Legislature(2005 - 2006)BUTROVICH 205
02/16/2006 03:30 PM Senate STATE AFFAIRS
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| SB297 | |
| Adjourn |
* first hearing in first committee of referral
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= bill was previously heard/scheduled
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= bill was previously heard/scheduled
| *+ | SB 297 | TELECONFERENCED | |
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ALASKA STATE LEGISLATURE
SENATE STATE AFFAIRS STANDING COMMITTEE
February 16, 2006
3:36 p.m.
MEMBERS PRESENT
Senator Gene Therriault, Chair
Senator Thomas Wagoner, Vice Chair
Senator Charlie Huggins
Senator Kim Elton
MEMBERS ABSENT
Senator Bettye Davis
COMMITTEE CALENDAR
SENATE BILL NO. 297
"An Act relating to contributions from permanent fund dividends
to certain educational organizations and to certain charitable
organizations that provide a positive youth development program,
workforce development, aid to the arts, or aid and services to
the elderly, low-income individuals, individuals in emergency
situations, disabled individuals, or individuals with mental
illness; and providing for an effective date."
HEARD AND HELD
PREVIOUS COMMITTEE ACTION
BILL: SB 297
SHORT TITLE: CONTRIBUTIONS FROM PERM. FUND DIVIDENDS
SPONSOR(s): STATE AFFAIRS
02/14/06 (S) READ THE FIRST TIME - REFERRALS
02/14/06 (S) STA, FIN
02/16/06 (S) STA AT 3:30 PM BUTROVICH 205
WITNESS REGISTER
Heather Brakes, Staff to Senator Therriault
Alaska State Capitol
Juneau, AK 99801-1182
POSITION STATEMENT: Introduced SB 297
Sharon Barton, Director
Permanent Fund Dividend Division
Department of Revenue
PO Box 110400
Juneau, AK 99811-0400
POSITION STATEMENT: Answered questions related to SB 297
Jeff Clarke, Chief Administrative Officer
Rasmuson Foundation
301 West Northern Lights Blvd.
Suite 400
Anchorage, AK 99503
POSITION STATEMENT: Answered questions related to SB 297
ACTION NARRATIVE
CHAIR GENE THERRIAULT called the Senate State Affairs Standing
Committee meeting to order at 3:36:33 PM. Present were Senators
Kim Elton, Thomas Wagoner, Charlie Huggins, and Chair Gene
Therriault.
SB 297-CONTRIBUTIONS FROM PERM. FUND DIVIDENDS
CHAIR GENE THERRIAULT announced SB 297 to be up for
consideration. He asked Ms. Brakes to introduce the bill.
3:37:17 PM
HEATHER BRAKES, Staff to Senator Therriault, explained that the
bill establishes a streamlined mechanism for Alaskans to donate
money to charitable organizations. The Permanent Fund Division
of the Department of Revenue would contract with an agent to
implement and administer the program. She described the design
as similar to what is currently done for the University of
Alaska college savings account through the Permanent Fund
Dividend (PFD) application.
The bill only allows applicants who file electronically the
option of making contribution(s) and the amount can either be a
varying dollar amount or a percentage of the dividend.
The department would contract with an agent that would pay the
implementation and administrative costs for the first three
years. The reason for that is so that the qualifying
organizations would receive 100 percent of the donations. After
that time administrative costs would be deducted from the
donations and applied equitably to all recipients. The agent
would also be responsible for the due diligence on applications
including verifying financial audits, sending out tax
information to donors, and paying for the initial system
upgrades to design the application and load the system. The
agent would also be responsible for confirming that groups that
applied and had been accepted to the program were able to
receive and administer funds to the recipients.
Each of the estimated 500 organizations that might qualify for
inclusion must file an application. Qualifying criteria includes
having 501(c)(3) status for two calendar years prior to
application. The organization must have an IRS 990 form on file
and have a local advisory board. As currently drafted, the
organizations would receive $100,000 or 5 percent of their
annual receipts from contributions. If the annual budget is
higher than $50,000 in the preceding fiscal year the
organization must provide the program agent with an independent
financial audit that is conducted by a certified accountant.
Grant organizations and contributors to 501(c)(4) or (6) non-
profits would not be eligible.
As currently drafted, the program sunsets in three years unless
reauthorized by the Legislature. The Rasmuson Foundation has
offered to underwrite the estimated $300,000 in administrative
and startup costs in the initial years.
3:42:05 PM
CHAIR THERRIAULT added that eligibility is structured so that
contributions are restricted to established non-controversial
entities that already have community support. You cannot have a
501(c)(3) that grants money to (c)(4)s and (c)(6)s that can
engage in lobbying activities or political expenditures. The
idea is that the money would flow to programs that provide a
direct benefit in the public.
He noted that the title indicates the wide variety of
organizations that would be eligible. He asked Ms. Brakes to
explain how they determined that there might be 500 eligible
entities.
