Legislature(2015 - 2016)SENATE FINANCE 532
04/12/2016 01:30 PM Senate FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| SB128 | |
| HB188 | |
| HB83 | |
| HB289 | |
| HB231 | |
| HB268 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | SB 128 | TELECONFERENCED | |
| + | HB 188 | TELECONFERENCED | |
| + | HB 83 | TELECONFERENCED | |
| + | HB 289 | TELECONFERENCED | |
| + | HB 231 | TELECONFERENCED | |
| + | HB 268 | TELECONFERENCED | |
| + | TELECONFERENCED |
SENATE FINANCE COMMITTEE
April 12, 2016
1:37 p.m.
1:37:16 PM
CALL TO ORDER
Co-Chair MacKinnon called the Senate Finance Committee
meeting to order at 1:37 p.m.
MEMBERS PRESENT
Senator Anna MacKinnon, Co-Chair
Senator Peter Micciche, Vice-Chair
Senator Click Bishop
Senator Mike Dunleavy
Senator Lyman Hoffman
Senator Donny Olson
MEMBERS ABSENT
Senator Pete Kelly, Co-Chair
ALSO PRESENT
Laura Cramer, Staff, Senator Anna MacKinnon; David Teal,
Director, Legislative Finance Division; Representative Dan
Saddler, Sponsor; Kim Skipper, Staff, Representative Dan
Saddler; Representative Gabrielle LeDoux, Sponsor; Amy
Michel, Staff, Representative LeDoux; Esther Mielke, Staff,
Representative Bob Lynn; Kris Curtis, Legislative Auditor,
Alaska Division of Legislative Audit; Gene Therriault,
Staff, Alaska Industrial Development and Export Authority.
PRESENT VIA TELECONFERENCE
Stuart Spielman, Autism Speaks, Washington DC; Margaret
Brodie, Director, Division of Health Care Services,
Department of Health and Social Services, Anchorage;
Kristen Vandagriff, Alaska Governors Council on
Disabilities and Special Education, Anchorage; Sarah
Batton, Attorney, Groh Eggers, Anchorage; Ken Jacobus,
Anchorage BAR Association, Anchorage; Glenda Ledford,
Chair, Board of Barbers and Hairdressers, Wasilla; Jeannine
Jabaay, Board of Barbers and Hairdressers, Hope; Jeff
Edwards, Director, Parole Board, Department of Corrections,
Anchorage; Michael Lamb, Chief Financial Officer, AIDEA.
SUMMARY
SB 128 PERM. FUND:DEPOSITS;DIVIDEND;EARNINGS
SB 128 was HEARD and HELD in committee for
further consideration.
CSHB 83(JUD)
REPEAL COLLECTION OF CIVIL LITIG. INFO
CSHB 83(JUD) was HEARD and HELD in committee for
further consideration.
CSHB 188(FIN)
PERSON W/DISABILITY SAVINGS ACCOUNTS
CSHB 188(FIN) was HEARD and HELD in committee for
further consideration.
CSHB 231(FIN)
EXTEND BOARD OF PAROLE
CSHB 231(FIN) was HEARD and HELD in committee for
further consideration.
HB 268 AIDEA:DIVIDEND TO STATE;INCOME;VALUATION
HB 268 was HEARD and HELD in committee for
further consideration.
HB 289 BOARD OF BARBERS AND HAIRDRESSERS
HB 289 was HEARD and HELD in committee for
further consideration.
SENATE BILL NO. 128
"An Act relating to the Alaska permanent fund;
relating to appropriations to the dividend fund;
relating to income of the Alaska permanent fund;
relating to the earnings reserve account; relating to
the Alaska permanent fund dividend; making conforming
amendments; and providing for an effective date."
1:37:58 PM
Co-Chair MacKinnon explained the intent of the committee
substitute for SB 128 was to address the state's fiscal
crisis.
1:38:44 PM
Vice-Chair Micciche MOVED to ADOPT the committee substitute
for SB 128, Work Draft 29-GS2859\N (Wallace/Martin,
4/12/16).
Co-Chair MacKinnon OBJECTED for DISCUSSION.
1:39:00 PM
AT EASE
1:40:42 PM
RECONVENED
1:41:09 PM
Co-Chair MacKinnon announced that the documents discussed
at the table were available online under the bill.
1:41:24 PM
LAURA CRAMER, STAFF, SENATOR ANNA MACKINNON, explained the
committee substitute. She read from the Sectional Analysis
(copy on file):
Section 1: Legislative intent that the legislature
reevaluate the use of the earnings of the Permanent
Fund in three years
Section 2: Amerada Hess income no longer flows to the
Capital Income Fund. Segregation of these funds is no
longer legally required
Section 3: Dedicated deposits of royalties to the
Permanent Fund are reduced from the current 25/50
split on old/new leases to the constitutional minimum
of 25 percent
Section 4:
(a) Requires the Alaska Permanent Fund
Corporation to determine the net income of the
earnings reserve account as the income is
realized and received
(b) Defines the Percent of Market Value (POMV)
payout as 5.25 percent of the average year-end
market value of the Permanent Fund and Earnings
Reserve Account for the first five of the most
recently completed six fiscal years. The payout
may not exceed the year-end balance of the
earnings reserve account for the fiscal year just
ended
Section 5: AS 37.13.145 is the Disposition of Income
of the Permanent Fund statute
(a) Unchanged - Establishes the ERA and
identifies the ERA as holding earnings of the
Permanent Fund and ERA
(b) Repealed in this bill - dividends based on
statutory net income
(c) Repealed in this bill - inflation proofing
(d) Repealed in this bill - segregation of
Amerada Hess
(e) Added in this section - each year the
legislature may appropriate to the General Fund
the amount available for distribution from the
Earnings Reserve Account under the POMV in Sec. 4
(b)
Section 6: Dividends are comprised of 20 percent of
the 5.25 percent POMV outlined in Sec. 4(b), and 20
percent of prior year royalties, excludes those
dedicated to the Permanent Fund or School Fund (25.5
percent are dedicated)
Section 7: Mental Health Trust Fund may not be
included in the computation of income available for
distribution under the POMV
Section 8: Makes computation of Mental Health Trust
Fund income consistent with computation of other
Permanent Fund Income
Section 9: Transfer of money to the Dividend Fund
requires an appropriation
Section 10: The amount of each Permanent Fund Dividend
for fiscal years 2017, 2018, and 2019 shall be $1,000
Section 11: Conforms to Sec. 9, which moves money to
the Dividend Fund by appropriation
Section 12: Once the money is in the Dividend Fund,
the Department of Revenue shall annually pay dividends
without further appropriation
Section 13: Repeals language relating to the former
dividend calculation, inflation proofing calculation,
and Amerada Hess language
Section 14: Repeals Sec. 10 - $1,000 dividend for
three years
Section 15: The Commissioner of Revenue and the Alaska
Permanent Fund Corporation may adopt regulations,
policies and procedures to implement this Act
Section 16: Retroactivity clause
Section 17: Effective Date for sections 15 and 16,
immediate
Section 18: Effective Date, July 1, 2016
1:45:56 PM
Senator Olson wondered how the dividend amount would
fluctuate under Section 6, what the expected dividend
payout would be after 2019.
