SENATE BILL NO. 338 "An Act making certain individuals convicted of crimes ineligible for permanent fund dividends and relating to certain payments of compensation from the crime victim compensation fund; and providing for an effective date." This was the first hearing for this bill in the Senate Finance Committee. Co-Chair Donley testified this bill modifies the eligibility requirements for the permanent fund dividend for people convicted of a crime. He noted that under current law, after two years of a violent criminal's "release", the offender could begin to receive dividends. He added that current law stipulates, "individuals do not qualify for a dividend if, during the qualifying year they are convicted of a felony or, if during all or part of the qualifying year they are incarcerated as a result of a felony or a misdemeanor [conviction], and they have a prior felony or two or more misdemeanor [convictions]." He explained this provides that regardless of the offence committed, a felon is eligible to receive a dividend two years after release from prison. Co-Chair Donley stated this legislation would change the current provisions to stipulate that individuals convicted of a felony or misdemeanor would lose their permanent fund dividend for at least two years, regardless of whether or not they have a prior conviction. He qualified this would apply to those convicted of a crime and are incarcerated for that offense. Co-Chair Donley added this legislation establishes a "sliding scale" whereby offenders convicted of more serious and violent crimes would be ineligible to receive dividends for longer periods of time. He also noted that offenders convicted of unclassified felonies would lose their dividend forever. He informed these are the most serious class of felonies in Alaska, and include murder, attempted murder, solicitation and conspiracy to commit murder, kidnapping, rape, sexual abuse of a minor and misconduct involving a controlled substance, i.e. drug dealers. He listed those convicted of a Class A, B or C felony crime of violence would be ineligible to receive a dividend for 20 years; those convicted of lesser, non-violent, felonies would be ineligible to receive a dividend for ten years; those convicted of a violent misdemeanor, Class A or B, would lose their dividend for five years; and those convicted of a nonviolent misdemeanor, and who are incarcerated for that offense, would be ineligible to receive a dividend for two years following release. Co-Chair Donley noted that an individual convicted of a violent misdemeanor, but not incarcerated for that offense, would be ineligible to receive a dividend for two years, rather than the five years stipulated for those receiving a prison sentence. He described the "double threshold" applied to misdemeanor convictions, of determining whether the crime committed was violent, and whether the Court determined jail time is warranted for the offense. Co-Chair Donley noted the final provision applies to the offense of First Degree Criminal Mischief under AS 11.46.480(a)(3), intentional damage to an oil or gas facility, which stipulates the person convicted of this crime would be ineligible to receive a dividend for 20 years. He stated the public policy for this provision relates to the recent shooting of a hole in the Alyeska Pipeline. He emphasized the expense for repair and cleanup, in addition to the millions of dollars of lost revenue of the spilled oil. He stressed that a person who inflicts such "malicious damage" to the facilities that generate the funds in which the dividends are derived, should not be entitled to collect a dividend. He qualified the existing statute contains a significant monetary "threshold" of the amount of damage inflicted that is applied to this provision. Co-Chair Donley predicted this legislation would generate significant revenue, as the denied dividend funds would be available for State expenditure in the same manner current inmate dividends are diverted for use by the Department of Corrections, the Violent Crimes Compensation Board, the Council on Domestic Violence and Sexual Assault, and grants for non-profit victim's advocacy groups. He noted this legislation also stipulates that if a victim of a crime has received a judgment or order of restitution against the offender, the victim would receive first priority for the dividend funds. Co-Chair Donley acknowledged that some municipalities and other entities garnish permanent fund dividends from offenders for the purpose of offsetting expenses. He asserted the "more important public policy call," that permanent fund dividends should not be awarded to people who commit serious crimes and who "break their social contract with their neighbors". He asserted that the right to vote is revoked and yet money is given to these offenders by the State of Alaska. Co-Chair Donley noted the high operating expenses of the Department of Corrections and remarked it is reasonable to deny the funds to those who incur the costs, and instead utilize the funds to assist in covering their expenses. Senator Austerman asked how this affects municipalities that practice garnishment and whether they would receive dividend funds under this legislation. Co-Chair Donley understood municipalities utilize the "dividend flow" to offset some costs, although he was unfamiliar of the details of the programs. He suggested an amendment could be offered to the bill to make provisions for municipalities. Senator Austerman anticipated administrative difficulties in tracking the ineligibility periods of all offenders in the State. Co-Chair Kelly referenced the fiscal note submitted by the Department of Public Safety, which addresses this issue. Senator Austerman referenced Section 2(d)(1) on page 2, lines 5 through 7, which reads as follows (1) during the qualifying year, the individual was sentenced as a result of conviction in this state of a felony or misdemeanor and the judgment has not been reversed or vacated; Senator Austerman commented