HOUSE JUDICIARY STANDING COMMITTEE January 19, 1994 1:15 p.m. MEMBERS PRESENT Rep. Brian Porter, Chairman Rep. Jeannette James, Vice-Chair, arrived later Rep. Pete Kott Rep. Gail Phillips Rep. Joe Green Rep. Cliff Davidson, arrived later Rep. Jim Nordlund COMMITTEE CALENDAR Confirmation of Reappointment of SHIRLEY MCCOY to the SELECT COMMITTEE ON LEGISLATIVE ETHICS (joint with Senate Judiciary, taped and transcribed separately). HB 75 "An Act relating to qualifications for permanent fund dividends; and providing for an effective date." HEARD AND HELD IN COMMITTEE FOR FURTHER CONSIDERATION HB 49 "An Act relating to facsimile absentee ballot application and facsimile absentee voting." NOT HEARD - HELD OVER WITNESS REGISTER REP. ELDON MULDER Alaska State Legislature Capitol, Room 116 Juneau, Alaska 99811 Phone: 465-2647 Position Statement: Prime Sponsor of HB 75 TOM WILLIAMS, Director Department of Revenue Permanent Fund Division P.O. Box 110460 Juneau, Alaska 99811-0480 Phone: 465-2323 Position Statement: Testified on behalf of Permanent Fund Division regarding HB 75 TOM ANDERSON, Legislative Aide Rep. Terry Martin's Office Alaska State Legislature Capitol, Room 411 Juneau, Alaska 99811 Phone: 465-3785 Position Statement: Testified in favor of HB 75 LYNN ZEILER 22611 McManus Dr. Anchorage, Alaska 99567 Phone: 688-6446 Position Statement: Testified in favor of HB 75 (Testified via teleconference) JANELE BOLLS P.O. Box 212326 Anchorage, Alaska 99521 Phone: 333-0823 Position Statement: Testified in favor of HB 75 (Testified via teleconference) KENNETH KIRK Attorney at Law 900 W. 5th Ave., #730 Anchorage, Alaska 99501 Phone: 279-1659 Position Statement: Testified in favor of HB 75 (Testified via teleconference ) PREVIOUS ACTION BILL: HB 75 SHORT TITLE: QUALIFICATIONS FOR PFD'S BY MILITARY BILL VERSION: SPONSOR(S): REPRESENTATIVE(S) MULDER,Martin JRN-DATE JRN-PG ACTION 01/20/93 114 (H) READ THE FIRST TIME/REFERRAL(S) 01/20/93 114 (H) MLV, JUDICIARY, FINANCE 02/25/93 (H) MLV AT 10:00 AM CAPITOL 17 03/03/93 (H) MLV AT 05:00 PM CAPITOL 17 03/03/93 (H) MINUTE(MLV) 03/05/93 545 (H) MLV RPT 2DP 3NR 03/05/93 545 (H) DP: MULDER, FOSTER 03/05/93 545 (H) NR: WILLIS, NAVARRE, KOTT 03/05/93 545 (H) -FISCAL NOTE (REV) 3/5/93 01/19/94 (H) JUD AT 01:15 PM CAPITOL 120 BILL: HB 49 SHORT TITLE: ABSENTEE BALLOTING BY FAX BILL VERSION: SPONSOR(S): REPRESENTATIVE(S) MARTIN,Brice JRN-DATE JRN-PG ACTION 01/13/93 52 (H) READ THE FIRST TIME/REFERRAL(S) 01/13/93 53 (H) STATE AFFAIRS,JUDICIARY,FINANCE 01/20/93 117 (H) COSPONSOR(S): BRICE 01/28/93 (H) STA AT 08:00 AM CAPITOL 102 01/28/93 (H) MINUTE(STA) 01/30/93 (H) STA AT 08:00 AM CAPITOL 102 01/30/93 (H) MINUTE(STA) 02/09/93 (H) STA AT 08:00 AM CAPITOL 102 02/11/93 (H) STA AT 08:00 AM CAPITOL 102 02/11/93 (H) MINUTE(STA) 02/13/93 (H) STA AT 08:00 AM CAPITOL 102 02/18/93 (H) STA AT 08:00 AM CAPITOL 102 02/18/93 (H) MINUTE(STA) 03/02/93 (H) STA AT 08:00 AM CAPITOL 102 03/02/93 (H) MINUTE(STA) 03/04/93 (H) STA AT 08:00 AM CAPITOL 102 03/04/93 (H) MINUTE(STA) 03/05/93 541 (H) STA RPT CS(STA) NEW TITLE 1DP 1DNP 5NR 03/05/93 541 (H) DP: VEZEY 03/05/93 541 (H) DNP: ULMER 03/05/93 541 (H) NR: B.DAVIS,OLBERG, G.DAVIS, SANDERS,KOTT 03/05/93 541 (H) -FISCAL NOTE (GOV) 3/5/93 03/05/93 541 (H) REFERRED TO JUDICIARY 04/21/93 (H) JUD AT 01:00 PM CAPITOL 120 01/19/94 (H) JUD AT 01:15 PM CAPITOL 120 ACTION NARRATIVE SENATE TAPE 94-2, SIDE A Number 000 The joint meeting of the House and Senate Judiciary Standing Committees was called to order at 1:25 p.m., on January 19, 1994, for the reconfirmation hearing of SHIRLEY McCOY to the Select Committee on Legislative Ethics. Representative Brian Porter and Senator Robin Taylor co-chaired the meeting. This portion of the meeting was transcribed separately. The joint meeting was adjourned at 2:00 p.m. HOUSE TAPE 94-5, SIDE A Number 000 CHAIRMAN PORTER called the individual House Judiciary meeting to order at 2:05 p.m. Chairman Porter noted the meeting was teleconferenced. He stated for the record that Reps. Green, Kott, Nordlund and G. Phillips were in attendance. He then brought up HB 75 for discussion. HB 75: QUALIFICATIONS FOR PFD'S BY THE MILITARY Number 046 REPRESENTATIVE ELDON MULDER, Prime Sponsor of HB 75, presented the committee with a proposed committee substitute and said the reason the bill changed was because of a substantial problem they thought they had solved a couple years back. He discussed working as a legislative aide for former Senator Shirley Craft when they became aware of a problem that spouses of military personnel who are non- residents, but who's spouse and dependents were residents, were being automatically thrown into review and actually being denied the Permanent Fund Dividend (PFD). He said they felt that was discriminatory and not fair, and the legislature