HOUSE STATE AFFAIRS STANDING COMMITTEE March 23, 1999 8:06 a.m. MEMBERS PRESENT Representative Jeannette James, Chair Representative John Coghill Representative Scott Ogan Representative Jim Whitaker Representative Bill Hudson Representative Beth Kerttula Representative Harold Smalley MEMBERS ABSENT All members present COMMITTEE CALENDAR * SPONSOR SUBSTITUTE FOR HOUSE BILL 96 "An Act relating to deposits to the Alaska permanent fund; and providing for an effective date." - MOVED SSHB 96 OUT OF COMMITTEE * HOUSE BILL 132 "An Act relating to allowable absences from the state for purposes of eligibility for permanent fund dividends; and providing for an effective date." - HEARD AND HELD; ASSIGNED TO SUBCOMMITTEE * HOUSE BILL 55 "An Act relating to eligibility for the longevity bonus; and providing for an effective date." - HEARD AND HELD (* First public hearing) PREVIOUS ACTION BILL: HB 96 SHORT TITLE: DEPOSITS TO THE PERMANENT FUND SPONSOR(S): REPRESENTATIVES(S) ROKEBERG, Phillips, Green Jrn-Date Jrn-Page Action 2/17/99 237 (H) READ THE FIRST TIME - REFERRAL(S) 2/17/99 237 (H) STATE AFFAIRS, FINANCE 3/05/99 367 (H) SPONSOR SUBSTITUTE INTRODUCED 3/05/99 367 (H) READ THE FIRST TIME - REFERRAL(S) 3/05/99 367 (H) STA, FINANCE 3/10/99 417 (H) COSPONSOR(S): PHILLIPS 3/15/99 462 (H) COSPONSOR(S): GREEN 3/23/99 (H) STA AT 8:00 AM CAPITOL 102 BILL: HB 132 SHORT TITLE: PERMANENT FUND ALLOWABLE ABSENCES SPONSOR(S): REPRESENTATIVES(S) COWDERY BY REQUEST Jrn-Date Jrn-Page Action 3/11/99 428 (H) READ THE FIRST TIME - REFERRAL(S) 3/11/99 428 (H) STA, FINANCE 3/23/99 (H) STA AT 8:00 AM CAPITOL 102 BILL: HB 55 SHORT TITLE: LONGEVITY BONUS ELIGIBILITY SPONSOR(S): RULES BY REQUEST OF THE GOVERNOR Jrn-Date Jrn-Page Action 1/22/99 61 (H) READ THE FIRST TIME - REFERRAL(S) 1/22/99 61 (H) STATE AFFAIRS, HES, FINANCE 1/22/99 61 (H) 2 FNS (ADM, DHSS) 1/22/99 61 (H) ZERO FISCAL NOTE (DHSS) 1/22/99 61 (H) GOVERNOR'S TRANSMITTAL LETTER 3/23/99 (H) STA AT 8:00 AM CAPITOL 102 WITNESS REGISTER REPRESENTATIVE NORMAN ROKEBERG Alaska State Legislature Capitol Building, Room 24 Juneau, Alaska 99801 Telephone: (907) 465-4968 POSITION STATEMENT: Sponsor of HB 96. PETER TORKELSON, Researcher to Representative Cowdery Alaska State Legislature Capitol Building, Room 204 Juneau, Alaska 99801 Telephone: (907) 465-6848 POSITION STATEMENT: Presented HB 132 on behalf of Representative Cowdery. BRAD ESARY 3920 Alitak Bay Circle Anchorage, Alaska 99515 Telephone: (907) 344-1931 POSITION STATEMENT: Testified in Support of HB 132. DEBORAH VOGT, Deputy Commissioner Department of Revenue P.O. Box 110400 Juneau, Alaska 99811-0400 Telephone: (907) 465-2300 POSITION STATEMENT: Provided information on HB 132. PAM LaBOLLE, President Alaska State Chamber of Commerce 217 Second Street Juneau, Alaska 99801 Telephone: (907) 586-2323 POSITION STATEMENT: Suggested that the merchant marines be included in HB 132. ALISON ELGEE, Deputy Commissioner Department of Administration P.O. Box 110200 Juneau, Alaska 99811 Telephone: (907) 465-2200 POSITION STATEMENT: Presented HB 55, on behalf of the Governor. DAN KECK, Chairman State Legislative Committee for AARP P.O. Box 938 Sitka, Alaska 99835 Telephone: (907) 747-3908 POSITION STATEMENT: Testified in opposition to HB 55. ACTION NARRATIVE TAPE 99-16, SIDE A Number 0001 CHAIR JEANNETTE JAMES called the House State Affairs Standing Committee meeting to order at 8:06 a.m. Members present at the call to order were Representatives James, Coghill, Ogan, Whitaker, Kerttula and Smalley. Representative Hudson arrived at 8:25 a.m. HB 96-DEPOSITS TO THE PERMANENT FUND CHAIR JAMES announced SSHB 96, "An Act relating to deposits to the Alaska permanent fund; and providing for an effective date," is before the committee. Number 0015 REPRESENTATIVE ROKEBERG advised the committee members that HB 96 will help close the fiscal gap by a statutory reallocation where the funds generated from mineral royalties and bonus lease sales are deposited. House Bill 96 repeals a provision from the 1980 legislation passed in conjunction with the entire rewrite of the Permanent Fund Corporation's operating procedures and policies. At that time the amount of general fund revenues was $4.07 billion. REPRESENTATIVE ROKEBERG said that in the early 80s the state was "awash in our cash." The legislature directed and allocated more royalty and bonus revenues into the corpus and principal of the permanent fund rather than going directly into the general fund. He pointed out that a reason they were able to do that, is that the vast majority of oil fields (that were discovered on the North Slope) were excluded from the calculations as well as those fields in the Cook Inlet Region (an area that was still having a substantial contribution to state revenue). Therefore, when the decision was made to make the reallocation it had a limited impact on the budget allocation. And frankly, to this day, it has very little impact. Representative Rokeberg further stated, "That's an example of what it takes to develop resources in the state - sometimes literally decades before leases are made, exploration takes place and with success any revenues flow toward the state and the other members of the state of Alaska, our citizens." Number 0095 REPRESENTATIVE ROKEBERG applauded the legislature for making the statutory changes to the permanent fund and directed the member's attention to the "History of Alaska's Permanent Fund," Rural Research Agency, Alaska State Senate and encouraged the members to read it. [Not