HOUSE BILL NO. 186 An Act relating to quarterly payments of a permanent fund dividend, and to a permanent fund dividend and eligibility for public assistance; and providing for an effective date. 1:51:34 PM REPRESENTATIVE JAY RAMRAS, SPONSOR, explained that the Permanent Fund Dividend (PFD) has been and continues to be a boon to the Alaskan economy for the past 22 years. The program allows Alaskans to enjoy part of the State's oil revenue. Since the time of inception, many businesses have profited from running sales near the time the dividend is distributed. Often, citizens will use their dividends to make down payments on high-end consumer products and effectively end up with more debt than they would have incurred had they not received a PFD in the first place. He pointed out that HB 186 allows eligible residents to electronically receive their dividend and the ability to elect to receive their payments in either in a lump sum or to divide their dividend income into four equal, quarterly payments. Under HB 186, the program takes effect January 2006. Representative Ramras thought that HB 186 would provide citizens an opportunity to financially help themselves and their families throughout the year. However, quarterly payments are not recommended for those receiving public assistance because payouts, especially for multiple family members, could interfere with available federal public assistance. 2:01:30 PM Vice-Chair Stoltze asked how it would affect "hold harmless" provisions. Representative Ramras reiterated that the bill was not designed for a person on public assistance. The State has exclusions for someone in that program and there would be a disclaimer on the form for residents on public assistance. He stated the legislation would be a "good deal" for most and could bring a "savings-stability". The program could be voluntary in nature and administrative costs would include postage. 2:04:21 PM Vice-Chair Stoltze questioned how much the legislation would keep in the State's economy. Representative Ramras had not requested any studies on that; however, felt strongly that there are many middle-income families that will benefit. 2:06:20 PM Representative Holm asked about the possibility of receiving monthly payments. Representative Ramras commented that monthly payments would affect the cost of the fiscal note. Also, he did not think it would help as much as a budgeting tool for those in the middle-income bracket. 2:07:41 PM Representative Holm asked if the legislation resulted from a constituent request. Representative Ramras said no. He pointed out that many seniors used to use their longevity bonus as a household budgeting tool. 2:08:23 PM Representative Holm asked Representative Ramras why he thought that people, who do not handle their money well, would opt for the proposed program. Representative Ramras replied that the program was designed for people who would like to handle their money better. He emphasized it would be a voluntary program. 2:10:40 PM Representative Foster thought the legislation was a good idea, however, questioned if residents in his district could receive their dividends mailed rather than electronically deposited. He thought mailing could be cost prohibitive to the Department of Revenue. Representative Ramras agreed that mailing would create a significant fiscal note and would make it cost prohibitive. 2:12:17 Representative Kelly agreed that it would be good for some folks to receive monthly checks to cover the costs for bill paying. Representative Ramras attempted to demonstrate that the legislation could pay for itself. He believed that if the program did catch on, it could be broadened out to a monthly base payment, and noted that quarterly dividends were modeled after the way stocks generate their dividends. 2:14:19 PM Representative Foster indicated that from the fiscal note, it appears it would cost the State of Alaska, fifty cents ($.50) for each family member. He mentioned that many villagers from his area would not qualify for the program but would still be required to pay. Representative Ramras advised that the fiscal note indicates the amount needed to set up the program. He pointed out another note, indicating the offset income expected. Representative Ramras believed it could be a positive note in the future. The cost would be bore by the General Fund not the Permanent Fund. 2:16:46 PM Representative Hawker addressed Representative Foster's concern. He pointed out that the funding source would be Permanent Fund earnings; however, the manner in which the dividend calculation works, the amount would be taken off the top. The effect would be on the dividend and in years forward, the amount would receive earnings lost from the use of that money. 2:17:39 PM Vice-Chair Stoltze asked how long it would take to determine if the program was working. Representative Ramras suggested five years as an appropriate sunset date. Vice-Chair Stoltze inquired about Child Support Enforcement garnishment. Representative Ramras acknowledged that was a concern for the banks by taking the Department of Revenue to task. Vice-Chair Stoltze worried about the child enforcement dynamics. Representative Ramras understood that if the person was a "garnishee", the computer system would then recognize that and reject them. 2:21:59 PM Co-Chair Chenault asked if it would be mandatory to get four payments rather than one per year. Representative Ramras replied that garnishes would not be able to participate in the program at all. The Department of Revenue determines the route for the garnishment procedures and that the option remains for one payment per year. Co-Chair Chenault referenced the fiscal garnishment costs and understood the costs would be handled quarterly. Representative Ramras did not know. 2:23:58 PM PAUL DICK, OPERATIONS MANAGER, PERMANENT FUND DIVIDEND DIVISION, DEPARTMENT OF REVENUE, addressed HB 186, clarifying that the program would be optional. Dividends would be paid October, January, April, and July. A person would not qualify if garnished and that any garnishment would be honored in full. 2:25:44 PM Mr. Dick addressed an additional garnishment, the Internal Revenue Service (IRS) withholding. There are situations, in which someone might qualify for the quarterly dividend and then subsequently become garnished by the Child Support Agency. If there were a garnishment on record, the Department would take whatever remains in that account and would pay the remainder for the garnishment. Essentially, it pulls them from the quarterly option. Mr. Dick stated that the fiscal note was based on 5,000 people using the option, approximately 1% of the applicant population. Interest earnings were calculated at 2% interest. 2:27:39 PM Mr. Dick mentioned the monthly provisions, finding that the quarterly amount changed from $12 dollars to $40 dollars per year, per person participating. He offered to answer questions of the Committee. 2:28:13 PM Co-Chair Chenault referenced the garnishment pay out. Mr. Dick reiterated that the garnishment would be paid in the amount remaining in the person's quarterly account. 2:29:14 PM Co-Chair Meyer noted that the bill would be held in Committee for further consideration and discussion regarding the merit. Co-Chair Chenault referenced back up regarding the hold harmless insertion. Representative Ramras said that the Division of Public Assistance will provide the disclaimer and that those recipients would be informed that they do not qualify. 2:30:44 PM Representative Weyhrauch asked about quarterly liens. Representative Ramras responded that it would be the aggregate amount. He added, there is only one time per year, a person could make the garnishment claim. 2:31:52 PM Representative Kelly continued questions regarding garnishment concerns. Representative Ramras explained the garnishment claim filing system, adding that if person missed the deadline for filing their application, they would not be able to collect the remaining quarterly portion. 2:32:52 PM In response Representative Kelly, Representative Ramras explained that any creditor would be able to garnish 100% of what is due them. 2:33:57 PM Representative Ramras urged that the bill not be placed in the "back seat" of the Committee. He requested reconsideration in a timely manner. 2:34:50 PM HB 186 was HELD in Committee for further consideration. 2:35:14 PM