SB 84-LAND VOUCHERS; PFDS  3:34:37 PM CHAIR REVAK announced the consideration of SENATE BILL NO. 84 "An Act relating to the veterans' land purchase discount; establishing state land vouchers; relating to the permanent fund dividend; relating to the duties of the Department of Revenue; authorizing the Department of Natural Resources to accept state land vouchers; relating to eligibility for public assistance; and providing for an effective date." 3:36:30 PM BRIAN FECHTER, Deputy Commissioner, Department of Revenue, Anchorage, Alaska, presented a slideshow on SB 84: PFD Land Vouchers. He advanced to slide 1, SB 84 Creates the PFD Land Voucher Program: • PFD applicants can elect a land voucher in lieu of a cash PFD • Face value of the land voucher is 2x the statutory formula value of the PFD MR. FECHTER elaborated, stating a $3,000 statutory PFD would result in a $6,000 land voucher. • PFD Land Vouchers can be used to purchase state land offered for sale by DNR • Land vouchers have long historic precedent • Payment to American Revolution veterans MR. FECHTER said that from the American Revolution through WWII, there is a precedent of giving land vouchers to veterans. American Revolution soldiers received land vouchers as payment, and WWII veterans received land vouchers in appreciation for their service. • Used at statehood by various states to distribute and settle land • Objective: Get State Land into the Hands of Alaskans  3:37:38 PM MR. FECHTER advanced to Slide 2, Land Voucher Program Details: • Vouchers can't be used to buy Mental Health Trust lands • Parents can't apply for vouchers for their children MR. FECHTER stated that this policy encourages parents to contribute to the Alaska 529 university savings plan rather than apply for land vouchers on behalf of their children. Only adults may apply for land vouchers. • Vouchers can't be used to pay rents or fees just sale price MR. FECHTER stated that the voucher only applies to the initial purchase price of the land. • Vouchers only available to PFD applicants who use the electronic application MR. FECHTER said this is consistent with "Pick, Click, Give, the education raffle, and other voluntary election programs. • PFD applicants need to be determined eligible within the PFD year • Vouchers are transferable and never expire MR. FECHTER explained that an individual may give away or sell a land voucher to transfer ownership. • Dept of Revenue will track voucher transfers, and will replace lost, stolen or destroyed vouchers • Vouchers may be garnished up to the value of the cash PFD MR. FECHTER offered a hypothetical example of how the land voucher garnishment would work. Suppose the legislature appropriates a $1,000 PFD, and the individual, who elects a land voucher, owes $1,000 in unpaid child support. $1,000 cash will go to the Child Support Division, and the individual will receive what remains. The garnished land voucher will total the value of the land voucher minus the garnished amount. • Cash from PFDs not paid in cash because of voucher election lapses to General Fund • DHSS and other benefits programs must consider voucher as income or resources in determining benefits eligibility 3:39:41 PM MR. FECHTER advanced to Slide 3, Lands in Alaskan Hands. He stated that the Department of Natural Resources contributed this slide. Help fulfill the Alaska Constitution's mandate to develop state resources to benefit the public. Make Alaska land more accessible to all by making it easier for Alaskans to purchase land. No other state has less land in private hands than Alaska. The PFD Land Voucher Bill is a response to the demand, by helping individual Alaskan's realize land ownership. The PFD Land Voucher Bill would be a win-win for both the individual Alaskan and the state treasury. MR. FECHTER reiterated that the purpose of SB 84 is to fulfill the constitutional mandate to develop state resources for the maximum benefit of the public. In stark contrast to Rhode Island's 97 percent, private ownership of land in Alaska is only three percent. 3:40:20 PM MR. FECHTER advanced to slide 4, Cashflow Hypothetical. The following numbers are hypothetical for illustrative purposes only. Cashflow Hypothetical CY2022 Statutory PFD: $2,300/person FY2023 Approp. PFD: $1,000/person Land voucher: $4,600/person Cash PFD elections: 600,000 Land voucher elections: 40,000 Amount appropriated from ERA to GF to PFD Fund: $640mm Cash PFDs: $600mm Lapse to GF from unelected cash PFDs: $40mm Face value of land vouchers: $184mm Land ultimately sold: $300mm Cash to GF from land sales: $116mm Total Cash to GF: $156mm MR. FECHTER explained that, in this hypothetical example, a person elects $1,000 cash or a $4,600 land voucher. Suppose 40,000 individuals elect land vouchers. Of the $640,000,000 appropriated for PFDs, $600,000,000 will be distributed in cash and $40,000,000 will lapse to the general fund. As land is purchased, revenue generated from land sales will grow the general fund over time. 3:41:20 PM SENATOR KIEHL asked about the assumption of induced effect versus just putting more land up for sale. MR. FECHTER answered that question brings up a major governor's initiative. The governor has invested a lot of resources in the Department of Natural Resources and has pressed the department to maximize land sales. The governor wants unallocated lands available for sale, so Alaskans can make purchases and participate in sales. MR. FECHTER stated that the department has not done an analysis to determine the proportion of land sales that would occur with or without this program. He expressed his belief that the program would incentivize Alaskans to participate in land sales and get more land in the hands of Alaskans. The ripple effects of land sales are numerous, especially with property taxes in organized communities. SENATOR KIEHL asked whether the hypothetical example proportions are based on the average parcel value, one voucher applied per parcel, multiple vouchers applied per parcel, or anything in particular. He asked how the figure, $300,000,000 for the amount of land sold, was derived. MR. FECHTER answered that this is an illustrative example of how the cash flow would work. Absent an accurate number to put in front of the committee, illustrative numbers, not backed by science, were used. 3:43:58 PM SENATOR STEVENS commented that lands available for purchase over the years have not always been in desirable areas. He asked what process the department uses to announce land sales, whether this sale would be more significant than in the past, and how to select and purchase land. MR. FECHTER deferred the question to Ms. Colles, Division of Mining, Land, and Water, Department of Natural Resources. 