01/29/1998 01:35 PM Senate L&C

                                                                               
             SB 254 - LEVY ON PERMANENT FUND DIVIDEND                          
                                                                               
CHAIRMAN LEMAN called the Senate Labor and Commerce Committee                  
meeting to order at 1:35 p.m. and said there wasn't a quorum, but              
that he would take testimony on SB 254.                                        
                                                                               
MR. MIKE PAULEY, Staff to Senator Leman, said that SB 254 will                 
enhance the ability of the State of Alaska and other private                   
businesses to collect from other private parties that are in a                 
state of default from their financial obligations.  Existing state             
law provides that 45 percent of a person's Permanent Fund dividend             
check is exempt from collection for a judgement (from a private                
party).  There are some exceptions (who can recover 100 percent) to            
this rule like child support obligations, defaulted student loans,             
and any debt owed to an agency of the State.  This implies that the            
State has a greater right than private parties to recover a debt               
that is lawfully owed.                                                         
                                                                               
When businesses are not able to collect funds from those in                    
default, it increases the cost of doing business.  These costs are             
passed on to honest consumers in the form of higher costs for goods            
and services.  So in a very real sense, the majority of Alaskan                
consumers are paying for the financial irresponsibility of a small             
minority.                                                                      
                                                                               
SB 254 changes the 45 percent exemption for Permanent Fund Dividend            
checks to a "0 percent" exemption.  While this levels the playing              
field in terms of the percentage that can be garnished, it still               
assigns a higher collections priority for certain obligations to               
the State, such as child support payments.                                     
                                                                               
MS. NANCI JONES, Director, Permanent Fund Dividend Division,                   
provided the Committee with a summary of attachments since                     
inception of the program.  In 1982 there were 27 attachments and in            
1997 there were 94,386 attachments.  She noted that the IRS had a              
computer glitch this year and withdrew over $20,000 of its claims.             
This meant that the smaller claims were able to be paid, not the               
IRS.                                                                           
                                                                               
MR. JOHN LOW, Anchorage resident, supported SB 254, because of an              
unpleasant experience that happened to him in 1995 with a bad                  
tenant who left him with a cleanup and remodeling bill of more than            
$8,000.  He found the tenant eventually, but couldn't garnish her              
wages because of the generous exemption allowed by State law.  His             
only hope is to seize her PFD check which he has done twice so far.            
He figures it will take more than 13 years to collect this debt,               
but it can be paid off in six and a half years, if the legislature             
eliminates the exemption on PFD checks.                                        
                                                                               
CHAIRMAN LEMAN said he also had a similar unpleasant experience and            
sympathized with him.                                                          
                                                                               
MS. MARLENE SLAVIN, Charge Off Collector, National Bank of Alaska,             
said she can't express enough about how many unpaid judgements they            
have.  Receiving only 45 percent of the PFD's is allowing them to              
pay interest due on the loans instead of reducing the principle                
balance.  If they could receive 100 percent of the PFD, they could             
reduce the balance on a lot of the loans and possibly pay most of              
them off.                                                                      
                                                                               
She said they would not be taking anything away from people who are            
receiving the PFD, since this is free money the State is giving us.            
Local businesses should be treated the same way as State agencies.             
                                                                               
Number 230                                                                     
                                                                               
MR. TROY FERGUSON, Branch Manager, Northland Credit Corporation,               
said he also represented the Alaska Consumer Finance Services                  
Group.  He supported SB 254, because he thought everyone should be             
on a level playing field as far as the PFD check goes.  Everyone is            
required to pay their obligations and even if they can't get 100               
percent of the PFD, he thought the 45 percent needed to be                     
adjusted.                                                                      
                                                                               
Number 261                                                                     
                                                                               
MR. VINCE USERA, Assistant Attorney General, suggested deleting                
language on line 9 stating "both before and after payment is made              
to the individual," because that language was originally inserted              
to protect the 45 percent the individual was allowed to claim as               
exempt.  If 100 percent is available for collection, it makes no               
sense to have that language in there.  It would also cause some                
confusion when compared with language in AS 938.03.0 (b) which                 
provides for a liquid assets provision.  Monies from the PFD are               
not part of the definition of liquid assets for which there is an              
exemption.  This is terribly abstruse material, although not a                 
grave legal problem.  He questioned whether that language really               
served a useful purpose in present law, because there is no                    
definition of "after."                                                         
                                                                               
CHAIRMAN LEMAN agreed that it made sense to clarify the language               
and said he couldn't adopt amendments today, but would work on the             
bill and bring it up in another meeting.  He adjourned the meeting             
at 1:56 p.m.