1:46:34 PM
Co-Chair MacKinnon relayed that David Teal, Director,
Legislative Finance Division would be available to answer
questions.
1:46:39 PM
Ms. Cramer agreed that Mr. Teal would walk through the
output from the model.
1:46:55 PM
Co-Chair MacKinnon WITHDREW the OBJECTION. There being NO
OBJECTION, the proposed committee substitute was adopted.
She relayed that Mr. Teal would walk through how the bill
would address the budget shortfall and how it would affect
the Permanent Fund.
1:47:47 PM
DAVID TEAL, DIRECTOR, LEGISLATIVE FINANCE DIVISION, looked
at the "LFD Fiscal Model" (copy on file).
1:48:00 PM
AT EASE
1:48:33 PM
RECONVENED
1:48:35 PM
Co-Chair MacKinnon remarked that the Permanent Fund
Corporation had requested a model using a 6.9 percent
Permanent Fund investment return; the governor's original
model had used 7.45 percent. She noted that the model
before the committee used the 6.9 percent investment
return.
1:49:16 PM
Mr. Teal looked to the price scenario at the center of the
document. The scenario used the spring 2016 revenue
forecast. He noted that the yellow highlighted fields
reflected no growth in the operating budget, and in fact
had a targeted cut of $247 million, which was subject to
change.
1:50:07 PM
Co-Chair MacKinnon understood that the estimated capital
spend projected in the model was $185 million.
Mr. Teal replied in the affirmative.
1:50:16 PM
Mr. Teal noted the factors of Community Assistance and Debt
Service, as projected, and highlighted that the model
contained no revenue variables: sales tax, income tax,
motor fuel tax, indirect expenditure adjustments, the
Governor's tax bills package, except for the Tax Credit
Reform bill - the modeling output of which were the House
Finance Committee numbers. He directed committee attention
to the blue bars under "Custom Plan Specifications" which
reflected a POMV payout of 5.25 percent, with 20 percent of
the payout going to dividends, and an additional 20 percent
going to dividends from royalties. He pointed to the upper
right line graph on the slide, which showed that dividends
would be steady at $1000. He said that without the cap,
dividends would drop to $900 for 3 years and then would go
back to $1000 through 2025. He said that the model assumed
that the CBR would earn more than the current 1 to 2
percent. He said that it was not in the bill, but there had
been discussion of more aggressively investing the CBR so
that the returns on it would be higher. He elaborated that
there were a number of ways to do that, but it would not
make a significant difference to the model. He noted that
the lower left graph on the slide reflected that the CBR
balance under the model would drop to $2 billion. He
furthered that those earnings did not make or break the
model. He indicated the graph in the upper left corner,
which showed the UGF revenue/budget, in millions. He stated
that the expenditure line was the dark line on top, the
bars represented oil revenue [blue], CBR/SBR draws
[orange], and the POMV draw from the earnings reserve
[green]. The graph indicated that the deficit would narrow,
but that it would still exist through 2025. He said that
the lower left graph showed that reserve balances were
expected to stabilize at approximately $12 billion. He
noted that the table at the bottom of the graph showed
reserves of approximately $12 billion in 2025. The deficit
would still exist, but because it would be lower than it
was currently, the reserves would be exhausted after 28
years. He said that it was worth noting that although
reserves in 2017 were approximately $14 billion, the state
was spending reserves at a more rapid rate, which would
exhaust them in 8 years or less.
1:54:39 PM
Mr. Teal remarked that the reserve balance would be
slightly lower, and the deficit would be so much lower that
the glide path would be better under the legislation than
under the status quo. He noted the table in the lower right
of the slide that reflected in turquoise the real value of
the Permanent Fund would fall slightly overtime and would
not keep pace with inflation at the projected earnings
rates. He noted that although there would be a nominal
payout of 5.25 percent, there was a 6 year lag in the
projection because the payout was based on the first 5 of
the most recently completed 6 years. Because of the long
look back, the effective payout as shown in the lower right
hand corner of the slide was at roughly 4.9 percent.
1:55:59 PM
Co-Chair MacKinnon surmised that the slide reflected a
spending increased from FY16 to FY17.
Mr. Teal replied that there was actually a reduction in FY
17, but remarked that in FY16 the dividends were not shown
as general fund expenditures. The graph was showing only
UGF expenditures. He clarified that if FY 17 dividends were
shown, the line would increase from $5 billion to $6.4
billion.