included in the packet]. REPRESENTATIVE ROKEBERG referred to Section 15 of the Alaska Constitution states that: At least twenty-five percent of all mineral lease rentals, royalties, royalty sale proceeds, federal mineral revenue sharing payments and bonuses received by the State shall be placed in a permanent fund the principal of which shall be used only for those income-producing investments specifically designated by law as eligible for permanent fund investments. All income from the permanent fund shall be deposited in the general fund unless otherwise provided by law. Number 0128 REPRESENTATIVE ROKEBERG explained that the legislature is providing by law the allocation to the statutory or constitutional minimum of 25 percent which the Prudhoe Bay field, and most other fields in the state, are currently producing. REPRESENTATIVE ROKEBERG referred to the report "Estimated Impact on the General Fund if Permanent Fund Contributions Were at 25 Percent of Mineral Income," Legislative Research, February 16, 1999 [included in the packet]. The spreadsheet lists royalties for most of the fields that are entered into as leases after December 1, 1979. Approximately $5.5 million would have been realized in this current fiscal year if HB 96 were in place. He said coal leasing and other mineral revenues are not listed and believes bonus amounts were also not included. REPRESENTATIVE ROKEBERG pointed out that HB 96 has an effective date of July 1, therefore, it would impact fiscal year 2000. He said, "And you'll see in column A, that this is current price projections that are being used for the Legislative Finance [Committee] and the Governor in calculating our current budget. And it shows a $12.50 ANS west coast 'basket price' and projects over on the far-right column to $9.5 million. So, madam chair, this is a relatively small and minor amount. ... This is one tile in the whole mosaic and that what we have to do to put together to recognize the problems that are facing the state's fiscal year right now." Number 0181 REPRESENTATIVE ROKEBERG noted the report also indicates, that during the next 15 years, the revenues derived from this statutory change will generate $16 million which shows how the revenues would go up. REPRESENTATIVE ROKEBERG stated, "I think the important thing about this particular legislation right now is that number one it's symbolic in terms of recognizing our needs to have funds in the general fund. And secondly, any future development that we undertake to replace the diminishing production at Prudhoe Bay should be, I believe at the 25 percent level and not the 50 percent level. ... This includes potential federal revenue. There's the bill before the U.S. Congress right now to have a multi-state revenue sharing for ... offshore of the Outer Continental Shelf oil development. And if any federal royalties are received, for example into our 90-10 split - so it would be allocated at 25 percent instead of 50 percent. So any future income we could receive from the federal government would also be at the 25 percent to the permanent fund and 75 percent to the general fund." Number 0221 REPRESENTATIVE ROKEBERG said the first area wide lease sale, of June 1998, generated a net of $53 million in closed bids to the State of Alaska. Had HB 96 been in place, we would have realized an additional $13 million into the general fund - now they go into the permanent fund. He further stated, "I believe the legislature can make the case that, currently we need the money and in the future we'll need money for our operating account. And from an economic standpoint, this does nothing ... more than change the allocation because I would suggest to the committee that we can't save our way to prosperity by putting money into the permanent fund and frankly getting little or no value out of it with the exception of the permanent fund dividend." Representative Rokeberg said he thinks making a change in that allocation will have very minimal (indisc.) impacts. REPRESENTATIVE ROKEBERG said the director of Communications, Alaska Permanent Fund Corporation, prepared an analysis of the impact on the dividend for HB 96, which includes the proposed $4 billion transfer from the corpus of realized earnings (which the Governor made in the State of the State Address). The director's short response (March 22, 1999) was that the differential was so minimum he didn't even make a difference. He said ... based on our financial analysis, the impact would be less than $10 difference over five years in either case. REPRESENTATIVE ROKEBERG indicated that the public may accuse him of raiding the permanent fund which he is doing nothing of the kind. He suggested that the legislature use its constitutional mandated power (indisc.) appropriation. Its right to change statutory allocations and that's what HB 96 does. Number 0287 REPRESENTATIVE OGAN referred to an article regarding the use of the earnings reserve of the permanent fund. He said, "As you know, the legislature has the authority to appropriate with a simple majority vote, and it's simply the left over income after we pay dividends and inflation proof." He indicated that, in every instance, the press referred to it as "the permanent fund." This money isn't the permanent fund because it has not been deposited yet. He asked Representative Rokeberg if HB 96 would get fair play in the press. REPRESENTATIVE ROKEBERG remarked that HB 96 deals with the allocation of deposits either in the principal of the permanent