SENATE BILL NO. 104 "An Act relating to appropriations from the dividend fund; creating the criminal fund; and providing for an effective date." 9:45:00 AM SENATOR FRED DYSON, offered a brief history of the legislation that lead to SB 104. He said that in 2012 there was court ordered restitution of victims totaling $600,000; approximately $70,000 was given to the Violent Crimes Compensation Board for distribution to victims. He asserted that there were millions in court ordered restitution that had not been paid. He said that the legislation was a vehicle that would make priorities clearer and provide a method for the funds to be accumulated. He opined that that the Department of Corrections (DOC) was using $13 million per year to pay for inmate healthcare with none of the funds going to victims. He said that with the passage of the Affordable Care Act prisoners would be eligible for Medicaid, which would allow for the department to receive reimbursement. He offered that the governor supported the bill. He said that the bill would clarify ambiguity in existing law. 9:50:53 AM JOSHUA BANKS, STAFF, SENATOR FRED DYSON, spoke to the fiscal impacts of the bill. He remarked that there were six fiscal notes currently attached to the bill, and only one had fiscal impact. He said that the DOC fiscal note had been written to be larger than anticipated, but would be updated as new information was brought to light. He believed that even with the fiscal note, based on projections for the 2014 dividend, there would be minimal negative fiscal impact to DOC. 9:52:01 AM Senator Dyson referred to a report from Legislative Research Services (copy on file). He lamented that the mission that the legislature has clearly articulated in law had been ignored. Vice-Chair Fairclough requested a sectional analysis. Mr. Banks explained the document, "Section Analysis - CS SB 104 (STA)" (copy on file): Section 1  AS 43.23.028(a)(5) Prioritizes by order of importance the legislative purposes for making certain individuals under AS 43.23.005(d) ineligible for a PFD to be: compensation for crime victims, child support arrearages, court- ordered rehabilitation programs, and other incarceration or probation costs. AS 43.23.028(a)(7) References a new section of law to be used to determine which agencies can receive money from the Criminal Fund. AS 43.23.028(b) Adds language to allow money from the criminal fund to go to the purposes listed in this section, after the appropriation to the criminal fund.   Section 2  AS 43.23.031 A new section in law is created to deal with appropriations from the criminal fund: 1. Section (a) sets the priority order for how the money in the criminal fund should be appropriated and the departments that should receive the money. 2. Sections (b) states that by October 1 of each year the Violent Crimes Compensation Board will send to the Office of Management and Budget the total amount of compensable claims from the previous fiscal year and the operating costs of the VCCB. 3. Section (c) states that by October 1 of each year the child support services agency will report to the Office of Management and Budget the total amount of money owed towards child support arrearages of incarcerated individuals. 4. Section (d) states that the Department of Corrections will report to the Office of Management and Budget the total amount of money owed towards court-ordered drug or alcohol treatment. 5. Section (e) provides that the Office of Management and Budget will use the amounts reported by each department in sections (b)-(d) and the total amount of money in the criminal fund under AS 43.23.028(a)(6) to determine how much money should go to each department. 6. Section (f) states that the Office of Management and Budget will send a report to the Legislature at the same time the Governor submits the Operating Budget listing the size of the appropriation to each agency. Section 3  AS 43.23.048 A new section is put into law to statutorily create the Criminal Fund as an individual account within the dividend fund consisting of money that would have been paid to felons and certain misdemeanants had they not been made ineligible under AS 43.23.005(d). This section also emphasizes that the money in the Criminal Fund may be appropriated in accordance with AS 43.23.031. Finally, this section states that it does not create a dedicated fund in violation of Article IX Section 7 of the Alaska State Constitution. Section 4  AS 43.23.055 1. Subsection (6) is amended to allow the Department of Revenue to create new regulations that are necessary to implement the Department's new responsibilities in AS 43.23.031. 2. Subsection (11) is added to give the child support services agency the authority to use the list of ineligible individuals to determine the amount of child support arrearages owed by these individuals. Section 5  This section provides that this bill will take effect on July 1, 2014. 