1:56:47 PM
Co-Chair MacKinnon surmised that the way that the dividend
was calculated and paid out would change under the
legislation and the dividend payments would be reflected in
the Operating Budget.
Mr. Teal responded that currently the dividends did not
show as general fund expenditures. They were reflected in
the fiscal summary, but in a different section; under the
legislation dividends would appear as general fund
expenditures.
1:57:23 PM
Co-Chair MacKinnon assured Alaskans that there would be
zero growth in the operating budget.
1:58:04 PM
Co-Chair MacKinnon asked whether the green bars on the
graph in the upper left of the slide reflected a $2.4
billion draw in FY17.
Mr. Teal responded that $2.4 billion was an accurate
approximation.
1:58:26 PM
Co-Chair MacKinnon referred to FY 25 on the same chart, and
surmised that the draw would increase to $3 billion.
Mr. Teal replied that the draw would increase as the
Permanent Fund and the Earnings Reserve increased.
1:58:55 PM
Co-Chair MacKinnon noted that the dividend check would
remain steady at about $1000, in perpetuity. She said that
the Governor's original plan, SB 114, as well as offerings
in the house had all been incorporated into the cs in an
effort to stabilize the dividend, while using the bulk of
the assets in the form of earnings to diversify Alaska's
revenue stream. She indicated the lower left hand corner of
the slide which showed the stabilizing of the draw on
reserves. She said that currently the legislature was
looking at removing $7 billion, over two years, to pay for
expenses. She furthered that more work needed to be done to
ensure that the state did not lose any stability in growing
the corpus of the fund.
2:00:19 PM
Senator Dunleavy surmised that if spending could be driven
down from $5.2 billion, to $4 billion, reserves could be
extended and less of a draw would be necessary.
Mr. Teal replied in the affirmative.
2:00:52 PM
Senator Dunleavy remarked that people should understand
that as spending was pushed down, the life of the savings
and the Permanent Fund would be extended.
2:01:37 PM
Co-Chair MacKinnon agreed. She understood that for the
first time in Alaska's history, $700 million for dividend
payouts was listed as new money spending in the Operating
Budget. She furthered that there was no increase to the
Operating Budget, but dividends going out to the people of
Alaska were reflected.
Mr. Teal responded yes. He added that the $5.3 billion in
spending included the payout of dividends, which meant that
the graph reflected a $4.5 billion budget, in conventional
terms.
2:02:26 PM
Co-Chair MacKinnon asserted that the downward pressure on
the budget would continue; the bill would not solve all of
the state's fiscal problems, but would go a long way toward
future fiscal stabilization.
2:02:45 PM
Senator Hoffman looked at the bottom left graph, which
showed budget reserves without growth, out to 2053. [He
added the Years to Exhaust, 28, to the last date on the
graph 2025: 2053]
Mr. Teal replied that the Years to Exhaust used simple
math. He explained that in FY 25, reserves would be lower
at $11.9 billion, but the deficit would also be lower at
minus $432 million. He said that although there would be
lower reserves, they would last much longer.
2:04:09 PM
Senator Hoffman understood that with no growth, the
reserves would be exhausted by 2053.
Mr. Teal warned that it was risky to get too accurate with
projections of this kind.
2:04:30 PM
Vice-Chair Micciche queried the factors that made the
corpus of the fund grow faster under the scenario on the
slide, versus the status quo.
Mr. Teal replied that the balance included both the
Earnings Reserve and the Corpus. He said that they
continued to increase because 25 percent of royalties,
leases, etc., were being deposited into the Corpus every
year. He stated that 6.9 percent was being earned, but 5.25
percent was being paid out, any earnings above the payout
remained in the fund. He furthered that although the
inflation proofing provision had been repealed, inflation
proofing would still exist.
2:05:49 PM
Vice-Chair Micciche noted that the cuts in state government
that were reflected on the slide were less than what the
committee hoped to accomplish. He pointed out that the
model also did not include changes to oil and gas credits.
2:06:18 PM
Co-Chair MacKinnon interjected that the model did take oil
and gas tax credit changes into account, she referred to
the Tax Credit Reform line in yellow at the center of the
page.
2:06:21 PM
Vice-Chair Micciche asserted that it would be more
favorable to the fiscal outlook if the actual reductions
were higher.
Mr. Teal agreed. He said that the Governor's oil and gas
credit reform bill would have the most impact, the House
Resource Committee version would have had the least impact,
and the House Finance Committee version would split the
difference.
2:06:45 PM
AT EASE
2:06:59 PM
RECONVENED
2:07:01 PM
Vice-Chair Micciche thought that it would be helpful to
include a separate box on the slide that reflected the
expected $700 million payout for the dividend, with a spend
line below it.
2:07:28 PM
Co-Chair MacKinnon wondered whether there could be an
asterisk on the FY 17 line to reflect the addition of the
$700 million payout for the dividend. Something to
highlight that the Operating Budget was not growing.
Mr. Teal replied that he could include the dividend
payments in the FY 16 line.
Senator Dunleavy reiterated that highlighting the figure
for the public as a "different spend" could be helpful.
2:08:15 PM
Co-Chair MacKinnon repeated that clearly highlighting that
the $700 million was for dividends, and not government
spending, would be helpful.
Mr. Teal agreed to highlight the difference on a future
slide.
2:08:56 PM
Co-Chair MacKinnon mentioned the document titled "Status
Quo" (copy on file) and related that the public could find
it online under the bill.
2:09:15 PM
Senator Olson understood that the bill did not eliminate
the need for a three-quarter vote to access the CBR.
Mr. Teal replied that as long as the legislature had a CBR
draw and a large earnings reserve balance it faced
supermajority votes.
