Legislature(1993 - 1994)

03/10/1993 09:00 AM Senate STA

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
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                 SENATE STATE AFFAIRS COMMITTEE                                
                         March 10, 1993                                        
                            9:00 a.m.                                          
                                                                               
                                                                               
  MEMBERS PRESENT                                                              
                                                                               
  Senator Loren Leman, Chairman                                                
  Senator Mike Miller, Vice Chairman                                           
  Senator Robin Taylor                                                         
  Senator Johnny Ellis                                                         
  Senator Jim Duncan                                                           
                                                                               
  MEMBERS ABSENT                                                               
                                                                               
  None                                                                         
                                                                               
  COMMITTEE CALENDAR                                                           
                                                                               
  SENATE BILL NO. 6                                                            
  "An Act amending and making effective an annuity program and                 
  amendments to the longevity bonus  program and the permanent                 
  fund dividend program provided for in secs. 2 -  18, ch. 99,                 
  SLA 1985; and providing for an effective date."                              
                                                                               
  SENATE BILL NO. 128                                                          
  "An Act relating to legislative audits."                                     
                                                                               
  PREVIOUS SENATE COMMITTEE ACTION                                             
                                                                               
  SB   6 - See State Affairs minutes dated 2/3/93.                             
                                                                               
  SB 128 - No previous action to record.                                       
                                                                               
  WITNESS REGISTER                                                             
                                                                               
  Barbara  & Eric Poetzsch                                                     
  Box 871487                                                                   
  Wasilla, AK 99687                                                            
  POSITION STATEMENT:  Support SB 6                                            
                                                                               
  Hugh Johnson                                                                 
  HC 31 Box 511L                                                               
  Wasilla, AK 99654                                                            
  POSITION STATEMENT:  Supports SB 6                                           
                                                                               
  Elizabeth Cason                                                              
  2332 W. Lake Lucille Drive                                                   
  Wasilla, AK 99687                                                            
  POSITION STATEMENT:  Supports SB 6                                           
                                                                               
  Nyle Hill, Sr.                                                               
  Box 876446                                                                   
                                                                               
                                                                               
  Wasilla, AK 996787                                                           
  POSITION STATEMENT:  Supports SB 6                                           
                                                                               
  Ann Walsh                                                                    
  924 Kellum St., #201                                                         
  Fairbanks, AK 99701                                                          
                                                                               
  Tom Williams, Director                                                       
  Permanent Fund Division                                                      
  Department of Revenue                                                        
  P.O. Box 110460                                                              
  Juneau, AK 99811-0460                                                        
  POSITION STATEMENT:  Offered information on SB 6                             
                                                                               
  Rose Palmquist                                                               
  Talkeetna Ave.                                                               
  Palmer, AK                                                                   
  POSITION STATEMENT:  Supports SB 6                                           
                                                                               
  Doris Solthall                                                               
  Fairbanks Pioneers' Home                                                     
  Fairbanks, AK                                                                
  POSITION STATEMENT:  Supports SB 6                                           
                                                                               
  Joe Workman                                                                  
  Fairbanks Pioneers' Home                                                     
  Fairbanks, AK                                                                
  POSITION STATEMENT:  Supports SB 6                                           
                                                                               
  Isabella Brady                                                               
  610 Biorka St.                                                               
  Sitka, AK 99835                                                              
  POSITION STATEMENT:  Supports SB 6                                           
                                                                               
  John Shaffer                                                                 
  303 Kimsham St.                                                              
  Sitka, AK 99835                                                              
  POSITION STATEMENT:  Supports SB 6                                           
                                                                               
  Carlene Sanders                                                              
  Box 877492                                                                   
  Wasilla, AK 99687                                                            
  POSITION STATEMENT:  Supports SB 6                                           
                                                                               
  Ernie Line                                                                   
  2645 Whispering Woods                                                        
  Wasilla, AK 99654                                                            
  POSITION STATEMENT:  Supports SB 6                                           
                                                                               
  Rick Richards                                                                
  HC 30 Box 5530                                                               
  Wasilla, AK 99654                                                            
  POSITION STATEMENT:  Supports SB 6                                           
                                                                               
