HB 132-PERMANENT FUND ALLOWABLE ABSENCES CHAIR JAMES announced HB 132, "An Act relating to allowable absences from the state for purposes of eligibility for permanent fund dividends; and providing for an effective date," is before the committee. Number 0617 PETER TORKELSON, Researcher, presented HB 132 on behalf of Representative Cowdery. He said the essential issue is equity. If state employees are allowed to work out-of-state for more than 180 days and still receive their dividend, why not private employees. Mr. Torkelson further stated that, "We believe that private employees are truly the backbone of our state's economy and should be afforded the same privileges and protection under law as state employees. These equity concerns we believe are addressed in HB 132." MR. TORKELSON explained that HB 132 is structured to only apply to a private employee who works instate at least part of the year, and one in which their employer certifies in writing that the employee was required to work outside of Alaska as a condition of employment. The intent is to only qualify people who really do live in Alaska and work out-of-state. He noted that Mr. Bradley Esary is a prime example because he works hard and brings his money back to Alaska. He is exactly the kind of productive citizen our economy needs to stay healthy. [Mr. Esary testifies later]. MR. TORKELSON pointed out that last year the Permanent Fund Dividend Division had 918 people who checked absence codes on their application which may indicate that they would fall into this category. Mr. Torkelson indicated that the application isn't specific enough to know exactly how many people were out for work or for other issues. Other than the 918 people, if we just assumed that 1,000 people got their dividends next year because of HB 132, all dividends statewide would only be reduced by $2.62. He said that it's a small expense for giving private employees the same status under the law that public employees now enjoy. Number 0659 REPRESENTATIVE KERTTULA announced that she may have a conflict due to the broadness of the bill. She reported that her sister is an out-of-state employee and benefits by this. REPRESENTATIVE OGAN pointed out that he has a constituent who is a merchant marine and is at sea more than 180 days a year. He asked if his constituent would be eligible under this provision. MR. TORKELSON replied that it is his understanding that the merchant marines would be eligible as long as he worked instate at least part of the year. And, if that means pulling into port and getting off the ship in Alaska, it is his understanding that he would be covered. He said it is the intent of HB 132 it to include merchant marines. REPRESENTATIVE OGAN implied that, if a person messes with the residency requirement, the Legal and Research Services Division (Legislative Affairs Agency) gets their dander up. He said he rewrote Title 16 "residency," which turned out to be a long and arduous process because there are a lot of people who would love to scam this money. He asked if there are safeguards to keep people from doing that if HB 132 is expanded. Number 0692 MR. TORKELSON replied that the legislature increased the penalty for fraudulent applications beyond simple fraud statutes. If someone makes a fraudulent application for the permanent fund, they are liable to lose all future permanent fund dividends and are required to repay all dividends they have received to date. This would also apply to an employer who fraudulently certifies in writing for the purpose of validating a fraudulent claim. Mr. Torkelson said they believe that those are substantial penalties to preclude this from being disproportionately abused. REPRESENTATIVE KERTTULA asked if HB 132 makes it retroactive to include 1997, 1998 and 1999. MR. TORKELSON noted that Section 2 makes it retroactive to 1997, 1998 and 1999. Number 0727 BRAD ESARY testified in support of HB 132 via teleconference from Anchorage. He said that he and his wife have been residents of Alaska for 23 years, they have raised three children and have four grandchildren, all of whom are residents. He mentioned that he pays taxes, has a CDL [commercial drivers license], served on a jury, purchased a vehicle and handgun permit. MR. ESARY explained that in 1997 his employer, of 18 years, lost the contract at Prudhoe Bay. Instead of traveling to the North Slope oil fields, Mr. Esary traveled for the same employer for short periods of time at various locations outside of Alaska and performed the same duties. He explained that his checks were directly deposit to Alaska and that all his living expenses were paid by his employer. Mr. Esary said he was astonished to learn that he was denied the 1998 permanent fund dividend because he was absent from the state over 180 days. To be exact, it was 191 days. MR. ESARY said, "I do not think that my need to work for a living is any different from that of a state employee. And, to treat a private sector - Alaskan resident any differently, I think needs to be corrected." REPRESENTATIVE HUDSON asked Mr. Esary if his family remains in Alaska when he works out-of-state. Number 0779 MR. ESARY replied that his family does remain in Alaska. Number 0791 DEBORAH VOGT, Deputy Commissioner, Department of Revenue, said that the legislature has taken away the commissioner's discretion in establishing additional allowable absences that are not on the statutory list. MS. VOGT stated that the Department of Revenue has the issue of administrative feasibility. She asked that the legislature draw lines that are clear and that are easy to administer. But, with the massive number of applications the department needs to be able to program the computer in a way that deals with recurring situations in a reasonable way, and temporary employees need to be able to handle these kinds of things. Ms. Vogt said, "So we're for clear lines - not fuzzy lines. And, unfortunately, I believe that the lines set up by this proposal [HB 132] are quite fuzzy." MS. VOGT noted that HB 132 will create more inequities than it cures. For example, some of the folks that she has seen (that have spent more than 180 days out-of-state) are self-employed. A poignant case is a fisherman, due to the collapse of the fishing industry, took a job fishing on a boat that was out-of-state for more than 180 days, but he didn't have