fund or the general fund. It remains to be seen what type of impact it will have. REPRESENTATIVE ROKEBERG mentioned he had recently conducted a survey in his district. He said question 19 shows that people recognize what type of financial condition the state is in. Alaska's Constitution mandates that 25% of oil and mineral leases, royalties and bonuses are deposited into the principal of the Permanent Fund. In 1980, the Legislature increased that to 50% of all new leases. If we repealed this law and went back to the original 25%, an extra $12 million a year would be generated to help close the fiscal gap. Do you support changing the law back to the Constitution's 25%? Yes 164 No 72 REPRESENTATIVE OGAN stated, "I just look at the monies that are available to us, in the Constitutional Budget Reserve, the Earnings Reserve which we can spend with a simple majority. We have a tremendous asset in Alaska Housing [Finance Corporation], AIDA [Alaska Industrial Development and Export Authority], [Alaska] Science and Technology [Foundation] - we're talking billions, and billions, and billions of dollars." He said if his lifestyle was exceeding his income, he would make adjustments before he started looking at cutting off the revenue stream into his retirement account. He indicated that the legislature has basically scratched the surface with the changed in lifestyle but hasn't done a fundamental reorganization and reprioritization. Therefore, he has a hard time supporting HB 96. Number 0405 REPRESENTATIVE HUDSON said he recalled when the legislature felt so flush that we decided that we could increase our contributions into the permanent fund from 25 percent to 50 percent on all new leases. He also mentioned the state's generosity through the permanent fund dividend program. REPRESENTATIVE HUDSON further stated, "We have shown the savings of this state, something that we should all be very proud of as well as our predecessors, because I think that when you can put $25 billion aside and still give away billions of dollars to the people that reside in the state of Alaska, totally eliminate any income tax in their behalf, have no statewide sales tax or other revenue generating things, and over the last number of years cut hundreds of millions of dollars out of your spending plan, I think that we've probably done a pretty noble thing. And now we are looking at a billion dollars deficit between what I consider to be largely essential services and the revenue stream that is coming in from our taxes and royalties and other receipts. To consider going back to the 25 percent from the 50 percent in the generous days is not unrealistic and so, ... I don't see how in the world we cannot look at something like this as a part of the total fix that we have to come up with here. So, I for one believe that it is timely and I'm quite supportive - I want to see the whole plan before I make my final decision." Number 0446 REPRESENTATIVE SMALLEY stated that hundreds of millions of dollars in cuts have also led to some increased taxes at the local level which is due to reductions in revenue sharing and municipal assistance. He said he agreed with Representative Hudson and would probably support HB 96 as well. REPRESENTATIVE ROKEBERG said he agrees with Representative Ogan about the necessity for making reductions in state spending and that his survey shows overwhelmingly that the people of the state of Alaska desire reductions in spending. Representative Rokeberg further stated that, "And I support that and will continue to support that. The point in fact, madam chair, is that we can't cut $1.1 billion out of our budget. It's absolutely impossible. Anybody who thinks otherwise is dreaming. So we need to look at all areas and all avenues in order to build a long range plan - that the state is sustainable and have public acceptance. And, I think this bill is only one small part of that because it doesn't have a major impact now but will have in the future - I think for future fuel development". If future legislators want to change that, they have a right to do that. REPRESENTATIVE ROKEBERG said his number one goal is finding a solution to the state's problems but avoiding taxation both at the state and local levels. He reiterated that the impact of HB 96 will be minimal because we're just shifting an allocation, we're going from savings to appropriations. Number 0491 REPRESENTATIVE ROKEBERG said he disagrees with Representative Ogan characterization of the permanent fund as a retirement account because the permanent fund is for all generations and future generations of Alaskans. CHAIR JAMES mentioned no one had signed up to testify on HB 96. REPRESENTATIVE OGAN said a better clarification of the permanent fund would be a "rainy day account." The permanent fund was set up in case the state ran out of money or that it couldn't pay for services. He said Senator Stevens indicated that the Pacific Rim is recovering faster than anyone expected. The day after OPEC (Organization of Petroleum Exporting Countries) decides to cut back production, Alaska's prices could jump significantly. REPRESENTATIVE OGAN concluded that the legislature needs to be careful in planning because of possible short-term glitches in the oil prices. He said the state has enough savings accounts that the legislature doesn't need to make drastic changes to policy. Number 0546 CHAIR JAMES stressed that the state needs a long-term spending plan before we can have a long-term funding plan - and