HOUSE BILL NO. 216 "An Act relating to transfers from the dividend fund; creating the restorative justice account; relating to appropriations from the restorative justice account for payments for and services to crime victims, operating costs of the Violent Crimes Compensation Board, operation of domestic violence and sexual assault programs, mental health services and substance abuse treatment for offenders, and incarceration costs; and providing for an effective date." 9:42:47 AM REPRESENTATIVE CHUCK KOPP, SPONSOR, thanked the committee and introduced himself. ERIC CORDERO-GIORGANA, STAFF, REPRESENTATIVE CHUCK KOPP, introduced himself. Representative Kopp stated that the bill would reset in law the legislative purpose for making certain persons ineligible to receive a dividend; those who have been incarcerated on a felony during their qualifying year, those that have been convicted of a felony during their qualifying year, or those that have been convicted of a misdemeanor but have a prior felony or two prior misdemeanors. He said that the dividends that would otherwise be paid to those Alaskans would provide funds for services and payments to crime victims and operating costs through he Violent Crimes Compensation Board. Secondly, the funds would be used to pay restitution owed to crime victims. Thirdly, the fund would provide for grants to non- profits for crime victims, for mental health services and substance abuse treatment for offenders, to provide funds to the Office of Victims Rights (OVR) to help people get restitution payments, and to provide fund to the Council on Domestic Violence and Sexual Assault (CDVSA) for grants to victims. He added that the bill included obtaining reimbursement for some costs to the Department of Corrections related to probation and incarceration. He said that the bill would establish the Restorative Justice Account as a separate account within the dividend fund and allowed the commissioner to make a transfer each year from the dividend fund to the Restorative Justice Fund in an amount equal to the amount that would have been paid during the previous fiscal year to individuals who were ineligible for dividends. The bill established a priority order and percentages of payment. He believed that the bill brought back the original purpose of the fund. He said that the fund was not considered dedicated and that the legislature could still make appropriations at they deemed fit. 9:47:20 AM Co-Chair Foster listed individuals available for questions. Representative Kawasaki noted that a previous version of the bill looked at priority order of payment and the current bill looked at percentages of payment. He thought that the dedicated fund issue had become murky and quoted the legal opinion from the legislative Division of Legal and Research Services from April 7, 2018: However, you should be aware that creating a requirement that a certain percentage go towards a specific purpose can make the fund look more like a dedicated fund, carrying a greater risk that a court could find the appropriation is not intended to be discretionary. Representative Kawasaki asked Representative Kopp to address the point raised in the memo. Representative Kopp thought that there was a long history of similar practice through the state's technical and vocational programs; percentages were set in statute for varying technical programs in the state. He said that it had never been challenged. 9:49:55 AM Co-Chair Foster OPENED and CLOSED public testimony. Representative Grenn MOVED to ADOPT Amendment 1, 30- LS0572\L.1 (Martin, 3/28/18) (copy on file): Page 1, lines 6 - 7: Delete ''relating to contributions from dividends;" Page 8, line 7, through page 9, line 20: Delete all material. Renumber the following bill sections accordingly. Representative Wilson OBJECTED for discussion. Representative Grenn explained that he supported the original intent of the bill. He shared that the original intent of the Pick.Click.Give program was to focus on 501(c)(3) nonprofits that were the safety net for many Alaskans. He worried that adding programs like the on under the bill could divert support from those nonprofit, non- government organizations. He expressed concern that the program did not have an audit provision. He thought that the words Pick.Click.Give should be removed from the legislation. 9:52:40 AM Representative Kopp shared that the amendment did not hinder the bill. He was neutral on the amendment and believed it stayed consistent with the legislation's intent. Representative Wilson OBJECTED to the amendment. She explained her reasoning. Representative Grenn replied there were over 600 statewide nonprofits that Alaskans could donate to in order to help victims of violent crimes. He listed other nonprofits focused on helping victims. Representative Wilson said her understanding was that the organizations did not help the individual who had been victimized. She did not believe that Pick.Click.Give would be affected by the legislation as written. 9:56:27 AM Representative Kawasaki wondered whether there were auditing requirements for the compensation fund similar to the ones required of Pick.Click.Give organizations. Representative Grenn could not speak to the administrative process of the account. He did not believe that the fund worked within the parameters of the nonprofits under the Pick.Click.Give umbrella. He thought that sticking with the original intent of the Pick.Click.Give program would be the best practice for the state. Representative Wilson hoped to clarify the conversation about how the compensation funds were being spent and to quell assumptions that no one was being held accountable to how the funds were being spent. KATE HUDSON, EXECUTIVE DIRECTOR, VIOLENT CRIMES COMPENSATION BOARD, DEPARTMENT OF ADMINISTRATION, answered that a performance report was completed and submitted to the federal government every quarter, in addition to an annual performance report. She said that there was no requirement to perform a state audit on a regular basis, but that one had been performed roughly 12 years ago. She said that the records could