SB 84-LAND VOUCHERS; PFDS  4:11:07 PM CHAIR SHOWER reconvened the meeting and 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." He listed the individuals available to answer questions. 4:11:38 PM MIKE BARNHILL, Deputy Commissioner, Department of Revenue (DOR), Juneau, Alaska, stated that SB 84 creates a program through the Permanent Fund Dividend (PFD) that allows applicants to elect a PFD land voucher in lieu of a cash dividend. The face value would be two times the statutory formula of the dividend. He said this is an opportunity for Alaskans to use their vouchers to purchase state land from the Department of Natural Resources (DNR). He described the precedent of land vouchers in this country that started after the American Revolutionary War to compensate veterans. He said the governor's objective is to get state land into the hands of Alaskans. 4:13:50 PM MR. BARNHILL summarized the following sectional analysis for SB 84: Section 1: Amends AS 38.05.940(c) to allow a veteran to apply one or more dividend land vouchers issued under AS 43.23.018 to the one-time purchase of discounted state land under AS 38.05.940(c) ("Land purchase price discount for veterans.")   Section 2: Amends AS 38.05.940(d) to limit a person using a dividend land voucher to purchase land under AS 43.23.018 to purchasing surface rights only, and to prohibit a person from applying a dividend land voucher to costs ineligible for a discount under the section. Section 3: Amends AS 38.95 by adding three new sections. Proposed AS 38.95.350 directs the Department of Natural Resources (DNR), on or after Jan. 1, 2022, to accept one or more dividend land vouchers at their face value for purchase of state land under land contracts. It prohibits DNR from accepting vouchers for payment of rents or fees or land purchases. A voucher will be exhausted after one use whether it covered the full land sale price or not, and applicants are entitled to no refund or other credit for any portion of the voucher's value remaining after such a sale. Mental health trust land is excluded from state land that can be purchased with a voucher. Proposed AS 38.95.360, requires DNR to report to the governor before September 1 of each year the number and total value of dividend land vouchers it accepted for payment in the previous fiscal year. The report shall include a recommendation for any additional appropriation for the Land Disposal Income Fund to account for decreases to the fund caused by acceptance of vouchers to pay for state land. Loss of these funds, if not replaced by another revenue source, will result in significant challenges to maintaining DNR's land sale programs. Proposed AS 38.95.400 defines "department" to be DNR. Section 4: Adds a new section, AS 43.23.018. Subsection (a) directs DOR to allow a person using the electronic application for a Permanent Fund dividend and not a person or public agency applying on behalf of another individual, or an assignee of the right to receive a dividendto make an irrevocable election to receive a single dividend land voucher instead of a monetary dividend. It directs DOR, if unable during a dividend year to determine whether an applicant is eligible to receive a dividend, to void that applicant's election to receive a dividend land voucher; if later determined to be eligible, the applicant will be eligible to receive a monetary dividend, but not to elect to receive a dividend land voucher. Subsection (b) sets the value of a dividend land voucher at twice the value of a monetary dividend as calculated under AS 43.23.025 if 50 percent of income available distribution was deposited into the Fund's dividend fund under AS 37.13.145(b). Subsection (c) limits the use of vouchers only to purchase of land under AS 38.95.350. Subsection (d) provides that vouchers issued under this section do not expire. Subsection (e) makes vouchers transferable to any person. The Department of Revenue is required to keep records of voucher transfers. An action against the state related to transfer of a state land voucher is prohibited. Subsection (f) provides that issuing a land dividend voucher creates no obligation on DNR to make any state land available for sale or to enter any land sale contract, nor does it confer eligibility to purchase state land. Subsection (g) provides that the value of a voucher subject to garnishment is set under AS 43.23.140(e). The Department of Revenue shall issue land vouchers for the value remaining after such collection. Section 5: Amends AS 43.23.045 by adding a new subsection (f), directing that the cash from foregone PFDs resulting from individual elections to receive state land will, after garnishment under AS 43.23.140, lapse to the General Fund. Section 6: Amends AS 43.23.055 to conform the Revenue commissioner's duties to include issuing state land vouchers under AS 43.23.180; directs Revenue to develop regulations to establish procedures and time limits for voucher issuance and use, as well as for replacing a lost, stolen or destroyed land voucher; and directs Revenue to report annually to DNR both the number of individuals electing to receive land vouchers instead of monetary dividends, and the number and