SB 154-PFD CONTRIBUTIONS TO GENERAL FUND  3:44:42 PM CHAIR MEYER called the committee back to order and announced the consideration of SB 154. 3:45:06 PM SENATOR WILSON, Alaska State Legislature, bill sponsor, explained that SB 154 would allow Alaskans to donate all or a portion of their PFD directly to the state's general fund. He said the bill would provide those Alaskans who would like to donate to the state's general fund a method and an opportunity to do so through the Pick.Click.Give program. He explained that the Alaska Department of Administration has said the PFD donation process to the state would be tax exempt and could be used to provide tax relief, reduce the rates, and allow to "Only tax the other portion of their items." He disclosed that any other cash donation to the general fund would be exempt from the 7-percent coordination or would not be required to pay the $250 fee. He added that the "children protection piece" for the PFD already exists in statute. 3:46:53 PM GARY ZEPP, Staff, Senator Wilson, Alaska State Legislature, Juneau, Alaska, provided a sectional analysis for SB 154 as follows: Section 1:  Amends AS 43.23.062(a) by adding to the general fund and "the general fund" to allow contribution from the electronic Alaska Permanent Fund dividend to the state general fund. Section 2:  Amends AS 43.23.062(b) to add "general fund" to the list of organizations, community foundations or charitable organizations eligible to be added to the contributions list. Section 3:  Amends AS 43.23.062(m) by adding "general fund" or to the list of organizations that do not have a coordination fee withheld. MR. ZEPP noted that a zero fiscal note was submitted by Centralized Administrative Services-Finance Division, Department of Administration. He detailed the second fiscal note from the Permanent Fund Dividend Division, Taxation and Treasury, Department of Revenue as follows: • FY2019: $20300 for programming to establish and administer new process. • FY2020 and beyond: $10000 annually to administer program. 3:51:15 PM SENATOR WILSON emphasized that the intent of the legislation is not to politicize the Pick.Click.Give program. CHAIR MEYER asked if the bill should have a fiscal note showing some revenue to the general fund. SENATOR WILSON explained that the statute does not allow donations to be used to help offset the cost of the program. He said his office has met with the Department of Revenue to look at ways to offset the ongoing cost. He noted that an amendment could be introduced where a percentage fee from the first donation could be used to offset some of the reoccurring cost. CHAIR MEYER assumed that somebody could write a $1,500 check to the State of Alaska if they wanted too. SENATOR WILSON answered correct. CHAIR MEYER asked if the legislation would save the taxes by having it taken off the PFD. SENATOR WILSON specified that the intent was to ease the process for Alaskans. He added that the transaction would also be a tax deduction. 3:53:13 PM MR. ZEPP noted that Senator Wilson's office will work with The Alaska Community Foundation to address potential concerns regarding donor competition and work on messaging to make sure folks understand the difference of their donations. SENATOR GIESSEL pointed out that a PFD must be declared on an individual's income report to the IRS. She asked if donating directly to the general fund would bypass IRS notification. MR. ZEPP emphasized that he is not a tax consultant but opined that donating a PFD to the general fund would bypass IRS notification. SENATOR GIESSEL replied that she was surprised by Mr. Zepp's answer. MR. ZEPP disclosed that the executive branch classified the donation as charitable. SENATOR GIESSEL pointed out that the proper definition is the donation is tax deductible but nevertheless income that an individual will be taxed on. MR. ZEPP answered that he believed so. 3:54:53 PM SARA RACE, Director, Permanent Fund Dividend Division, Alaska Department of Revenue, Juneau, Alaska, noted that she was not a tax professional but opined that once a dividend is issued it becomes income; however, a contribution back to the state can be used as an itemized deduction just like a contribution to a nonprofit. 3:55:23 PM CHAIR MEYER opened public testimony. SENATOR WILSON asked what happens if an individual declines their PFD. MS. RACE assumed that an individual would not apply for a voluntary program; however, she noted that there is an option available for somebody that decided to sign over their dividend or write a check back to the state and the funds would be deposited into the general fund. She disclosed that there are a couple of individuals every year that call the Department of Revenue and go through the process of returning their PFD. CHAIR MEYER asked Ms. Race if she had any other comments on the division's fiscal note. MS. RACE explained that the administrative costs taken on from SB 154 ends up being different because there is a statute that says that the department cannot use operating funds from the dividend fund to administer the Pick.Click.Give program, so without the 7-percent fee being taken off for an application fee that is why a fiscal note was included. 3:57:24 PM NINA KEMPPEL, President & CEO, The Alaska Community Foundation, Anchorage, Alaska, noted the success of the Pick.Click.Give program and thanked the Legislature for developing and continually refining the program. She disclosed that over $20 million has been raised in charitable giving for over 700 charitable organizations. She remarked that the Pick.Click.Give program faces challenges due to the uncertainty around the permanent fund and the state's near-term finances. She disclosed that the program finds attracting new donors to be harder. She explained that the original intent of the Pick.Click.Give program was to be a tool for the nonprofit sector to be able to increase their unrestricted charitable donations. She added that the program was also intended to assist charitable organizations in cultivating new and existing relationships with their donors as well as increasing the impact of Alaska's nonprofit sector. 4:00:08 PM MS. KEMPPEL said The Alaska Community Foundation sees the merits of SB 154 but noted the foundation's concerns with the legislation where the charitable intention of Pick.Click.Give will be "watering down" as well as causing confusion about what is a charitable organization by bringing in a new element into the program. She opined that the legislation opens the door to anyone joining the program outside of charitable organizations. She said the foundation's final concern pertains to the general fund not having to contribute towards the program's 7-percent administrative fee and that may lead to a public misperception regarding the program's low-overhead-number administrative fee. SENATOR GIESSEL asked Ms. Kemppel if charitable organizations are defined as 501(c)(3). MS. KEMPPEL replied yes, except for some educational organizations such as the university. 4:02:47 PM PAMELA LEARY, Director, Treasury Division, Alaska Department of Revenue, Juneau, Alaska, said the only impact from the bill in terms of processes is that there will be more money in the general fund to go towards the state's operating cost. SENATOR GIESSEL asked how many people routinely give their PFD back, how much revenue is generated, and how many more might return their PFD if SB 154 is passed. MS. LEARY replied that she did not know. She noted that the bill's intent will provide a process should an individual decide to return their PFD. CHAIR MEYER asked if a person could write a check to the "treasury or revenue" if a person wanted to give $10000 to the state government because Alaska does not have an income tax. 4:04:39 PM MS. LEARY answered yes. She explained that an individual could write a check to the "State of Alaska." She noted that the money is sent to the general fund. CHAIR MEYER asked if an individual can request that the money specifically go to education. MS. LEARY replied that she is not sure the money can go anywhere other than the general fund. 4:06:34 PM CHAIR MEYER closed public testimony. SENATOR WILSON noted that he would like to offer an amendment either in the Senate State Affairs Committee or the next committee of referral. He explained that his intent is to lower the fiscal note's ongoing costs and figure out ways to make sure the process is easy without burdening additional charitable giving. CHAIR MEYER noted that Senate Finance is the next committee of referral, an appropriate venue for Senator Wilson to offer his amendment. He remarked that SB 154 is a good mechanism for those that want to give their PFD back to the state. 4:08:11 PM SENATOR GIESSEL moved to report SB 154, version 30-LS0081\D from committee with individual recommendations and attached fiscal notes. 4:08:21 PM CHAIR MEYER said there being no objection, the motion carried.