Legislature(2021 - 2022)BUTROVICH 205

01/31/2022 03:30 PM Senate RESOURCES

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**Streamed live on AKL.tv**
                   SB  84-LAND VOUCHERS; PFDS                                                                               
3:34:37 PM                                                                                                                    
CHAIR REVAK  announced the  consideration of  SENATE BILL  NO. 84                                                               
"An  Act  relating  to  the  veterans'  land  purchase  discount;                                                               
establishing state land vouchers;  relating to the permanent fund                                                               
dividend; relating  to the duties  of the Department  of Revenue;                                                               
authorizing the  Department of Natural Resources  to accept state                                                               
land  vouchers; relating  to eligibility  for public  assistance;                                                               
and providing for an effective date."                                                                                           
3:36:30 PM                                                                                                                    
BRIAN  FECHTER,  Deputy   Commissioner,  Department  of  Revenue,                                                               
Anchorage,  Alaska, presented  a  slideshow on  SB  84: PFD  Land                                                               
Vouchers. He  advanced to  slide 1,  SB 84  Creates the  PFD Land                                                               
Voucher Program:                                                                                                                
   • PFD applicants can elect a land voucher in lieu of a                                                                       
     cash PFD                                                                                                                   
   • Face value of the land voucher is 2x the statutory                                                                         
     formula value of the PFD                                                                                                   
MR.  FECHTER elaborated,  stating  a $3,000  statutory PFD  would                                                               
result in a $6,000 land voucher.                                                                                                
   • PFD Land Vouchers can be used to purchase state land                                                                       
     offered for sale by DNR                                                                                                    
   • Land vouchers have long historic precedent                                                                                 
     • Payment to American Revolution veterans                                                                                  
MR. FECHTER said that from  the American Revolution through WWII,                                                               
there  is  a  precedent  of giving  land  vouchers  to  veterans.                                                               
American Revolution  soldiers received land vouchers  as payment,                                                               
and  WWII veterans  received land  vouchers  in appreciation  for                                                               
their service.                                                                                                                  
   • Used at statehood by various states to distribute and                                                                      
        settle land                                                                                                             
    • Objective: Get State Land into the Hands of Alaskans                                                                    
3:37:38 PM                                                                                                                    
MR. FECHTER advanced to Slide 2, Land Voucher Program Details:                                                                  
   • Vouchers can't be used to buy Mental Health Trust                                                                          
   • Parents can't apply for vouchers for their children                                                                        
MR.  FECHTER  stated  that  this  policy  encourages  parents  to                                                               
contribute to the Alaska 529  university savings plan rather than                                                               
apply for land vouchers on  behalf of their children. Only adults                                                               
may apply for land vouchers.                                                                                                    
   • Vouchers can't be used to pay rents or fees  just                                                                          
     sale price                                                                                                                 
MR. FECHTER stated  that the voucher only applies  to the initial                                                               
purchase price of the land.                                                                                                     
   • Vouchers only available to PFD applicants who use the                                                                      
     electronic application                                                                                                     
MR. FECHTER  said this  is consistent  with "Pick,  Click, Give,                                                                
the education raffle, and other voluntary election programs.                                                                    
   • PFD applicants need to be determined eligible within                                                                       
     the PFD year                                                                                                               
   • Vouchers are transferable and never expire                                                                                 
MR. FECHTER explained that an individual  may give away or sell a                                                               
land voucher to transfer ownership.                                                                                             
   • Dept of Revenue will track voucher transfers, and will                                                                     
     replace lost, stolen or destroyed vouchers                                                                                 
   • Vouchers may be garnished up to the value of the cash                                                                      
MR.  FECHTER  offered a  hypothetical  example  of how  the  land                                                               
voucher   garnishment  would   work.   Suppose  the   legislature                                                               
appropriates a $1,000 PFD, and  the individual, who elects a land                                                               
