CSHB 2(FIN) PERMANENT FUND DIVIDEND ELIGIBILITY  CHAIRMAN GREEN brought CSHB 2(FIN) before the committee as the next order of business. NICOLE POIERRIER , a legislative intern for Representative Pete Kott, read the following sponsor statement into the record: "HB 2 rights the wrong done by a particular court ruling. The ruling's effects have unintentionally excluded spouses from receiving permanent fund dividends in the event an individual leaves the state under an allowable absence and the spouse accompanies an individual. "Historically the spouse is allowed to piggy-back on the individual leaving the state under an allowable absence. A court ruling changed this status by stating that marriage cannot be the reason used to determine a person's residence eligibility. Unintentionally, the effect of this ruling has disrupted the allowable absences traditionally accepted which include a spouse accompanying an individual for purposes of military service, medical treatment and educational pursuits. Students who leave the state on allowable absences remain eligible for the permanent fund while their spouses who accompany them are ineligible. Similarly, service members who leave the state on allowable absences remain eligible for the permanent fund while the spouses are ineligible. "Through monetary incentives the ruling has effectively encouraged families to break apart for lengthy periods of time. The situation is deplorable and will be remedied by HB 2. "HB 2 excuses an individual from an absence of the state when the reason for the absence includes accompanying another eligible resident, who is absent for a reason permitted under this section, as the spouse, minor dependent, or disabled dependent of the eligible resident. "Effective January 1, 1998, HB 2 will restore to spouses the status they had prior to the Superior Court's unfortunate ruling. In addition, this bill will permit Alaskans who, because of the Court's ruling, did not previously qualify, to apply for prior year dividends, provided they: (1) would have been otherwise eligible for prior year dividends; and (2) apply for the prior year dividend during the 1998 application period. "HB 2 passed the House unanimously. This bill is good public policy. I urge your support." Number 195 CHAIRMAN GREEN noted the presence of Senator Mackie. Number 227 REPRESENTATIVE PETE KOTT , prime sponsor of HB 2, came to the table to respond to questions from committee members. Responding to an inquiry by Chairman Green, he said the fiscal note from the Department of Revenue shows two part-time people will be required to verify the applications of persons filing. Conceivably, there are 14,000 applications that potentially represents anywhere from five to seven thousand individuals, although he doesn't think anybody has a good grasp of the actual number. He also explained that when that court decision was rendered, it really established two classes of people. There were a number of cases in appeal to the division for a number of reasons, and as those appeals were resolved, those individuals were paid. These were individuals who would have otherwise been affected by the court decision, but because their appeals were heard in a most expeditious manner, they were paid. However, there was this other group that had appeals in the process, but because of the court decision, they were left out. So, there were two groups of people and that was reason they went back to 1992. CHAIRMAN GREEN asked if he has extrapolated what the impact of this legislation would be on future dividends. REPRESENTATIVE KOTT responded that at the upper end it could effect the dividend by about an $11 reduction in individual dividends, although it could be substantially lower. CHAIRMAN GREEN suggested that maybe at some point the issue of how long an individual can be out of state for any reason and continue to receive a dividend should be addressed and at some point have a cut-off date. Number 295 SENATOR MACKIE asked at what point do people that move away from military service no longer become Alaska residents or qualify for Alaska Permanent Fund Dividends. He questioned if somebody comes here from Oklahoma and serves in the Air Force for a year or two and then they are transferred somewhere else with probably no intention of returning, how long are they being carried on the books as Alaska residents, if they were in the state long enough to become a resident and have their spouse become a resident. He also asked if a military person leaves Alaska and marries someone, does that spouse have to have been an Alaska resident in order to qualify. He said he full well appreciates our armed forces, but what bothers him and a lot of other people is people that come to the state for one or two years, but then they leave with no intent to return but still qualify for dividends. REPRESENTATIVE KOTT commented that his questions were getting to the heart of the problem, which is trying to define "intent." He said it is a difficult issue whether it relates to the military or to students. Number 370 DEBORAH VOGT , Deputy Commissioner, Department of Revenue, said over the years the department has supported legislation such as HB 2 to provide benefits to the spouses of individuals who are on allowable absences, whose benefits were foreclosed by the court decision. The department has a program that the Legislature has set up to permit a number of categories of individuals to leave for permitted purposes. Through the years the department has felt that it is more equitable for all of the members of a family to be paid if some of them are. However, Ms. Vogt related that the department does have some difficulty with the retroactivity portions of the legislation. One reason is that for a person that was absent in 1992, the information is getting fairly stale for the department to now make a determination on whether the absence was permissible under the rules and the intent that the individual harbored in 1992. Another reason she would raise is that the Legislature has not passed the legislation in three different iterations. The department held a number of these cases open for years while the Legislature considered several of these bills, thinking that the Legislature was going to reverse the court's decision in this area and allow them to pay these people. Last year when the legislation failed, the department resolved those cases by denying those appeals. Ms. Vogt said it now seems uncomfortable to them to go back and reopen all the cases and pay folks for those past years. She reiterated the department favors the legislation on an ongoing basis, but would oppose it in its retroactive application. Ms. Vogt said the department has a list of 11 allowable absences, most of which were enacted by the Legislature, but the department does have the statutory authority to add to the list at the department level if the commissioner so chooses, although they would rather not. She said every line that you draw has inequities on one side or another. Her personal preference would be to have it just like the longevity bonus program, people are not paid while they are gone from the state. Responding to Senator Mackie's concern about how long people can be gone and still keep getting paid, Ms. Vogt said there are a couple of rules, one of which is a departmental regulation and the other the Legislature