that under this language, a jaywalker could lose their dividend. Co-Chair Donley corrected that jaywalking is a violation not a misdemeanor. He explained a misdemeanor is a crime in which jail time of less than one year could be required. He noted that offenders are often convicted of "simple assault" and are not incarcerated, particularly if it is a first offense. Co-Chair Kelly pointed out this legislation would pertain to a conviction of Forth Degree Assault, which could result from an offender who "takes a swing at someone and miss[ed]". Co-Chair Donley commented it would be difficult to obtain a conviction for such an event. Co-Chair Kelly agreed, but qualified that if the offender was a youth, the juvenile justice system could impose a sentence at a youth facility because the probation officer determines the youth should spend the night in jail in order to "teach a lesson." He asserted there is a different threshold in this situation as the intent is to impose punishment, but rather to discourage future behavior. He asked if this legislation would apply to Title 47, which governs the juvenile justice system. Co-Chair Donley responded the intent of this legislation is to apply only to those convicted and subsequently incarcerated. He informed he would consult with the Division of Legal and Research Services on the possible relationship this bill would have to the juvenile justice system. Co-Chair Kelly and Co-Chair Donley discussed methods of distinguishing between the adult criminal justice system and the juvenile justice system. Senator Austerman referenced the charge of Minor in Possession. He noted that the driver's license of a juvenile charged of this offense, even if found not guilty, is still revoked. Co-Chair Donley replied that most juveniles are not formally adjudicated but rather referred to a diversion system and are therefore never formally convicted of the crime. He repeated that he would research the matter further and investigate whether Minor in Possession is considered a serious misdemeanor, which could qualify under this legislation. Senator Wilken, pointing out there are different levels of felonies, asked if there are different levels of misdemeanors. Co-Chair Donley answered there are Class A and Class B degrees of misdemeanors in Alaska. Senator Wilken wanted to ensure "the punishment fits the crime" and asked for the definition of offenses that qualify as Class A or Class B Misdemeanors. Co-Chair Donley agreed to provide a list of the offenses classified as Class A and Class B Misdemeanors. Senator Leman shared his main concern is that victims receive restitution and that child support and student loan obligations are paid. He pointed out this legislation does not address child support and student loan payments. Co-Chair Donley understood other statutes address collection authority for child support and student loan debts. He agreed payment is made easier through permanent fund dividends. Senator Leman restated that current law allows the State to garnish the dividends of those owing child support or student loans. He asked if under this legislation, whether the funds would remain available for payment of these debts. BARBARA MICKLOS, Director, Child Support Enforcement Division, Department of Revenue, testified that under current statute, child support receives the highest priority for garnishment of dividends with only bankruptcy receiving a higher priority. She noted this legislation does not change this priority system. She raised concern however that increasing the number of people ineligible to receive a dividend and subsequently reducing the amount of funds available, would result in less money paid to the families. Ms. Micklos explained for Senator Leman's benefit, that diversion of the funds is not automatic as is the case with the Department of Corrections receiving the dividend funds of incarcerated offenders. She detailed that the Child Support Enforcement Division could only garnish a dividend from those who have applied for the dividend. She added that in some instances, the Division has obtained a court order requiring the debtor to apply for the dividend for the purpose of garnishment. Senator Leman stressed this is his concern. He spoke to the necessity for a mechanism whereby the Division could apply for the dividend funds on behalf of the party owed child support from an ineligible offender. Otherwise, he surmised the funds would be redistributed to the qualifying dividend recipients. Co-Chair Donley corrected the funds would be allocated to the "four statutory suggested uses": the Department of Corrections, the Victims Compensation Board, the Council on Domestic Violence and Sexual Assault, and grants to non-profit organizations. He asserted the funds would be utilized for "a very high public purpose". He suggested the statutory suggested uses could be increased to include the Child Support Enforcement Division. Senator Hoffman pointed out the Department of Revenue fiscal note addresses this issue specifically. He cited that in FY 05, child support collections would be reduced by $1.1 million; the amount would increase to $1.7 in FY 08, and continue to increase in future years. He furthered that the amount the Division collects and deposits into the general fund as reimbursement to public assistance benefits, would be reduced approximately $4 million annually. Senator Hoffman shared Co-Chair Donley's concerns regarding dividends paid to felons. SFC 02 # 21, Side B 09:57 AM Senator Hoffman continued suggesting that the length of time an offender is ineligible to receive a dividend could be increased but that the current allocation system should remain unchanged. Senator Austerman requested further explanation of the provision that stipulates a convicted felon is ineligible to receive a dividend. NANCI JONES, Director, Permanent Fund Dividend Division, Department of Revenue, testified that the dividend is "not a one to one relationship" as the ineligible offenders are not allowed to submit