an Alaskan employer who sent him out. Ms. Vogt said, "On the other hand, there may be people that this legislation doesn't intend to benefit - that can make a very strong argument that they would be entitled. We have a lot of multi-state employers, Alaska Airlines, BP [British Petroleum], folks that have businesses in many different parts of the world." Number 0830 MS. VOGT pointed out that the issue of where a person's true home is, is not always easy to discern. For example, folks may not have a family. An employee of Alaska Airlines may have an apartment in Anchorage and Seattle, he or she may be required to work in Anchorage for one month and to work in Seattle for ten months, and then is given a month off. She asked, what are we to determine about that person. MS. VOGT explained the department proposed 180-day rule (which was adopted), to provide a clean line that helped them distinguish between those folks that spend enough time in the state. The legislature has chosen to say it doesn't matter how long the military personnel and higher education staff are outside. But for the vast group of people who do travel, for a reason that's not on the list, the department needed some way to distinguish - among the many reasons that people are gone and to draw a line that could be defended. Ms. Vogt noted that this type of discretion is hard to administer. MS. VOGT said she recognizes, with all due respect to Representative Kerttula's sister, the inequity between state employment and public employment. She said she agrees that that's an issue that the legislature might want to pay attention to, however, she is not sure that HB 132 helps draw that line in the way that removes all the inequities. Number 0864 CHAIR JAMES said, "I really appreciate your concerns. And even though I've made the statement that, 'when we started walking down this road of allowing absences, we've walked ourselves into this big pit.' I've been told that most of the work in the Permanent Fund Dividend Division is dealing with appeals and almost every appeal is based on some absence - it doesn't necessarily fall into the issue. Would it be, that in the beginning we wouldn't have allowed any and that we would have said, 'To be here you get it, you don't be here you don't get it! But, one of the things is you can't go backwards." TAPE 99-16, SIDE B Number 0001 CHAIR JAMES continued, "We have to recognize that different people make their living different ways and so it shouldn't make any difference whether they have an employer or not. So, I agree that's an inequity that we wouldn't want to encourage here." She asked Ms. Vogt if she had any suggested language that would make it more encompassing or more fair. MS. VOGT responded, "I have thought about it a fair amount and I really can't figure out how to define it in a way that our folks can implement that reaches who you want to reach." It's often a very difficult determination to make. It's easy for a person who has lived in Alaska for 30 years and has a home and pays taxes. ... But a lot of people don't fit in that category, we've got folks who don't own homes in Alaska, who rent and who might rent during their employment outside as well. Ms. Vogt further stated, "And we really can't really look at the fact that someone has lived here for 25 years because that really discriminates against the person who came to Alaska last year and really has established, and intends to remain an Alaskan resident but also travels outside." She agreed with Chair James that we've started down a road with a lot of unintended consequences. CHAIR JAMES noted an inequity needs to be fixed. She said she believes there has been a piece of legislation introduced every year to make more people eligible for the permanent fund dividend. Number 0101 REPRESENTATIVE HUDSON asked if spouses, minor dependents, or disabled dependants, would also be eligible if he, she, or they decided to accompany this worker. MS. VOGT responded, "That's certainly the way it would work - the way the statutes and regulations are currently drafted. An accompanying family, of a person on an allowable absence is also eligible." REPRESENTATIVE HUDSON indicated that if a worker is out-of-state for greater than 180 days we don't know to what extent, it could be 200, 240 days, possibly up to one year. Number 0217 REPRESENTATIVE WHITAKER commented that if the question is truly equity, rather than open "Pandora's box" even wider, item 10 could be eliminated. serving as an employee of the state in a field office or other location; REPRESENTATIVE OGAN stated that the definition of "eligibility" (you are a state resident on the date of the application, was a state resident during the entire qualifying year) seems a little ambiguous. He indicated that people had houses in Alaska but were residents of another state, that they maintained their residency in order to obtain no-cost hunting tags and what not. He said, "It doesn't have anything in there about domicile. ... Domicile is a much tighter description. It says that, a domicile and residency is usually the same place, they're frequently used if they have the same meaning but they're not identical terms. Residence means living in a particular locality, but domicile means living in that locality with intent to make it a fixed and permanent home. And there's no reference to either in the language change here that we're proposing or any where in the eligibility requirements of domicile." MS. VOGT agreed that the word domicile is more restrictive than residency. She pointed out that the residency definition is located in the definition section of (indisc.