SSTA - 3/28/95 SB 135 PFD NOTICES AND ELIGIBILITY SENATOR SHARP brings up SB 135 as the next order of business before the Senate State Affairs Committee and calls the first witness. Number 313 SENATOR STEVE FRANK, Co-Chairman of the Senate Finance Committee, prime sponsor of SB 135, states SB 135 is a subject that passed the senate last year. SB 135 would require persons incarcerated or convicted of a third misdemeanor to contribute their permanent fund dividends, on the theory that those persons should incur at least some part of the costs imposed on the system through their illegal behavior. It provides the state a way to fund some of the programs in the Department of Corrections. It would also allow legislative discretion for utilization of the money for other agencies, including the Department of Public Safety and the Department of Law. Number 334 SENATOR RANDY PHILLIPS asks if there are any word changes from last year's version. DAVID SKIDMORE, Aide to Senator Frank, responds that the portion of SB 135 that references the Department of Revenue is slightly different. Permanent fund dividends forfeited under SB 135 will not be used to satisfy child support obligations; it is thought that would be unconstitutional, under the constitutional requirement that public funds not be used for private purpose. Another change was in the effective date. Only offenses from the effective date of January 1, 1996 will be counted. SENATOR DUNCAN is not sure he understands the entire impact of SB 135. He asks if this is being considered as a source of funding for the Department of Corrections in the FY 96 operating budget. If SB 135 does not pass, will it impact funding for the Department of Corrections? Number 365 SENATOR FRANK does not think whether SB 135 passes or not would have any affect on the Department of Corrections budget. The budget proposal assumes this money will be available. But he does not think 2.7 million dollars in general funds will be taken out of the budget if SB 135 does not pass. SENATOR DUNCAN asks if he understands correctly that SB 135 would allow 2.7 million dollars of permanent fund earnings to go to the Department of Corrections, and if SB 135 didn't pass, then that funding source will have to be replaced by general funds. SENATOR FRANK replies that is correct. Number 388 SENATOR DUNCAN says he is not in favor of giving convicted felons a permanent fund dividend, but he wants to know what the impact will be on the Child Support Enforcement Division (CSED) and other recipients of garnished dividends. SENATOR FRANK thinks there may be some reduction in garnishment of dividends for child support obligations. They tried to work around that, but they felt as though the number of people affected by that would be small. Number 405 MR. SKIDMORE thinks about 300 of the approximately 2,050 individuals would have child support obligations that would be affected. That does not take into account families on AFDC. Number 415 SENATOR DUNCAN comments he is concerned with impact on child support, victim restitution, treatment programs, and payment of fines and judgements. SENATOR FRANK acknowledges there may be some impact on child support, but it would only affect those folks who weren't on AFDC. It is hard to tell how many people would be affected, but since it is probably such a small number of people, would we be willing to keep paying dividends to persons convicted of three or more misdemeanors, just so that small group won't be affected? If we didn't have AFDC as a back-up mechanism, then there would be more reason to be concerned about those people losing an obligor's dividend. [Senator Duncan asked a question, which was not picked up by the recording equipment.] SENATOR FRANK answers maybe. SENATOR DONLEY asks Senator Frank to clarify that currently, only people incarcerated for felonies don't receive their dividends. SENATOR FRANK responds that is correct. SENATOR DONLEY asks if SB 135 would continue to deny dividends after a felon has been released from prison. MR. SKIDMORE responds SB 135 would not deny dividends to released felons. SENATOR DONLEY asks if SB 135 would deny dividends to felons for the first year following their release from prison. MR. SKIDMORE thinks it would do that. SENATOR DONLEY doesn't understand that language in the bill. Number 458 MR. SKIDMORE replies that the structure of the existing statute was followed in drafting the legislation. Also taken into consideration was the qualifying period for permanent fund dividends. SENATOR DONLEY asks what happens if a person is convicted of a felony, but does not go to prison. Would a felon lose his or her dividend for the rest of their life? MR. SKIDMORE responds that would not be the case. Under SB 135 they would just lose their dividend for the following dividend year. SENATOR DONLEY notes the same thing would apply to persons convicted of a third misdemeanor, but not imprisoned. MR. SKIDMORE confirms