2:09:48 PM
Co-Chair MacKinnon hoped that the other body would do the
three-quarter draw because the money currently in the CBR
had a rate of return for interest of 2 percent, the
borrowing interest would be higher if the legislature was
forced to go into the earnings reserve account.
2:11:05 PM
Vice-Chair Micciche remarked that the governor preferred a
fixed draw, and supported the intent for stability. He
asked how the budget could be kept small, even as earnings
increased and the POMV draw grew.
Mr. Teal replied that there were things that could be done
that would limit spending, but that if money was available
it could be spent; future spending was up to the
legislature. He thought that the governor assumed that
extra revenue would always be spent, which was the primary
difference between the DOR analysis of the model and the
LFD analysis. He believed that the truth fell somewhere in-
between always spending or always saving, but it would be
up to each legislature to decide. He said that rules could
be established to limit spending when the price of oil
rebounded, and could be easily added to legislation of this
nature.
Vice-Chair Micciche understood that the stability of the
POMV was similar to a fixed draw because it was based on
earnings that would not fluctuate dramatically. What would
create the change would be a fluctuation in oil related
revenue, which was where rules should be applied.
Mr. Teal responded that the combination of oil revenue and
the POMV payout would be the issue. He agreed that the POMV
payout was fairly stable, but the other oil revenue was
not. He said that exercising spending restraint when
surpluses were available would eliminate volatility. He
said that the hypothetical could not be modeled because
spending would always be at the per-view of the
legislature.
2:15:05 PM
Senator Dunleavy believed that there should be less
government spending.
2:16:19 PM
Co-Chair MacKinnon recalled a conversation with Mr. Teal
about the consideration of a draw that could not exceed the
$3.3 billion as suggested by the governor. She relayed that
in her duration at the legislature, money had been returned
to the CBR over the top of what had been borrowed by past
legislatures, and spending had been done in the Capital
Budget. She recognized that dividend reductions and taxes
made the public uncomfortable unless there was also
conversation about controlled government spending.
2:17:52 PM
Senator Dunleavy remarked that there should be less
government spending. He added that deferred maintenance in
the state needed to be addressed.
2:18:47 PM
Co-Chair MacKinnon remarked that there was also an unfunded
pension liability issue that needed to be considered. She
asserted that there needed to be less spending, but that
the state needed to pay the debts that it owed - one of
which was deferred maintenance.
2:20:08 PM
Vice-Chair Micciche pointed out the Alaska State
Constitution specified that one legislature could not "tie
the hands" of future legislatures, which he believed was a
blessing and a curse.
2:21:20 PM
Co-Chair MacKinnon explained that the senate had proposed
$1 billion in cuts to the Operating Budget and was hopeful
that the two bodies to craft a plan that would work for
Alaska. She noted that the committee was tackling the issue
from all angles.
2:22:46 PM
Senator Bishop asked how the real value effective payout
could be kept at 100 percent in the out years.
Mr. Teal responded that one way would be to earn more
money, and the other would be to reduce the payout rate
from 5.25, which some considered aggressive. He said that
those were the two levers that would help maintain the real
value of the Permanent Fund.
2:23:51 PM
Co-Chair MacKinnon interpreted that to mean to cut the
budget and draw less from reserves - or increase revenue
through other sources.
Mr. Teal agreed.
SB 128 was HEARD and HELD in committee for further
consideration.
2:24:38 PM
AT EASE
2:31:57 PM
RECONVENED
CS FOR HOUSE BILL NO. 188(FIN)
"An Act establishing a program for financial accounts
for individuals with disabilities; exempting the
procurement of contracts for the program from the
State Procurement Code; exempting certain information
on participants in the program from being subject to
inspection as a public record; providing that an
account under the program for an individual with a
disability is not a security; allowing a state to file
a claim against an individual's financial account
under the program to recover Medicaid payments after
the individual's death; and providing for an effective
date."
2:32:27 PM
REPRESENTATIVE DAN SADDLER, SPONSOR, introduced the
legislation and read from the Sponsor Statement:
HB 188 seeks to help Alaskans cope with the challenges
of living with a disability by allowing individuals
and families to set up tax-free savings accounts,
called "ABLE accounts," to pay for education, housing,
transportation or other disability-related expenses.
The U.S. Congress passed the "Achieving a Better Life
Experience (ABLE) Act" in 2014, authorizing states to
create special savings accounts for disability-related
expenses modeled after the successful "529 college
savings programs," named after the relevant section of
IRS code.
ABLE accounts, also known as "529A" accounts, allow
individuals with disabilities to improve their
financial security by using private investments to
supplement their benefits from insurance, employment,
Supplemental Security Income (SSI), Medicaid, and
other sources. Assets held in an ABLE account would
not be counted under means tests required for Medicaid
or SSI, although SSI cash benefits would be suspended
if the ABLE balance exceeded $100,000.
ABLE accounts could be spent for education,
transportation, job training and support, assistive
technology, health and wellness, legal and other
qualified services. Contributions would be limited to
$14,000 per year, and capped at $400,000. A person
could have only one account.
To be eligible for an ABLE account, a person must have
become blind or disabled before the age of 26. The
Governor's Council on Disabilities and Special
Education estimates that about
13,770 Alaskans - 10 percent of those with a
disability - might qualify for ABLE accounts.
By empowering Alaskans with disabilities and their
families to build their financial independence, HB 188
will help them meet more of their life challenges by
relying on private resources, without eroding the
value of public benefits to which they are entitled.
ABLE accounts will be important tools for helping them
live full, productive lives in their communities.
Representative Saddler divulged that the bill had evolved
during the legislative process to make sure that money in
ABLE account was not unavailable to creditors should the
account holder go bankrupt or fail to pay their debts. He
noted that there were specific benefits to having a state
authorized ABLE account; first, by passing the bill Alaska
could join a consortium of other states in obtaining the
economies of scale and lower account fees for account
holders. Secondly, Alaskans could go to DOR directly if
there were problems with their accounts. He said that the
contribution limits would be matched to the college savings
plan; $400,000, the highest in the nation. He concluded
that passage of the bill would demonstrate concern for
disables Alaskans by providing them a way to improve their
lives, without increasing any state costs.