                                                                               
  Harry Jenkins                                                                
  210 10th Ave.                                                                
  Fairbanks, AK 99701                                                          
  POSITION STATEMENT:  Supports SB 6                                           
                                                                               
  Commissioner Nancy Usera                                                     
  Department of Administration                                                 
  P.O. Box 110200                                                              
  Juneau, AK 99811-0200                                                        
  POSITION STATEMENT:  Offered information on SB 6                             
                                                                               
  Paula Scavera, Legislation Analyst                                           
  Legislative Research Agency                                                  
  130 Seward St., Suite 218                                                    
  Juneau, AK 99801                                                             
  POSITION STATEMENT:  Offered information on SB 6                             
                                                                               
  Arnold Perry                                                                 
  Box 871643                                                                   
  Wasilla, AK  99687                                                           
  POSITION STATEMENT:  Supports SB 6                                           
                                                                               
  Gerald Bohms                                                                 
  535 Halverson                                                                
  Fairbanks, AK 99709                                                          
  POSITION STATEMENT:  Supports SB 6                                           
                                                                               
  Hugh Doogan                                                                  
  359 Slater Drive                                                             
  Fairbanks, AK 99701                                                          
  POSITION STATEMENT:  Testified on SB 6                                       
                                                                               
  Harold Ward                                                                  
  1250 Clinton Circle                                                          
  Wasilla, AK 99654                                                            
  POSITION STATEMENT:  Supports Governor's version of                          
                       annuity program legislation                             
                                                                               
  ACTION NARRATIVE                                                             
                                                                               
  TAPE 93-18, SIDE A                                                           
  Number 001                                                                   
                                                                               
  Chairman Leman  called  the Senate  State Affairs  Committee                 
  meeting to order at 9:00 a.m.                                                
  SENATOR LEMAN  introduced SB 6 (ANNUITY  PROGRAM AMENDMENTS)                 
  as  the  first  order  of  business  and  noted  that  seven                 
  teleconference sites around the state would be participating                 
  in the hearing.                                                              
                                                                               
  Number 043                                                                   
                                                                               
  BARBARA POETZSCH, a resident of  Wasilla, stated her support                 
                                                                               
                                                                               
  for SB 6,  saying she  feels it  is very  necessary to  keep                 
  seniors in Alaska  because they are a  very productive group                 
  of people.                                                                   
                                                                               
  Number 085                                                                   
                                                                               
  HUGH JOHNSON, President of Wasilla  Area Seniors, voiced his                 
  support  for  SB 6.    He  noted there  were  several senior                 
  citizens present at the Mat-Su LIO listening to the hearing.                 
                                                                               
                                                                               
  Number 110                                                                   
                                                                               
  ERIC  POETZSCH,  a resident  of  Wasilla, stated  his strong                 
  support for SB 6 and said it is badly needed.                                
                                                                               
  Number 120                                                                   
                                                                               
  ELIZABETH  CASON,  representing the  Wasilla  Senior Center,                 
  said there is a large group of seniors that desperately need                 
  their monthly longevity bonus, and without it, they will not                 
  be able to remain in the  state.  They are in support of  an                 
  annuity program rather than having no program at all.                        
                                                                               
  Number 142                                                                   
                                                                               
  NYLE HILL, SR., a senior citizen  from Wasilla, stated he is                 
  a recipient of the longevity bonus  and it is important that                 
  he continues to receive it or he will have to leave Alaska.                  
                                                                               
  Number 150                                                                   
                                                                               
  ANN WALSH, a resident of  Fairbanks testifying in support of                 
  SB 6, said she believes the annuity  is in the best interest                 
  of eligible Alaskans, and that the proposed amendment giving                 
  a person the choice of contributing 25, 50 or 75 percent  of                 
  his  or her  annuity is very  good.  However,  she said that                 
  people need to know  what that would mean upon  reaching age                 
  65. She suggested that a chart be  prepared illustrating the                 
  three options  and what the individual would  receive at age                 
  65.  She  stressed that this kind of information needs to be                 
  distributed  statewide so  that  Alaskans, especially  young                 
  adults, can understand the program.                                          
                                                                               