passed. One is the two-year rule, where people are automatically ineligible if they have not been physically in the state sometime within the last two calendar years before their application. She noted that when the Legislature passed that law a lot of people who had been gone for many years became ineligible and were no longer able to stay on the roles. Number 456 CHAIRMAN GREEN asked if there has been a visible difference since the two-year requirement was passed, and MS. VOGT acknowledged there was a very dramatic difference after that. She said the other rule that addresses that issue is a regulation that says after a person has been gone for five years, that individual is presumed to no longer be a resident. Number 470 SENATOR MACKIE inquired as to the actual number of spouses that would be eligible under this legislation. NANCI JONES , Director, Permanent Fund Division, related the cumulative number from 1992 up to 1996 is 5,900. The application period for the 1997 dividend is still open, but it is estimated there will be an additional 2,500 applicants. Ms. Jones added that the retroactive provision is the section of the bill that the division disagrees with because it is setting a bad precedent; it is opening up a filing schedule for people who never filed before. Number 540 SENATOR DUNCAN asked what the department's position was on CSHB 2(FIN). MS. VOGT responded that the department supports the legislation without Section 4. MS. JONES added their support for the first section of the bill which is separating the residency from the eligibility requirements by putting it into statute. Number 555 SENATOR MACKIE asked if the department would agree that the original intent of the program was to allow for the spouses, and the reason they haven't been receiving the dividend is because it is the court that has said that they don't comply. He then asked why they wouldn't support this legislation if it fixes the original intent of the program. MS. VOGT clarified that the department does support the legislation, but without the retroactive portion because (1) the information is stale, and (2) because of the failure of the Legislature to pass this legislation in the last three years. Number 566 CHAIRMAN GREEN opened the meeting to public testimony. SUSANNE BADILLA of Juneau, testifying in support of HB 2, said she has been a resident of Alaska since 1979 and had been receiving permanent fund dividends since the program's inception. In 1994 she and her husband decided to move their family of five to Washington for a year so that her husband could attend college to get a special education endorsement. Because the family was out of state for 180 days in two separate calendar years, she was denied dividends for both of those years; however, her husband and children continued to receive their dividends. She said as the statute now stands, it penalizes spouses who choose not to be separated from their families, as well as putting a financial burden on families who are depending on the dividend to make ends meet. She urged the committee to rectify the situation by passing HB 2. TAPE 97-6, SIDE B Number 015 JOAN HALE , testifying from Anchorage in support of HB 2, stated she has lived in Alaska since 1977, except for temporary absences when her husband was stationed in Mississippi for his military service. While they were out of state, her husband and children continued to receive their dividends, and she received hers until 1994 when she was denied the 1994 dividend after the court ruling came down, in spite of the fact that she had returned and was living permanently in the state. To demonstrate their intent to return and remain permanently she and her family returned once in 1992 for three weeks and twice in 1993 for a total of four weeks. She said she and her family followed the rules that were required to maintain their residency for the dividend, but none of the information they provided to the department was considered in the denial during the appeal process. The sole reason for the denial was the arbitrary exclusion of the piggyback rule. Ms. Hale then filed suit after all attempts through the permanent fund appeal process had failed. They prevailed in Superior Court; Judge Shortell agreed that the Department of Revenue had erred in applying the Zieler case as the sole reason for the denial of Ms. Hale's 1994 dividend as there were other factors that must be considered and they were not. The department has filed an appeal with the Supreme Court and is demanding that the Hales pay its courts cost should the department prevail, but on the other hand, the department is unwilling to pay any of the costs incurred by the Hale family. She urged the committee's support for HB 2. Number 075 WOODY WENSTROM , testifying from Fairbanks, said in 1992 he was the recipient of an international teaching fellowship. This fellowship sent him and his family to Australia for the entire year of 1992. Because of this they were denied the 1993 dividend, and because they arrived back home during the second week in January of 1993, they were also denied the 1994 dividend. He said the statute provides that professional educational development and sabbaticals are allowable allowances for receiving the dividend. The Fairbanks North Star Borough School District has informed the Department of Revenue that they consider his fellowship a sabbatical and the Department of Education considers his fellowship professional, educational development, but the Department of Revenue refuses to accept these letters as acceptable to award he and his family the dividend. He suggested the best way to handle this situation is to include in the bill his situation as a international teaching fellow as an allowable absence to receive the dividend. Number 100 JILL HOCKEMA , testifying from Homer in support of HB 2, said she was born and raised in Ketchikan, living there until 1993 when she moved to Oregon with her spouse, who is in the U.S. Coast Guard. The whole time they were gone, she maintained her Alaska residency and she returned to the state every single year that they were gone, but she has been denied dividends since 1994. She was informed by the department that she was denied the 1996 dividend solely because she did not own a home in Alaska and she chose to work outside of the state while her husband was serving his tour of duty. Ms. Hockema said she has been a resident for thirty years and she feels like she is being penalized for marrying a member of the military who gets transferred out of state and even if they have every intent to move back. Number 152 LYDIA CLARK , a resident of Sitka, voiced her strong support for HB 2. Her husband was diagnosed in Sitka with ALS in 1994. They were told to seek better medical care in the Lower 48, which they did, and, as a consequence, she and her children lost their eligibility for leaving with him. She and the children returned to Sitka in July 1995, and they have been denied the permanent fund dividend for 1995, 1996 and they will be in review for 1997. Number 192 There being no further public testimony, CHAIRMAN GREEN stated there were a couple of things she wants to check on relating to the bill, and that the bill would be back before the committee the following week. There being no further business to come before the committee, the meeting adjourned at 4:45 p.m.