amended the statutes to say that just because a spouse is not a resident, doesn't necessarily mean the other spouse is not a resident. He cited a case in point where a long-time Alaskan marries a person serving in the military, and is then stationed outside of Alaska or overseas, and plans on coming back to Alaska, met the two year residency requirement, but is denied the PFD. Number 100 REP. MULDER continued, saying they thought they had closed that loophole; however, it became apparent through the course of the year that the loophole wasn't closed quite far enough. He said while it did solve the problem for the in- state dependents and spouses of military personnel, those out-of-state are now being thrown into review. Rep. Mulder explained that the number of people it impacts is relatively unknown, although it's estimated in a court case to be 800 or more. He said that the Department of Revenue (DOR) will tell the committee that the proposed legislation would dramatically open the floodgate, but he disagrees. Rep. Mulder said what he thinks the department is saying they are presuming guilt, while his position with this legislation is presuming innocence. He added that an Alaskan leaving the state with a non-resident military spouse has every right to receive a PFD, provided they meet the requirements, and should not automatically be thrown into review. REP. MULDER said HB 75 closes that loophole by amending AS 42.23.015(A) to state that the residency of an individual spouse may not be a factor relied upon by the commissioner in determining the residency of an individual. He added that previously this section stated that the residency of an individual spouse may not be the principle factor relied upon by the commissioner for the determination of residency. Rep. Mulder said additionally the legislation amends AS 43.23.095(A) dealing with the acceptable reasons for absence from the state, and in subsection (C) instead of "military service" the section would read "service in the military forces of the United States or to a company as a spouse or a dependent a state resident or non-resident serving in the military forces." Number 175 REP. KOTT asked, If two non-Alaskan's come to Alaska and one chooses Alaska residency, is that allowable or a problem? Number 196 REP. MULDER replied that Rep. Kott should direct his question to the department, but he thinks it is allowable, if the intent is there to change residency. Number 236 REP. KOTT asked if the CS affects people that come to the state and spend a number of years here and then leave for their home state. Number 284 REP. MULDER suggested looking at the first paragraph of the department's position paper, and that it is a consideration. He added that a non-resident's action shouldn't affect a resident's intention. Number 300 REP. KOTT said he felt it should be a consideration, although not necessarily the prime consideration. Number 337 REP. MULDER responded that currently the provision was putting an overly harsh interpretation on families, which shouldn't be the case until they show intent, or take actions to show they are not going to remain Alaskans. Number 357 REP. PHILLIPS referred to page 1, line 11, which states "however the residency of an individual spouse may not be a factor relied upon by the commissioner in determining residency," and asked if this provision applied not only to military personnel, but someone that's at school, or in the peace corp, etc., or is it just for the military. REP. PHILLIPS continued saying that the way it is written and the title of the bill, it starts out talking about people just being gone, but then moves on to discuss people that are only absent for the following reasons, and asked why wouldn't it apply to someone going out to school. Number 380 REP. MULDER replied that Rep. Phillips was right, the first paragraph does affect everybody, and the second page directs it only towards the military. Number 395 TOM WILLIAMS, Director, Permanent Fund Division, Department of Revenue (DOR), testified regarding the CS, and mentioned drafting a zero fiscal note, which points out several problems the department has with the legislation. He said Section 1 and Section 2 are problems. He dealt with Section 1 first. Mr. Williams discussed the historical issue of dealing with spouses with two different residencies and the issue of intent. He described legislation which amended section 15(a) to make sure that the PFD Division would not inappropriately review an individual's eligibility based on the residency of their spouse. Mr. Williams said it was clear that the intent of the legislation (SB 327) was that the department could look at the intent of an individual; a spouse's non-residency would be looked at, but it would not be the main factor. Number 450 MR. WILLIAMS