Legislature(2003 - 2004)

03/11/2003 08:00 AM House STA

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
HB 158-ELIMINATING LONGEVITY BONUS PROGRAM                                                                                    
CHAIR WEYHRAUCH  announced that  the last  order of  business was                                                               
HOUSE  BILL NO.  158,  "An Act  eliminating  the longevity  bonus                                                               
program and making related conforming  changes; and providing for                                                               
an effective date."                                                                                                             
Number 1070                                                                                                                     
MIKE  MILLER, Commissioner,  Department of  Administration (DOA),                                                               
explained that his role was  to give some background regarding HB
158  and the  Alaska Longevity  Bonus program.   He  reminded the                                                               
committee  that  there  have  been   three  major  votes  in  the                                                               
legislature regarding the Alaska  Longevity Bonus program; he was                                                               
in  the legislature  for  two  of those  votes,  while his  older                                                               
brother was  in the legislature for  the first vote.   He said he                                                               
discussed the  first vote at length  with his brother.   The vote                                                               
was  taken in  the  mid-1970s and  created  the Alaska  Longevity                                                               
Bonus  program; at  that time,  it had  a type  of sunset  clause                                                               
because the only  people who could qualify were  those who'd been                                                               
in Alaska  before 1959 -  before statehood.   Commissioner Miller                                                               
said, according to his older brother,  it was an effort to reward                                                               
Alaskans who had been in the state during the territorial days.                                                                 
COMMISSIONER MILLER  said there  was a  case against  a longevity                                                               
bonus program  in 1984  - the  Vest case  - which  challenged the                                                             
constitutionality of the territorial clause;  the State of Alaska                                                               
lost in  the Alaska Supreme  Court.  Commissioner Miller  said he                                                               
was  in the  legislature at  that time  and it  had two  choices:                                                               
abolish the program or open it up  to all seniors.  He noted that                                                               
[the state]  was "awash in  oil dollars"  at the time  and opened                                                               
the  program up  to all  seniors.   He indicated,  in retrospect,                                                               
that this was a mistake.                                                                                                        
Number 1237                                                                                                                     
COMMISSIONER  MILLER  said  in  1994  the  program's  costs  were                                                               
beginning to  "run wild" in  the amount  of $67 million  and were                                                               
projected  to be  over $100  million  within the  next couple  of                                                               
years, with no end in  sight; [the legislature] decided something                                                               
had to be  done and chose to  "stair step" the program.   He took                                                               
responsibility for that decision which,  he opined, turned out to                                                               
be the  wrong one.   Two classes of seniors  were unintentionally                                                               
created:   those  who collect  [the  bonus check]  and those  who                                                               
don't.   He  estimated that  there are  18,000 people  collecting                                                               
[longevity bonus]  checks.  His  sources tell him that  there are                                                               
approximately 38,000  people in Alaska  over the  age of 65.   He                                                               
added that  there's no rationale of  "why you get it,  or why you                                                               
do not get it."                                                                                                                 
COMMISSIONER MILLER  shared stories illustrating that  the result                                                               
of the  stair stepping was that  some seniors born and  raised in                                                               
Alaska, but born one year past  the cutoff date, did not qualify,                                                               
whereas others  qualified for the  program after having  moved up                                                               
from  "Outside," for  example.   He  said the  program no  longer                                                               
serves its original intent; the  program passed in the '70s bears                                                               
no  resemblance to  the  one in  existence  today.   Commissioner                                                               
Miller said  this is one  reason he is personally  supporting the                                                               
bill to  eliminate the  program.   In response  to a  question by                                                               
Chair  Weyhrauch, he  said  the original  bill  [required that  a                                                               
person  had to  be]  65 years  old.   He  said  he believes  that                                                               
currently the youngest senior on the program is 72.                                                                             
REPRESENTATIVE BERKOWITZ said, "That's correct."                                                                                
CHAIR  WEYHRAUCH  offered  his understanding  that  [the  current                                                               
qualifications] require a senior to be 72 to collect it.                                                                        
COMMISSIONER  MILLER answered  yes, "assuming  that they  were in                                                               
the state at  the time that the  last step took place."   He said                                                               
his mother  is 86 years old,  was out of the  state approximately                                                               
five years during  the stair stepping, is now back  in the state,                                                               
but does not  qualify, even though he believes she  paid her dues                                                               
in  the  territorial  days  and  early  statehood.    In  further                                                               
response, he said  he doesn't know the exact number  of people in                                                               
Alaska who are  at least 72 years old.   He reiterated that there                                                               
are two  groups of  seniors for  whom, in  his opinion,  there is                                                               
little rhyme or reason why they've been divided that way.                                                                       
Number 1514                                                                                                                     
REPRESENTATIVE BERKOWITZ  disagreed.  Noting that  a statute came                                                               
into  effect in  1996,  he  said about  the  program,  "It was  a                                                               
promise that  apparently that legislature  felt it  couldn't keep                                                               
in perpetuity,  so, in essence,  it phased out the  program; that                                                               