3:44:39 PM CHRISTY COLLES, Operations Manager, Division of Mining, Land, and Water, Department of Natural Resources, Anchorage, Alaska, provided invited testimony on SB 84. The department has over- the-counter sales comprised of unsold auction parcels and unsold parcels from the remote recreational staking cabin program sale. MS. COLLES said auctions are the main way the department notifies the public of a land sale. The department identifies land, ensures it is properly classified and develops subdivisions with road access. The department determines a starting price based on an appraisal, for which individuals may submit bids. Lands are available across the state, and auctions occur once every year. MS. COLLES explained that the remote recreational cabin staking program works differently than an auction. The department identifies a large area, and a limited number of individuals are allowed to stake 5 to 20 acres of land. It is a competitive process because the program may limit the number of authorizations in certain areas. So, there may be more interest than parcels available. MS. COLLES said auctions and remote recreational cabin staking go through a decision process and are available online for individuals to place a bid. 3:46:35 PM SENATOR STEVENS surmised that if SB 84 were to pass, it would generate a lot of interest in and applications for state lands. He asked whether the department was prepared to identify more lands or if the availability of land will remain status quo. MS. COLLES answered that there are limitations with the current statutes, but the goal is to make more land available. The governor has introduced a couple of bills to increase the availability of land. 3:47:24 PM SENATOR KIEHL asked what proportion of the state's sales price the state uses to prepare parcels for sale through auction or over the counter. The purpose of the question is to compare preparation costs incurred by individuals against costs incurred by the state. MS. COLLES answered that an exact percentage depends. The department puts a lot upfront into subdivision sales, including appraisals and surveys. The sale price reflects those costs. She stated that through the land disposal income fund (LDIF), the department tries to cover the cost of all employees that administer the program, including appraisal and survey costs. The department tries to redeposit recouped expenditures back into the LDIF to fund future projects. SENATOR KIEHL stated that the mean, median, and mode parcel sale proportions would be helpful as a follow-up. CHAIR REVAK requested that the department provide the information to the committee. 3:49:18 PM SENATOR KIEHL referred to Mr. Fechter's hypothetical example that outlined the garnishment process for land vouchers. He asked why the multiplier applied to the land voucher's issuance is not similar to its reduction. MR. FECHTER answered that this was a policy decision. In SB 84, the cash value set aside for individuals is less than the land voucher value. Garnishing the total value of the land voucher might cause the PFD fund to go underwater. MR. FECHTER explained that the maximum amount a PFD may be garnished is not to exceed the appropriated value of the PFD. The idea is to have a level playing field so that the maximum amount deductible is the same for any PFD, whether a cash PFD or a land voucher. SENATOR KIEHL inquired further into the possible imbalance of the land voucher garnishment calculation in SB 84. An individual with a partially garnished PFD comes out way ahead of those whose PFD is not garnished. The garnished individual gets their debt satisfied and almost the full voucher amount. They get the full multiplier on the plus side without the multiplier on the minus side. MR. FECHTER answered that is accurate. The physical asset, the land voucher, could be garnished by implementing a garnishment process. However, it is much more valuable to the garnishing agency to satisfy a debt with cash. While the land voucher has intrinsic value, it is more challenging to turn it into cash to satisfy a debt. 3:51:51 PM CHAIR REVAK asked whether the land vouchers would be transferable. MR. FECHTER answered yes. Individuals may sell their land vouchers for whatever someone is willing to pay, or they can give them away. CHAIR REVAK asked who would create and oversee the land voucher program, including the prevention of fraud and counterfeit vouchers. MR. FECHTER answered that the state would benefit from its existing, robust PFD application process as a control to verify identity, prevent scams, and ensure security, are already in place. The Department of Revenue (DOR) envisions holding vouchers in a database. DOR will verify a person's identity in the event of a voucher exchange. DOR will track certificate holders, so holders must report voucher transfers. The certificate itself is just a piece of paper; it is not a bearer instrument. The database will contain certificate ownership data and data on the number of vouchers redeemed. DOR will work with the Department of Natural Resources (DNR) to track the outcome of all its land sales. CHAIR REVAK commented a paper certificate opens up an opportunity for fraud. He asked whether land vouchers would have a digital tracking mechanism. MR. FECHTER answered that the paper certificate associates the voucher owner with a unique identifying number and gives the owner a tangible record to possess. The core balance of vouchers would be kept with DOR and tracked digitally. An individual could not steal a voucher by merely taking possession of the paper certificate. 