Legislature(1995 - 1996)
02/01/1996 03:31 PM STA
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
SB 217 INCOME LIMITS FOR LONGEVITY BONUS SENATOR SHARP brought up SB 217 as the next order of business before the Senate State Affairs Committee and called a representative of the administration to give an overview of the legislation. The chairman announced that no action will be taken on the bill at this date. Number 090 CONNIE SIPE, Director of the Division of Senior Services, Department of Administration, representing the prime sponsor, stated that SB 217 would change the longevity bonus statute to eliminate Alaska Senior Citizens with high incomes. Ms. Sipe related information contained in the sponsor's statement. One of the things the administration decided while trying to make budget reductions that affected seniors, was that we should try to make reductions in a way that would impose the least hardship on seniors. SB 217 is in addition to the phase-out program, it does not replace the phase-out program. The income limitation is not needs based. The bill will probably affect 1,500-2,000 people. If a senior's income drops, that senior can become eligible again for a longevity bonus. The second portion of SB 217 would address bonus recipients who spend little of the year in Alaska. TAPE 96-8, SIDE A Number 001 MS. SIPE continued with the administration's overview of SB 217. She stated that about half of the feedback the administration has received regarding the legislation has been supportive. Many of the people who have been in support of the legislation have suggested lowering the income ceiling. Though there has been both support and opposition, she believes SB 217 was the best proposal, and that it could be simply administered. Administration on an honor basis is the intention. The longevity bonus program has always been administered on an honor basis, with only those people who gave us indication to believe they were defrauding the program, or those people who were reported for fraud being investigated. This program is run with three clerks. Number 038 CHAIRMAN SHARP asked if the program can really be processed by three people. MS. SIPE responded that the program processes, every single month, a bonus sign-off from every single person. We have to physically open the envelopes and enter the data into the computer. We will create one more computer field, and we feel we can handle that. We can send two extra sheets of paper in any one envelope for the same amount of postage. She thinks the administration could handle it with no additional resources if the legislation is kept as simple as it is currently written. If more hardship exemptions are made or more verifications are required, then it would get more difficult. Number 064 CHAIRMAN SHARP asked Ms. Sipe if dividends received from regional (native) corporations are tax exempt from federal income taxes and would not be included in gross income. MS. SIPE responded that is a question she has asked the drafting attorney, and she is waiting for a reply. Veteran's benefits and disability benefits are not taxable, so they wouldn't be included in gross income. SENATOR LEMAN thinks native corporation dividends would not be taxed. SENATOR RANDY PHILLIPS asked Ms. Sipe if administration will be based on faith. MS. SIPE responded that is how the program is currently run. There has been audit after audit, and very little fraud is found among this population. Senior citizens tend to be really honest. SENATOR RANDY PHILLIPS commented it was one thing to prove you're 65 and living in the state. It is another thing to prove income. People are more secretive about income than age. Number 109 MS. SIPE replied that people will not be asked to disclose their income, but to declare themselves above or below a limit. SENATOR RANDY PHILLIPS asked how she's going to prove something like that. MS. SIPE responded that one of the side benefits of the limit that the governor set, was that it is felt that at that income level there is less incentive to want to hedge. SENATOR RANDY PHILLIPS commented it would be interesting to see how many people hedge on PFD applications. He thinks it is about 10%. MS. SIPE replied that her division has worked with the PFD Division and done cross-runs, and they don't find that percentage in the longevity bonus program. SENATOR RANDY PHILLIPS thinks it will be harder to prove whether or not someone's cheating on the income requirements than on presence- in-the-state requirements. He has a hard time accepting the so- called honor system, based on these income levels. CHAIRMAN SHARP commented maybe that's because Senator Phillips is so young. He asked Ms. Sipe about the second part of the bill regarding required presence in the state. MS. SIPE responded that if a person is out more than 90 days in a row, they are out of the program. But the program currently does not have a cumulative time requirement, like in the permanent fund dividend program. Number 170 CHAIRMAN SHARP asked for confirmation that the benefit will be tied strictly to income, and not net worth. MS. SIPE replied that is correct. She also mentioned that a side- benefit of the income requirement in SB 217 would result in almost a two-million dollar savings impact in the public assistance budget. The hold-harmless state replacement of lost federal supplemental social security income to the lowest income elders in our state would no longer be necessary. The Social Security Act allows states to set up programs that benefit seniors, disabled, etcetera, as long as there is any kind of means or asset test. That impact was not planned when we were working on this bill. We were looking at what we could do to contribute to the budget situation. Number 188 CHAIRMAN SHARP asked if the administration explored the possibility or received input on acceptability of an across-the-board reduction. MS. SIPE responded that was considered, but we felt that would take $25 or $50 or whatever from some people who were among the neediest of seniors. CHAIRMAN SHARP stated he hears from many people who tell him they would rather take equal cuts, than dividing and conquering on one end or the other of the benefit. Number 210 SENATOR RANDY PHILLIPS commented that in earlier testimony, Ms. Sipe stated SB 217 was not meant to be a needs-based test. But now you say something different. MS. SIPE replied that what she was saying is that she has been asked if people with less than $60,000 or $80,000 are considered needy in Alaska. We do not. The governor's philosophical approach was not to say that was a level of need. It is to find a comfortable area where we feel that most people with that income would not be harmed by the loss of the longevity bonus. You will see from the fiscal note that that benefit to public assistance came in later. It happens to be a side-benefit of this decision, but it was not done in order to make the program needs based. In fact, we are still waiting for written verification from the federal agencies that even income limits as high as $60,000 and $80,000 meet their tests. They have only told us that verbally. Number 245 CHAIRMAN SHARP stated he wants to review other possible one-time monies received by individuals or families that possibly should be considered in the $60,000 or $80,000 income limit. He's still waiting to hear back from IRS officials. The chairman announced that SB 217 will be set aside. SENATOR RANDY PHILLIPS asked the chairman if he is receiving a longevity bonus. CHAIRMAN SHARP responded he won't be 65 until 1998, so reduction and termination of the longevity bonus is already in the cards for him. He announced that SB 217 will be brought up again when more information is received.