Legislature(1997 - 1998)
02/05/1998 01:40 PM Senate L&C
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* first hearing in first committee of referral
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= bill was previously heard/scheduled
SB 254 - LEVY ON PERMANENT FUND DIVIDEND
CHAIRMAN LEMAN called the Senate Labor and Commerce Committee
meeting to order at 1:40 p.m. and announced SB 254 to be up for
consideration.
MR. MIKE PAULEY, Aide to Senator Leman, explained proposed changes
to SB 254, version E, which he said were simply technical.
Department of Law thought that existing language might have a
potential conflict with the $1,400 liquid assets exemption in Title
9, Chapter 38. Once a Permanent Fund check is actually sent to
someone and has been deposited into their checking account and
commingled with other funds, it becomes hard to distinguish what is
Permanent Fund Dividend money vs. what comes from your pay check,
etc.
Also, as a practical matter with the private sector such as banks
and credit unions who do garnish Permanent Fund Dividend checks,
99.9 percent of the things are done prior to the person receiving
the check. So it's kind of a redundant provision of the law. The
final issue where there is some ambiguity is in the word, "after" -
meaning a check could be garnished after payment is made to the
individual. The word "after" is not defined and the issue has been
raised that theoretically you could collect 16 years worth of
dividend checks going back to 1982 which would amount to an
enormous amount of money and there seems to be a general consensus
that that wasn't the original intent.
The second change on page 2, lines 3 - 5 was made because the
Alaska Commission on Post Secondary Education, when they garnish a
student loan check, is not technically speaking taking a legal
action. They handle it simply as an administrative matter.
There's no court order involved or anything like that. This change
removes the words, "legal action" which removes the implication
that only through legal action could you garnish a Permanent Fund
check and that's not the intent of the bill.
SENATOR KELLY asked how this works in reality if they don't have to
have a legal action to garnish a check. He asked if anyone else,
like a landlord or a finance company, had to go through some legal
procedure.
MR. PAULEY answered yes, and this change does not exclude those
procedures. He referred the committee to page 1, line 7 that says,
"may be taken through levy, execution, garnishment, attachment, or
any other remedy for the collection of debt."
Number 108
SENATOR MILLER asked why a person would bother to fill out the
Permanent Dividend form, if he knew the whole thing was going to be
garnished.
MR. PAULEY responded he thought because it's an annual thing, the
debtor doesn't necessarily know whether you're going to put in the
request for garnishment any more than the person wanting to garnish
knows for sure whether you are going to apply. Also, the majority
of people who are interested in this legislation have told him they
want it to be 100 percent. There is about a 20 percent minority
who don't want it. The reason people want it at 100 percent is
because that's what State agencies get to collect.
SENATOR KELLY asked if any of those people had agreed to lower
their interest rates because collecting is a risk of doing business
and now they come to the State where the risk of collecting goes to
zero if they get 100 percent of a dividend check. We are a free
collection agency for these people.
Number 172
MR. PAULEY said the issue of interest rates has not come up.
SENATOR KELLY asked if there was any compensation to the Division
for all their efforts.
MS. NANCY JONES, Director Permanent Fund Division, responded that
they charge an administrative fee of $2 to levy upon a dividend
check.
SENATOR KELLY asked if $2 was in statute or regulation.
MS. JONES said AS43.23.071 gives them the authority to collect
fees. The fee is in regulation.
SENATOR MILLER asked why it was only $2.
MS. JONES explained that another statute in Chapter 9 limits the
amount any State agency can charge. The $2 fee is what has been
charged for a long time. Normally they collect $150,000 - $185,000
per year. If a person has six creditors asking for a levy, that's
$12 for her division - regardless of their priority.
She explained that every attachment has to go through some legal
proceedings in order for it to be declared a legal debt with a
judgement issued against a person. Her concern is if they take out
the legal action wording, a person might think that they don't have
to go through any legal process to attach the dividend. It would
cause confusion about what actually has to be done.
SENATOR LEMAN noted that there are other places in law that
describe what actions you have to take to collect on debts.
MS. JONES agreed.
SENATOR KELLY asked if she expected an increase in garnishments
with passage of this law.
