Legislature(1993 - 1994)
03/10/1993 09:00 AM Senate STA
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* first hearing in first committee of referral
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+ teleconferenced
= bill was previously heard/scheduled
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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