SENATE BILL NO. 37 "An Act relating to treatment of permanent fund dividends for purposes of determining eligibility for certain benefits; and providing for an effective date." Senator Phillips stated for the record that he is representing District L. The committee substitute before the committee basically gives the option of the welfare recipient to decide to accept monies from welfare programs or the permanent fund dividend, but not both. Historically, in 1981, the legislature passed the permanent fund dividend with a hold harmless. Approximately $2 million was paid out of the general fund up to 1986. In 1986, the legislature decided to have the recipients of all the PFD's pay for the hold harmless. That amount is $22 million currently, which translates to $41.45 per person. There are 573,000 people receiving the dividend. The CS excludes only the Adult Public Assistance recipients and the Supplemental Security Income recipients. Basically, they will receive their benefit plus the permanent fund dividend. The other 39,500 people will have to make a decision whether to take the permanent fund dividend for that particular month or their financial assistance from other programs. Co-chair Halford asked about the fiscal note attached to the bill. Senator Phillips responded that it has been difficult obtaining a fiscal note. He had just received it an hour prior to the meeting, asked the department to explain it. He also wanted to make clear that the SSI and APA recipients will both receive their benefits plus their PFD. The hold harmless would cost those receiving the PFD, $4.2 million or, approximately $8 per person. This deduction would include 8,000 people. Senator Phillips stressed he chose to exclude from the CS the APA and SSI recipients since this category of people can least help themselves. Co-chair Halford asked Senator Phillips to move the proposed CS and explain it to the committee. Senator Phillips MOVED CS for SB 37 9-LS0449/G, Cook, dated 2/15/95. (See subsequent hearing of 3/9/95 for adoption of updated draft, 3/17/95). Co-chair Halford asked if there were any objections to adopting CS as the working vehicle. Without objection, the CS for SB 37 is ADOPTED. Senator Phillips explained that the bill would effect 39,500 people and would exclude only those on APA and SSI. The total is 8,000 on APA and SSI. Co-chair Halford asked for consideration in adopting a program allowing those on public assistance to check off a block on their permanent fund application indicating an equal number of monthly dividend payments. This would avoid exceeding the welfare guidelines, with administrative costs deducted from their individual dividends. Co-chair Halford's intent is to mitigate the effect of not taking from everyone else's dividend to fund the hold harmless. Senator Rieger supports this action. He has a POM which says that federal rules allow for this action. Co-chair Halford asked Elmer Lindstrom, Special Assistant to the Commissioner of Health & Social Services to address the committee. Mr. Lindstrom stated that the department is opposed to passage of SB 37. The entire text of his presentation is attached. End: SFC-95, #8, Side 1 Begin: SFC-95, #8, Side 2 Mr. Lindstrom also noted that the department did supply Senator Phillips with draft fiscal notes to reflect the draft CS that was made available to H&SS. Senator Sharp spoke of the "check-off" recommended by Co- chair Halford. He pointed out the "double-dipping" effect. He stressed the frustration of the state making payment of the permanent fund dividend which takes the obligation away from the federal in that month. He would like to find a resolution to the problem which allows people the ability to absorb the additional amount opposed to dropping off the role because of the income. He felt there must be a more sensible plan to the present inequity of payment distribution. Mr. Lindstrom answered that there has not been a detailed analysis of the problem, though it has been mentioned previously and the department is going to look at it. The first guess is that it would increase the cost of the hold harmless program. He explained that when individuals receive their dividend, they spend it immediately in one month, resulting in the loss of their benefit for one month. By spending it all in one month, they are over the cap for benefits for that one month. But, if that $1,000 were to be spread over 3 or 4 months, it would be a dollar for dollar reduction in each of those months, resulting in an increase cost of the hold harmless program in total. Added onto that would be additional administrative costs. Senator Sharp inquired if the 47,000 people involved in the program are up against the income cap? Mr. Lindstrom responded that in the one month expenditure of the dividend, the income puts them significantly over the income cap for that month. The results are a loss of income for the one month. That amount that is considerably over the cap, we are not having to hold harmless. But if you spread that amount over a greater period it would be subject to reimbursement. Mr. Curtis Lomas, Program Officer, Division of Public Assistance with the Department of Health & Social Services spoke to the issue of Senator Sharp's question. He stated that there has been considerable discussion regarding quarterly and monthly payments with the dividend. To state it clearly, public assistance payments are not an "on" and "off" situation. If the income is below the limit for the program there is eligibility for payment, but it is reduced by the amount of the total income. In a typical case with a family on AFDC, if everyone in the family gets the dividend payments in October, it will result in the family being ineligible for that month. The loss to that family is approximately $923, if they have no other income. In the department's analysis in the past, the calculations across