2:36:31 PM
Senator Olson wondered how many people were expected to
take advantage of the program.
Representative Saddler replied that it was estimated that
there were 130,000 disabled Alaskan residents, 10 percent
of which would qualify for the program.
2:36:53 PM
Senator Olson wondered whether the program would negatively
impact the resources for those who did not qualify for the
program and relied on support from the Department of Health
and Social Services (DHSS).
Representative Saddler stated that the program would have
no effect on the DHSS budget or the resources for others.
He asserted that this would be an opportunity for people
who would create the accounts to deposit private funds. He
thought that the program could benefit DHSS.
2:37:39 PM
Vice-Chair Micciche noted that the costs associated with
the bill would be covered by the Alaska Mental Health Trust
Authority (AMHTA).
Representative Saddler replied in the affirmative. He
furthered that many of the beneficiaries of AMHTA were
disabled and would benefit from the legislation. He said
that after initial implementation, fees would support the
program at no cost to the state.
2:38:22 PM
Co-Chair MacKinnon requested a Sectional Analysis.
2:38:43 PM
AT EASE
2:39:33 PM
RECONVENED
2:39:40 PM
KIM SKIPPER, STAFF, REPRESENTATIVE DAN SADDLER, discussed
the Sectional Analysis (copy on file):
Sec. 1: Cites this as the Alaska ABLE Act Savings
Program Act
Sec. 2: Creates a new chapter 65. Alaska Savings
Program for Eligible Individuals
Sec. 06.65.010: Program authorized. Authorizes
Alaska ABLE savings program in the Department -
which is the Alaska Department of Revenue. Allows
it to implement and administer the program under
the Federal ABLE Act.
Sec. 06.65.020: General department duties.
Outlines the duties of the department in
implementing and administering the program.
Sec. 06.65.030: Modification of program. Gives
the Department authority to modify the program in
accordance to any federal law changes
Sec. 06.65.040: Additional department powers.
Allows department to set fees for program
transactions and services and also develop
marketing plan to promote the ABLE program
Sec. 06.65.050: Contracting authority;
procurement exemption. Allows department to
contract with a person to assist in implementing
the program, provide services, join other states
to obtain or provide services for implementation,
join a cooperative effort with other states to
provide services for the program that could
include investment and record-keeping services.
Allows state to join with other states to allow
an Alaska resident to participate in a program in
another state under federal authorizing law and
for an outside state to participate in a program
in this state. If contracting with another state,
AS 36.30 (Procurement Code) will not apply.
Sec. 06.65.060: Investment oversight: Allows the
department to oversee and approve selection of
investment managers and advisors for the program,
and to oversee all investment disclosures and
regulatory filings related to program investments
Sec. 06.65.070: Financial contractor obligations:
outlines duties/obligations of the selected
financial contractor(s)
Sec. 06.65.080: Additional audits: Allows the
department to order an audit of the contractor's
financial operation and position in addition to
annual audit if the department has reason to be
concerned
Sec. 06.65.090: Contract termination; non-
renewal. Gives department authority to not renew
a financial contract. If so it would take custody
of the program accounts and transfer them to
another financial contractor that offers similar
program accounts
Sec. 06.65.100: Eligible individuals. Describes
who is eligible to participate in the program.
Sec. 06.65.110: Representative of eligible
individuals. Describes who may act as a
representative of the eligible individual who is
a minor or lacks decision-making capacity
Sec. 06.65.120: Program account ownership. States
that the owner of the program account is the
designated beneficiary.
Sec. 06.65.130: Number of program accounts.
Allows only one program account per designated
beneficiary under federal authorizing law.
Sec. 06.65.140: Program account application:
Outlines department procedures for program
account applications and information to be
collected in that process
Sec. 06.65.150: Program account establishment
fee. Allows financial contractor to charge a non-
refundable to establish program account. That fee
to be determined in the contract with the
financial contractor.
Sec. 06.65.160: Program account contributions.
Outlines how a person can make a contribution,
the limit authorized by federal law, allows
department to reject or withdraw a contribution
that exceeds that annual limit or maximum limit
established by authorizing law or if designated
beneficiary is not eligible, and that financial
contractor must report contributions to the IRS.
Sec. 06.65.170: Limited investment direction.
Limits to two the number of times a program
account investment can be changed.
Sec. 06.65.180: Change of designated beneficiary.
Allows a designated beneficiary or representative
to change beneficiary of an account to another
eligible individual in the family.
Sec. 06.65.190: Distribution for qualified
expenses. States that withdrawals from the
program accounts may only be used for qualified
expenses for the designated beneficiary.
Sec. 06.65.200: Rollover distribution. Subject to
federal law governing rollovers, a distribution
from a program account can be made to the same
designated beneficiary or another eligible
individual in the family, and the timeframe for
that to be done.
Sec. 06.65.210: Statements. Requires that
statements re: program accounts be issued 4 times
a year at times established by the department and
that the program contractor provide related
information at the department's request.
Sec. 06.65.220: Preparation and filing. In
addition to other reports a financial contractor
shall prepare and file statements required under
state and federal law and other agencies.
Sec. 06.65.230: Separate accounting. Requires a
financial contractor to provide separate
accounting for each program account.
Sec. 06.65.240: Annual fee. Allows a financial
contractor may charge an annual fee for
maintenance of a program account.
