3:27:44 PM HOUSE BILL NO. 366 An Act relating to an exemption from public disclosure of certain appropriations from the dividend fund; and providing for an effective date. REPRESENTATIVE HARRY CRAWFORD, SPONSOR, explained that approximately 5,000 children do not receive child support because the non-custodial parent is incarcerated and ineligible to receive a Permanent Fund Dividend (PFD). When the non-custodial parents are ordered to pay child support, but are unable to do so, their PFD is garnished. Under current law, the PFD of individuals found ineligible under AS 43.23.005(d) are appropriated to the Department of Corrections and to the programs for the victim crimes. HB 366 allows the Department of Revenue to provide grants to minor children of incarcerated individuals. The bill ensures that minor children of incarcerated individuals do not lose out on the child support they depend upon. 3:30:20 PM Vice-Chair Stoltze noted those funds are also being used by a number of other agencies such as the Council on Domestic Violence and Sexual Assault (CDVSA). He asked if the sponsor had discussed the impacted reductions the bill would have to the Department of Public Safety. 3:31:14 PM JERRY BURNETT, DIRECTOR, DIVISION OF ADMINISTRATIVE SERVICES, DEPARTMENT OF REVENUE, addressed the effect on the other departments. As the bill is written, it allows payments to be written to Child Support Enforcement Agency (CSEA) for children of incarcerated parents out of the PFD fund. In the FY09 budget, there is approximately $16 million dollars allocated between the Department of Public Safety and the Department of Corrections from the PFD felon funds. There are approximately 5,000 incarcerated parents in the Department of Corrections. If the program was an equivalent program, approximately half the money would not be available. He noted that in the Department of Corrections, all those funds are budgeted for inmate health and would then need to be paid through General Funds. Vice-Chair Stoltze emphasized that the bill does carry fiscal impact, which is not indicated in the fiscal notes. 3:33:33 PM Mr. Burnett clarified that the bill would have no affect on the FY09 budget, which has already passed. The effect of the bill would be shown in FY10. Representative Crawford agreed HB 366 does have fiscal impact. The change was never intended to remove those funds from the children. He maintained that the debt is owed and should be given back to those children. Co-Chair Chenault acknowledged that no one disagrees with that; however, was concerned with the zero note submitted by the Department of Corrections, stressing a fiscal impact to the General Funds. 3:36:51 PM Representative Hawker asked why AS 43.23.028, the public notice section regarding the notice on the Permanent Fund Dividend stub, had been included. He recommended that the eligibility section be addressed. Representative Crawford explained that Legislative Legal Services had drafted that section and he requested they testify to it. 3:40:54 PM TAMARA COOK, DIRECTOR, LEGISLATIVE LEGAL SERVICES, LEGISLATIVE AFFAIRS AGENCY, JUNEAU, testified via teleconference, addressed the concerns of Representative Hawker. She explained that the way in which the PFD program works with respect to AS 43.23.005(d) basically identifies individuals that will not be eligible for the dividends. Then the Legislature has an elaborate notice requirement. When the Legislature appropriates money from the fund for a non dividend fund purpose, including hold-harmless, the notice appears on the check stubs so that the State's population knows when money is being taken from the dividend fund and not paid directly as dividends. There is an exception, which is being amended in HB 366. The exception is established on Page 1, which clarifies that to the extent that the Legislature chooses to appropriate money from the PFD, that does not exceed the amount that would have been paid to State residents, then the notice requirement is not triggered. In order to avoid the trigger, there are certain emphases to certain purposes as established on Page 1 & Page 2; the bill essentially adds another purpose. 3:43:52 PM Representative Hawker understood that there were no statutory provisions for the existing appropriations #1-#5 and that they were not noticed. Ms. Cook replied correct. The Legislature makes an appropriation from the dividend fund as long as the amount appropriated is from one of the five listed purposes. 3:44:43 PM Representative Hawker stated that the bill would carve out another exception to the notice requirements and asked what was being accomplished by not disclosing the information through the notice requirement. Representative Crawford pointed out that the State is not allowed to use public funds to pay the debt of an individual. Representative Hawker commented that to accomplish that intent, the language should return to the eligibility section stipulating the exception, AS 43.23.005, Section (d), add (f), placing another waiver requirement for the purpose of satisfying child support. 3:46:37 PM Ms. Cook explained that the problem is that the recommendation is to set up a program that explains there are certain types of criminals that do not qualify for PFD's and then single out some of those people that owe child support. The problem becomes an equal protection concern. The State has an interest in determining who qualifies for the PFD; that sub-section (d) was litigated and it survived the litigation. The State will be allowing some of these people to qualify for another PFD. She did not know how to justify that. The State does not have an interest in helping criminals pay off debt. Representative Hawker asked why under current statute and regulation, does the Department allow payments of dividends to a certain class of people absent from the State as students and at the same time regulate that they will not give the same treatment to a student on a Fulbright scholarship. 3:49:05 PM Ms. Cook explained that Representative Hawker was addressing the "allowable absence" provision. The Legislature has created a list of allowable absences deemed to be residences for that program. She did not think that all allowable absences had been litigated. Representative Crawford commented that the analogy is that to garnish a PFD check, is not on the same level as innocent children's equal protection concerns. He did not want to make all criminals eligible to pay off debts with their PFD's. Representative Hawker agreed it was defending and protecting the rights of that innocent individual. Representative Crawford suggested it would provide benefit in the right to satisfy part of their debt. 3:51:44 PM Vice-Chair Stoltze commented on passage of the expanded aspect of application of felons. He did not recollect any change to the eligibility for child support but instead would expand the net of the number of penalized people. He asked that the record be made clear. Mr. Burnett agreed that the effects of making people ineligible for dividends never changed the eligibility for the Child Support Enforcement Agency to garnish. It only changed the number of people. 3:54:09 PM Representative Crawford worried about children being in line for the garnishments. Representative Hawker requested to see the House Letter of Intent related to the enactment of sub-Section (b). PUBLIC TESTIMONY CLOSED Co-Chair Chenault recommended discussion with the Department of Corrections regarding the zero note. HB 366 was HELD in Committee for further consideration.