Legislature(1995 - 1996)
01/24/1995 08:05 AM STA
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
HSTA - 01/24/95 Number 205 HB 4 - PERMANENT FUND DIVIDEND ELIGIBILITY REPRESENTATIVE PETE KOTT, SPONSOR OF HB 4, noted that a similar bill to HB 4 almost passed last year, but died awaiting concurrence the final night of session. This legislation would remedy a problem resulting from a court ruling. That ruling suggests that wives of those eligible to receive the permanent fund, living out of state, are no longer eligible. It is the piggyback rule. The wives cannot piggyback on their husband's travel and be considered eligible. This measure is trying to correct that, and is retroactive to January 1, 1994, to allow all those last year into the program. From early indications, the fiscal note will be approximately $600. He said a representative from the Department of Revenue was present at the meeting to suggest some changes that he is in agreement with. Representative Kott said some of the changes were a result of the new 1995 permanent fund application. REPRESENTATIVE JOE GREEN questioned the amount in the fiscal note. REPRESENTATIVE KOTT said the early fiscal note indications, and this still has to come down from the Governor, is $600. It is an unofficial version awaiting arrival from the Governor's Office. CHAIR JAMES noted that the Governor's Office is having a problem getting geared up to provide fiscal notes. They are behind, therefore, she recommended lenience on getting these bills passed. This bill has additional referrals to Judiciary and Finance, so it will not be passing without a fiscal note. It will be at the will of committee about what we do. REPRESENTATIVE KOTT said it was unofficial, but, by June 30, 1995, the division will mail out 1,300 notices to those who were denied in 1994, and that is the $600 mailing and processing cost. Number 265 REPRESENTATIVE GREEN remarked that the $600 is for mailing, but what about the amount of the money that the permanent fund then is actually giving to how ever many spouses, dependent children and other eligible people. REPRESENTATIVE KOTT estimated the cost for implementing this bill would be about a $2 per person reduction in the dividend check that each individual would receive, and this was not coming from general fund money. Military spouses and other members who accompanied their husbands out of state were on an eligible absence and were receiving the permanent fund dividend (PFD) check for about eight or nine years before the judge ruled on this. The original intent of the legislature was not to prohibit those eligible wives or spouses from receiving the dividend check when they were accompanying their eligible spouse. Currently, the eligible spouse and eligible children can receive it, but the wife or husband cannot receive it. This bill corrects a deficiency in a court ruling that was somewhat inaccurate. CHAIR JAMES asked if there were any further questions. She introduced Tom Williams, Director, Permanent Fund Dividend Division, Department of Revenue. Number 290 TOM WILLIAMS, DIRECTOR, PERMANENT FUND DIVIDEND DIVISION, DEPARTMENT OF REVENUE, referred the committee to a handout for his testimony. He summarized the lengthy document, saying there was court action, which on December 16, 1993, invalidated a regulation allowing spouses to piggyback onto their eligible Alaska resident's absence. As a result of a change in the law that occurred, effective January 1992, there was a conflict between a statute and a regulation. With such a regulation, the regulation falls. The department asked the legislature to fix that problem last year, and in HB 392 there was language to do that. HB 392 did not pass in the final minutes of session. The effect was to make the piggyback absence invalid since January 1, 1992. It affected 1992, 1993 and 1994 applicants. Virtually all of the 1992 and 1993 applicants had been paid. Some were remaining in appeals. When the department got ready to pay those remaining in appeals, if they were denied for another reason and that denial was subsequently overturned, they could not do it they discovered, because the applicants no longer had an allowable absence. After consulting with the Attorney General's Office, the division determined they would not go back and assess the 1992 and 1993 applicants that had already been paid. So, the only people that have been affected from 1992 and 1993, were those that had an appeal pending. That denial had been overturned and they're just waiting to be paid. They pended those - they did not take any action on them; they held them awaiting a legislative solution. MR. WILLIAMS said 1994 was different. He explained none of the 1994 applications have been paid. The division had no basis for making that allowable absence since it had been struck down. The division ended up denying all those that had been absent more than 180 days. Mr. Williams said they looked at those who had been gone less than 180 days and tried to fit them into the general 180-day discretionary absence where they could. Unfortunately, not many of those people met that requirement. The total they were required to deny was 2,690 spouses. There were also some children that were sponsored by those spouses. These spouses were given the opportunity to change the sponsorship of those children over to the other Alaska resident. Some took advantage of that, but not everybody did. Consequently, if they did not have an eligible sponsor, the department had to deny them payment. The intent of the legislation is to retroactively reinstate the piggyback rule to where it was prior to the court ruling. After discussing the bill with the Department of Law, there is some question as to whether the initial draft actually does that. There is a conflict between two statutes. The conflict arises because absences are a component of a definition of state residency. This legislation takes what was once described as an allowable absence by regulation and moves it