HOUSE BILL NO. 166 "An Act relating to contributions from permanent fund dividends to community foundations, to certain educational organizations, and to certain other 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." Representative Thomas spoke in support of HB 166, which would attempt to increase private philanthropy in Alaska by giving people an option of donating a portion of their PFD to their favorite charity. Alaskans who make $100,000 or more, rank among the lowest in the nation as far as percentage of income donated to charities. The legislation allows a PFD check off, which should allow charities to benefit. Representative Thomas related that HB 166 also requires that the charity meet certain criteria before it can be place on the list. The Rasmuson Foundation has pledged to fully fund the administrative costs of the program for the first three years of the program, creating a zero fiscal impact on the state in these crucial beginning years. He pointed out that the bill would sunset in 2010. Representative Thomas noted that they have had several requests for charities to be included on the list. There are approximately 5,000 non-profit charities. Representative Thomas urged the committee to support this bill. 3:10:35 PM ROSEMARY HAGEVIG, CATHOLIC COMMUNITY SERVICES, stated support for last year's version of the bill, as well as for the current legislation. She thanked Representative Thomas and the Rasmuson Foundation. She reported that addressing the needs of the needy in our population is a shared responsibility, not only by the agencies and government, but also by society as a whole. The bill would provide a convenient way for the general population to help. 3:12:13 PM BRENDA HEWITT, UNITED WAY, SOUTHEAST ALSAKA, testified in favor of the bill. She pointed out the zero fiscal note. JEFF CLARKE, VICE PRESIDENT, RASMUSON FOUNDATION, testified in support of the legislation. Representative Hawker asked if the commitment is for the Rasmuson Foundation to underwrite the first three years of the program. Mr. Clarke said yes. Co-Chair Meyer asked if it is the same legislation as last year. Mr. Clarke replied that it is the same except the eligibility for participating organizations has been broadened. Vice Chair Stoltze wondered about anticipated costs. Mr. Clarke asked which costs he is referring to. Vice Chair Stoltze wanted information about continuing costs after three years. Mr. Clarke said he could not answer the question at this time. 3:17:59 PM JERRY BURNETT, DIRECTOR, DIVISION OF ADMINISTRATIVE SERVICES, DEPARTMENT OF REVENUE, brought attention to a couple of issues. The biggest concern is the possibility of not being able to implement the program by the FY 08 dividend season due to technical problems. The department does not want to have a problem with incorrectly paying dividends due to this legislation. He suggested having the legislation take effect for the FY 09 dividend season. The second issue is that the legislation allows for dollar amount payments as well as percentage amounts. He maintained that there are problems with allowing a percentage amount. 3:20:31 PM Mr. Burnett addressed the fiscal note by the Department of Revenue for $320,300. It assumes that the Rasmussen Foundation would pay the costs of program implementation of $45,000 in FY 07, and about $91,000 a year the next two years. The bill has a sunset date of 2010. On-going costs beyond the three years would be expected to be picked up as administrative costs against the charities receiving contributions. If the bill moves, refinements can be made to the fiscal note in the future. Representative Gara asked if the bill, as written, allows for passing future costs, beyond three years, on to the charities. Mr. Burnett replied that there is a sunset, and it also does not allow PFD funds to pay for the program. Representative Gara asked if the bill continues, if the administrative charge would go to the individual agency. Mr. Burnett thought the bill did not have a provision for that at this point. Representative Gara suggested reminding people how much they gave each year to promote further giving. Mr. Burnett said that a 1099 would have information as to where the money went. Mr. Burnett thought the suggestion was feasible as part of the program. 3:24:34 PM Representative Hawker asked about limiting the mechanism to fixed dollar amounts rather than percentages. He wondered where that idea came from. Mr. Burnett thought it came up in State Affairs. Representative Hawker agreed with the idea. Vice Chair Stoltze asked why "for profit" organizations are not included. Mr. Burnett reported that that discussion also took place in State Affairs. He said that is a policy decision, not the Department of Revenue's call. Representative Crawford asked what happens if one does not itemize on income tax. He wondered how this contribution would be treated. Mr. Burnett said it would be allowable as a deduction and would not show up as income. 3:28:43 PM Representative Thomas MOVED to ADOPT Conceptual Amendment #1, on page 1, line 12, add "more" after "$100 or" and delete all reference to percentages. Co-Chair Meyer OBJECTED. Representative Gara asked for clarification regarding if more than $100 could be donated. Representative Thomas said yes. Co-Chair Meyer WITHDREW his OBJECTION. Representative Hawker OBJECTED. He thought "or more" should be further defined. Representative Gara suggested "any amount up to the value of the dividend." 3:31:31 PM Co-Chair Meyer asked for Mr. Burnett's opinion. Mr. Burnett thought it should be in clear increments, the simpler the better, up to the value of the dividend. He said he could live with the conceptual amendment. Representative Hawker restated that the intent of the conceptual amendment is to provide a fixed increment up to the amount of the dividend. The sponsor and the department can work together to determine the appropriate increment. Representative Hawker WITHDREW his OBJECTION to adopt Conceptual Amendment #1. Representative Kelly suggested having a minimum amount. Representative Thomas said $25 is the minimum. Representative Kelly asked what happens if a mathematical mistake is made. Representative Hawker noted that the $25 floor was already fixed in statute. There are specific provisions already in the bill to address mathematical mistakes. There being NO further OBJECTION, Conceptual Amendment #1 was adopted. 3:35:06 PM Co-Chair Meyer MOVED to ADOPT Conceptual Amendment #2 to change the date to begin in FY 09. Representative Thomas OBJECTED. He argued that the legislation should begin as soon as possible. Mr. Burnett reiterated that there are some technical concerns with implementing the bill due to the ongoing rewrite of the PFD system. This bill cannot take priority over getting an online application that works. He noted that the department is working with the Rasmussen Foundation to make the bill work. Representative Thomas requested to be updated on the problems at the Department of Revenue. Mr. Burnett related that PFD problems in the past have nothing to do with the technical rewrite problems of the online application system. He described a capital project regarding rewriting the system. 3:39:35 PM Representative Hawker shared the anxieties of the department over putting the bill into action. He suggested extending the date. Representative Thomas suggested adding some intent language. Representative Hawker suggested withdrawing Conceptual Amendment #2. Co-Chair Meyer WITHDREW Conceptual Amendment #2. 3:41:38 PM Representative Hawker MOVED to ADOPT Conceptual Amendment #3: "It is the intent of the legislature that the department does its absolute best to accomplish the requirements of the bill for the 2008 dividend distribution. However, the legislature recognizes that if there are insurmountable technical impediments to achieving that date that the effective (applicability) dates would shift back one year: 2009, 2010, and 2011." (In the event that the applicability date is shifted, the sunset date should also be shifted.) There being NO OBJECTION, it was so ordered. 3:43:06 PM Representative Foster thanked the Rasmuson Foundation for their contributions. Representative Foster MOVED to REPORT CSHB 166 (FIN), as amended, out of Committee, with individual recommendations and the accompanying fiscal note. CSHB 166 (FIN) was reported out of Committee with a "do pass" recommendation and with a new fiscal note by the Department of Revenue. There being NO OBJECTION, it was so ordered.