discussed a "piggyback" factor whereby a non- resident spouse could piggyback on a resident spouse when out on allowable absences and receive the PFD, which current regulations reflect. He said this legislation would revert that to basically exclude the allowable absence piggyback provision for all individuals. Mr. Williams discussed a recent court decision in Zeiler v. the State of Alaska, where Judge Dana Fabe upheld the department's position with respect to allowable absences and whether the department is unjustly denying dividends to individuals who are absent with non-resident spouses. This legislation would reaffirm that in statute. Number 518 CHAIRMAN PORTER asked Mr. Williams about Judge Fabe's decision, which would seem to indicate that the department may not use the residency or lack thereof of the spouse to determine the other's residency. Number 523 MR. WILLIAMS said the court decision said it can't be the principle factor with respect to the piggybacking of the absence being the major factor in whether or not somebody qualifies for a PFD. Number 530 CHAIRMAN PORTER asked what was the fact situation of that case. Number 533 MR. WILLIAMS replied that the fact situation of the Zeiler case was an individual Alaska resident married a non- resident, and when the family left the state, she continued to apply for dividends, and the department identified her as ineligible and she challenged it on the basis that she was accompanying a non-resident member of the military and the court upheld the department's assessments. Number 554 REP. NORDLUND spoke regarding Section 1 and said the point Mr. Williams raised was a good one and suggested that Rep. Mulder would not want that to happen, and there must be a way of rewording the legislation to achieve what Rep. Mulder wants. Number 563 MR. WILLIAMS said the real solution is probably to bifurcate the definition of residency in the PFD statutes and bifurcate that from the absence provision to make it clear that absence is a condition of eligibility, not a condition of residency. He said then the statute as written would reflect that it's not the principal factor and would work fine, because you wouldn't look at absences when you look at residency. MR. WILLIAMS then directed his testimony to Section 2 of HB 75, which the department sees as creating several problems, including the scenario where two non-residents move into the state and the husband remains a non-resident while the wife and kids declare their residency. He said they are definitely eligible while they are in state. Mr. Williams said HB 75 would say the state will continue to pay you when you leave, and the department thinks that opens the door potentially to a number of people taking that option. MR. WILLIAMS went on to say that Mr. Mulder was correct in discussing intent, and the department can only base their decision on a person's external actions, and so they look for actions that are consistent with what they declare. He said that leaving with a non-resident, while there are exceptions to the rule, but in the general and broad sense, it's not consistent with somebody's intent to return and remain permanently. Mr. Williams said the department sees that as a very incongruous declaration, and there is a large economic incentive for a large family who declares Alaska residency. Number 637 REP. PHILLIPS asked, For the record, how many check's were issued last year, and how many cases of fraud did the department institute and follow through on last year? Number 640 MR. WILLIAMS responded that the department had roughly 549,000 applications filed for 1993; and of those about 525,000 are eligible; and they have denied about 23,000, but not all of those involved fraud. Number 649 REP. PHILLIPS asked roughly how may fraud cases were filed. Number 653 MR. WILLIAMS replied that in the last year they have probably had six to eight individual cases, some of which span several years, so they involve multiple dividends. Number 657 REP. PHILLIPS asked how many fraud cases are pending that have not been acted on yet. Number 660 MR. WILLIAMS said he doesn't have a count on the fraud cases but they have probably 240 applications that are under criminal investigation. Number 671 REP. PHILLIPS asked, Of the 23,000 that were denied last year, what percentage of those have you in the past year gone back and reinstated? Number 676 MR. WILLIAMS said there was an appeal process and there were about 5,000 appeals for 1993; so of 23,000 they have about 5,000 appeals, and the overturn rate at this time is around 20 percent. REP. GREEN asked about the length of time between filing, being denied, appealing, and coming to a determination. Number 700 MR. WILLIAMS said the appeal process can take up to a year. Number 738 REP. KOTT asked, If a resident