we're working on that as we speak. Chair James said, "In putting together a long- term spending plan, it is much easier to start at 2.2 than it is to start at 3 because I don't know how, without some magic, that we could cover an escalating $3.3 billion budget at this time. So, I think we can be real pleased with ourselves that we've been able to curb our spending and our appetite for money". She said she believes the legislature also needs to look at every little pot of money to see whether it should be put into one big pot. CHAIR JAMES referred to Representative Rokeberg's survey. She said, "I think it's up to us to be able to provide the public with the explanation of reality because we absolutely cannot cut ourselves clean and we cannot tax ourselves enough to solve this problem. So, it's going to take a combination of things and this is one of them. ... I like to avoid taxes as long as possible, and when we do put in taxes, I want to know that that is going to fill the gap." Number 0596 REPRESENTATIVE HUDSON moved to report SSHB 96 out of committee with individual recommendations and the accompanying zero fiscal note. There being no objection, it was so ordered. HB 132-PERMANENT FUND ALLOWABLE ABSENCES CHAIR JAMES announced HB 132, "An Act relating to allowable absences from the state for purposes of eligibility for permanent fund dividends; and providing for an effective date," is before the committee. Number 0617 PETER TORKELSON, Researcher, presented HB 132 on behalf of Representative Cowdery. He said the essential issue is equity. If state employees are allowed to work out-of-state for more than 180 days and still receive their dividend, why not private employees. Mr. Torkelson further stated that, "We believe that private employees are truly the backbone of our state's economy and should be afforded the same privileges and protection under law as state employees. These equity concerns we believe are addressed in HB 132." MR. TORKELSON explained that HB 132 is structured to only apply to a private employee who works instate at least part of the year, and one in which their employer certifies in writing that the employee was required to work outside of Alaska as a condition of employment. The intent is to only qualify people who really do live in Alaska and work out-of-state. He noted that Mr. Bradley Esary is a prime example because he works hard and brings his money back to Alaska. He is exactly the kind of productive citizen our economy needs to stay healthy. [Mr. Esary testifies later]. MR. TORKELSON pointed out that last year the Permanent Fund Dividend Division had 918 people who checked absence codes on their application which may indicate that they would fall into this category. Mr. Torkelson indicated that the application isn't specific enough to know exactly how many people were out for work or for other issues. Other than the 918 people, if we just assumed that 1,000 people got their dividends next year because of HB 132, all dividends statewide would only be reduced by $2.62. He said that it's a small expense for giving private employees the same status under the law that public employees now enjoy. Number 0659 REPRESENTATIVE KERTTULA announced that she may have a conflict due to the broadness of the bill. She reported that her sister is an out-of-state employee and benefits by this. REPRESENTATIVE OGAN pointed out that he has a constituent who is a merchant marine and is at sea more than 180 days a year. He asked if his constituent would be eligible under this provision. MR. TORKELSON replied that it is his understanding that the merchant marines would be eligible as long as he worked instate at least part of the year. And, if that means pulling into port and getting off the ship in Alaska, it is his understanding that he would be covered. He said it is the intent of HB 132 it to include merchant marines. REPRESENTATIVE OGAN implied that, if a person messes with the residency requirement, the Legal and Research Services Division (Legislative Affairs Agency) gets their dander up. He said he rewrote Title 16 "residency," which turned out to be a long and arduous process because there are a lot of people who would love to scam this money. He asked if there are safeguards to keep people from doing that if HB 132 is expanded. Number 0692 MR. TORKELSON replied that the legislature increased the penalty for fraudulent applications beyond simple fraud statutes. If someone makes a fraudulent application for the permanent fund, they are liable to lose all future permanent fund dividends and are required to repay all dividends they have received to date. This would also apply to an employer who fraudulently certifies in writing for the purpose of validating a fraudulent claim. Mr. Torkelson said they believe that those are substantial penalties to preclude this from being disproportionately abused. REPRESENTATIVE KERTTULA asked if HB 132 makes it retroactive to include 1997, 1998 and 1999. MR. TORKELSON noted that Section 2 makes it retroactive to 1997, 1998 and 1999. Number 0727 BRAD ESARY testified in support of HB 132 via teleconference from Anchorage. He said that he and his wife have been residents of Alaska for 23 years, they have raised three children and have four grandchildren, all of whom are residents. He mentioned that he pays taxes, has a CDL [commercial drivers license], served on a jury, purchased a vehicle and handgun permit. MR. ESARY explained that in 1997 his employer, of 18 years, lost the contract