying a resident who was eligible, such as the spouse or children of military personnel. In response to Representative Berkowitz, Mr. Persily estimated that the total was approximately 26,000, or 4 percent of the state's population. CHAIR WEYHRAUCH commented that he thinks this is a "huge symbolic problem." MR. PERSILY stated that [the department's] concern is that the policy is clearly defined and easily administered. For example, he noted that according to statute, it is an allowable absence for a person to attend [an out-of-state] college/university full-time. Fifteen years ago, the legislature defined "full- time" as attending a college or university that is accredited. He noted that there are several religious universities in the country that are not accredited, by choice. He said [the department] looked for a means to change that by regulation, which he added, "I just signed today, in fact." He noted that the change would include a college or university that is eligible for certain federal student loan programs. MR. PERSILY, in response to [Representative Dahlstrom's] previously stated question regarding people on religious missions, recommended that, if the legislature wants to include those people, it does so in such a way that [the department] knows "what it means" and can administer it. The Peace Corp is clearly definable, he added. Number 2475 REPRESENTATIVE BERKOWITZ stated that there is no "catch-all" exception that allows the division to use discretion as to whether people [qualify for the dividend under an allowable absence]. He emphasized that that is problematic. Regarding the 26,000 people who are Outside, he said that he would be curious to know what the average period of absence is, within each of the [aforementioned] categories. MR. PERSILY clarified that the people [he previously listed] are those who claim an allowable absence during the year; it doesn't mean that they resided Outside the entire year. The number of payments actually mailed out of state "last year," he said, was approximately 16,000, or 2 percent. REPRESENTATIVE BERKOWITZ asked if [the department] has a way of tracking how long those 16,000 people have been gone. MR. PERSILY replied that he does not know, but can ask the people in Data Processing. He indicated limiting factors in the law. For example, no matter what reason someone is out of the state, he/she must return for at least 72 consecutive hours every other year. Before that law, he said that people would book a flight into the state, stay long enough to wash their hands in the Anchorage International Airport, and get back on another plane. REPRESENTATIVE McGUIRE indicated her willingness to work on the issue in another bill. REPRESENTATIVE GRUENBERG stated that he dealt with the issue in past legislative sessions, and it is called the "touch and go" provision. Number 2580 MR. PERSILY noted that the 72-hour rule is under AS 43.23.005(a)(4). He said that [the department] is allowed to waive that statute in one exception found in (f) in that statute, which is in a time of national military emergency. [That exception] was invoked within the last month, for the 2002, 2003, and 2004 dividends, he revealed, because some military personnel and their families will not be able to get back on the 72-hour rule. MR. PERSILY noted that other than the 72-hour requirement every two years, there's a presumption in statute whereby if people are gone more than 5 years, have not maintained sufficient ties, and have not returned for at least 30 days during that 5-year period, they're out. He added, "And then there's a hard-and- fast 10 years; no matter why you're out, no matter how long you come back for - how frequently - you're out after ten." Number 2637 REPRESENTATIVE BERKOWITZ opined that if people are "just sort of disappearing off the end of a five-year or ten-year period," and they've been collecting dividends all that time, they are in violation of the "intent to remain component," and [the legislature] ought to be able to "recover something from them." MR. PERSILY, prefacing that what he was about to say would be more of a political issue for the legislature, stated that the vast majority of the people that [the department] observes "running into problems on the five-year rule" are in the military. He said that [the department] receives reams of letters from [military personnel] explaining why they cannot return or why "there is a problem." He continued as follows: I'll be honest, some of the letters I find bordering a little bit on offensive, because they accuse the dividend division of discriminating against the military, not understanding the situation, and being un-American, and that's not the fact. We're trying to enforce the laws and the rules, and we don't pick on anyone in particular. But, the presumption is, if you're not back 30 days in 5 years, you obviously must not have an intent to return, unless you can show why: serious medical problems, or, if you were stationed somewhere that you were not allowed leave time. But that 5-year rule is very controversial within the ranks of military applicants, so I guess I'm just warning you. Number 2700 REPRESENTATIVE SEATON asked if there is a requirement that military personnel [claiming Alaska residency] select Alaska "on their transfer," as their number one priority for their next assignment. MR. PERSILY answered that they must have Alaska as their official residence on their leave and earnings statement and list Alaska as their first choice [for transfer]; however, in many cases, the career options are not [available in Alaska]. He said, "So then what they say is they plan to retire here, and they search for property in Talkeetna." He stated, "Those become statements where we're trying to judge someone's intent, which is difficult." Number 2739 REPRESENTATIVE HOLM moved to report HB 205 out of committee with individual recommendations and the accompanying fiscal note. There being no objection, HB 205 was reported out of the House State Affairs Standing Committee.
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