be easily audited should that ben requested. She stated that several agencies were covered by the legislation, which presented the question of how they were presented on the Pick.Click.Give page. 10:00:08 AM Representative Wilson asked whether the needs for violent crime compensation were currently being met with funding. Ms. Hudson answered that it varied from year to year. She said that some years all the money was spent and bled into the next fiscal year, and some years not all the money was spent. She said that the issue was that the board was very small, and that funding had remained flat for many years; the board knew for a fact that they were not meeting the needs of all the crime victims in the state and wondered whether victims were even aware of the fund. She said that homicides that involved dependent children required a lot of funds. She said that there were eligibility restrictions of the fund which were offset by other programs like domestic violence shelters and rape crisis centers that to meet some of the needs that the compensation board could not. Representative Kawasaki wondered how the compensation board would advertise itself under Pick.Click.Give. Ms. Hudson stated that she was not entirely sure. She assumed that advertising would be done on the Pick.Clik.Give website and possible public service announcements would be done. Representative Grenn answered that one of the requirements for the application for Pick.Click.Give was a 990. He asked Ms. Hudson whether her organization used that particular tax form. Ms. Hudson replied in the negative. Representative Wilson MAINTAINED her OBJECTION. A roll call vote was taken on the motion to adopt Amendment 1. IN FAVOR: Kawasaki, Ortiz, Pruitt, Gara, Grenn, Guttenberg, Seaton, Foster OPPOSED: Thompson, Tilton, Wilson The MOTION PASSED (8/3). There being NO further OBJECTION, Amendment 1 was ADOPTED. Vice-Chair Gara was generally supportive of the bill but had questions. He asked about the backfill amount for the various programs that would no longer be receiving as much money from the funds. He agreed they wanted to move money to the items specified in the bill, but he was concerned about items that would receive less funding. Representative Kopp replied that the bill would establish a priority order and not a dollar amount. He said that the percentages were a valuable approach because it would allow DOC to receive their maximum percentage. He said that OVR would be allowed to facilitate restitution orders, which was the greatest need in helping victims get back on their feet. He stated that the minimal increase would streamline the restitution process. 10:07:16 AM DAVID TEAL, DIRECTOR, LEGISLATIVE FINANCE DIVISION, suggested placing the fiscal notes in order beginning with the Department of Law note (LAW), OMB component 2717. He directed committee attention to Page 2: The Department of Law used to collect restitution for victims. This program was defunded in 2017. The court system now collects restitution for victims. Because the Department of Law no longer collects restitution, the department anticipates no fiscal impact if the bill becomes law. He noted that Page 2 of the bill stated that LAW would still be involved in the collection of funds, which made him question the fiscal note. He thought that there could be fiscal impact in the future. 10:10:10 AM Representative Kopp relayed that LAW had in the past a Victims' Restitution Unit, which was removed in 2017. He said that with that removal the department was still giving notice to victims about eligibility to receive assistance from the state but that the court had step in to assist with receiving payments and helping to facilitate those payments. He stressed that under the bill, OVR would step up to facilitate those payments. 10:11:09 AM Mr. Teal agreed with the sponsor. He stated that there could be some confusion because LAW could step in if the victim chose to get help from the department. He thought that the issue could be addressed in the future. The second fiscal note was from the Alaska Court System, OMB component 769. He explained that the addition of OVR to the equation would require coordination, which would have fiscal impact if the office paid restitution. He pointed to the money for a data entry person, but no money for the payment of restitution. Representative Kopp interjected that the money for restitution was subject to legislative appropriation. He said that the most common restitution figure was $1000; the restitution order had not traditionally been a part of the OVR budget, so an appropriation to help pay restitution orders would be needed. He did not believe that huge amounts of money would need to be appropriated. 10:13:50 AM Co-Chair Foster listed additional invited individuals available to testify. Representative Wilson asked how long the position would be needed. Mr. Teal answered that the appropriation for the position did not have to be used for the position but could be used for operating costs, including the payment of restitution. He said that the position was intended to set up the coordination between the court and OVR to be sure that their databases aligned. He stated that once the coordination occurred, the position may no longer be required. Whether the money was taken away or used for restitution in the future was up to the legislature. Representative Wilson thought that it was unusual that the duration of the position was ambiguous. 10:16:17 AM Mr. Teal reviewed the Department of Revenue fiscal note, OMB Component 981. he relayed that the department was requesting $20 thousand in FY19, and $15 thousand each year after for management fees associated with the new sub- account of the dividend fund. He felt that there was little need to pay for the fees with general funds, he thought that the new fund could be charged for the management fees. The bill did not currently stipulate that one of the purposes of the fund was to allow for the payment of managing fees. He said that the general fund was appropriate, given the way the bill was drafted, but that could be amended. Representative Wilson asked if the fiscal note pertained to Amendment 1. Mr. Teal answered in the negative. He said that when a fund of any kind was established, the department needed to track the funds. He said that money would be flowing in and out of the fund continually, which the department needed to track. Mr. Teal reviewed the Department of Health and Social Services fiscal note, OMB Component Number 2134, with zero impact. 