MS. BRAKES explained that: 3,000 non-profits are currently
registered in Alaska; 2,000 have current 990 tax returns on
file; 1,000 have audits; and 500 receive at least 5 percent of
their annual receipts from charitable giving.
CHAIR THERRIAULT noted that Alaska and Hawaii have been
identified as the most generous region according to a recent
Time Magazine article. However, local charities have indicated
that they tend to feel the brunt when Alaskans respond to
disasters outside the state.
SB 297 is a streamlined effort to take advantage of the offer
from the Rasmuson Foundation to underwrite the start-up costs
for a number of years.
3:47:09 PM
SENATOR WAGONER asked whether this would require a rewrite of
the Permanent Fund computer program.
CHAIR THERRIAULT asked Ms. Barton to respond.
SHARON BARTON, Director, Permanent Fund Dividend Division,
advised that it would take substantial changes to the computer
system to recognize a request to deduct a certain amount from an
individual check. The number of potential amounts under the
proposal adds further complication. The initial estimate,
including the changes to the web site, is $200,000 if paper
applications aren't included. Including paper applications will
increase the cost.
SENATOR WAGONER asked about the timing.
MS. BARTON responded optimistically and said she believes that
the division could get a contractor to complete the project by
October 2007 as the bill envisions.
SENATOR ELTON asked for an interpretation of line 25 on page 3
to clarify whether it means the payment made in 2007 or the PFD
for 2007.
CHAIR THERRIAULT stated that the dividend payment for 2007 is
determined by residency in 2006 so the division would have a
year to prepare for the electronic application that would be
available to fill out on January 1, 2007.
SENATOR ELTON noted that the bill speaks to the PFD for 2007 and
he didn't know if that is for residency in 2007 or the check
that is issued in 2007.
CHAIR THERRIAULT answered it's the check that is issued in 2007.
MS. BARTON advised that the division interprets the bill the
same way. It refers to the dividend that will be paid in October
as the 2006 dividend. She said she interprets the bill to mean
the dividend paid in 2007.
CHAIR THERRIAULT said he would ask the drafter if adding the
word "issued" would clarify the point.
SENATOR ELTON asked if a parent could make a contribution from a
minor child's check.
CHAIR THERRIAULT replied he envisions that they could. He asked
Ms. Barton if he could have his son's check deposited into his
checking account.
MS. BARTON said yes and nothing in statute prohibits the
division from honoring a parent's request to make a donation
from a child's PFD.
SENATOR ELTON asked whether the state could make a contribution
from a minor's dividend if that minor is in state custody
CHAIR THERRIAULT replied that isn't his intent.
MS. BARTON added there is nothing in statute that would allow a
state agency to do that.
SENATOR ELTON asked for elaboration on the administrative cost
and how those would be switched in several years.
3:55:48 PM
MS. BRAKES explained that the intent is that the agent would pay
the administrative costs for the first three years. If the
program is reauthorized, the costs thereafter would be equally
distributed to the recipient organizations.
CHAIR THERRIAULT clarified there would be a formula to spread
the costs among the entities that received the money.
SENATOR HUGGINS suggested that a $10 contribution floor might
not be practical. He then referenced a proposal to hold certain
PFD checks and asked whether those would be available for
donations.
MS. BARTON responded if that bill were to pass, the designated
donation would be held until the PFD was paid to the individual.
Designated donations would be handled the same way that
garnishments are currently handled.
CHAIR THERRIAULT suggested it might be advisable to make the
policy call to disallow such deductions. With regard to a floor,
he said he was open to suggestion from the committee.
JEFF CLARK, Chief Operating Officer for the Rasmuson Foundation,
asserted that it's individuals who power the nation's
philanthropy. To demonstrate that point he reported that in 2003
non-profits received $241 billion, and 83 percent of the
donations came from individuals. On the other hand, Alaskans
typically give 30 percent less of their annual income to non-
profits than the nationwide average. The benefit of this
legislation to Alaskans, he said, is that the selection process
would be easier because the various entities would be listed in
one place.
4:03:11 PM
CHAIR THERRIAULT asked Ms. Barton to talk about the additional
expense associated with including the paper application in the
proposal and about the success the division has had in its
effort to encourage applicants to file electronically.
MS. BARTON explained that including paper applications would add
about $40,000 in programming costs. Information about the new
program would already be in the application booklet so the
incremental cost would be to include the check-off space on the
application and in the booklets that are distributed around the
state. The real cost comes from the fact that there is no unused
area on the application form, which means an additional page on
the application would be necessary. Last year the cost for the
extra page and additional forms was between $4,000 and $5,000.
Ms. Barton advised that the extra page would also place the
booklet into the next price range for postage so she would
estimate the overall additional costs associated with adding the
option to paper applications would be about $50,000.