  Number 177                                                                   
                                                                               
  TOM WILLIAMS,   Director, Permanent Fund  Dividend Division,                 
  Department of Revenue,  said his  testimony would relate  to                 
  technical concerns with regard to the bill.  The bill refers                 
  to 1985  legislation which amended some PFD statutes.  Those                 
  PFD statutes have subsequently been amended and the language                 
  that would become effective should SB  6 pass in its current                 
  form is different than the current amendments.                               
                                                                               
                                                                               
  SENATOR  TAYLOR asked if the  department was going to submit                 
  amendments  to   correct   the  problem.      TOM   WILLIAMS                 
  acknowledged that they would do so.                                          
                                                                               
  Number 224                                                                   
                                                                               
  SENATOR  TAYLOR  noted that  at  a previous  hearing  on the                 
  legislation,  there was  discussion  on amending  provisions                 
  that  would  allow  for  an  unlimited contribution  into  a                 
  person's  individual  account,   but  the  legislation,   as                 
  currently  drafted, would  need  an amendment  to accomplish                 
  that.    TOM  WILLIAMS  said  the  Permanent  Fund  Dividend                 
  Division's involvement simply is with  respect to the check-                 
  off  on  the dividend  application.    It was  limited  to a                 
  specific   number   of   options.      The   Department   of                 
  Administration  would  be  responsible  for  setting up  the                 
  annuity program and  administering it,  and the Division  of                 
  Treasury in the  Department of Revenue would  be responsible                 
  for investing those funds.  SENATOR TAYLOR commented that he                 
  would  rather see  the  funds being  managed  by the  Alaska                 
  Permanent Fund Corporation.                                                  
                                                                               
  Number 295                                                                   
                                                                               
  ROSE PALMQUIST,  Legislative Chairman of  the Older Persons'                 
  Action  Group   (OPAG),   presented   the   committee   with                 
  resolutions   passed   by   three  different   organizations                 
  supporting  the  development  of an  annuity  program.   Ms.                 
  Palmquist referred to a  1991 study by OPAG, which  she said                 
  clearly showed that senior  citizens are not only a  cost to                 
  the state, but  they bring  back many times  over what  they                 
  might cost the governments.   Senior citizens bring more  to                 
  the economy of  the state than does tourism and  more to the                 
  state than fisheries provides  to the state.   Ms. Palmquist                 
  said  the  programs the  State  of  Alaska has  had  for its                 
  seniors  has improved  the  demographic  population  mix  of                 
  Alaska's residents, and  she thinks  that is a  considerable                 
  factor to consider.                                                          
                                                                               
  Number 400                                                                   
                                                                               
  SENATOR ELLIS asked  if OPAG  has done any  research on  the                 
  Alaska longevity bonus hold harmless  provision, and if that                 
  program  was  discontinued,  what  the  impact would  be  on                 
  peoples' federal benefits,  etc.   ROSE PALMQUIST said  they                 
  would review that  particular legislation and come up with a                 
  position on it.                                                              
                                                                               
  Number 428                                                                   
                                                                               
  DORIS  SOLTHALL,  testifying  from the  Fairbanks  Pioneers'                 
  Home, stated  her support  for SB  6, saying  it will  still                 
  bring economy to the State of Alaska.  She questioned if any                 
  thought has been  given to a cut-off amount of assets that a                 
                                                                               
                                                                               
  person  before being  disqualified for  the  longevity bonus                 
  program.                                                                     
                                                                               
  Number 436                                                                   
                                                                               
  JOE WORKMAN, testifying  from the Fairbanks  Pioneers' Home,                 
  stated his support for SB 6.                                                 
                                                                               
  Number 446                                                                   
                                                                               
  ISABELLA BRADY,  a member  of the  Alaska Native  Sisterhood                 
  Camp    4 in  Sitka,  said  she and  her  husband  have been                 
  receiving the longevity bonus for several years and they  do                 
  need it  to  meet their  monthly  budget.   She  said it  is                 
  supplement to their social security  monthly checks.  She is                 
  aware of the  yearly rising  cost of  the current  longevity                 
  bonus program  and    supports  the concept  of  an  annuity                 
  program.                                                                     
                                                                               
