HOUSE STATE AFFAIRS STANDING COMMITTEE March 25, 1999 8:05 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 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 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 3/23/99 (H) HEARD AND HELD 3/23/99 (H) MINUTE(STA) 3/25/99 (H) STA AT 8:00 AM CAPITOL 102 WITNESS REGISTER GENE DAU, Member Capital City Task Force, AARP P.O. Box 20995 Juneau, Alaska 99802 Telephone: (907) 586-3816 POSITION STATEMENT: Testified in opposition to HB 55. RUTH BOHMS 535 Halvorson Road Fairbanks, Alaska 99709 Telephone: (907) 479-6790 POSITION STATEMENT: Testified in opposition to HB 55. MARIE DARLIN National Association for Retired Federal Employees 415 Willoughby Avenue, Number 506 Juneau, Alaska 99801 Telephone: (907) 3637 POSITION STATEMENT: Testified in opposition to HB 55. ALAN JOHNSTONE, President AARP P.O. Box 679 Sitka, Alaska 99835 Telephone: (907) 747-5931 POSITION STATEMENT: Testified in opposition to HB 55. MARGUERITE STETSON, State President AARP 3009 Northwood Street Anchorage, Alaska 99517 Telephone: (907) 245-5259 POSITION STATEMENT: Testified in opposition to HB 55. DEWITT FIELDS P.O. Box 25 Kodiak, Alaska 99615 Telephone: (907) 486-3949 POSITION STATEMENT: Testified in opposition to HB 55. HARRY JENKINS, member AARP 210 Tenth Avenue Fairbanks, Alaska 99701 Telephone: (907) 456-4905 POSITION STATEMENT: Testified in opposition to HB 55. CAROLYN LADWIG, member AARP and State Coordinator for Economic Security 5840 Jordan Circle Anchorage, Alaska 99504 Telephone: (907) 337-7658 POSITION STATEMENT: Testified in opposition to HB 55. DAN KECK, Chairman Legislative Committee for AARP P.O. Box 938 Sitka, Alaska 99835 Telephone: (907) 747-3408 POSITION STATEMENT: Testified in opposition to HB 55. JERRY BOHMS, member Pioneers of Alaska and AARP 535 Halverson Road Fairbanks, Alaska 99709 Telephone: (907) 479-6970 POSITION STATEMENT: Testified in opposition to HB 55. BOB HUFMAN, Chairman Legislative and Government Affairs Committee Pioneers of Alaska 1018 Galena Street Fairbanks, Alaska 99709 Telephone: (907) 474-0549 POSITION STATEMENT: Testified in opposition to HB 55. GLEN FRANKLIN 1213 Coppet Street Fairbanks, Alaska 99709 Telephone: (907) 474-9475 POSITION STATEMENT: Testified in opposition to HB 55. ART BUSWELL 102 Maple Drive Fairbanks, Alaska 99709 Telephone: (907) 474-0637 POSITION STATEMENT: Testified in opposition to HB 55. JOE STRUNKA P.O. Box 70550 Fairbanks, Alaska 99707 Telephone: (907) 479-3347 POSITION STATEMENT: Testified in opposition to HB 55. ALISON ELGEE, Deputy Commissioner Department of Administration P.O. Box 110200 Juneau, Alaska 99811 Telephone: (907) 465-2200 POSITION STATEMENT: Provided information on HB 55. ACTION NARRATIVE TAPE 99-17, SIDE A Number 001 CHAIR JEANNETTE JAMES called the House State Affairs Standing Committee meeting to order at 8:05 a.m. Members present at the call to order were Representatives James, Coghill, Whitaker, Kerttula and Smalley. Representatives Ogan and Hudson arrived at 8:07 a.m. HB 55 - LONGEVITY BONUS ELIGIBILITY CHAIR JAMES announced that the committee would hear HB 55, "An Act relating to eligibility for the longevity bonus; and providing for an effective date." It had been heard previously, on March 23. Number 017 CHAIR JAMES notified members that Bill Ray, who represents the pioneers, had a death in the family and had asked Chair James to put on the record that he is violently opposed to HB 55. Number 057 GENE DAU, Member, Capital City Task Force, AARP, testified that the task force would like to see HB 55 die in committee. He urged the committee to vote it down. CHAIR JAMES noted that Representatives Ogan and Hudson had arrived. Number 066 RUTH BOHMS testified via teleconference from Fairbanks in opposition to HB 55. She read the following testimony: I arrived in Alaska in 1951 and have lived in Alaska for 48 years. I am here today to speak against HB 55, which proposes to "means test" the longevity bonus program by requiring maximum gross income for an unmarried person to be less than $60,000 and for a married couple to be less than $80,000 for eligibility to receive a longevity bonus. The longevity bonus program began in 1973 with $100 payments to persons 65 years of age and older, and the monthly amount increased to $250 over the next eight years. For example: from 1973 to 1976 it was $100. In 1977, it went up to $125. In 1978, it increased to $150. In 1980, it increased to $200. In 1981, it reached $250, the present monthly amount. In 1994, with HB 81, the longevity bonus program began to be phased out. During 1994, persons turning 65 that year could apply for $200. During 1995, persons turning 65 could apply for $150. In 1996, persons turning 65 years could apply for $100. The program closed out and the last day to apply was December 31, 1996. Now, going back 26 years to 1973, when the longevity bonus program began, Alaskans 65 years of age received a $100 payment. Theoretically, some of those early recipients are alive today at approximately 91 years of age. Some of the first recipients were upper-income individuals, and others were in lower income brackets. But after 26 years of being in the program, one would have to say that those initial recipients, some rich and some poor, even today, are grandfathered in the program. Likewise, even the last of the recipients