an application. She detailed the process of the Division matching a list of inmates against residency and other eligibility criteria. She noted that an inmate, who would not have otherwise qualified for a dividend due to residency requirements, would not be included in these calculations. She continued that the number of inmates ascertained to otherwise be eligible to receive a dividend is multiplied by the amount of the dividend, and the total is appropriated to the aforementioned statutorily suggested uses. Co-Chair Donley stated that although the fiscal notes indicate the amount of dividend funds the State "accesses for other purposes," the State would not actually lose revenue because the revenue would be garnered "in a different way", although it remains accounted as general funds. Ms. Micklos affirmed, "There is a wash in terms of a loss to the State." However, she stressed that currently, 90 percent of the Division's collections are paid to families and that permanent fund dividends comprise a major portion of collected funds. She listed $16.7 million of a total $90 million, was collected from dividends the prior year. Co-Chair Donley asked how much of the predicted loss of $1.1 million would be collected if the dividends were not available. He assumed this amount would be recouped by salary and other income sources. Ms. Micklos reiterated the Division could garnish a dividend only if the recipient is delinquent in child support payments. Therefore, she informed, the Division attempts to collect the debt from other sources. She emphasized, however that in some instances, the dividend is the only asset a debtor has. She also pointed out the dividends are only available for garnishment in October of each year and that during the remainder of the year, the Division attempts to secure funds from other income sources. Co-Chair Donley requested the witness prepare proposal whereby a list of those owing child support could be cross-referenced with those who are ineligible to receive a dividend to determine the amount of funds that would otherwise be collected from these individuals. He furthered these funds could then be allocated to the Division for payment to the families due child support. He surmised this process could protect the mission of the Division and also increase funding for the four statutorily suggested uses. Ms. Micklos agreed to this undertaking. Senator Leman remarked his concerns would be alleviated if such a method were implemented. He realized that student loan repayment and other obligations are important but stressed they are of lesser priority than child support. Senator Hoffman requested figures reflecting the predicted losses to student loans, court ordered restitutions, municipalities and private businesses. Co-Chair Donley noted court ordered restitutions would continue to have access to the dividend funds through the Victims Compensation Board. He asserted that although he is "real sensitive" to child support issue, he is not as concerned with "every little judgment or claim the State has" because the funds are deposited into the State treasury. Senator Hoffman was concerned about the affect this legislation would have on the viability of the student loan program. Co-Chair Donley questioned the number of student loan recipients who have committed a serious crime. He surmised there are very few. Senator Leman agreed child support is the highest priority in this matter, although the other dividend uses are worth consideration. He noted that recent statutory changes enabling businesses to recover losses by garnishing up to 80 percent of a debtor's dividend, has been effective. He assumed people convicted of serious crimes also are probably not satisfying other financial obligations. Senator Green remarked that if this legislation is proposed as a penalty for the offender, she questioned the continuation of dividends for the purpose of satisfying that individual's debt of "sweet issues". She stated it would be unfair for the State to receive payment of a debt if a private debt holder is unable to collect payment. Senator Hoffman opined that once an offender has paid their debt to society, the individual should be eligible to receive a dividend. Senator Leman countered that the State is investing funds each year to incarcerate the offender and there is an accumulated debt regardless that the offender has served the time of the sentence. He commented the offender would likely never pay off the actual cost that society has invested in the incarceration. He suggested the dividend is a "token amount" that could be utilized to pay some of the investment. Senator Hoffman asserted Senator Leman's comments might be true, but cautioned if this legislation passes into law it could be challenged in court using the same argument. Senator Green asked if there was concern that this legislation could result courts considering the number of years an offender would be ineligible to receive a dividend as part of the punishment and therefore imposing shorter prison sentences. Co-Chair Donley replied this could occur but stressed the intent of sentencing statutes prohibits judges from considering dividend eligibility in sentencing. He surmised this legislation could have some impact in the cases of minor crimes of violence. He stated that because of the graduating scale based on the seriousness of the crime committed, this bill meets equal protection and due process considerations. He pointed out that no other state offers a dividend and therefore Alaska "reserves the authority to be able to withhold it and set the criteria for it, so long as it does so in a reasonable manner that's consistent with constitutional provisions." Co-Chair Donley expressed his intent to work with the Child Support Enforcement Division to develop an alternate funding mechanism for child support obligations. He agreed with Senator Green that the offenders incurred the debt and it should not be the responsibility of the State to cover those debts. However, he