at Prudhoe Bay. Instead of traveling to the North Slope oil fields, Mr. Esary traveled for the same employer for short periods of time at various locations outside of Alaska and performed the same duties. He explained that his checks were directly deposit to Alaska and that all his living expenses were paid by his employer. Mr. Esary said he was astonished to learn that he was denied the 1998 permanent fund dividend because he was absent from the state over 180 days. To be exact, it was 191 days. MR. ESARY said, "I do not think that my need to work for a living is any different from that of a state employee. And, to treat a private sector - Alaskan resident any differently, I think needs to be corrected." REPRESENTATIVE HUDSON asked Mr. Esary if his family remains in Alaska when he works out-of-state. Number 0779 MR. ESARY replied that his family does remain in Alaska. Number 0791 DEBORAH VOGT, Deputy Commissioner, Department of Revenue, said that the legislature has taken away the commissioner's discretion in establishing additional allowable absences that are not on the statutory list. MS. VOGT stated that the Department of Revenue has the issue of administrative feasibility. She asked that the legislature draw lines that are clear and that are easy to administer. But, with the massive number of applications the department needs to be able to program the computer in a way that deals with recurring situations in a reasonable way, and temporary employees need to be able to handle these kinds of things. Ms. Vogt said, "So we're for clear lines - not fuzzy lines. And, unfortunately, I believe that the lines set up by this proposal [HB 132] are quite fuzzy." MS. VOGT noted that HB 132 will create more inequities than it cures. For example, some of the folks that she has seen (that have spent more than 180 days out-of-state) are self-employed. A poignant case is a fisherman, due to the collapse of the fishing industry, took a job fishing on a boat that was out-of-state for more than 180 days, but he didn't have an Alaskan employer who sent him out. Ms. Vogt said, "On the other hand, there may be people that this legislation doesn't intend to benefit - that can make a very strong argument that they would be entitled. We have a lot of multi-state employers, Alaska Airlines, BP [British Petroleum], folks that have businesses in many different parts of the world." Number 0830 MS. VOGT pointed out that the issue of where a person's true home is, is not always easy to discern. For example, folks may not have a family. An employee of Alaska Airlines may have an apartment in Anchorage and Seattle, he or she may be required to work in Anchorage for one month and to work in Seattle for ten months, and then is given a month off. She asked, what are we to determine about that person. MS. VOGT explained the department proposed 180-day rule (which was adopted), to provide a clean line that helped them distinguish between those folks that spend enough time in the state. The legislature has chosen to say it doesn't matter how long the military personnel and higher education staff are outside. But for the vast group of people who do travel, for a reason that's not on the list, the department needed some way to distinguish - among the many reasons that people are gone and to draw a line that could be defended. Ms. Vogt noted that this type of discretion is hard to administer. MS. VOGT said she recognizes, with all due respect to Representative Kerttula's sister, the inequity between state employment and public employment. She said she agrees that that's an issue that the legislature might want to pay attention to, however, she is not sure that HB 132 helps draw that line in the way that removes all the inequities. Number 0864 CHAIR JAMES said, "I really appreciate your concerns. And even though I've made the statement that, 'when we started walking down this road of allowing absences, we've walked ourselves into this big pit.' I've been told that most of the work in the Permanent Fund Dividend Division is dealing with appeals and almost every appeal is based on some absence - it doesn't necessarily fall into the issue. Would it be, that in the beginning we wouldn't have allowed any and that we would have said, 'To be here you get it, you don't be here you don't get it! But, one of the things is you can't go backwards." TAPE 99-16, SIDE B Number 0001 CHAIR JAMES continued, "We have to recognize that different people make their living different ways and so it shouldn't make any difference whether they have an employer or not. So, I agree that's an inequity that we wouldn't want to encourage here." She asked Ms. Vogt if she had any suggested language that would make it more encompassing or more fair. MS. VOGT responded, "I have thought about it a fair amount and I really can't figure out how to define it in a way that our folks can implement that reaches who you want to reach." It's often a very difficult determination to make. It's easy for a person who has lived in Alaska for 30 years and has a home and pays taxes. ... But a lot of people don't fit in that category, we've got folks who don't own homes in Alaska, who rent and who might rent during their employment outside as well. Ms. Vogt further stated, "And we really can't really look at the fact that someone has lived here for 25 years because that really discriminates against the person who came to Alaska last year and really has established, and intends to remain an Alaskan resident but also