voucher, owes  $1,000 in unpaid  child support. $1,000  cash will                                                               
go  to  the  Child  Support Division,  and  the  individual  will                                                               
receive what remains.  The garnished land voucher  will total the                                                               
value of the land voucher minus the garnished amount.                                                                           
   • Cash from PFDs not paid in cash because of voucher                                                                         
     election lapses to General Fund                                                                                            
   • DHSS and other benefits programs must consider voucher                                                                     
         as income or resources in determining benefits                                                                         
3:39:41 PM                                                                                                                    
MR.  FECHTER advanced  to Slide  3,  Lands in  Alaskan Hands.  He                                                               
stated that the Department of  Natural Resources contributed this                                                               
       Help fulfill the Alaska Constitution's mandate to                                                                        
         develop state resources to benefit the public.                                                                         
      Make Alaska land more accessible to all by making it                                                                      
             easier for Alaskans to purchase land.                                                                              
       No other state has less land in private hands than                                                                       
     The PFD Land Voucher Bill is a response to the demand,                                                                     
          by helping individual Alaskan's realize land                                                                          
     The PFD Land Voucher Bill would be a win-win for both                                                                      
         the individual Alaskan and the state treasury.                                                                         
MR. FECHTER  reiterated that the purpose  of SB 84 is  to fulfill                                                               
the  constitutional mandate  to develop  state resources  for the                                                               
maximum  benefit  of  the  public. In  stark  contrast  to  Rhode                                                               
Island's 97 percent, private ownership  of land in Alaska is only                                                               
three percent.                                                                                                                  
3:40:20 PM                                                                                                                    
MR.  FECHTER  advanced to  slide  4,  Cashflow Hypothetical.  The                                                               
following  numbers  are  hypothetical for  illustrative  purposes                                                               
                     Cashflow Hypothetical                                                                                      
     CY2022 Statutory PFD:              $2,300/person                                                                           
     FY2023 Approp. PFD:                $1,000/person                                                                           
     Land voucher:                      $4,600/person                                                                           
     Cash PFD elections:                      600,000                                                                           
     Land voucher elections:                   40,000                                                                           
     Amount appropriated                                                                                                        
       from ERA to GF to PFD Fund:             $640mm                                                                           
     Cash PFDs:                                $600mm                                                                           
     Lapse to GF from unelected cash PFDs:      $40mm                                                                           
     Face value of land vouchers:              $184mm                                                                           
     Land ultimately sold:                     $300mm                                                                           
     Cash to GF from land sales:               $116mm                                                                           
     Total Cash to GF:                         $156mm                                                                           
MR.  FECHTER  explained that,  in  this  hypothetical example,  a                                                               
person  elects $1,000  cash  or a  $4,600  land voucher.  Suppose                                                               
40,000  individuals  elect  land vouchers.  Of  the  $640,000,000                                                               
appropriated for  PFDs, $600,000,000 will be  distributed in cash                                                               
and  $40,000,000 will  lapse  to  the general  fund.  As land  is                                                               
purchased,  revenue  generated  from  land sales  will  grow  the                                                               
general fund over time.                                                                                                         
3:41:20 PM                                                                                                                    
SENATOR  KIEHL  asked  about the  assumption  of  induced  effect                                                               
versus just putting more land up for sale.                                                                                      
MR. FECHTER answered  that question brings up  a major governor's                                                               
initiative. The governor  has invested a lot of  resources in the                                                               
Department of  Natural Resources  and has pressed  the department                                                               
to  maximize land  sales. The  governor  wants unallocated  lands                                                               
available  for   sale,  so  Alaskans   can  make   purchases  and                                                               
participate in sales.                                                                                                           
MR. FECHTER stated  that the department has not  done an analysis                                                               
to determine the  proportion of land sales that  would occur with                                                               