into statute. They drafted a committee substitute that will do what the sponsor has, except it removes all doubt regarding the technical problem. It removes the allowable absences from the definition of state resident, moves it to a separate section, and defines allowable absence as an eligibility criteria. That eliminates the conflict with the provision that says you cannot consider the residency of your spouse as not the principal factor. It still retains the allowable absence provision, and it allows it to reinstate the historically allowable absences that has been on the books since the beginning of the program. Another difference is that in Section IV of the proposed version, it would ensure that the 1992, 1993 and 1994 applicants are made whole again. He said that would allow the division to pay those 1992 and 1993 piggybacking spouses that are currently pending. In Section V, it takes a different approach to an extension of an application period. In the original bill there is a provision saying that 1994 and 1995 applicants have until September 1 to resubmit an application if they were affected by this legislation. The division believes that piggybacking spouses who applied in the past have already applied for the 1994 dividend, and those applications are on file. So this is an extension of the appeal deadline up to September 1, as opposed to the reapplication period. While the division had denied 2,690 applicants, they only received appeals from 1,373 applicants. Those have been pended. The other 1,300 that have not appealed would benefit by having an extended appeal period. With regard to 1995, the proposed substitute doesn't have anything to do with them as far as an extended filing period. The reason for that is contained in the last two pages of the information before the committee. He indicated that the division has put an important notice in the 1995 dividend application to spouses absent from Alaska, which is that they should go ahead and apply for the 1995 dividend by the application deadline. Number 435 MR. WILLIAMS said the fiscal note covers preparing and doing a mailout to those people we want to target, letting them know the law has changed and they can appeal or reapply, whichever the legislature chooses. He also referred to a question asked by Representative Green about the fiscal note, saying they have not included any fiscal impact related to the total amount of the dividend because, by formula, there is a certain amount that will be distributed. It doesn't change the amount of dividend payments, it will change who it goes to. Assuming there were 2,690 people paid, it would calculate to a little over $2.6 million. Number 465 REPRESENTATIVE GREEN asked if eligibility is automatic for persons from another state who are married to someone in the military, who is an Alaskan resident because of their military service and is then shipped out. MR. WILLIAMS said the piggybacking spouse rule only applies to individuals who accompany an eligible Alaska resident. It doesn't apply to individuals accompanying a resident from another state. Both spouses have to be Alaska residents and they have to take the steps to initiate their own Alaska residency prior to the qualifying year. So for them to get the 1994 dividend, both spouses would have had to establish Alaska residency through normal means, declaring that they are an Alaska resident registering to vote, prior to the beginning of the qualifying year that would have been prior to January 1, 1993. Number 494 REPRESENTATIVE BRIAN PORTER asked how many more eligible people this version of the bill would incorporate in the past and in the future. There are some applications pending for 1992 and 1993, that the new wording would provide the division a better way of providing money. He wondered if they could do it anyway with Representative Kott's version. MR. WILLIAMS answered no. Under Representative Kott's version there is no relief for 1992 and 1993. That is why they suggested that they make sure it goes back to...effective for 1992 and 1993. He did not how many there are, he did not have a number, but probably fewer than 100. REPRESENTATIVE PORTER wondered if there were any other categories of individuals who would be eligible under his version, besides the 100, as opposed to the original bill. MR. WILLIAMS answered "No. They are not opening it up beyond the piggybacking spouse. Another important issue is that they included in the committee substitute, a modifier that you must accompany an `eligible Alaskan resident' as opposed to just an `Alaska resident.'" Number 520 REPRESENTATIVE SCOTT OGAN asked if moneys have been set aside on the pending applications, and where the revenues will come from if it is not set aside. MR. WILLIAMS said moneys were not originally calculated in to cover that. It was originally estimated there would be 535,000 payable as of December 31, 1994. Our actual payables were 531,000. There should be money there to pay those. The worse case scenario is that the pending applicants would have to wait until July 1, because there is a provision under AS 43.23.025 which has the calculation of the dividend. Every year you put all the money that is left in one pot, slice off what is necessary to pay prior year dividends, including these, then you calculate the remaining dividends. There is a method by which people can be paid, if they can be paid now, because there are sufficient funds in the pot. He said they would do that just as soon as the legislation passed. If there was not, they would wait until July 1, at which time there would be, assuming the dividend program continues. REPRESENTATIVE OGAN asked if people's PFD checks will not be reduced next year, if these pending applications are paid. MR. WILLIAMS said there is a possibility that will occur. It will depend on the number of other appeals that are overturned and whether we come up to that actual 535,000. It is possible there will be virtually no effect. Number 550 REPRESENTATIVE