  Number 470                                                                   
                                                                               
  JOHN SHAFFER,  a Sitka resident,  said that although he does                 
  not  receive  the longevity  bonus,  he is  deeply concerned                 
  about  it as he reflects on  its impact upon persons he does                 
  know and upon  the future of the  State of Alaska.   He said                 
  that after  a great deal  of reflection by  senior citizens,                 
  they  have agreed to support the concepts that are contained                 
  in SB 6.   They believe it will help to  protect the current                 
  recipients and  that it will  assure program stability.   He                 
  urged passage of the legislation this session.                               
                                                                               
  Number 494                                                                   
                                                                               
  CARLENE  SANDERS  of  Wasilla, stated  she  and  her husband                 
  support SB  6.   She said  they both  receive the  longevity                 
  bonus and they  would like to spend the  rest of their lives                 
  in the state.                                                                
                                                                               
  Number 500                                                                   
                                                                               
  ERNIE  LINE,  a resident  of  Wasilla, related  that several                 
  weeks ago he attended a  Wasilla Chamber of Commerce meeting                 
  that was addressed  by Governor Hickel.   He asked  Governor                 
  Hickel,  specifically,  whether or not  he was supportive of                 
  SB  6,  and his  answer  was "Yes."   Two  weeks  after that                 
  meeting,  the governor's  legislation  was introduced.   Mr.                 
  Line has  studied both  bills and believes  that SB  6 is  a                 
  better piece of legislation.                                                 
                                                                               
  Number 515                                                                   
                                                                               
  RICK RICHARDS, testifying from  Wasilla, stated he was  a 66                 
  year  resident  of Alaska,  and  he understands  how seniors                 
  would  be affected if  the existing longevity  bonus and tax                 
                                                                               
                                                                               
  exemption programs for seniors were eliminated.  He believes                 
  the existing program is about as good as can be done for the                 
  seniors of the state.                                                        
                                                                               
  Number 534                                                                   
                                                                               
  HARRY JENKINS, testifying from Fairbanks, stated support for                 
  SB 6.   However, he said  more information is needed  in the                 
  news media explaining  the program to the younger  people of                 
  the state and  how much their return would be when they turn                 
  65 years of age.  He urged passage of SB 6.                                  
                                                                               
  Number 545                                                                   
                                                                               
  COMMISSIONER NANCY USERA, Department of Administration, said                 
  for  many  years Governor  Hickel  has supported  an annuity                 
  approach to  phasing out the  longevity bonus, and  the most                 
  priority item for him  is that the people who  are currently                 
  receiving  the bonus  continue to  do so;  that  the current                 
  generation of  seniors be  grandfathered in.   She  said the                 
  governor's proposal, as well as SB 6, does that.                             
                                                                               
  Commissioner Usera said the annuity concept, itself, is very                 
  sound, but their  disagreement with the annuity  is having a                 
  government run program, setting up another bureaucracy,  and                 
  putting the government  in the  business of doing  something                 
  that local financial  institutions are  already doing.   She                 
  pointed out that if there was  a high level of participation                 
  for  the  program, a  significant  number of  permanent fund                 
  dividends  would come out  of the  local economies  and that                 
  could have a very negative impact.                                           
                                                                               
  Commissioner Usera said the Administration's difficulty with                 
  the  annuity  is that  it  has some  administrative problems                 
  associated with it, and  they think that the people  who are                 
  currently  receiving that bonus should continue to do and be                 
  grandfathered in.                                                            
                                                                               
  TAPE 93-18, SIDE B                                                           
                                                                               
  Number 020                                                                   
                                                                               
  SENATOR TAYLOR asked if the Commissioner  had an estimate of                 
  what  the administration of  this investment portfolio would                 
  cost to run.  COMMISSIONER USERA  responded that it would be                 
  driven by the level  of participation.  She said  she wasn't                 
  sure that  under the  structure of  this program  that there                 
  would be a sufficient  level of participation to be  able to                 
  absorb the fixed  overhead costs of  administering it.   She                 
  said she was  concerned that "in  the name of seniors,"  one                 
  more time we're  going to be paying  state employee salaries                 
  to  administer  programs that  otherwise  could be  spent in                 
  delivering direct  services to seniors  through direct grant                 
  programs  and  community based  programs  that are  the true                 
                                                                               
