Legislature(1995 - 1996)

01/24/1995 08:05 AM STA

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

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