MS. JONES answered no. Referring to the chart comparing 1996 and
1997 garnishments she explained they are not changing any
priorities for being paid first; they are just removing the 55
percent exemption that the other writs and certified services are
held against. She noted that the Division lost fees when the IRS
made a mistake for one year and didn't attach dividend checks.
SENATOR KELLY asked if the summary of voluntary and involuntary
attachments shows that they have to attach more Permanent Fund
Dividend checks every year.
MS. JONES agreed.
SENATOR KELLY noted that there were 18,000 claims in 1997 for other
writs and certified services. He thought there would be more
claims.
MS. JONES said she thought that's because the other agencies are
coming on line, like the Department of Health and Social Services
and traffic fines. She agreed more and more people are in a debt
status and they are getting more writs totally.
SENATOR KELLY noted that there were 26,000 unpaid claims and asked
why.
MS. JONES explained if a person is not eligible for a dividend or
they ran out of money from paying someone with a higher priority,
they are an unpaid claim.
SENATOR KELLY asked how many dividend checks were given out in
1997.
MS. JONES answered 553,800.
SENATOR KELLY said he was trying to figure out what percentage of
dividend checks get attached.
MS. JONES said somewhere between 17 or 18 percent.
Number 345
SENATOR KELLY said he was concerned at 100 percent people would
just stop filling out the form and it be counterproductive. Also,
if the State is serving as a collection agency for private
businesses, he thought there should be a larger collection fee. He
asked if the fee came from the individual's portion.
MS. JONES answered yes.
SENATOR KELLY reiterated that he thought the collection fee should
be more.
Number 445
SENATOR KELLY asked if there was a statistic for the number of
people who are Alaska residents who didn't fill out dividends every
year.
MS. JONES responded that there was no accurate measurement because
they have no way of knowing if a person doesn't file. She said
that Child Support has concerns about people not filing, but their
collections are pretty high. She asked if he wanted to change the
fee across the board because right now they charge every agency and
the private individuals.
SENATOR KELLY thought that maybe the fee should be a percentage of
the check.
SENATOR MACKIE said he was concerned that this change would hurt
collections for the Division of Child Support.
SENATOR KELLY said he had a conceptual amendment to change 100
percent to 70 percent which would leave a person enough incentive
to fill out an application and then add a five percent garnishment
fee. He did not want to overwhelm private people with a huge
collection fee, but he didn't think it was unreasonable to raise
the collection fee for people who would at best get 45 percent
under existing law.
SENATOR MACKIE said he thought they should charge the IRS five
percent also.
SENATOR KELLY agreed, but he didn't see the advantage in raising
the fee for Child Support unless it would make the bookkeeping
easier.
Number 500
MS. JONES said that right now the fee is born by the applicant and
asked if they want to take the fee out of the 30 percent going to
the applicant or should it be taken out of the 70 percent that goes
to the person filing the claim.
SENATOR KELLY said the fee should come off the top and everything
else is prorated.
MR. VINCENT USERA, Assistant Attorney General, said the reason
Child Support collections are going up is because more and more in
the divorce process there is a contractual obligation to apply for
the PFD. He thought more and more providers of services are going
to put those into their contractual agreements in the future.
Although the worry about people not applying is valid, more and
more when someone takes out a loan, for instance, they are going to
have to sign an agreement that they have to apply for the PFD
whether or not they would get it.
Number 535
SENATOR KELLY moved to adopt the CS to SB 254. There were no
objections and it was so ordered.
SENATOR MACKIE said he preferred to make it the same percentage
across the board, but not reduce it for child support.
SENATOR KELLY moved the conceptual amendment of 70 percent for the
private debtors and a five percent garnishment fee on everything.
CHAIRMAN LEMAN said he understood that to mean that five percent
was the maximum that could be garnished no matter how many debtors
there were.
SENATOR KELLY said that was a great deal better than $2 per claim.
SENATOR MACKIE asked if this applied to Child Support.
SENATOR KELLY replied that any application that has a garnishment
against it will take five percent of the top.
CHAIRMAN LEMAN called an at-ease for five minutes. He then asked
for a roll call vote. SENATORS MILLER, MACKIE and KELLY voted yes;
CHAIRMAN LEMAN voted no and the motion carried.
TAPE 98-4, SIDE B
CHAIRMAN LEMAN said they would set CSSB 254am aside until the
committee could see the final version.
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