9:57:57 AM Senator Hoffman asked whether there was a timeframe for when the perpetrator would have their dividend reinstated. Mr. Banks responded that under AS 43.23.005 an incarcerated felon, third-time misdemeant, or a misdemeant with a prior felony, would be ineligible to receive a dividend until released from jail. 9:59:17 AM Vice-Chair Fairclough asked how money got into the fund. Mr. Banks deferred the question to the Permanent Fund Division. He said that there was a list from DOC and the Department of Public Safety (DPS) that DOR used to determine which inmates should have their dividends deposited into the criminal fund. 10:00:38 AM Vice-Chair Fairclough asked how the dividends could help to pay child support for the children of those incarcerated if the inmates failed to apply for the permanent fund. She wondered about the children of parents who did not apply for the dividend, could the child collect their dividend retroactively. Senator Hoffman interjected that the child would not be able to apply for the retroactive dividends until they reached the age of 18. He thought that those children would have expenses before the age of 18 and should not be punished for their parents neglect. He opined that the issue had yet to be addressed, even for children whose parents were not incarcerated. 10:02:11 AM Vice-Chair Fairclough stressed that the bill referred to individuals who were leaving incarceration. She wanted to understand the formula of how the money would be distributed. Mr. Banks deferred the question to LAW. Senator Hoffman remarked that the department could apply on behalf of the child for their parent's dividend if the parent was delinquent in their child support payments. Vice-Chair Fairclough reiterated he desire to understand how money would be dropped into the fund. 10:04:12 AM Co-Chair Meyer queried how the priority list for distribution of the funds was established. Mr. Banks responded that distribution was the per-view of the legislature and the governor. He cited Page 3 of the bill which listed the agencies that were currently eligible to receive money from the criminal fund. He believed that for budgetary purposes the CDVSA had opted to not receive money from the criminal fund. 10:06:09 AM Senator Dyson stressed that under the concept of victim restoration the court would order that everything that the victim needed for restoration would be covered by the fund. CHUCK KOPP, STAFF, SENATOR FRED DYSON, explained that there were no new entities in the bill. He asserted that the legislation was crafted to assure that the victims were the first on the priority list to receive money from the fund. He stated that the intent of the bill was to establish the fund in statute and to assure that money from the criminal fund went first and foremost to victim restoration. 10:08:11 AM Vice-Chair Fairclough explained that CDVSA had received significant financial support from the criminal fund in the past. In the past few years the legislature had been using general fund dollars for the CDVSA and the felon monies had been distributed elsewhere. She understood that the monies had been going to programs inside of the DOC rather than to victim restoration. Co-Chair Meyer CLOSED public testimony. 10:09:35 AM Vice-Chair Fairclough asked for more information regarding how the money was distributed into the fund. Mr. Banks responded that the process was conducted by DOR. DAN DEBARTOLO, DIRECTOR, PERMANENT FUND DIVISION, DEPARTMENT OF REVENUE, could not speak to how the dividend program calculated the amount appropriated into the criminal fund. Annually, the division matched a large file from DOC that identified the incarcerated individuals against the current dividend application list. He explained that if incarceration was the only thing that was disqualifying the individual for the dividend DOR applied that percentage to the number of people in the file, including those who did not apply in that year. He said that the division then determined how many people would have received a dividend, had they applied. The number of people was then multiplied by the amount of the dividend for the year, which determined the pool of funds reported to the Office of Management and Budget (OMB). He said that the amount had ranged over the years from $9 million to $19 million. 10:12:15 AM Vice-Chair Fairclough requested further clarification. Mr. DeBartolo responded that the calculation had been used for a while. He said that the assumption was that not every inmate that fell into one of the criminal fund categories was applying for a dividend because they had become aware that they were ineligible. The process allowed for the division of account for those individuals. Vice-Chair Fairclough felt that an individual who was incarcerated should be required to apply for the PFD, in order to provide for their family or contribute to the criminal fund. 10:14:39 AM Co-Chair Meyer noted that all of the money in the fund could be used solely for priority one listed on Page 4 of the bill. Mr. Banks responded that there were two charts included in the bill file. The first, "Historic PFD Criminal Fund Appropriations"(copy on file), illustrated the DOA appropriation that went to the Violent Crimes Compensation Board. He said that the board had never needed more than $2 million and had received much more. He did not anticipate that the Violent Crimes Compensation Board would take all of the money from the criminal fund. He spoke to child support, which was the next priority on the list. He said that the drafters of the bill understood that all of the funds could be used for child support, which had not been the intent of the legislation; the CS had been amended to limit one dividend per child support order. He referred to the second chart, "Potential Appropriation Scenarios". He said that the bill would have minimal impact on DOC's budget. 