or  without  this  program.  He expressed  his  belief  that  the                                                               
program would  incentivize Alaskans to participate  in land sales                                                               
and get  more land in the  hands of Alaskans. The  ripple effects                                                               
of land  sales are  numerous, especially  with property  taxes in                                                               
organized communities.                                                                                                          
SENATOR KIEHL asked whether  the hypothetical example proportions                                                               
are based  on the average  parcel value, one voucher  applied per                                                               
parcel,  multiple vouchers  applied  per parcel,  or anything  in                                                               
particular. He asked how the  figure, $300,000,000 for the amount                                                               
of land sold, was derived.                                                                                                      
MR. FECHTER answered that this  is an illustrative example of how                                                               
the cash  flow would work.  Absent an  accurate number to  put in                                                               
front  of  the committee,  illustrative  numbers,  not backed  by                                                               
science, were used.                                                                                                             
3:43:58 PM                                                                                                                    
SENATOR STEVENS commented that lands  available for purchase over                                                               
the years have not always been  in desirable areas. He asked what                                                               
process the department uses to  announce land sales, whether this                                                               
sale  would be  more significant  than in  the past,  and how  to                                                               
select and purchase land.                                                                                                       
MR.  FECHTER deferred  the question  to Ms.  Colles, Division  of                                                               
Mining, Land, and Water, Department of Natural Resources.                                                                       
3:44:39 PM                                                                                                                    
CHRISTY  COLLES, Operations  Manager, Division  of Mining,  Land,                                                               
and Water,  Department of  Natural Resources,  Anchorage, Alaska,                                                               
provided invited  testimony on  SB 84.  The department  has over-                                                               
the-counter sales comprised of unsold  auction parcels and unsold                                                               
parcels from the remote recreational staking cabin program sale.                                                                
MS.  COLLES  said  auctions  are  the  main  way  the  department                                                               
notifies the  public of  a land  sale. The  department identifies                                                               
land,   ensures   it   is  properly   classified   and   develops                                                               
subdivisions  with  road  access.  The  department  determines  a                                                               
starting price based  on an appraisal, for  which individuals may                                                               
submit bids. Lands  are available across the  state, and auctions                                                               
occur once every year.                                                                                                          
MS. COLLES  explained that the remote  recreational cabin staking                                                               
program  works  differently  than   an  auction.  The  department                                                               
identifies a large area, and  a limited number of individuals are                                                               
allowed  to stake  5 to  20 acres  of land.  It is  a competitive                                                               
process   because   the  program   may   limit   the  number   of                                                               
authorizations in certain  areas. So, there may  be more interest                                                               
than parcels available.                                                                                                         
MS. COLLES  said auctions and  remote recreational  cabin staking                                                               
go  through  a decision  process  and  are available  online  for                                                               
individuals to place a bid.                                                                                                     
3:46:35 PM                                                                                                                    
SENATOR STEVENS  surmised that if  SB 84  were to pass,  it would                                                               
generate a lot  of interest in and applications  for state lands.                                                               
He asked  whether the  department was  prepared to  identify more                                                               
lands or if the availability of land will remain status quo.                                                                    
MS. COLLES answered  that there are limitations  with the current                                                               
statutes,  but the  goal  is  to make  more  land available.  The                                                               
governor  has  introduced  a  couple of  bills  to  increase  the                                                               
availability of land.                                                                                                           
3:47:24 PM                                                                                                                    
SENATOR KIEHL  asked what proportion  of the state's  sales price                                                               
the state  uses to  prepare parcels for  sale through  auction or                                                               
over  the counter.  The purpose  of  the question  is to  compare                                                               
preparation costs incurred by  individuals against costs incurred                                                               
by the state.                                                                                                                   