constitutes  rhyme  and reason."    He  said he  appreciates  the                                                               
difficult financial position it puts  the state in, but a promise                                                               
was made  to seniors, many  of whom  are depending on  the income                                                               
from the longevity  bonus and most of whom are  on fixed incomes.                                                               
For example, according to some surveys  he has viewed, he said up                                                               
to 65  percent of  the people in  the Matanuska-Susitna  area who                                                               
collected  [the  bonus]  in  1993  indicated  it  was  absolutely                                                               
essential for  their well-being.  He  told Representative Miller,                                                               
"You might disagree  with it, but to dismiss it  as being without                                                               
sense, I think, overstates your case."                                                                                          
COMMISSIONER  MILLER   explained  that  the  "rhyme   or  reason"                                                               
referred to  the legislature's lacking  the political  courage to                                                               
say, "Enough  is enough."   He  said he  would agree  to disagree                                                               
[with Representative Berkowitz].                                                                                                
Number 1610                                                                                                                     
CHAIR WEYHRAUCH  asked if  there had ever  been an  analysis done                                                               
during Commissioner Miller's time  in the legislature to consider                                                               
making the program needs-based.                                                                                                 
COMMISSIONER  MILLER   said  there  had  been   some  discussion;                                                               
however, there  was disagreement  within the senior  community as                                                               
to whether to make it needs-based.   He said he believed that the                                                               
prior  [Knowles] administration  offered  proposals  a couple  of                                                               
times to make  it needs-based, but the  legislature, for whatever                                                               
reason, decided not to do that.                                                                                                 
CHAIR  WEYHRAUCH asked  if there  had  been discussion  regarding                                                               
having people "check  off" whether they want  the longevity bonus                                                               
or not.                                                                                                                         
COMMISSIONER MILLER said he doesn't  believe that discussion took                                                               
place, although  people could  make that  choice by  not applying                                                               
for the  bonus.  In response  to a question regarding  how people                                                               
sign up each year, Commissioner  Miller explained that people who                                                               
receive the check each year fill out a form found on each check.                                                                
CHAIR WEYHRAUCH asked  if there'd ever been an attempt  to send a                                                               
form out to  qualifying seniors asking if they want  to receive a                                                               
longevity bonus, asking them to sign and send the form back.                                                                    
Number 1735                                                                                                                     
COMMISSIONER  MILLER  said  he   doesn't  believe  that  sort  of                                                               
"blanket statement"  had even  been discussed.   He  reminded the                                                               
committee that unlike  an executive order, a bill  can be changed                                                               
[to incorporate]  different ideas.   He agreed to a  request made                                                               
by Chair Weyhrauch  to "send us the form."   In further response,                                                               
he related  his belief that  checks go out  either at the  end of                                                               
the month or at the first of the month.                                                                                         
CHAIR  WEYHRAUCH  asked  if  there   had  been  any  analysis  to                                                               
determine  what the  predominate  use of  the  money received  by                                                               
seniors is.                                                                                                                     
COMMISSIONER MILLER indicated he didn't know.                                                                                   
CHAIR WEYHRAUCH  offered that he has  heard the money is  used to                                                               
offset the cost of prescription drugs.                                                                                          
COMMISSIONER MILLER said he understands  what a tough decision is                                                               
before  the committee.   [The  state]  would spend  approximately                                                               
$47.5 million  on the program  [in 2003].  The  legislature needs                                                               
to ask if  that's affordable or whether some of  that money would                                                               
be better  spent in  other areas  for seniors.   The  question he                                                               
posed  to  the  committee  is whether  it  should  spend  limited                                                               
dollars as a  "blanket" to all seniors, or to  help those most in                                                               
need.  He said he personally believes in the latter.                                                                            
Number 1900                                                                                                                     
CHAIR WEYHRAUCH  asked that top department  officials be involved                                                               
on future hearings  [of HB 158].  He also  requested the presence                                                               
of  the [assistant]  attorney general  tasked  with drafting  the                                                               
bill,  and asked  for  as  much information  as  possible on  the                                                               
program to be  given to the committee and made  public in advance                                                               
of  the  next scheduled  hearing.    He  said  this issue  is  an                                                               
important one.                                                                                                                  
Number 1982                                                                                                                     
REPRESENTATIVE LYNN  remarked that  he is over  70 years  old and                                                               
doesn't  receive  the  longevity  bonus.   He  said  he  supports                                                               
Governor Murkowski's  "courageous" [financial] plan, but  that he                                                               
also believes in keeping his  own campaign promises, one of which                                                               
he read  as follows, "Bob  Lynn believes in your  longevity bonus                                                               
as a  contract between  Alaska seniors and  the State  of Alaska.                                                               
I'll protect [the] longevity bonus contract."                                                                                   