Sec. 06.65.250: Use as security. Prohibits a
program account from being used as security for a
loan
Sec. 06.65.260: No state obligation. Declares
that the program does not create an obligation of
the state, department, or any agency to guarantee
the return of principal or pay interest on the
principal in a program account
Sec. 06.65.270: Confidentiality. Specifies that
program account information is confidential
Sec. 06.65.280: Exchange of information. Allows
the Department to exchange information with the
Department of Health and Social Services and
other state agencies to determine whether an
individual is eligible
Sec. 06.65.290: Treatment under means test
programs. Specifies the program account amounts
must be disregarded in determining eligibility
for means-tested programs
Sec. 06.65.300: Deposit from permanent fund
dividend. Allows deposits to program accounts
from the permanent fund dividend
Sec. 06.65.310: Program expense fund. Establishes
program expense fund and describes it purpose and
operation
Sec. 06.65.320: Medicaid claims: Allows that the
state may file a claim against the program
account of a beneficiary who dies.
Sec. 06.65.330: Governing law. Establishes
federal law as governing to the extent of any
conflict with state law
Sec. 06.65.340: Regulations. Requires the
department to adopt implementing regulations
Sec. 06.65.350: Annual report. Requires the
department to evaluate the program each year and
file an annual report on or before the start of
each legislative session beginning in 2018
Sec. 06.65.390: Definitions.
Sec. 3: AS 36.30.850(b): Adds ABLE program account
oversight as a responsibility of the Commissioner of
Revenue
Sec 4: AS 40.25.120(a) is amended to create an
exception to public inspection for names, addresses,
and other program account identifying information
Co-Chair MacKinnon queried the location of the Section 4
within the bill.
[Section 4 was located on Page 11.]
2:45:39 PM
AT EASE
2:46:29 PM
RECONVENED
2:46:58 PM
Ms. Skipper continued to discuss the Sectional Analysis:
Sec. 5: AS 45.55.990(32): Excludes program accounts
from the definition of "security"
Sec. 6: AS 47.07.055: Allows the state to file a claim
against the designated beneficiary's program account
after the individual dies
Sec. 7: Transition
Requires the Department to file its first report
on the program on or before the first day of the
Second Regular Session of Thirtieth Alaska State
Legislature (2018)
Sec. 8: Transition
Allows the Department to adopt regulations, but
not before the effective date of the provisions
authorizing the Alaska ABLE savings program
Sec. 9: Effective Date
Section 8 takes effect immediately
2:48:02 PM
Co-Chair MacKinnon CLOSED public testimony.
2:48:24 PM
STUART SPIELMAN, AUTISM SPEAKS, WASHINGTON DC (via
teleconference), testified in support of the legislation.
He stated that 40 states had enacted similar legislation.
Co-Chair MacKinnon wondered whether DHSS had any comments
or concerns pertaining to the bill.
2:49:20 PM
MARGARET BRODIE, DIRECTOR, DIVISION OF HEALTH CARE
SERVICES, DEPARTMENT OF HEALTH AND SOCIAL SERVICES,
ANCHORAGE (via teleconference), testified that there was a
potential benefit to the department because over time the
amount that the department would spend for disabled
individuals could decrease.
2:50:08 PM
Co-Chair MacKinnon asked whether the administration
supported the bill.
Ms. Brodie replied that the administration supported the
legislation.
2:50:26 PM
KRISTEN VANDAGRIFF, ALASKA GOVERNORS COUNCIL ON
DISABILITIES AND SPECIAL EDUCATION, ANCHORAGE (via
teleconference), spoke in support of the bill. She said
that the bill would be a great tool for individuals and
their families to be more independent and self-sufficient,
and to be able to join the workforce.
CSHB 188(FIN) was HEARD and HELD in committee for further
consideration.
2:51:12 PM
AT EASE
2:53:10 PM
RECONVENED
CS FOR HOUSE BILL NO. 83(JUD)
"An Act relating to collecting information about civil
litigation by the Alaska Judicial Council; repealing
Rule 41(a)(3), Alaska Rules of Civil Procedure, and
Rules 511(c) and (e), Alaska Rules of Appellate
Procedure; and providing for an effective date."
2:54:21 PM
Representative LeDoux presented the sponsor statement:
HB 83 eliminates the automatic reporting of
information about civil case settlements currently
required by law. This bill follows the advice of the
Judicial Council, which has recommended that the
legislature do away with this requirement. Passing
this bill would save money and time by freeing
attorneys and litigants from an unnecessary and
functionally useless submission of data which the
Judicial Council sees no point in collecting.
It is part of the job of the legislature to eliminate
waste and to make government more effective.
Discarding needless data collection requirements is an
easy way to achieve cost-savings and streamline
government. HB 83 does exactly this.
I urge your support for the swift passage of HB 83.
2:55:28 PM
AMY MICHEL, STAFF, REPRESENTATIVE LEDOUX, discussed the
Sectional Analysis (copy on file):
Section One: Repeals Alaska Rules of Civil Procedure
Rule 41(a) (3) and Alaska Rules of Appellate Procedure
Rules 511(c) and (e).
Section Two: Repeals AS 09.68.130 which requires
reporting of civil litigation information to the
Alaska Judicial Council.
Section Three: Per the Alaska Constitution, repealing
court rules requires a 2/3 majority of both bodies.
Section Four: Provides for an effective date
Co-Chair MacKinnon OPENED public testimony.
2:56:51 PM
SARAH BATTON, ATTORNEY, GROH EGGERS, ANCHORAGE (via
teleconference), testified in support of the bill. She
stated that the bill would save money and time for all
parties involved.
2:58:01 PM
KEN JACOBUS, ANCHORAGE BAR ASSOCIATION, ANCHORAGE (via
teleconference), spoke in support of the bill. He said that
the bill was supported by many of the state's bar
associations and was seemingly unopposed.
2:59:45 PM
Co-Chair MacKinnon CLOSED public testimony.
3:00:04 PM
Co-Chair MacKinnon solicited closing comments from the
sponsor.