10:18:38 AM Mr. Teal addressed the Department of Health and Social Services fiscal note, OMB Component Number 3099, with zero impact. Fiscal note 6 was for the Violent Crimes Compensation Board, OMB Component 2694. The note requested $178.7 thousand to pay the restitution for victims of crime. He said that the number was in the range of allowable percentages. He continued to the Fund Capitalization note, OMB component 2936, which matched the previous note. He said the fund would first be capitalized and then the money went from the Crime Victim Compensation fund, to the board, which in turn made payments from the fund. 10:20:46 AM Mr. Teal reviewed the fiscal note for the Court System, OMB Component Number 769, which showed a fund source change with one position added. He said that the change would take away $167.6 in general funds and replaced it with money from the Restorative Justice Fund of $251 thousand; the change resulted in a net gain of $83.8 and would pay for the 1-year position. He said that if more money became available, DOC would get less fund and would need offsetting general fund dollars. The last fiscal note was for the Department of Corrections, OMB Component Number 2952. He stated that if more of the fixed amount of money was used for purposes other than behavioral or physical health within the department, DOC would need money to offset the fund taken from them and used for other purposes. In FY19, the fiscal noted were lower than what was called for in the legislation, which could change in the future. He related that for 2019, the net cost would be $262 thousand, primarily in the Crime Victim Compensation Fund and then the fund source change in OVR. He concluded that $282 was the net general fund spend associated with the bill. 10:23:41 AM Vice-Chair Gara requested further clarification on the fiscal notes. Mr. Teal explained that more money would be spent for victim compensation, which would result in less of the restorative justice funds available to DOC. The DOC funds would need to be replaced at the cost of $262 thousand in general funds, plus $20 thousand in administrative fees, totaling $282 thousand. Vice-Chair Gara asked which fiscal note was under discussion. Mr. Teal clarified he was speaking about all the fiscal notes combined. Vice-Chair Gara spoke to the fiscal note for DOC, OMB 2952. He understood that $430 thousand was being added for DOC. Mr. Teal replied in the affirmative. He explained that DOC had $11,493.4 in restorative funds in their budget for physical healthcare costs. He said that because those restorative funds would be used for other purposes, the department would receive $11,063 from that fund source. They will need $430 thousand undesignated general funds to replace the money being used elsewhere. He furthered that the $282 thousand versus $430 thousand was because of the negatives in OVR where general funds were being taken away from the agency; the net of what was being taken from the agency and replaced with restorative funds was $83.8 and added up to $282 thousand. 10:27:30 AM Vice-Chair Gara asked about an additional $11 million being put in during conference committee. Mr. Teal hoped that would not be the case. Representative Wilson asked for verification that if nothing changed the following year there would still be a gain of $282 thousand required. Mr. Teal answered it was not a single fiscal note totaling $282, rather the sum of all notes. He said that in the next year the legislature may decide to fund some of the things that were currently a zero fiscal impact at present. There were grants through the Department of Health and Social Services (DHSS) that were a zero in FY19. He relayed that CDVSA had not prepared a note because they were expecting money anyway. He stated that there were some grants through DHSS that were zero in FY19, and according to the bill, the minimum percentages for those purposes was 1 or 2 percent. He said that as those things were funded in the future it would take money form DOC, which would mean that the UGF in DOC would need to be increased to make up for the loss. Representative Wilson asked about a scenario where nothing changed, and everything continued to be funded under the status quo. Aside from the $20,000 for administrative purposes - how would the fiscal impact increase. 10:30:29 AM Mr. Teal replied that the $282 thousand was the FY19 cost. He said that if nothing changed from the distribution in FY19 then there would be no change. He related that the money that was lost by departments to fund the payments would need to be replaced. He concluded that the future cost of the legislation may be just the $179 thousand, plus the $20 thousand in administrative cost. Co-Chair Foster believed there would be forthcoming note from Judiciary. Mr. Teal replied that the note misstated the fund name and would be corrected. Co-Chair Seaton MOVED to REPORT CSHB 216(FIN) out of committee with individual recommendations and the accompanying fiscal notes. There being NO OBJECTION, it was so ordered. CSHB 216(FIN) was REPORTED out of committee with a "do pass" recommendation and with one new zero fiscal note from the Department of Law; one new fiscal impact note from the Department of Administration; one new fiscal impact note from the Department of Administration for Fund Capitalization; one new fiscal impact note from the Department of Corrections; one new indeterminate note from the Alaska Judicial System; two previously published zero fiscal notes from the Department of Health and Social Services: FN2 (DHS) and FN3 (DHS); and one previously published fiscal impact note from the Department of Revenue: FN7 (REV). 10:32:59 AM AT EASE 10:34:11 AM RECONVENED