travels outside." She agreed with Chair James that we've started down a road with a lot of unintended consequences. CHAIR JAMES noted an inequity needs to be fixed. She said she believes there has been a piece of legislation introduced every year to make more people eligible for the permanent fund dividend. Number 0101 REPRESENTATIVE HUDSON asked if spouses, minor dependents, or disabled dependants, would also be eligible if he, she, or they decided to accompany this worker. MS. VOGT responded, "That's certainly the way it would work - the way the statutes and regulations are currently drafted. An accompanying family, of a person on an allowable absence is also eligible." REPRESENTATIVE HUDSON indicated that if a worker is out-of-state for greater than 180 days we don't know to what extent, it could be 200, 240 days, possibly up to one year. Number 0217 REPRESENTATIVE WHITAKER commented that if the question is truly equity, rather than open "Pandora's box" even wider, item 10 could be eliminated. serving as an employee of the state in a field office or other location; REPRESENTATIVE OGAN stated that the definition of "eligibility" (you are a state resident on the date of the application, was a state resident during the entire qualifying year) seems a little ambiguous. He indicated that people had houses in Alaska but were residents of another state, that they maintained their residency in order to obtain no-cost hunting tags and what not. He said, "It doesn't have anything in there about domicile. ... Domicile is a much tighter description. It says that, a domicile and residency is usually the same place, they're frequently used if they have the same meaning but they're not identical terms. Residence means living in a particular locality, but domicile means living in that locality with intent to make it a fixed and permanent home. And there's no reference to either in the language change here that we're proposing or any where in the eligibility requirements of domicile." MS. VOGT agreed that the word domicile is more restrictive than residency. She pointed out that the residency definition is located in the definition section of (indisc.--noise) 23 and it refers to residency definition in Title 1 which does have the element of intent. The definition of domicile implies that a person can only have one residence and cannot be a resident of more than one place at the same time. Number 0297 MS. VOGT also noted that it would be a per say disqualified if a person accepted to benefit in another state by a resident fishing license or resident tuition. Registering to vote or voting in another state is also a disqualification. She indicated that the department has trouble with welfare benefits because of the constitutional issues. It's very difficult to find a definition that you can easily apply without a lot of case-by-case analysis. Some of the Alaska Marine Highway employees have residences in both states and it's difficult to tell the difference in those folks. CHAIR JAMES said we could create equity, as Representative Whitaker said, by deleting number 10. REPRESENTATIVE KERTTULA asked Ms. Vogt if other exemptions have been made retroactive. Number 0357 MS. VOGT noted that the retroactivity provisions in HB 132 are quite troublesome - largely because they would allow folks to essentially come into the program whether they have applied or not in those past years. Last year the legislature adopted HB 2 [Permanent Fund Dividend Eligibility] which came about because the Permanent Fund Division had by regulation - always had an allowable absence for the spouse of a person who was allowably absent. However, the court decision said they couldn't do that because they couldn't infer the intent of one adult by the intent of that person's spouse. Ms. Vogt said, "So we were faced with a situation where we could pay the student or the military member and we could pay the kids, but we couldn't pay the spouse and that's an inequity that HB 2 intended to address. Because there were several versions of HB 2, we had been telling applicants over the years to make sure they kept their applications in because they might get legislation that would allow us to pay them. So HB 2 was retroactive in the sense that (indisc.--coughing) had applied the year before could be paid. But essentially those people were kind of all on notice." MS. VOGT further explained that, although Representative Cowdery's office has made attempts to determine the number of people that would be affected, the division didn't know how many didn't apply because they know that being out-of-state more than 180 days is too long. Number 0391 CHAIR JAMES remarked, "We're not supposed to do retroactive law anyway." MS. VOGT said that it would be very problematic. CHAIR JAMES asked, if a person is denied one year, he or she doesn't receive the dividend the next year. MS. VOGT said HB 2 [1998], did in an oblique way address that because it took these allowable absences out of the definition of residency and put them into the eligibility statute. She said that the result of that is a fairly technical analysis, and that the division now relies on the definition of residency in Title 1. If a person was out-of-state for more than 180 days, but did not establish residency somewhere else, that person will be eligible next year if he or she is in the state [HB 2]. CHAIR JAMES asked if HB 132 wasn't retroactive, would Mr. Esary be eligible for 1998. MS. VOGT replied that if Mr. Esary was already