10:17:25 AM Vice-Chair Fairclough looked at the child support language in the bill. She wondered whether there was a way that the amount of money going to child support services could be increased without damaging the budget of DOC. Mr. Banks responded that the intent had not been to take funds away from the department. He believed that the step that had been taken to limit one dividend per order for child support was a good solution. 10:19:35 AM Vice-Chair Fairclough wondered if there was an order per child, or per family. She specifically wondered if more than one order could be submitted, creating further bureaucracy. Senator Dyson responded that the idea had been to provide restitution retroactively. He said that there was a huge amount of restoration due for businesses that had been burglarized. It had been decided that those businesses that received payment from insurance would not be a priority. He stressed that he wanted the funds to go to individuals. He said that the rearages on child support in the state ran into the 10's of millions of dollars. He said that the Child Support Enforcement Division had approached him with the idea so that the child support unmet obligations would not overpower other priorities. He stressed that it had not been the intention to protect DOC from the loss of $12 million per year. He suspected that most people did not realize that those funds were in the DOC budget in the first place. 10:21:50 AM Co-Chair Meyer understood one dividend would be ordered regardless of the number of children in a household. Mr. Banks replied in the affirmative. 10:22:39 AM Vice-Chair Fairclough stressed that the state was using percentages. She noted that the incarcerated individual may not have applied for all of the children in their household and wondered how those children would be compensated. She asserted that she did not understand the method used by the Permanent Fund Division to calculate the percentage. Mr. Banks said that it was difficult to find a perfect calculation to provide families with all of the necessary support. 10:24:45 AM Vice-Chair Fairclough remarked that the equation was complicated. She disagreed with the use of percentages in the calculation rather than using the number of actual applicants. She felt that the current method created a scenario where the funds were not making it to the victims. Mr. Kopp explained that the bill sponsor was amenable to the conversation spurred by Vice-chair Fairclough's questions. He furthered that sideboards would be put in place to assure that child support rearages would not eat up the entire criminal fund. He agreed that the methodology could be revisited. 10:27:11 AM Vice-Chair Fairclough relayed that what she needed to see was how DOR was calculating dividends and coming up with an $8 million number to fund something, because it currently was not funding victim restoration. She requested the formula that DOR used. 10:28:02 AM Co-Chair Meyer surmised that the money would be moved from the criminal fund to the Violent Crimes Compensation Board. He noted that the fiscal note for the board was zero. Mr. Banks said that the fiscal note was zero because the board did not anticipate any additional operating costs. 10:29:23 AM KACI SCHROEDER, SPECIAL ASSISTANT, DEPARTMENT OF CORRECTIONS, testified that the only concern that the department had was any reduction in criminal fund receipts. She said that any reduction would be met with a corresponding general fund request. 10:30:21 AM Vice-Chair Fairclough said that she had further questions for DOC regarding work opportunities for inmates and their ability to make money in order to provide restitution. She requested additional information on sentencing and the ability for inmates to access alcohol treatment and substance abuse programs during incarceration. Senator Dyson replied that the convicted felon was not excused from their debt and obligation because their forfeited dividend had gone into the criminal fund. He added that he had considered the issue of covering multiple children. 10:33:26 AM Co-Chair Meyer remarked that the fiscal notes did not reflect the $8.5 million being directed to the Violent Crimes Compensation Board. He felt that the fiscal notes needed to be studied and revised. Mr. Banks replied that there was no anticipation of the Violent Crimes Board receiving $8.5 million under the legislation. He understood that the note spoke to the worst-case scenario of the department losing the money that they would receive from the criminal fund they would need $8.5 million to backfill for their operating costs. He said that looking at projections for the 2014 dividend the department did not anticipate that there would be any loss. 10:35:46 AM Mr. Kopp remarked that the bill sponsor was confident that the legislation would not negatively affect DOC. 10:36:50 AM Senator Hoffman asked for calculations for FY16 through FY18 in order to examine how the fund would be distributed at higher numbers. Mr. Banks replied that there was a rough estimate of FY16 on the second chart. 10:38:11 AM Senator Hoffman felt that the number did not calculate all of the lower earning years of the dividend. He wondered if there was the anticipation that the number would increase in FY 17 and FY18. Mr. Banks agreed to provide that information. SB 104 was HEARD and HELD in committee for further consideration.