value of such vouchers issued. Sections 7-8: Amends AS 43.23.140 by adding a new subsection (e) to specify that the value of a land voucher may only be garnished up to the amount available for garnishment from a monetary dividend. Section 9: Adds a new subsection AS 43.23.240(d), directing the Department of Health and Social Services to consider a land voucher as income or resources of an applicant, in calculating that applicant's eligibility for public assistance programs it administers, and to notify all public assistance recipients of the effects of receiving a dividend land voucher. Section 10: Adds a new subsection AS 43.23.250(b), to require financial needs-based programs administered by the state or by a state instrumentality or a municipality to consider the value of a dividend land voucher held by an applicant as income or resources in determining whether the person is eligible for the program. Section 11: Adds a new subsection to AS 43.23.270. New subsection (f) applies the same penalties for violations of state law relating to Permanent Fund dividend eligibility and application, to dividend land vouchers eligibility and application. Section 12: Establishes as the bill's effective date as January 1, 2022. MR. BARNHILL deferred to Mr. Parsons to offer the Department of Natural Resources' (DNR) perspective of the bill. 4:17:56 PM MARTY PARSONS, Director, Division of Mining, Land, and Water, Department of Natural Resources (DNR) Anchorage, Alaska, described SB 84 as a means to fulfill the constitutional mandate to help develop the land and resources of Alaska in the public interest. He said he views the voucher as a win for both individuals and the state treasury. It is an opportunity to get more land into the hands of Alaskans. CHAIR SHOWER asked how many acres of state land are eligible under the state land sale program and where it is located. 4:20:59 PM MR. PARSONS stated that just over 2 million acres are classified as "settlement" and could be included in the land sale program. Much of it is remote, but there is some near Tok, Glenallen, Wasilla, and Fairbanks. He noted the lack of infrastructure in the state and said the department has tried to ensure that the land it offers has buildable sites. CHAIR SHOWER asked him to talk about the size of the properties relative to the size of the PFD. MR. PARSONS said five-acre parcels are about the average size and the cost is about $3,000 per acre or $15,000 for a five-acre parcel. He also noted the state's generous financing program for state land sales. CHAIR SHOWER asked if unrelated individuals could pool resources to purchase a piece of land. MR. PARSONS said he doesn't believe there are limitations but he would defer to Mr. Barnhill. 4:26:40 PM MR. BARNHILL clarified that the legislation does not prevent individuals from pooling their land vouchers. CHAIR SHOWER asked how the land is titled. MR. BARNHILL said he assumes the title would be the same as would be granted in any other state land sale, but he would defer to Mr. Parsons. MR. PARSONS confirmed that the title would be similar to any other land purchased from the state. SENATOR HOLLAND asked how often the previous PFD voucher program was used. MR. BARNHILL replied that legislation was never enacted into law. SENATOR HOLLAND asked if the money stays in the Earnings Reserve Account (ERA) or transferred "to some portion of the state for the property." 4:28:24 PM MR. BARNHILL referred to the hypothetical cash flow on page 4 of the PowerPoint to answer the question. He noted that he prepared the hypothetical at the committee's request last year when it considered similar legislation. He clarified that the hypothetical was not a projection; it showed how the money moves. The example shows a statutory PFD of $2,300 per person, actual appropriation of $1,000 per person, and the land voucher under this bill of $4,600 per person. Of the 640,000 PFD applicants, 600,000 elect the cash PFD and 40,000 elect the PFD land voucher. The total amount appropriated from the ERA to the general fund (GF) to the PFD fund is 640,000 times $1,000 or $640 million. Of this, cash PFDs total $600 million, $40 million lapses to the GF because of land voucher elections (40,000 times $1,000 or $40 million), and the face value of the land vouchers is $4,600 per person times 40,000 participants or $184 million. The hypothetical assumes $300 million in land sales to which $184 million in land sales is applied, leaving $116 million that the purchasers would need to supply from personal resources to complete the $300 million purchase. The result of this hypothetical shows $116 million in cash from the purchases plus $40 million in unelected cash PFDs or $156 million going to the general fund. MR. BARNHILL displayed a mock-up of the land voucher to conclude the presentation. CHAIR SHOWER found no questions and asked if he had any closing comments. MR. BARNHILL reiterated that the purpose of SB 83 is to get state land into the hands of Alaskans and move residents to a higher degree of self-sufficiency. CHAIR SHOWER stated support for the concept then highlighted the cost barrier to access the land. 4:33:10 PM CHAIR SHOWER held SB 84 in committee.