MS.  COLLES  answered  that  an  exact  percentage  depends.  The                                                               
department puts  a lot upfront into  subdivision sales, including                                                               
appraisals and surveys. The sale  price reflects those costs. She                                                               
stated that  through the  land disposal  income fund  (LDIF), the                                                               
department  tries  to  cover  the  cost  of  all  employees  that                                                               
administer  the program,  including appraisal  and survey  costs.                                                               
The  department tries  to  redeposit  recouped expenditures  back                                                               
into the LDIF to fund future projects.                                                                                          
SENATOR KIEHL stated that the  mean, median, and mode parcel sale                                                               
proportions would be helpful as a follow-up.                                                                                    
CHAIR   REVAK  requested   that   the   department  provide   the                                                               
information to the committee.                                                                                                   
3:49:18 PM                                                                                                                    
SENATOR  KIEHL referred  to  Mr.  Fechter's hypothetical  example                                                               
that  outlined  the garnishment  process  for  land vouchers.  He                                                               
asked why the  multiplier applied to the  land voucher's issuance                                                               
is not similar to its reduction.                                                                                                
MR. FECHTER answered  that this was a policy decision.  In SB 84,                                                               
the cash  value set aside for  individuals is less than  the land                                                               
voucher value.  Garnishing the  total value  of the  land voucher                                                               
might cause the PFD fund to go underwater.                                                                                      
MR.  FECHTER explained  that  the  maximum amount  a  PFD may  be                                                               
garnished is  not to  exceed the appropriated  value of  the PFD.                                                               
The idea  is to have  a level playing  field so that  the maximum                                                               
amount deductible is the same for  any PFD, whether a cash PFD or                                                               
a land voucher.                                                                                                                 
SENATOR  KIEHL inquired  further into  the possible  imbalance of                                                               
the land voucher garnishment calculation  in SB 84. An individual                                                               
with  a partially  garnished PFD  comes  out way  ahead of  those                                                               
whose PFD is  not garnished. The garnished  individual gets their                                                               
debt satisfied and  almost the full voucher amount.  They get the                                                               
full multiplier  on the plus  side without the multiplier  on the                                                               
minus side.                                                                                                                     
MR. FECHTER  answered that is  accurate. The physical  asset, the                                                               
land voucher,  could be garnished  by implementing  a garnishment                                                               
process.  However, it  is much  more valuable  to the  garnishing                                                               
agency to  satisfy a debt with  cash. While the land  voucher has                                                               
intrinsic value, it  is more challenging to turn it  into cash to                                                               
satisfy a debt.                                                                                                                 
3:51:51 PM                                                                                                                    
CHAIR   REVAK  asked   whether   the  land   vouchers  would   be                                                               
MR.  FECHTER  answered  yes.  Individuals  may  sell  their  land                                                               
vouchers  for whatever  someone is  willing to  pay, or  they can                                                               
give them away.                                                                                                                 
CHAIR REVAK asked  who would create and oversee  the land voucher                                                               
program,  including  the  prevention  of  fraud  and  counterfeit                                                               
MR.  FECHTER  answered that  the  state  would benefit  from  its                                                               
existing, robust PFD  application process as a  control to verify                                                               
identity,  prevent scams,  and ensure  security,  are already  in                                                               
place.  The   Department  of  Revenue  (DOR)   envisions  holding                                                               
vouchers in  a database. DOR  will verify a person's  identity in                                                               
the  event of  a  voucher exchange.  DOR  will track  certificate                                                               
holders,   so  holders   must  report   voucher  transfers.   The                                                               
certificate itself is  just a piece of paper; it  is not a bearer                                                               
instrument. The database will  contain certificate ownership data                                                               
and data on  the number of vouchers redeemed. DOR  will work with                                                               
the Department  of Natural Resources  (DNR) to track  the outcome                                                               
of all its land sales.                                                                                                          
CHAIR   REVAK  commented   a  paper   certificate  opens   up  an                                                               
opportunity for fraud. He asked  whether land vouchers would have                                                               
a digital tracking mechanism.                                                                                                   