emphasized the circumstances are different "in the unique case of child support," because the State currently intervenes and acts as an agent for private parties, "because children are so important to the State." He also noted the burden returns to the State if children are not properly supported by their parents. Senator Green commented, "I agree with you and I disagree with you." Senator Austerman asked about the logistics of determining the amount of dividend funds available. He questioned how, after an offender completes probation, the State would know if residency and other criteria would otherwise be met, because the offender does not submit an application. Co-Chair Donley posed the question to Ms. Jones, asking her how offenders who leave the State are currently tracked. Ms. Jones responded that offenders who qualified for a dividend, before serving their sentence would qualify for at least one year following release, because they remained Alaska residents during their imprisonment. She noted a new system would be required to calculate the residence eligibility for the otherwise ineligible offenders. Co-Chair Donley suggested this could be done using voter registration records, driver license records and other methods. Senator Ward asked about collection of dividends for offenders on probation in Alaska. Ms. Jones answered the Department of Corrections could provide a list of those on probation, which would be cross-referenced in the same manner as the current inmate lists. Senator Austerman reiterated his concern of the "maze and nightmare" of creating a program to accurately track the offenders and their residency qualification. He noted that while serving probation, the offender's residency would be accounted for, but questioned how this could be done after probation is complete. Co-Chair Donley suggested establishing a "standard" to include dividend funds for those offenders who register to vote, obtain an Alaska drivers license or are under the supervision of the Department of Corrections. Senator Hoffman pointed out drivers licenses are valid for five years and suggested an offender could leave the state after only one year. He recommended utilizing census data instead. Senator Austerman supported the concept of utilizing dividends as financial restitution to the State. DIANE WENDLANDT, Assistant Attorney General, Collections and Support Sections, Civil Division, Department of Law, testified via teleconference from Anchorage, that she is responsible for supervision the collections, which includes: criminal fines, cost of incarceration, cost of appointed council, forfeited bonds, penalties, and restitution for victims. She stated the Collections Section collects an average of $3.5 million annually, with a small portion of that amount used to fund the collection efforts and the majority of the funds deposited into the general fund or allocated to other departments. Ms. Wendlandt stated that approximately 85 percent of the collections are against criminal defendants who would likely be affected by this legislation. She informed that approximately 90 percent of funds the Section collects are permanent fund dividend attachments. She described the 80,000 unpaid judgments, which vary from $40 to several thousand dollars, noting that 10,000 to 15,000 judgments are satisfied each year. She stressed the Section "deals on a very large scale, but very small amounts per judgment" and therefore the cost effectiveness of the collection efforts must be considered. She stated the effort involved in dividend attachment is significantly less than required for income withholding, property seizures and other methods. She continued to detail the collection efforts as they pertain to dividend attachment. Ms. Wendlandt pointed out this legislation provides for dividend funds to be used for compensation to victims of violent crimes but not to victims of nonviolent crimes. Co-Chair Kelly interjected to request the witness work with Co- Chair Donley to address these issues. Co-Chair Donley noted the witness is "rightfully expressing" the impacts on the Section. However, he disagreed the extent of the impact because the State would automatically receive the funds that the Section currently must employ staff to collect. He also noted there would be no impact on restitution because of the authority of the Victims Compensation Board. Co-Chair Donley commented that the collected funds are currently accounted as program receipts and reiterated this legislation would account the funds as general funds. He understood the agencies would therefore be required to compete for the general funds, but stressed there would be a net gain to the State. LINDA WILSON, Deputy Director, Public Defenders Agency, Department of Administration, testified via teleconference from Anchorage in opposition of the bill. She stated that this would impact the Agency's clients, who are indigent people. She spoke to the fines, restitutions and other debts imposed on the clients, and emphasized that if unable to pay these debts, the offenders could be in violation of the conditions of their probation or parole. Ms. Wilson informed that the Agency received $190,000 in FY 99, $190,000 in FY 00, and $430,000 in FY 01, from the Department of Law. Co-Chair Donley commented, "It's pretty amazing that some State bureaucracies are so entrenched" as to assert the State should pay offenders' criminal fines. He emphasized the need to "look at the big picture." He stressed this legislation is a revenue generator to the entire State with the exception of those who commit offenses. He stated this would facilitate the prioritization of State programs, as they would compete for funding on "a level playing field" "and not just because one department happened to have access to these off-budget funds and another one didn't." Co-Chair Donley reiterated his intent to establish a method to utilize the ineligible dividend funds for child support payments. Co-Chair Kelly ordered the bill HELD in Committee.