She reported that the effort to encourage electronic application
was overwhelmingly successful. 282,000 people applied in
January, which is an encouraging increase from the 211,000
electronic applications filed last year. February has been
typically slow, but 350,000 on-line applications are anticipated
before the end of the application period. That would amount to a
little over half and more are anticipated next year.
CHAIR THERRIAULT said he envisions a sorting mechanism that
would make it easier for applicants to find local entities
without having to sort through the statewide list.
SENATOR ELTON announced that he would have his staff look into
the potential consequences this might have in terms of local
contributions to schools. A second question he had related to
how the distribution of donations would be impacted since rural
areas of the state tend to use paper applications more
frequently.
CHAIR THERRIAULT responded he didn't think the option would
impact local support in any way and it wouldn't factor into a
community's responsibility to support education.
He asked if members had comments on the specific amount of the
donation.
SENATOR ELTON acknowledged that it would be more difficult for
the division to administer, but he thought it would be best to
leave the amount open and without a floor.
SENATOR WAGONER observed that with electronic applications the
computer wouldn't allow over contributions.
SENATOR HUGGINS recalled that no one took advantage of a similar
bill that Senator Green sponsored. He argued that donations
should be higher than $10 and not exceed the total value of the
dividend.
MS. BARTON said simplicity is better.
MS. BRAKES drew attention to page 2, line 2, which says: "If the
total amount of contributions elected by an applicant exceeds
the amount of the permanent fund dividend that the applicant is
entitled to receive, contributions shall be deducted from the
dividend in the order the organizations elected by the applicant
appear on the contribution list..." The recipient list is
reordered annually so that, for example, the ice skating club of
North Pole isn't always the last on the list and therefore
likely to receive the least money.
4:17:38 PM
MS. BARTON said another option would be to deduct contributions
in the order that the person lists them on the application.
CHAIR THERRIAULT reviewed paragraph (8) on page 3 and said the
language wouldn't preclude a smaller entity from participating;
it's just that a charity that has an annual budget larger than
$250,000 would have to fulfill the financial audit requirement.
MS. BRAKES agreed.
SENATOR WAGONER mentioned Senator Green's bill and questioned
spending the money to establish this option without knowing the
level of interest at the community level.
CHAIR THERRIAULT related that the other option set up an account
by which people could make donations whereas this option would
be part of the electronic application. He suggested that the
various charitable organizations would probably encourage people
to make donations and furthermore this is a pilot program. If,
at the end of three year trial, there has been little response
the program would sunset.
4:21:32 PM
SENATOR WAGONER remarked this could be an expensive effort that
might not increase the level of giving.
CHAIR THERRIAULT surmised that the more sophisticated charities
would say that the easier it is to give, the more givers there
will be. The hope is that making it easier to give will grow the
pool of givers.
SENATOR ELTON asked if the audit requirement for entities that
have an annual budget in excess of $250,000 was arbitrary
because he believes that any entity participating in the program
ought to be subject to an audit regardless of the size of its
budget.
He suggested it'd be worthwhile for members to check with local
United Way campaigns because a lot of fundraising is targeted on
that October date and he suspects that this new option will be
competition for the same funds.
CHAIR THERRIAULT asked Ms. Brakes the genesis of the $250,000
threshold.
MS BRAKES responded she wasn't sure where the dollar amount came
from, but Mr. Clark might have an answer.
CHAIR THERRIAULT asked Mr. Clark if the $250,000 audit threshold
was a federal requirement.
MR. CLARK replied his understanding is that it is not a federal
requirement and he would agree that the number is probably
arbitrary. Referencing previous comments he told the committee
that if five percent of the people who are eligible for the PFD
were to make an average donation of $100, that would amount to
an incremental $3 million per year for Alaska non-profits. This
is one avenue to help non-profits be more sustainable, he said,
and if this bill passes, the Rasmuson Foundation would be happy
to undertake a public awareness campaign.
4:27:51 PM
CHAIR THERRIAULT asked Ms. Barton if she had demographic
information on the more than 300,000 electronic applications
that have been filed.
MS. BARTON replied 2004 applications were received from every
zip code in the state, but she hadn't broken down whether or not
there was a higher percentage of electronic filers coming from
Anchorage - for example - than rural Alaska. That's the next
step, she said.
SENATOR HUGGINS asked if Friends of the National Rifle
Association (NRA) would fit the parameters.
CHAIR THERRIAULT said he didn't believe so because of lobbying
activities, but the process begins with inquiring about the
entity's specific status. The next hurdle is that if the entity
is a 501(c)(3) non-profit, it cannot grant any of its money to a
501(c)(4) or a 501(c)(6).
CHAIR THERRIAULT encouraged members to contact their local
United Way campaigns and announced he would hold SB 297 in
committee.
There being no further business to come before the committee,
Chair Therriault adjourned the meeting at 4:31:20 PM
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