MR. FECHTER  answered that the  paper certificate  associates the                                                               
voucher  owner with  a unique  identifying number  and gives  the                                                               
owner a tangible record to  possess. The core balance of vouchers                                                               
would  be kept  with  DOR and  tracked  digitally. An  individual                                                               
could  not steal  a voucher  by merely  taking possession  of the                                                               
paper certificate.                                                                                                              
3:55:02 PM                                                                                                                    
SENATOR STEVENS said  that this is a great idea,  but if there is                                                               
no more  land than currently  available, the state will  not wind                                                               
up with more money in the  treasury. He expressed his belief that                                                               
the obligation  is to identify  more land  to sell; he  hoped the                                                               
administration would attempt to do so.                                                                                          
MR. FECHTER answered  that is precisely the  intent. He expressed                                                               
his belief that  the Department of Natural  Resources (DNR) spoke                                                               
earlier about  a series  of bills that  would remove  barriers to                                                               
making land  available. He  deferred to DNR  to speak  more about                                                               
those bills.                                                                                                                    
SENATOR STEVENS commented that it is  a lot of work, and he hopes                                                               
the administration achieves its goal.                                                                                           
3:55:52 PM                                                                                                                    
CHAIR REVAK  expressed concern  that the  $40,000 [$40.6  per OMB                                                               
Component Number  981] operating budget expense  indicated on the                                                               
fiscal  note   is  insufficient.  He  asked   what  software  the                                                               
Department of Revenue intends to  implement to track land voucher                                                               
activity  and land  voucher transfers.  He  wondered whether  the                                                               
department  would require  additional  staff  to track  vouchers,                                                               
prevent fraud, and prevent counterfeiting.                                                                                      
MR. FECHTER  answered that the  amount is  in line with  the last                                                               
major PFD  election program. Raffle programming  changes required                                                               
$20,000 to $40,000. DOR has a  dedicated IT team that uses EDIUS,                                                               
the  backend   software  for  the  PFD   eligibility  system.  He                                                               
expressed  his belief  that the  existing  software could  easily                                                               
integrate the land voucher program.  DOR does not know the demand                                                               
for  the land  voucher program  but  does not  envision half  the                                                               
applicants choosing the land voucher  election the first year. As                                                               
the program moves  forward, DOR may come back  to the legislature                                                               
if the program becomes a burden.                                                                                                
3:57:26 PM                                                                                                                    
SENATOR KIEHL  commented that  various assistance  programs would                                                               
consider land  vouchers as  income and  resources. A  fiscal note                                                               
indicates  that the  Division of  Public  Assistance estimates  a                                                               
one-time  mailing to  its  clients  to notify  them  of the  land                                                               
voucher's  impact  on  their eligibility  for  public  assistance                                                               
programs. He asked why this  notification could not be sent every                                                               
SHAWNDA  O'BRIEN,   Director,  Division  of   Public  Assistance,                                                               
Department  of  Health  and   Social  Services,  Juneau,  Alaska,                                                               
provided invited  testimony on  SB 84.  She expressed  her belief                                                               
that the division could automate  the notification system to send                                                               
a standardized  notification to new program  recipients. The cost                                                               
would fluctuate depending on the  number of new recipients in the                                                               
program.  The  $140,000  [139.8 per  OMB  Component  Number  236]                                                               
ballpark  fiscal  note  estimate  is   based  on  the  number  of                                                               
recipients currently in the division's program.                                                                                 
SENATOR KIEHL  commented that, in  his experience,  recipients at                                                               
the edge  of the  income ladder for  these programs  are working,                                                               
not  unemployed. He  emphasized that  it is  difficult for  these                                                               
recipients to work multiple jobs, get  food on the table, and get                                                               
the kids to  school. He asked what the education  success rate is                                                               
when the  requirements of a  program change; in other  words, how                                                               
effective is the uptake from one letter for one notice.                                                                         