married a non-resident and then they left the state, can the department check up on them because they have left? Number 749 MR. WILLIAMS said it's not a matter of residency, rather a matter of eligibility. He said the short answer is they are not on allowable absence if they leave with a non-resident, and the only piggyback that there is, or was, deals with leaving with another resident who is on an allowable absence. Number 770 REP. KOTT asked about a particular case, say an Alaska Native, who leaves with a non-resident, and now that person is not eligible for a PFD? Number 778 MR. WILLIAMS said the solution to that is to have the non- resident declare Alaska residency as well, and if they leave under an allowable absence, then they will be entitled to PFD's. Number 795 REP. NORDLUND said he supports the bill, but is concerned about an individual leaving with a non-resident and never coming back to Alaska to live. Number 801 MR. WILLIAMS replied that you have to be physically present in the state every two years. Number 810 REP. NORDLUND said he thinks that some people may abuse the system. Number 813 REP. KOTT asked if the department could place PFD's into a trust fund for those in question? Number 826 MR. WILLIAMS replied that anything is possible, but there would be administrative costs involved. He also said that the purpose of PFD's is to encourage people to maintain residency in Alaska. Number 861 TOM ANDERSON, Legislative Aide to Representative Terry Martin, Prime Sponsor of HB 49, explained that Rep. Martin had previously had legislation doing basically the same thing. Mr. Anderson reiterated Rep. Martin's support for HB 75 and asked the committee to support the bill. TAPE 94-5, SIDE B Number 102 REP. KOTT said he thought the fraudulent rate was probably closer to 15 percent. He asked how many of Rep. Martin's constituents were getting checks. Number 160 REP. MULDER again reiterated his testimony in favor of HB 75. Number 180 LYNN ZEILER testified on teleconference from Anchorage in favor of HB 75 and urged the committee to support it. She said she had been a resident of Alaska since 1960 and married a military man in 1974; and in 1990, the PFD Division told her to pay back all of the dividends she had received. MS. ZEILER read a statement from PAT WILSON supporting the legislation. Number 376 REP. KOTT expressed his concern about the number of out-of- state people who come to Alaska to try and get a PFD. Number 399 JANELE BOLLS, from Anchorage, testified in support of HB 75 and said she had been married to a military man in 1974 and has been wrongly turned down by the department for PFD's in 1985 through 1988. Number 497 The committee discussed military personnel and how they can change their residency to Alaska. Number 558 KENNETH KIRK, attorney for the declaratory group, testified in support of HB 75 and said in his opinion it was alright to drop Section 1, so long as Section 2 was left intact. Number 659 CHAIRMAN PORTER asked Mr. Kirk if a spouse and dependents of a person in the military come to Alaska as non-residents, and one spouse establishes residency, they are covered under Section C of the legislation. He asked if this provision would also cover a resident that marries a non-resident. Number 682 MR. KIRK said certain requirements must be met. Number 687 REP. PHILLIPS moved to adopt the Committee Substitute for House Bill 75. The motion was seconded. Number 701 REP. NORDLUND asked Rep. Mulder if he would be willing to strip Section 1 out of the bill. Number 705 REP. MULDER replied that this was a new issue to him, so he couldn't give a definitive answer. He asked Tom Williams from the PFD Division for his opinion. Number 721 MR. WILLIAMS replied that the legislation still needs a fix, even if Section 1 is dropped, but it could be solved by separating residency from eligibility, and it needs to be in statute. Number 732 REP. MULDER asked Mr. Williams, If Section 1 was deleted, would Section 2 solve the military issue? Number 737 MR. WILLIAMS replied that it would create an inconsistency. Number 741 MR. KIRK said he thought it could be solved through intent language. Number 751 MR. WILLIAMS said he didn't believe intent language would solve the problem; absences need to be separated from residency. Number 758 CHAIRMAN PORTER asked Rep. Mulder to adopt language to address the problem and perhaps look at doing another committee substitute. Number 766 REP. JAMES voiced a concern that the military is being treated better than other Alaska residents, and she thinks all Alaskans should be treated equally. Number 781 CHAIRMAN PORTER held HB 75 for action at a future date. CHAIRMAN PORTER also held over HB 49 due to a lack of time for a comprehensive hearing. ADJOURNMENT CHAIRMAN PORTER adjourned the meeting at 3:10 p.m.