Representative LeDoux urged passage of the legislation.
CSHB 83(JUD) was HEARD and HELD in committee for further
consideration.
3:00:19 PM
AT EASE
3:01:09 PM
RECONVENED
HOUSE BILL NO. 289
"An Act relating to the membership of the Board of
Barbers and Hairdressers."
3:01:27 PM
REPRESENTATIVE GABRIELLE LEDOUX, SPONSOR, explained that
the legislation:
House Bill 289 creates equal board representation for
all licensees governed by the Board of
Barbers and Hairdressers. The board oversees the
licensing of 2,271 hairdressers; 962 manicurists and
nail technicians; 542 estheticians; 151 barbers; and
146 tattoo and piercing artists.
The existing board structure has 1 hairdresser, 1
hairdresser with an esthetician certification, 1
tattoo or piercing artist, 1 public member and 2
barbers.
In 2015, the legislature passed HB 131, which required
manicurists and nail technicians to become licensed
through the board; however the existing statute does
not provide for representation from that sector of the
industry. HB 289 fixes this by increasing the board
from 6 to 7 members, so that the second largest body
of licensees the board oversees has a seat at the
table to represent their trade.
HB 289 reallocates one designated barber seat to a
licensee at-large. This alteration reflects the
changes in the industry. When the board seats were
originally allocated, over 1,200 barbers were licensed
in Alaska. That number has fallen to 151 licensed
barbers today. The reallocation of one member alters
the board composition to better reflect the current
industry membership levels.
I ask for your consideration and support of HB 289.
Co-Chair MacKinnon OPENED public testimony.
3:04:11 PM
GLENDA LEDFORD, CHAIR, BOARD OF BARBERS AND HAIRDRESSERS,
WASILLA (via teleconference), spoke in support of the
legislation. She particularly supported the addition of
manicurists and nail technicians to the board. She added
that the board voted unanimously to support the
legislation.
3:05:59 PM
JEANNINE JABAAY, BOARD OF BARBERS AND HAIRDRESSERS, HOPE
(via teleconference), spoke in strong support of the
legislation. She noted that there was an overrepresentation
of barbers on the board, given the number of barbers in the
state. She believed that that manicurists and nail
technicians should have a seat on the board and that the
odd number of board members illustrated best practices for
the small board that governed a large number of licensees.
She furthered that adding a seventh member made it easier
to attain a quorum. She said that when the statute was
created the state had over 1200 barbers, as of January 2016
the number was 152, which had led to the current
overrepresentation of barbers on the board.
3:09:30 PM
Senator Bishop queried the decline of barbers in the state.
Ms. Jabaay replied that she did not know.
3:10:09 PM
Co-Chair MacKinnon CLOSED public testimony
HB 289 was HEARD and HELD in committee for further
consideration.
3:10:51 PM
AT EASE
3:11:49 PM
RECONVENED
CS FOR HOUSE BILL NO. 231(FIN)
"An Act extending the termination date of the Board of
Parole; and providing for an effective date."
3:12:07 PM
ESTHER MIELKE, STAFF, REPRESENTATIVE BOB LYNN, testified
that the Board of Parole currently served in Alaska as the
authority over parole setting. She said that it was
currently set in statute to be terminated on June 30, 2016;
HB 231 originally extended that date to June 30, 2022, but
the most current version of the bill extends it to June 30,
2020. She relayed that the board was audited in 2015. The
audit included and examination of the board's performance,
in light of the 11 sunset criteria points provided within
Alaska statute. She continued that the Division of
Legislative Audit had found the board to be in good
standing, but provided 4 recommendations to improve
operations:
1. The executive director should improve procedures to
ensure required documentation for parole hearings is
accurate and consistently included in parole files.
2. The executive director in coordination with DOC
management should implement documentation standards to
ensure all offender and victim notifications are made in
accordance with statutory requirements.
3. The board should ensure proposed regulations address all
statutory requirements related to its duties.
4. DOC's Administrative Services Division director should
take steps to ensure ACOMS complies with state information
technology security standards and national best practices.
Ms. Mielke shared that the board agreed with the
recommendations. She related that HB 231 would fulfill the
constitutional requirement that the state establish a
parole system that kept Alaskans safe. She noted that the
fiscal note would cover the boards operating costs and had
already been included in the Operating Budget.
3:14:28 PM
KRIS CURTIS, LEGISLATIVE AUDITOR, ALASKA DIVISION OF
LEGISLATIVE AUDIT, explained that the division had
concluded the board conducted its business in a
professional and efficient manner, and recommended a 6 year
extension. She said that an 8 year extension had not been
recommended because of the current uncertainties in the
field of corrections. She furthered that the division felt
that that the new risk assessment tool that the department
had just implemented required legislative oversight earlier
than in 8 years. She mentioned the 4 recommendations made
by the division, and noted that they were administrative
and had not impacted the recommendation for extension. She
noted that the recommendations could be found on Page 9 of
the audit (copy on file). She reiterated the
recommendations. She echoed that the board and the DOC
concurred with all of the division's recommendations.
Co-Chair MacKinnon OPENED public testimony.
Co-Chair MacKinnon CLOSED public testimony.
3:18:46 PM
JEFF EDWARDS, DIRECTOR, PAROLE BOARD, DEPARTMENT OF
CORRECTIONS, ANCHORAGE (via teleconference), introduced
himself.
3:18:59 PM
Co-Chair MacKinnon opined that the board was costing the
state $1 million in General Fund dollars. She queried the
number of employees on the Parole Board.
Mr. Edwards replied that there were 6 full-time employees
of the board, as well as 5 governor appointed sitting
members who were considered part-time employees.
3:19:59 PM
Co-Chair MacKinnon asserted that the board would need to
defend its $1 million dollars.
