Legislature(2003 - 2004)
03/11/2003 08:00 AM House STA
* first hearing in first committee of referral
= bill was previously heard/scheduled
= 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.