1:42:59 PM HOUSE BILL NO. 273 An Act relating to the dividends of individuals claiming allowable absences; and providing for an effective date. Representative Joule WITHDREW Amendment #1, #24-LS0871\F.4, Cook, 2/6/06. Representative Joule MOVED to ADOPT Amendment #2, #24- LS0871\F.5, Cook, 2/7/06. Co-Chair Meyer OBJECTED. 1:44:29 PM Representative Joule explained that Amendment #2 would add a new subsection, which would read: "(f) The dividend for a current year shall be paid under AS 43.23.055(2) during the current year to an otherwise qualified individual claiming an allowable absence under AS 43.23.008(a)(1) or (2) if the individual was present in the state for at least 90 days during the qualifying year." Representative Joule stated the amendment would allow a student attending college out-of-state to collect the dividend if in that qualifying year, the student returns back to State at least 90 days. He submitted that benefit could encourage the student to come back to Alaska. He requested a positive vote on the amendment. 1:45:41 PM Representative Weyhrauch mentioned legal concerns with Amendment #2. He requested that the Department of Law testify regarding the amendment. 1:46:03 PM Representative Weyhrauch pointed out that there are already a number of allowable absences. He believed that the amendment would now "carve out" a student category. Presently, HB 273 holds the Permanent Fund Dividend (PFD) check for that student for when they do return and establish their residency; that could be a nice "nest egg" for them. Representative Weyhrauch pointed out that some students opt to give up Alaska State residency in order not to pay out- of-State tuition. He added that the University of Alaska has a tremendous program to educate students and that staying in State guarantees a dividend. 1:48:21 PM CHRISTOPHER POAG, ASSISTANT ATTORNEY GENERAL, DEPARTMENT OF LAW, provided background on the allowable differences for the PFD check. Persons who receive the PFD are Alaskan residents. The Supreme Court has allowed the State to go broader than the legislative provisions and indicate that they are permanent Alaskan residents. Alaska Statute (AS) defines what is a permanent resident. The person must be present in State and must intend to remain indefinitely. Allowable absences are for when a person is not present but intend to return & remain. If a person is a permanent resident, they receive the PFD check. The State has adopted statutory and regulatory provisions that allow for objective criteria as to who are current residents. 1:49:26 PM Mr. Poag continued, the thirteen allowable exceptions are essentially legislative findings that affect those people likely to return to the State. The Supreme Court has looked at that issue on a number of occasions, as it is an area that gets challenged quite often. The challenges are usually upheld for equal protection. In the thirteen categories, the Courts have said that the legislative objective had a fair and substantial relationship within the means used. Those are the guidelines that the proposed provision would be held too if the provision was challenged before the Supreme Court. The Supreme Court has said that the PFD is designed to encourage residents that are in Alaska to stay and/or return. 1:50:37 PM Mr. Poag advised that the provisions in the allowable categories have to be consistent with that purpose. There have been amendments offered to the provision based on need. He believed that the need-based exceptions could not survive that scrutiny. The exception must show that there are legislative findings to support a position that they are likely to return. Mr. Poag discussed Amendment #2, "common sense" that if the student returns to the State every year on the allowable absence for college for those 90-days, that would be a pretty good estimate that student intends to return. Mr. Poag pointed out that statistical evidence that the Permanent Fund Division has put together does not support the amendment. That evidence indicates that college students, if they were likely to return, it would be within the first two years. The statistics don't match the common sense being applied to the amendment. Another concern is by accepting one category, it would be carving out another "class". He noted criticism for an "elite" class of people allowed to leave the State. The amendment would be creating a third class for students. Creation of classes makes the provision less defensible to the Department of Law. He encouraged that if the amendment were passed, it should be applied across the board to all thirteen allowable categories. 1:52:59 PM Mr. Poag believed that the provision was defensible because the "common sense" approach supports it. When the Legislature indicated support for the 13 categories, it was based on common sense. That same common sense is not borne out of statistics and it would be more defensible if applied across the board. 