Mr. Edwards believed that the services that the board
provided would be vastly expanded through the possibility
of SB 91 because criminal justice commissions, on a global
level, had been expanded and their duties increased. He
noted that prison populations were continuing to grow. He
contended that his was the only agency that could release
individuals, who posed low risk, early. He felt that the
paroling authority provided a pathway to reintegration and
re-entry for low-risk prisoners into society, which was an
efficient use of state dollars. He relayed that housing
low-risk prisoners in jails was expensive and ineffective.
He believed that the board would be at the forefront of
saving hard-bed costs for the DOC.
3:22:37 PM
Vice-Chair Micciche queried a breakdown of the $852,000 in
personal services reflected on the fiscal note.
3:22:55 PM
Co-Chair MacKinnon referred to Page 1 of the audit:
The board is funded by the general fund. Expenditures
are primarily for personal services, travel, and
office rental costs. Budgeted expenditures for FY 15
were $896,700.
Co-Chair MacKinnon noted that there had been a staff
vacancy and wondered how long the position remained vacant.
Mr. Edwards replied that the position was vacant for a
period of time. He added that during the position's vacancy
there had been an expansion of the Probation Accountability
and Certain Enforcement (PACE) program, which had provided
the board with an additional staff position. He said that
the vacant position was filled once the board completed the
institution of the new program, which had been
legislatively mandated through SB 64 [SB 64 was passed
during 2013-2014]
3:23:57 PM
Co-Chair MacKinnon wondered whether the position had
remained vacant for all of FY 15.
Mr. Edwards agreed to provide that information.
Co-Chair MacKinnon understood that the board was
dovetailing in with the PACE program, which had resulted in
an additional position.
Mr. Edwards relied that one position control number (PCN)
had been designated to the parole board to support the PACE
program.
3:24:42 PM
Co-Chair MacKinnon asked whether Mr. Edwards managed 6
individuals, while someone else managed the PACE program.
Mr. Edwards replied that the DOC supervised the individuals
on the actual program, the board's role was to identify who
was acceptable for the program and to track violations. He
added that the PACE position was responsible for analyzing
data and providing data on behalf of the departments to the
effectiveness of the program.
3:25:25 PM
Co-Chair MacKinnon requested a written document detailing
the personal services and travel lines of the fiscal note.
CSHB 231(FIN) was HEARD and HELD in committee for further
consideration.
HOUSE BILL NO. 268
"An Act relating to the dividends from the Alaska
Industrial Development and Export Authority; relating
to the meaning of 'mark-to-market fair value,' 'net
income,' 'project or development,' and 'unrestricted
net income' for purposes of the Alaska Industrial
Development and Export Authority; and providing for an
effective date."
Co-Chair MacKinnon OPENED public testimony.
3:26:47 PM
Co-Chair MacKinnon CLOSED public testimony.
3:27:07 PM
GENE THERRIAULT, STAFF, ALASKA INDUSTRIAL DEVELOPMENT AND
EXPORT AUTHORITY, (AIDEA) testified that the first problem
that the legislation aimed to address was the "market
value" adjustment entries. He said that in order for AIDEA
to get its audited financial statement, new accounting
rules required that different assets that were held by the
authority be evaluated and mark-to-market adjustments be
made during the fiscal year. Generally Accepted Accounting
Principles (G.A.A.P) kept evolving, which required
recording of market value adjusting entries; essentially,
act like something happened that did not happen, and book
it as though it did. He relayed that this would be
considered a "non-cash" adjustment to the accounts that was
bringing an unnecessary amount of volatility to the
calculation of the dividend to the state treasury. He
pointed to Page 1 of the bill, which offered a definition
of mark-to-market fair value":
(2) "mark-to-market fair value" means fixing the
value of an investment as its market value as of the
financial reporting date;
Mr. Therriault directed committee attention to Page 2,
which showed that the legislature had previously included
and exclusion mechanism in the calculation of the net
income for the purposes of AIDEA paying out a dividend. He
stated that the bill proposed adding the mark-to-market
evaluations to the exclusion so that the non-cash
adjustments would be backed out and the true-net income of
the authority would serve for calculating the dividend. He
continued that the second problem the bill would address
was the "dividend penalty". When the value of a project had
been determined to have been permanently reduced, for some
reason, G.A.A.P required booking/recording an adjusting
entry between the balance sheet and the income statement to
reduce or remove some or all of the value of an asset or a
project from AIDEA's balance. The resulting entry reduced
net income. The consequence (depending on the facts), could
possibly either reduce the state's dividend from a project
it had funded due to an adjusting entry reducing value, or
have AIDEA paying a dividend on top of a project it had
funded due to an adjusting entry reducing value. The result
could be up to a 25 percent to 50 percent dividend penalty
from an adjusting entry. He noted that on Page 2 of the
bill noncash adjustments and the write-off of assets that
were purchased with outside sources of money had been added
to the exclusion clause that had already been established
by the legislature. This would base the yearly dividend to
the state treasury on true net income and would remove
unnecessary volatility in the calculation of those
dividends.
3:31:49 PM
Co-Chair MacKinnon requested a Sectional Analysis for the
legislation.
Mr. Therriault noted that the Sectional Analysis reiterated
the 2 problems that the bill would correct.
3:32:31 PM
Mr. Therriault warned that swings in the volatility of the
dividend would become more pronounced without the passage
of the legislation.
3:33:10 PM
MICHAEL LAMB, CHIEF FINANCIAL OFFICER, AIDEA (via
teleconference), echoed Mr. Therriault's remarks.
3:33:40 PM
Co-Chair MacKinnon asked whether the legislation was in any
way related to the purchase of a gas utility.
Mr. Lamb replied in the negative.
HB 268 was HEARD and HELD in committee for further
consideration.
ADJOURNMENT
3:34:56 PM
The meeting was adjourned at 3:34 p.m.