                                                                               
  foundation of providing  a real network  for seniors in  the                 
  state.  SENATOR  TAYLOR commented that the  program is going                 
  to fall flat on its face if it isn't attractive enough for a                 
  prudent investor to invest in.                                               
                                                                               
  Number 100                                                                   
                                                                               
  PAULA  SCAVERA,  Legislative  Analyst, Legislative  Research                 
  Agency,  said she has worked on longevity bonus problems and                 
  questions since  1983.   She related  that when the  annuity                 
  proposal was first a proposal before the Hammond Commission,                 
  it  was  thought then  that  the Permanent  Fund Corporation                 
  would do the  investing, however, they  did not want it  and                 
  that is why it is not in the bill.  She noted that last year                 
  the  real  rate of  return  was  higher in  the  Division of                 
  Treasury than it  was with  the Permanent Fund  Corporation,                 
  and that is where these funds would be invested.                             
                                                                               
  Ms. Scavera said a fiscal note shows that it would  cost the                 
  Division of Retirement and Benefits a little over $1 million                 
  to run the program.                                                          
                                                                               
  Ms. Scavera said she  had a discussion recently with  Daniel                 
  Carpenter, a tax  attorney who  designs pension programs  on                 
  Wall  Street  for  Fortune  Five  Hundred  Companies.    Mr.                 
  Carpenter feels that the state annuity fund would be capable                 
  of earning  a  higher  rate  of  return  for  an  individual                 
  contributor than an individual pension plan.  He also states                 
  that he  feels that  if an  individual defers  his permanent                 
  fund dividend through the annuity  program, that he wouldn't                 
  pay taxes on it.                                                             
                                                                               
  Number 462                                                                   
                                                                               
  SENATOR TAYLOR  restated  his  suggestion  that  individuals                 
  shouldn't be limited in the amount that they may wish to put                 
  into  their own  annuity account.   PAULA  SCAVERA  said she                 
  could contact Mr. Carpenter  to ask him if he  thought there                 
  would be  any  pros or  cons, tax  advantage-wise, for  that                 
  cause.                                                                       
                                                                               
  Number 200                                                                   
                                                                               
  ARNOLD PERRY, a resident  of Wasilla, said he supports  SB 6                 
  and there should be no doubt as to which way the legislature                 
  or the governor should go on this bill.                                      
                                                                               
  Number 220                                                                   
                                                                               
  GERALD BOHMS, a  resident of  Fairbanks, voiced his  support                 
  for SB 6, as well as the testimony by Ann Walsh  relating to                 
  getting  information  on  the  program  out to  the  younger                 
  adults.  He  said he agreed that the only way the program is                 
  going to work  is if there is wide participation in order to                 
                                                                               
                                                                               
  build the fund so that it will be self-sustaining.                           
                                                                               
  Number 235                                                                   
                                                                               
  HUGH DOOGAN, a lifelong Alaskan  residing in Fairbanks, said                 
  he was  just about  63 years of  age.   He contended  that a                 
  section  of the bill,  which says  that a  person who  is 65                 
  years of age on or before January 1, 1995, may  only receive                 
  the permanent fund  dividend in  cash and may  not elect  to                 
  receive an annuity credit, was discriminating against him.                   
                                                                               
  Number 246                                                                   
                                                                               
  HAROLD WARD,  a resident  of Wasilla,  said  he thought  the                 
  governor's proposal was  a viable program and  he feels that                 
  it is really the  best program for the seniors in the state.                 
  He  also spoke to the importance  of getting information out                 
  to the seniors and other people in the state.                                
                                                                               
  Number 275                                                                   
                                                                               
  There being no other  witnesses wishing to testify on  SB 6,                 
  SENATOR LEMAN closed  the public  hearing on the  bill.   He                 
  said  the  bill would  be brought  back  up sometime  in the                 
  future.                                                                      
  SENATOR   LEMAN   informed  the   committee   that   SB  128                 
  (LEGISLATIVE AUDITS) would be held  over.  He then adjourned                 
  the meeting at 10:13 a.m.                                                    

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