that is the case. In regards to court fines, for which dividends are currently being garnished, those fines would not be extinguished, it would simply be pushed back one year. Number 484 SENATOR DONLEY is willing to work on SB 135 in the Finance Committee, but he really thinks the bill should be stronger. SENATOR FRANK thinks they're trying to strike a balance between what would be constitutional and what would be supportable by a majority of legislators. He acknowledges that for some folks, it probably would be fair to take their dividends away for the rest of their lives. Number 490 SENATOR DUNCAN asks if Senator Frank concurs with his statement about double-dipping into the permanent fund earnings, and that it will impact everyone's dividend. SENATOR FRANK responds SB 135 will not impact everyone's dividend, only the incarcerated folks. SENATOR DUNCAN reasserts that if SB 135 is a double-dip in the permanent fund earnings, then it will affect dividends. SENATOR FRANK replies if that is what Senator Duncan implied, he was not agreeing with that. Senator Frank asks Mr. Skidmore to explain why two-years worth of dividends are being picked up to accelerate the collection. That is what Senator Frank meant by "double-dipping." SENATOR DUNCAN concurs with that. It does authorize the legislature to take over 2 million dollars out of the permanent fund earnings, which really hasn't been collected as dividends from the felons or repeat misdemeanants. SENATOR FRANK states the dividends won't go to the felon or repeat misdemeanants; that's the deal. SENATOR DUNCAN points out that the money is in the corrections budget for FY 96; it is not coming from those dividends, it is coming from the permanent fund earnings. So it really is double- dipping in the permanent fund earnings. So Senator Duncan thinks SB 135 will affect the amount of the dividend. SENATOR FRANK insists that is not the case. He asks Mr. Williams to discuss that point. TOM WILLIAMS, Aide to Senator Frank, states, "the individual was incarcerated in calendar year 1993. Therefor they were ineligible for the 1994 dividend. The department calculates the amount that would have been paid for the 1994 dividend, reports it to the legislature, and the legislature then appropriates it for fiscal year 1996. In essence, there is a year's lag in appropriating those funds to the Department of Corrections and the Department of Public Safety, because they were actually dividends that were not paid in fiscal year 1995. What SB 135 would do, it would double up in one sense by moving when the dividends are paid and corresponding them to when they are denied." Number 522 SENATOR DUNCAN continues his assertion that the first year it would seem to be that the money would be taken out of the permanent fund earnings account. It will impact the dividends. He states he is not convinced that dividends will not be reduced. He wants to know if there will be an impact on dividends, and if that will be reported on dividend check stubs. Senator Duncan does not know if he would oppose SB 135 on that point. Number 531 SENATOR FRANK does not think dividends would be affected by SB 135. SENATOR DUNCAN agrees with that, with the exception of the first year after the legislation becomes law. He agrees with everything Senator Frank has said, with the exception of the first year, when he believes there will be an extra 2.8 million dollars taken from the permanent fund earnings. Perhaps he is mistaken, but that is his perception. Senator Duncan asks if there is anyone from the Permanent Fund Dividend Division to clarify whether or not his concern is valid. MIKE MCGEE, Chief, Permanent Fund Dividend Operations, Permanent Fund Dividend Division, Department of Revenue, states the governor strongly opposes SB 135 for the very reason discussed today: the double-dipping nature of the first year the bill is law. Even if that provision is eliminated, the governor would still oppose SB 135, because he does not want to see a reduction in the monies available to those people and state agencies with attachments on dividends of people affected by the bill. The administration does see a reduction of 2.7 or 2.8 million in the permanent fund earnings, because that money will be paid twice. SENATOR RANDY PHILLIPS comments sometimes the legislature just doesn't agree with the governor. Number 549 SENATOR DONLEY wonders how much the dividends will be impacted. [There is general estimation and consensus that the amount will be about $4 or $5 per dividend, and that it will probably not be reportable on the dividend check stubs.] SENATOR DUNCAN thinks people should know if part of their dividend monies are being used for departmental operations. SENATOR LEMAN makes a motion to discharge SB 135 from the Senate State Affairs Committee with individual recommendations. Number 567 CHAIRMAN SHARP, hearing no objection, orders SB 135 released from committee with individual recommendations.