denied, he can't reopen his claim. Number 0459 REPRESENTATIVE OGAN said to use the definition of residence is not synonymous with domicile. He read the following statement, "Although the two terms are clearly closely related, a person may have only one legal domicile at one time but he may have more than one residence." If domicile was included in statute that says that the domicile was in the state would it clear the ambiguity about who's in and who's out? MS. VOGT noted that it would help her on a motion for reconsideration of a formal hearing denial. She said she is not sure it would help the person who's processing the applications. Domicile is more in line with what folks believe as appropriate for dividend eligibility. However, it doesn't necessarily distinguish between those "fuzzy cases." CHAIR JAMES remarked that it doesn't affect the issue of 180 days because the specific language states that more than 180 days is not acceptable. MS. VOGT agreed with Chair James. Number 0487 PAM LaBOLLE, President, Alaska State Chamber of Commerce, appeared before the committee. She stated that over the last few years, U.S.-flag vessel operators have made great efforts to train and recruit Alaskans for employment aboard U.S. merchant vessels serving in Alaska, coastwise, and in international trade. This undertaking includes raising a substantial endowment for scholarships to Alaskans attending the California Maritime Academy, securing a maritime union hiring hall in Anchorage, and developing a public/private partnership to offer maritime training and apprenticeship for Alaskans interested in a seagoing career. This undertaking has led to several dozen Alaskans finding high skill/fair-wage training and employment in the U.S.-flag merchant marine. MS. LaBOLLE said the permanent fund dividend issue is a problem for the merchant mariners because they are frequently absent from the state for more than 180 days. She pointed out that the Alaska State Chamber of Commerce would like dividend eligibility for merchant mariners who qualify for the permanent fund under the statute of the state regarding state citizenship and distribution of permanent fund dividends not withstanding their documented employment aboard merchant vessels in domestic or foreign waters. MS. LaBOLLE further stated, "Since Alaskans are proponents of local hire, and quality professional skill development, their efforts to provide this are hampered by the disqualification. Too often the fact this some times encourages them to just go ahead and relocate and stay out-of-state, and we feel that there's too much of an export already of Alaska talent. And, so we would like to do all we can to encourage these talented individuals to remain in the state." Number 0538 MR. TORKELSON noted the Department of Administration indicated that there are 18 out-of-state employees, which is a small number. He said, "Our position is essentially though that one is too many, I believe in the point we are making. The inequity is the issue and we would be more than happy to work with the committee to develop different language." CHAIR JAMES said she would like to assign HB 132 to a subcommittee. REPRESENTATIVE COGHILL told Mr. Torkelson that that number is going to be hard to substantiate because the State of Alaska also pays people to do fire suppression in the states of California and Oregon and could be out-of-state for a whole season. MR. TORKELSON noted there are 62 employees working for the Alaska Marine Highway, and that they reside in the Bellingham, Washington area. That they may, or may not claim to be residents. Number 0582 CHAIR JAMES assigned Representatives Ogan, Coghill and Smalley to the HB 132 subcommittee. [Representative Ogan will serve as Chairman]. HB 55-LONGEVITY BONUS ELIGIBILITY CHAIR JAMES announced that HB 55, "An Act relating to eligibility for the longevity bonus; and providing for an effective date," by request of the Governor, is before the committee. She mentioned she does not intend to move HB 55 out of committee today. Number 0600 ALISON ELGEE, Deputy Commissioner, Department of Administration, explained that HB 55 provides an income-cap in application for a longevity bonus program. It would allow people who made, as single people, less than $60 thousand, or as a married couple less than $80 thousand to continue to qualify for receipt of the longevity bonus. Individuals making an excess of that amount would be suspended from the program. They would not be disqualified forever if there was a change in the economic circumstances, they would be eligible if they had maintained every other residency provision of longevity bonus to get back on the program at whatever their suspended bonus amount was. MS. ELGEE pointed out that the Governor introduced HB 55 in an attempt to provide another means to reduce state spending. She said over half of the state's general fund spending is in pass- through programs that provide aid to individuals and local governments. These are formula programs because they're driven by statutory construct which dictates how much money is spent. To make an amendment to the longevity bonus program, the state would need a statutory change. Number 0624 MS. ELGEE further stated that, "The estimate of savings for this bill, is that we have approximately 8 percent of the seniors on the program that would end up losing the receipt of their longevity bonus as a result of this legislation. This is only an estimate. We do not collect income information in this