--noise) 23 and it refers to residency definition in Title 1 which does have the element of intent. The definition of domicile implies that a person can only have one residence and cannot be a resident of more than one place at the same time. Number 0297 MS. VOGT also noted that it would be a per say disqualified if a person accepted to benefit in another state by a resident fishing license or resident tuition. Registering to vote or voting in another state is also a disqualification. She indicated that the department has trouble with welfare benefits because of the constitutional issues. It's very difficult to find a definition that you can easily apply without a lot of case-by-case analysis. Some of the Alaska Marine Highway employees have residences in both states and it's difficult to tell the difference in those folks. CHAIR JAMES said we could create equity, as Representative Whitaker said, by deleting number 10. REPRESENTATIVE KERTTULA asked Ms. Vogt if other exemptions have been made retroactive. Number 0357 MS. VOGT noted that the retroactivity provisions in HB 132 are quite troublesome - largely because they would allow folks to essentially come into the program whether they have applied or not in those past years. Last year the legislature adopted HB 2 [Permanent Fund Dividend Eligibility] which came about because the Permanent Fund Division had by regulation - always had an allowable absence for the spouse of a person who was allowably absent. However, the court decision said they couldn't do that because they couldn't infer the intent of one adult by the intent of that person's spouse. Ms. Vogt said, "So we were faced with a situation where we could pay the student or the military member and we could pay the kids, but we couldn't pay the spouse and that's an inequity that HB 2 intended to address. Because there were several versions of HB 2, we had been telling applicants over the years to make sure they kept their applications in because they might get legislation that would allow us to pay them. So HB 2 was retroactive in the sense that (indisc.--coughing) had applied the year before could be paid. But essentially those people were kind of all on notice." MS. VOGT further explained that, although Representative Cowdery's office has made attempts to determine the number of people that would be affected, the division didn't know how many didn't apply because they know that being out-of-state more than 180 days is too long. Number 0391 CHAIR JAMES remarked, "We're not supposed to do retroactive law anyway." MS. VOGT said that it would be very problematic. CHAIR JAMES asked, if a person is denied one year, he or she doesn't receive the dividend the next year. MS. VOGT said HB 2 [1998], did in an oblique way address that because it took these allowable absences out of the definition of residency and put them into the eligibility statute. She said that the result of that is a fairly technical analysis, and that the division now relies on the definition of residency in Title 1. If a person was out-of-state for more than 180 days, but did not establish residency somewhere else, that person will be eligible next year if he or she is in the state [HB 2]. CHAIR JAMES asked if HB 132 wasn't retroactive, would Mr. Esary be eligible for 1998. MS. VOGT replied that if Mr. Esary was already denied, he can't reopen his claim. Number 0459 REPRESENTATIVE OGAN said to use the definition of residence is not synonymous with domicile. He read the following statement, "Although the two terms are clearly closely related, a person may have only one legal domicile at one time but he may have more than one residence." If domicile was included in statute that says that the domicile was in the state would it clear the ambiguity about who's in and who's out? MS. VOGT noted that it would help her on a motion for reconsideration of a formal hearing denial. She said she is not sure it would help the person who's processing the applications. Domicile is more in line with what folks believe as appropriate for dividend eligibility. However, it doesn't necessarily distinguish between those "fuzzy cases." CHAIR JAMES remarked that it doesn't affect the issue of 180 days because the specific language states that more than 180 days is not acceptable. MS. VOGT agreed with Chair James. Number 0487 PAM LaBOLLE, President, Alaska State Chamber of Commerce, appeared before the committee. She stated that over the last few years, U.S.-flag vessel operators have made great efforts to train and recruit Alaskans for employment aboard U.S. merchant vessels serving in Alaska, coastwise, and in international trade. This undertaking includes raising a substantial endowment for scholarships to Alaskans attending the California Maritime Academy, securing a maritime union hiring hall in Anchorage, and developing a public/private partnership to offer maritime training and apprenticeship for Alaskans interested in a seagoing career. This undertaking has led to several dozen Alaskans finding high skill/fair-wage training and employment in the U.S.-flag merchant marine. MS. LaBOLLE said the permanent fund dividend issue is a problem for the merchant mariners because they are frequently absent from the state for more than 180 days. She pointed out that the Alaska State Chamber of Commerce would like dividend eligibility for merchant mariners who qualify for the permanent fund under the statute of the state regarding state citizenship and distribution of permanent fund dividends not withstanding their documented employment aboard merchant vessels in domestic or foreign waters. MS. LaBOLLE further stated, "Since Alaskans are proponents of local hire, and quality professional skill development, their efforts to provide this are hampered by the disqualification. Too often the fact this some times encourages them to just go ahead and relocate and stay out-of-state, and we feel that there's too much of an export already of Alaska talent. And, so we would like to do all we can to encourage these talented individuals to remain in the state." Number 0538 MR. TORKELSON noted the Department of Administration indicated that there are 18 out-of-state employees, which is a small number. He said, "Our position is essentially though that one is too many, I believe in the point we are making. The inequity is the issue and we would be more than happy to work with the committee to develop different language." CHAIR JAMES said she would like to assign HB 132 to a subcommittee. REPRESENTATIVE COGHILL told Mr. Torkelson that that number is going to be hard to substantiate because the State of Alaska also pays people to do fire suppression in the states of California and Oregon and could be out-of-state for a whole season. MR. TORKELSON noted there are 62 employees working for the Alaska Marine Highway, and that they reside in the Bellingham, Washington area. That they may, or may not claim to be residents. Number 0582 CHAIR JAMES assigned Representatives Ogan, Coghill and Smalley to the HB 132 subcommittee. [Representative Ogan will serve as Chairman].