REPRESENTATIVE  LYNN said  he thinks  people need  to be  able to                                                               
trust their  government and those  they elect.   In the  world of                                                               
politics, he  said, "old folks are  too often a target  of fiscal                                                               
opportunity."     He  noted  that   18,000  [seniors]   does  not                                                               
constitute a  large portion  of the  overall state  population of                                                               
approximately 650,000.  He added,  "So it's kind of easy pickings                                                               
to  pick up  $47 million  dollars there."   He  agreed that  [the                                                               
state]  obviously needs  the  $47 million,  because  it facing  a                                                               
fiscal  crisis; however,  he  suggested that  a  cruise ship  tax                                                               
would raise  that amount, for example,  or a car rental  tax.  He                                                               
said the  list goes on regarding  where money can be  raised.  He                                                               
added, "The  pickings are easier  from the elderly than  they are                                                               
from the  big guys who have  lobbyists and who have  the bucks to                                                               
fight this  type of thing."   He said  he will keep  his promises                                                               
and respect  his elders.   He  noted that  this isn't  a personal                                                               
issue, but a political one.                                                                                                     
Number 2139                                                                                                                     
REPRESENTATIVE BERKOWITZ  asked if anyone had  conducted a recent                                                               
economic analysis of  the impact of cutting  the longevity bonus.                                                               
He said  he was aware  of a 2000  analysis by the  McDowell Group                                                               
and another  done by  Legislative Research about  10 to  15 years                                                               
ago.     He  asked  for   an  update  containing   the  following                                                               
information:   the  contribution this  $47 million  makes to  the                                                               
economy, who  the beneficiaries  are, where  the money  is spent,                                                               
and whether it  has a different multiplier  than multipliers from                                                               
other aspects of the economy.                                                                                                   
REPRESENTATIVE  BERKOWITZ shared  a concern  raised to  him by  a                                                               
senior constituent that  seniors on fixed incomes spend  a lot of                                                               
their  money in  the state,  and  that seniors  on fixed  incomes                                                               
might  be forced  to sell  their homes  [if HB  148 passes].   He                                                               
asked if the administration had  given any consideration to those                                                               
concerns  and,  if  so,  what  evidence it  has  to  support  the                                                               
elimination of a longevity bonus.                                                                                               
Number 2215                                                                                                                     
COMMISSIONER MILLER said  he would do his best  to find "whatever                                                               
information we have on hand."                                                                                                   
REPRESENTATIVE BERKOWITZ stated:   "It is somewhat appalling that                                                               
a change  of this  magnitude was  contemplated without  doing the                                                               
preliminary homework."                                                                                                          
Number 2235                                                                                                                     
REPRESENTATIVE GRUENBERG  said [$47] million  is a lot  of money.                                                               
Given the  lengthy history  of various  administrations' attempts                                                               
to attack  this program  and the  lengthy history  of legislative                                                               
support  for the  program, he  suggested that  the administration                                                               
knew HB  158 would be  controversial; therefore, it must  have an                                                               
alternative plan.  He asked  Commissioner Miller, "Where else can                                                               
you cut into your department?"                                                                                                  
COMMISSIONER  MILLER said  his department  has large  areas where                                                               
general  fund dollars  exist, such  as the  Office of  the Public                                                               
Defender, OPA  [Office of Public  Advocacy], and  "leasings," but                                                               
"leasings" is the only area that  can and is being considered for                                                               
cuts.   He  indicated that  Pioneers' Homes  and Senior  Services                                                               
have large  amounts of general  fund dollars, but will  be moving                                                               
to the Department of Health &  Social Services.  He mentioned the                                                               
[Division]   of  Motor   Vehicles  [within   the  Department   of                                                               
Administration] as another agency with  general fund dollars.  He                                                               
indicated some things just cannot be touched.                                                                                   
Number 2357                                                                                                                     
REPRESENTATIVE GRUENBERG  said his  previous question  was partly                                                               
rhetorical because he  knows there aren't many  areas [where cuts                                                               
can occur].  He then mentioned  an issue before the committee the                                                               
prior week  regarding public  facilities, which  are administered                                                               
by several  different departments.  He  asked Commissioner Miller                                                               
if he believed  there would be any cost  savings in consolidating                                                               
the administration of public facilities.                                                                                        
COMMISSIONER  MILLER  responded that  some  of  those issues  are                                                               
being considered  now and  he believes there  would be  some cost                                                               
savings, but he could not say how much at the present time.                                                                     
REPRESENTATIVE  GRUENBERG  suggested   this  committee  would  be                                                               
interested in Commissioner Miller's views on that.                                                                              
COMMISSIONER MILLER  reiterated that the committee  is faced with                                                               
a big policy call.                                                                                                              
CHAIR WEYHRAUCH announced that HB 158 would be held over.                                                                       

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