3:55:02 PM SENATOR STEVENS said that this is a great idea, but if there is no more land than currently available, the state will not wind up with more money in the treasury. He expressed his belief that the obligation is to identify more land to sell; he hoped the administration would attempt to do so. MR. FECHTER answered that is precisely the intent. He expressed his belief that the Department of Natural Resources (DNR) spoke earlier about a series of bills that would remove barriers to making land available. He deferred to DNR to speak more about those bills. SENATOR STEVENS commented that it is a lot of work, and he hopes the administration achieves its goal. 3:55:52 PM CHAIR REVAK expressed concern that the $40,000 [$40.6 per OMB Component Number 981] operating budget expense indicated on the fiscal note is insufficient. He asked what software the Department of Revenue intends to implement to track land voucher activity and land voucher transfers. He wondered whether the department would require additional staff to track vouchers, prevent fraud, and prevent counterfeiting. MR. FECHTER answered that the amount is in line with the last major PFD election program. Raffle programming changes required $20,000 to $40,000. DOR has a dedicated IT team that uses EDIUS, the backend software for the PFD eligibility system. He expressed his belief that the existing software could easily integrate the land voucher program. DOR does not know the demand for the land voucher program but does not envision half the applicants choosing the land voucher election the first year. As the program moves forward, DOR may come back to the legislature if the program becomes a burden. 3:57:26 PM SENATOR KIEHL commented that various assistance programs would consider land vouchers as income and resources. A fiscal note indicates that the Division of Public Assistance estimates a one-time mailing to its clients to notify them of the land voucher's impact on their eligibility for public assistance programs. He asked why this notification could not be sent every year. SHAWNDA O'BRIEN, Director, Division of Public Assistance, Department of Health and Social Services, Juneau, Alaska, provided invited testimony on SB 84. She expressed her belief that the division could automate the notification system to send a standardized notification to new program recipients. The cost would fluctuate depending on the number of new recipients in the program. The $140,000 [139.8 per OMB Component Number 236] ballpark fiscal note estimate is based on the number of recipients currently in the division's program. SENATOR KIEHL commented that, in his experience, recipients at the edge of the income ladder for these programs are working, not unemployed. He emphasized that it is difficult for these recipients to work multiple jobs, get food on the table, and get the kids to school. He asked what the education success rate is when the requirements of a program change; in other words, how effective is the uptake from one letter for one notice. MS. O'BRIEN answered that the educational part of the process mostly happens during the program's interview stage. Many programs require an interview with recipients to cover details like fraud, changes that require reporting, and other items. It is a hands-on, face-to-face opportunity to educate recipients about the program's rules and how changes affect them. Message repetition is often more successful in multiple venues, like incorporating a message into a written notification to build on the same message given in an interview. 4:01:04 PM CHAIR REVAK inquired about the land voucher garnishment process, asking whether the deduction would occur on the land voucher instead of the PFD. MR. FECHTER answered yes. Everyone would have the same level of garnishment whether an individual selects cash or voucher. The individual would receive the balance after the garnishment. Suppose an individual elects a land voucher, has a $1,000 garnishment, and the cash value of the PFD is $1,000. The individual would receive the total value of the land voucher minus $1,000. CHAIR REVAK repeated the garnishment process and questioned whether the calculation method was equitable. MR. FECHTER reiterated that if the cash value of the PDF is $1,000, an individual, who owes back child support and elects a cash PFD, could be garnished up to $1,000 to satisfy their debt. The same is true for an individual who elects a land voucher. Up to $1,000 could be garnished from the value of their land voucher to satisfy up to $1,000 of their debt. CHAIR REVAK asked whether the proposed garnishment method would affect state garnishment receipts. MR. FECHTER expressed his belief that it would not affect state receipts. The net effect is the same whether an individual elects a land voucher or a cash PFD. 4:04:25 PM CHAIR REVAK announced that the committee had received department answers to previous questions. CHAIR REVAK opened public testimony on SB 84. 4:04:44 PM EDWARD MARTIN, Representing Self, Kenai, Alaska, testified in support of SB 84. He played previously recorded testimony, stating the PFD land voucher was an idea he dreamed up years ago when the state was faced with $9 per barrel of oil and the state government attempted to access the permanent fund dividend. He expressed his belief that it was inappropriate then and is not appropriate now. The permanent fund dividend belongs to the people. As it concerns transferability, a parent could transfer land to their children in a trust. He recommended the program be open exclusively to Alaskans. Alaska has been a state for far too long without making land available. The state will generate tremendous revenue when land development creates a tax base. He suggested a simpler method to purchase land, mainly using unencumbered PFD money to make a land purchase. 4:09:48 PM CHAIR REVAK closed public testimony on SB 84. 4:10:00 PM CHAIR REVAK held SB 84 in committee.