MS. O'BRIEN  answered that  the educational  part of  the process                                                               
mostly  happens  during  the   program's  interview  stage.  Many                                                               
programs require  an interview with  recipients to  cover details                                                               
like fraud, changes  that require reporting, and  other items. It                                                               
is  a hands-on,  face-to-face opportunity  to educate  recipients                                                               
about the  program's rules and  how changes affect  them. Message                                                               
repetition  is often  more successful  in  multiple venues,  like                                                               
incorporating a message  into a written notification  to build on                                                               
the same message given in an interview.                                                                                         
4:01:04 PM                                                                                                                    
CHAIR REVAK inquired about the  land voucher garnishment process,                                                               
asking  whether the  deduction would  occur on  the land  voucher                                                               
instead of the PFD.                                                                                                             
MR. FECHTER answered  yes. Everyone would have the  same level of                                                               
garnishment whether  an individual  selects cash or  voucher. The                                                               
individual  would  receive  the balance  after  the  garnishment.                                                               
Suppose  an  individual  elects  a land  voucher,  has  a  $1,000                                                               
garnishment,  and  the cash  value  of  the  PFD is  $1,000.  The                                                               
individual  would receive  the total  value of  the land  voucher                                                               
minus $1,000.                                                                                                                   
CHAIR  REVAK  repeated  the garnishment  process  and  questioned                                                               
whether the calculation method was equitable.                                                                                   
MR.  FECHTER reiterated  that if  the cash  value of  the PDF  is                                                               
$1,000, an individual,  who owes back child support  and elects a                                                               
cash PFD, could be garnished up  to $1,000 to satisfy their debt.                                                               
The same is true for an  individual who elects a land voucher. Up                                                               
to  $1,000  could be  garnished  from  the  value of  their  land                                                               
voucher to satisfy up to $1,000 of their debt.                                                                                  
CHAIR REVAK  asked whether the proposed  garnishment method would                                                               
affect state garnishment receipts.                                                                                              
MR. FECHTER expressed  his belief that it would  not affect state                                                               
receipts.  The  net effect  is  the  same whether  an  individual                                                               
elects a land voucher or a cash PFD.                                                                                            
4:04:25 PM                                                                                                                    
CHAIR REVAK announced that the  committee had received department                                                               
answers to previous questions.                                                                                                  
CHAIR REVAK opened public testimony on SB 84.                                                                                   
4:04:44 PM                                                                                                                    
EDWARD  MARTIN, Representing  Self, Kenai,  Alaska, testified  in                                                               
support  of  SB  84.  He played  previously  recorded  testimony,                                                               
stating the PFD land voucher was  an idea he dreamed up years ago                                                               
when the state was faced with $9  per barrel of oil and the state                                                               
government attempted  to access  the permanent fund  dividend. He                                                               
expressed his  belief that it  was inappropriate then and  is not                                                               
appropriate  now.  The permanent  fund  dividend  belongs to  the                                                               
people. As  it concerns transferability, a  parent could transfer                                                               
land to their children in a  trust. He recommended the program be                                                               
open exclusively  to Alaskans.  Alaska has been  a state  for far                                                               
too long without  making land available. The  state will generate                                                               
tremendous revenue when  land development creates a  tax base. He                                                               
suggested  a  simpler  method  to  purchase  land,  mainly  using                                                               
unencumbered PFD money to make a land purchase.                                                                                 
4:09:48 PM                                                                                                                    
CHAIR REVAK closed public testimony on SB 84.                                                                                   
4:10:00 PM                                                                                                                    
CHAIR REVAK held SB 84 in committee.                                                                                            

Document Name Date/Time Subjects
DB 84 DOR Response Letter 1.31.2022.msg SRES 1/31/2022 3:30:00 PM
SB 84 Fiscal Note DHSS 1.28.2022.pdf SRES 1/31/2022 3:30:00 PM
SB 84
SB 84 Department of Revenue Presentation 1.31.2022.pdf SRES 1/31/2022 3:30:00 PM
SB 84
SB 84 Fiscal Note DNR 1.28.2022.pdf SRES 1/31/2022 3:30:00 PM
SB 84
SB 84 Fiscal Note DoR 1.28.2022.pdf SRES 1/31/2022 3:30:00 PM
SB 84
SB 84 Sectional Analysis 1.31.2022.pdf SRES 1/31/2022 3:30:00 PM
SB 84
SB 133 DNR Presentation 1.31.22.pdf SRES 1/31/2022 3:30:00 PM
SB 133