1:53:50 PM Representative Kerttula referenced a "separate class" and asked if it would receive the same scrutiny if a Court looked at it. Mr. Poag said it would; the Supreme Court has said that the Permanent Fund Dividend is an economic interest and as a result of that interest, it receives minimal scrutiny. Representative Kerttula thought that could help a little. 1:54:08 PM Representative Kerttula agreed with the "common sense" approach, and that returning every year for 90-days indicates a likelihood of coming back to the State. She pointed out that the statistical evidence quoted was based on one year - 1996. That was the year that the dot.com bubble was going wild; she believed a one-year snap shot was not relevant to the current scenario and was not sufficient evidence. 1:55:24 PM Mr. Poag agreed that it had only been a one-year survey - a statistically valid one-year survey. The assumption showed that those students were not returning at the rate thought in that period and those findings have been supported. 1:56:32 PM Representative Kerttula proposed that it would be better to do an across the board exemption. 1:56:48 PM Vice Chair Stoltze mentioned that the Courts should be responsible for making those "common sense" rules. He noted support for the amendment. 1:57:30 PM Representative Weyhrauch requested clarification on the data provided by the Division. SHARON BARTON, DIRECTOR, ALASKA PERMANENT FUND DIVIDEND DIVISION, DEPARTMENT OF REVENUE, explained that the study was statistically valid. Last year, a sample was taken from 1995 and tracked through 2004. This year's study was from 1996, and those students were tracked through 2005. The Division chooses a 10-year period as current statutes allow people to be out of State ten years. Ms. Barton did not sense that anything had changed since that time. 1:59:21 PM Representative Kerttula said that she did not mean to suggest that anything inappropriate was done; however, she believed that much had changed since the 90's. She inquired if it would be possible for the Division to go back and track what has happened since those years. Ms. Barton responded that the data was there, however, it would be a manual effort for the Division with the current computer systems used and would take a lot of time. 2:00:09 PM Representative Kerttula reiterated, all that is presently known are the two years in the '90's, which have been tracked; there is no way to know what applies to later years. 2:00:27 PM Representative Joule commented on the challenges facing the State to develop a necessary workforce and that the concern is a "huge issue". He maintained that it warrants passage of the amendment. 2:01:32 PM A roll call vote was taken on the motion. IN FAVOR: Joule, Kerttula, Moses, Stoltze OPPOSED: Hawker, Wehyrauch, Meyer Representative Foster, Representative Holm, Representative Kelly, and Co-Chair Chenault were not present for the vote. The MOTION FAILED (4-3). 2:02:14 PM Co-Chair Meyer MOVED to ADOPT Amendment #3, #24-LS0871\F.10, Cook, 2/14/06. Representative Weyhrauch OBJECTED. 2:02:43 PM SUE STANCLIFF, STAFF, REPRESENTATIVE MIKE KELLY, explained Amendment #3, would change the qualifying period from 10- years to 5-years. Questions that came up regarding that change were from people already beyond the five years such as military, education, post secondary students and those caring for or have terminal illness. Because of that, the legislative drafter added an application section that would allow anyone currently in the system, past those five years but under the ten years, to stay in and term out. Ms. Stancliff noted that the Division concurs with the proposed option. Representative Weyhrauch WITHDREW his OBJECTION. There being NO further OBJECTION, Amendment #3 was adopted. 2:04:21 PM Representative Kerttula MOVED to ADOPT Amendment #4, #24- LS0871\F.6, Cook, 2/9/06. Vice Chair Stoltze OBJECTED. Representative Kerttula explained that Amendment #4 would adjust language on Page 4, Line 19: Delete: "the year" Insert: "the two years" Representative Weyhrauch added that he objected to the amendment, referencing previous testimony provided by Mr. Poag, Department of Law and Ms. Barton, Permanent Fund Dividend Division. 2:05:55 PM Representative Kerttula claimed that the language was too narrow and that the amendment was justifiable. 2:06:05 PM Vice Chair Stoltze WITHDREW his OBJECTION. Representative Weyhrauch OBJECTED. A roll call vote was taken on the motion. IN FAVOR: Joule, Kerttula, Moses, Stoltze OPPOSED: Hawker, Wehyrauch, Meyer Representative Foster, Representative Holm, Representative Kelly, and Co-Chair Chenault were not present for the vote. The MOTION FAILED (4-3). 2:07:16 PM AT EASE: 2:07:26 PM RECONVENE: 2:08:35 PM Vice Chair Stoltze MOVED to REPORT CS HB 273 (FIN) out of Committee with individual recommendations and with the accompanying fiscal note. There being NO OBJECTION, it was so ordered. CS HB 273 (FIN) was reported out of Committee with a "no recommendation" and with a new fiscal note by the Department of Revenue. AT EASE: 2:09 P.M. RECONVENE: 2:17:38 PM.