all the programs that are both hold harmless and permanent fund dividend, a monthly payment scheme for the dividend roughly doubled the cost of the hold harmless program. Co-chair Halford noted that based on the payment, the gap in the state's welfare programs, between eligibility and poverty line is very small. Mr. Lomas confirmed 7%. Co- chair Halford confirmed that the gap is increasing as we reduce payment. He noted that it increased by the action of the last legislature. Mr. Lomas confirmed that it increases every year as the cost of living goes up. Co-chair Halford noted that it hinged on repealing the automatic cola. He said that there are not enough votes in the legislature to take this money out of the dividend this year, and he felt that this issue will not go away. Co-chair Frank asked for an analysis from the Department of Health and Social Services showing the calculations of the PFD that was done on a monthly basis? Senator Donley asked what the cost to the state is, versus the federal government, of transferred payments no longer received. Mr. Lomas responded that the formula for the federal and state funded program is 50%/50%. That applies to Medicaid and AFTC program. Co-chair Frank asked if the assumption included recipients choosing the dividend and foregoing their benefits? Mr. Lomas said that people apply for their dividend, because in almost every instance, they loose more if they choose public assistance over the dividend. Co-chair Frank stated that in an earlier analysis he had seen, it was unlikely that Medicaid would be lost. Mr. Lomas stated that with few exceptions that was true. The Medicaid Program is an anomaly of federal law that allows us to disregard dividend payments in most Medicaid cases as income. It only kicks in as an eligibility factor if somebody holds onto it beyond the month that they received it, then it is treated as an asset. Co-chair Frank stated that assumptions are made that people are going to forego their benefits if this law were to pass and continue to get the permanent fund dividend. He asked if minors can apply for their dividends, once they turn 18, as long as parents do not apply for them? Mr. Lomas said that was his understanding. He commented that Mr. Williams testified to that effect when he was with the PFD Division earlier this year. Co-chair Frank asked for analysis regarding support from other programs versus money from PFD, and how families might make decisions on one or the other program. Senator Zharoff asked if PFD's could be used for education? Mr. Lomas stated that under current operating policies, when the dividend for the advanced college tuition program is checked off, we do not treat it as a n asset for public assistance purposes. Mr. Lindstrom stressed to the committee the impact the reduction would have for the family. This would be the equivalent of a 7-1/2% rateable reduction. These are poor families that receive their dividends and spend their dividends very quickly. Co-chair Halford asked what income is not accountable for purposes of welfare? Is there any exempt income and what is it? Mr. Lomas responded that almost all income counts. Co- chair Frank asked if Native Corporation Dividends count under all categories? Mr. Lomas specifically said that there was a provision in the Native Claims Settlement Act (amendments were enacted in 1988 which applied to SSI, AFDC and APA programs) that holds harmless the first $2.0 per individual per annum. In the Food Stamp Program payments are not counted unless held over 6 months, then it is considered an asset. The Medicaid Program follows the rules of the AFDC and SSI programs. The first $2.0 per individual per annum is disregarded. There are other very minor income exclusions, such as the Foster Grandparent Program, which gives grants to seniors to act as surrogate grandparents. There are a few very specific provisions in federal law that exclude some rather unusual sources of income. He stated that there are also portions of earned income that are disregarded in the various programs as incentives to work and as recognition that there are costs related to working. The whole dollar amount of earnings is not generally counted. Those disregards vary depending upon the program. Co-chair Halford asked for a list of all disregards along with a one-page matrix that states the program, eligibility guidelines (in terms of dollars), and the normal payment amount that the permanent fund hold harmless contributes to that program. A single page that lays out the programs, eligibility, payment, and contribution of the hold harmless, by program. He also wanted clarity on why the state cannot change the law and provide for an income disregard for the permanent fund dividend instead of a hold harmless for the PFD. Senator Zharoff inquired about public assistance for the seasonally employed. He asked, if a person is on public assistance at the time the application for the PFD or receipt of the PFD comes out, does that exclude that person from participation for the entire year? Mr. Lomas responded that this legislation does not impact anyone's eligibility for PFD, it only impacts eligibility for the hold harmless and public assistance programs. The PFD is treated only as income if you happen to be on public assistance when you receive it. If employed and not in the caseload when the dividend is received, there is no eligibility to weigh against and no hold harmless consideration. Co-chair Frank asked for a seasonal study for the caseload by month. Senator Sharp asked if the permanent fund dividend effects the Energy Assistant Grants and low income housing? Mr. Lomas responded that they are not counted for the Energy Assistance Program which is a federally funded program that provides the department with latitude in terms of accountable income. ADJOURNMENT The meeting was adjourned at approximately 11:00 a.m.