IVAN IVAN had questions about the committee substitute. On page 3 of the proposed committee substitute, the new language inserted reads, "Maintains and demonstrates at all times an intent to return to the state." He questioned what the division uses as the criteria to show that intent when determining eligibility. MR. WILLIAMS said first they basically assume that the applicant is honest in telling them they have the intent to return to the state. They will believe them. They look for indicators that would be inconsistent with that intent. In fact, they adopted by regulation a series of steps or actions that clearly are inconsistent with the individual's intent. As long as an individual does not take an action inconsistent with maintaining that intent they will tend to believe them. They look for indications, such as the individual routinely coming back to the state after an absence, and if they maintain any ties here, or show some sort of connection to the state. They look for hard evidence to prove out their intent, but they start with the premise that their intent is valid. REPRESENTATIVE IVAN asked if the language appears in other statutes relating to the permanent fund. MR. WILLIAMS assured Representative Ivan that it is consistent with Title I, AS 01.10.055, which generally is the general residency description for the permanent fund. REPRESENTATIVE IVAN asked about the appeal period that is in place in retroactive payments to persons who are found eligible for the program. He asked about constituents who have missed a year, due to the inability to read languages. Representative Ivan asked if they would still be eligible to get the dividend check they missed the prior year if they failed to submit an application, or it was lost enroute. He asked how they handle that. MR. WILLIAMS said there is no provision for adult individuals who have missed or failed to file an application. There is a provision in law for children for whom an adult did not file an application to come back within one year of their eighteenth birthday or within one year of emancipation, to file for missed dividends. If an application was lost in the mail individuals can resubmit an application by a particular deadline. They have to provide a variety of proofs that they did submit a timely application. REPRESENTATIVE CAREN ROBINSON referred to two of her constituents, whose spouses have gone out to further their education, and they own property in Juneau. Also, one of the constituents returns to do business. She wanted to reaffirm that these are the types of people we are trying to get to who are deserving of the PFD. They clearly show long term residency, own property, and clearly have intent of coming back and only went temporarily to get further education or other kinds of military reasons. MR. WILLIAMS agreed. He said the piggybacking absence applies to any spouse that is piggybacking onto any legitimate absence. It is not just military. There are students, our congressional delegation, and service on the staff. Military and students are probably the highest category where piggybacking would apply. Number 615 CHAIR JAMES determined there were no further questions from the committee and no one waiting on the teleconference, so she called Judy Erickson to testify. Number 618 JUDY ERICKSON, BUSINESS OWNER, CAPITAL INFORMATION GROUP, and Juneau resident. She gave testimony in support of the bill. She testified that a personal experience made her aware of this issue when her ex-husband required long-term medical treatment outside of Alaska. Ms. Erickson explained that her ex-husband and his wife have lived in Alaska for 20 years, they maintain a home in Juneau. They have children whom they try to get down to see him as often as possible, for emotional support. The financial burden is great and it is important for them to have the dividend. She wanted to encourage the committee to change the law on this issue to allow people in this situation to receive the PFD. Number 640 CHAIR JAMES asked if there was anyone else from the floor who wanted to give testimony. REPRESENTATIVE JOHN DAVIES wished to add his voice in support for this particular bill stating that PFD problems are common among his constituents. He thinks the bill is long overdue and ought to be passed. He suggested adding two other categories that they might want to consider. They are included in HB 5 and fit in the structure of HB 4. The categories are: (1) Services of Volunteers of the Red Cross; and (2) Services of Volunteer of the International Executive Service Corps. It is slightly different in that it is a private nonprofit organization and does things essentially the same as the Peace Corps, which is an allowable absence. The Executive Service Corps matches up predominately retired executives in the U.S. with a business in a developing country or foreign country, where our business techniques can help advance the operation of a similar business in another country. It is by invitation of the other governments. It functions as the Peace Corps does in principle, but it is directed at making businesses more productive. It benefits all of us, because it is international trade and a good thing to do morally. Number 685 CHAIR JAMES rolled HB 4 over to the next calendar meeting, asking the sponsor for a committee substitute with changes in the original bill. Representatives Porter and Robinson agreed the bill could not be passed as it was, that changes were necessary. TAPE 94-1, SIDE B Number 022 CHAIR JAMES stated they should pass bills in the best condition they think they ought to be. She suggested the bill be brought back with amendments to the original bill so they could see the changes they are proposing, including the suggestions made by Representative Davies. The committee would try to get back to it Thursday and pass it. Number 065 CHAIR JAMES brought the meeting back to order after a five minute break and asked the record to reflect that Representative Ivan Ivan was still out.