state in any way to be able to absolutely verify that. What we are using is census data that is now 10 years old - looking at household incomes by age level in order to come up with that particular estimate." In addition to the savings that would accrue to the longevity bonus program, the department also pays close to $2 million in hold- harmless payment to recipients of SSI, supplemental social security income. The federal supplemental social security income program is written in such a way that if there is any kind of needs (indisc.), of a program like longevity bonus, the state would no longer have to pay the hold-harmless provision on the SSI side. They don't define what constitutes needs, so it is any kind of an income (indisc.), and would potentially save the state approximately $2 million in the hold-harmless payment. MS. ELGEE explained that the level was selected where the longevity bonus was not critical to an individual's ability to maintain financial independence. CHAIR JAMES announced a conflict because she is a longevity bonus recipient. [A majority of the other members declared a conflict in one way or another.] Number 0662 REPRESENTATIVE HUDSON asked how many people would lose their eligibility. MS. ELGEE replied there would be approximately 24 or 25 thousand individuals on the bonus program. REPRESENTATIVE HUDSON remarked that 4,000 to 5,000 Alaskans would be denied - anywhere from 250 down to 100 without regard of how long they lived here. MS. ELGEE replied that is correct, it would not make any judgement on residency whatsoever, it would just be based on income, income as reported on taxes. So, individual assets do not weigh into this calculation. REPRESENTATIVE HUDSON noted that the difficulty in assessing the needs of an elderly person is often not predicated strictly by their income, it can be that they may need dialyses or special medication for example. CHAIR JAMES mentioned the longevity bonus program is phased-out and is going down every year. The attitude of the folks on the longevity bonus program is that it is not a welfare program. Therefore, having to submit their financial data to qualify is objectionable and insulting to them. Probably those, who have been here the longest, are the ones with the highest income. They worked hard to get that, so they shouldn't be denied on that basis. Number 0714 DAN KECK, Chairman, State Legislative Committee for AARP testified in opposition to HB 55 via teleconference from Sitka. He said this is not a new issue. AARP feels that HB 55 is not in the best interest to the state of Alaska and most certainly not to the seniors of our state. MR. KECK said, "Back in 1993, we sat in a number of meetings discussing the idea of phasing this out and a lot of our people didn't agree, but the majority of us said, 'Well, looking at the best interest of the state in a long run, maybe we should go ahead and phase it out,' and we agreed to that. And we feel the phase- out program was working very well and should be left intact and let it go ahead and phase the program out over a period of years. We never thought of it as being a relief program or welfare program, and if we start putting a means test in this, then that's what it will wind up to be." MR. KECK concluded, "And, someone making $60 thousand or so might have problems that would give them less money than someone in the lower income that qualifies for welfare programs. So we don't want to put those people all in the same boat. So, we would just like to go on record as opposing this program, we'd like for you to keep us aware of what's going on. I didn't know about this until almost 10 o'clock last night ... or we would have had a lot of people across the state ready to testify. So, in the future, if this comes up again, we will rally the forces and let you know how we all feel about it." CHAIR JAMES informed Mr. Keck that HB 55 will be heard again on Thursday. Number 0745 MS. ELGEE stated that this provision would be administered as simply as possible. The longevity bonus program is pretty much on an honor system in terms of residence verification at this time. She said the department occasionally matches longevity bonus recipients to permanent fund dividend applicants or works with Legislative Audit to do spot checking. MS. ELGEE said if this legislation were to pass, the department would operate the financial eligibility in the similar fashion. People would be asked whether or not they had income in excess of the levels that were set by statute. They would have to make their records available on audit, but they would not have to submit their records as a part of the verification of that eligibility. CHAIR JAMES noted that the scary part for folks is that: The commissioner of Administration may by, by regulation, in order to verify gross income amounts, provide for access to records of a person who is applying for or receiving a bonus; and establish procedures for auditing gross income statements made by a person who is applying for or receiving a bonus; establish appropriate procedures for a hearing at the request of a person determined under this section to be ineligible for the bonus. CHAIR JAMES mentioned that when she was doing taxes she always made the comment that, "Next to their marital relationship, their money was next in their serious concerns of privacy." [HB 55 was heard and held]. Number 0785 ADJOURNMENT There being no further business before the committee, the Committee meeting was adjourned at 9:35 a.m.