who applied just before the program closed in 1996 [inadvertently said 1974] and who have been receiving the benefits for the past two and one half years, can be considered to be grandfathered into the current, closed program. Number 140 After all these years, to remove participants from this program based on their income would be indeed inviting a lawsuit. At the present time, state funding for longevity payments decreases each month as recipients pass away. Participants grow fewer in number, and the cost to the state goes down each and every month, and will continue to do so. Means testing would not increase state revenues significantly, and means testing as a principle is not acceptable to seniors who have helped to build this great state of Alaska. If HB 55 becomes law, then next year a new bill, with lower maximum income levels, could remove another group of seniors by means testing. For example, next year a bill might be introduced requiring that maximum gross income for single persons must be less than $50,000 to be eligible for the bonus, and for married couples gross income must be less than $70,000. So, in increments in the next few years, anyone above the poverty level may well be removed from the longevity bonus program. The many seniors I have talked to stand firmly behind the present longevity bonus program without any changes or modifications. I urge you to vote against HB 55. Number 183 MARIE DARLIN, National Association for Retired Federal Employees (NARFE), appeared before the committee in opposition to HB 55. She said there are more than 6,000 federal employees in the state who bring in more than $10 million in annuities every month to the state, which goes into the economy. Ms. Darlin stated, "We have been opposed from the very beginning to any means testing of any of the benefits of the retirees and seniors in Alaska. So, then, we continue to oppose this bill, also, and for many of the reasons that others have stated." Number 207 ALAN JOHNSTONE, President, AARP, testified via teleconference from Sitka in opposition to HB 55. He said he has resided in Alaska - mostly in the Panhandle - since 1923; he has paid his dues and expects his representatives not to reduce benefits, because he doesn't believe in it. Mr. Johnstone added that the seniors have earned their livelihoods, they have a long-felt need, and Alaskans should take care of their elders. Number 232 MARGUERITE STETSON, State President, AARP, testified in opposition to HB 55 via teleconference from Anchorage. She said AARP currently has 50,309 members in Alaska that are 50 years of age or older, which is a significant part of the population. Currently, AARP membership is over 51 percent of those that are 50 and older. She said she believes that the longevity program has urged seniors to remain in Alaska and spend in Alaska, which aids the Alaskan economy. MS. STETSON pointed out that it would cost a lot to determine means testing, and it would create a lot of ill will among Alaskan senior citizens. Further, it would only be a one-year solution to the budget problem. She further stated, "In the past we have looked at income tax as being the most fair; sales taxes catch tourists but hit the poor people harder, so we would not be in favor of that later. Seniors volunteer in their community and contribute greatly to the state of Alaska, and we would urge that you not change this Alaska longevity bonus program. It will phase itself out in the future years." Number 265 DEWITT FIELDS testified via teleconference from Kodiak in opposition to HB 55, noting that he has lived in Kodiak for 50 years. He said the longevity bonus program was created to compensate old-time Alaskans who helped to build this state. He believes there are other ways for the state to raise revenue; one of the best ways would be to look at all the government vehicles that the state not only buys but also helps to support. Before the bonus, many people went "outside," which they would do again if the state did away with this bonus. Mr. Fields said he would support an income tax; he pointed out that he is 83 years old and still working. He noted that people come to Alaska every summer, beginning about May; they work all summer, "make their wad," then return home. He sees no reason why they shouldn't leave a compensation behind for the privilege of working in Alaska. Number 319 HARRY JENKINS, member, AARP, testified via teleconference from Fairbanks in opposition to HB 55. He informed the committee that HB 55 has brought 23 new members into their local chapter [AARP]. He asked how was it concluded that it would only effect 8 percent of the people receiving the longevity bonus. CHAIR JAMES replied that the Administration indicated that it is just a guess based on the census figures. MR. JENKINS remarked that the people in Fairbanks don't guess. Number 342 CAROLYN LADWIG, member, AARP, and State Coordinator for Economic Security, testified via teleconference from Anchorage in opposition to HB 55, noting that she will be 55 years old in a couple of days and has lived in Alaska since 1966, except for one year. She emphasized that she is opposed to mean testing for senior benefits and that people who have helped deserve to be able to afford to remain in the state as long as they choose to and not have benefits cut that they have qualified for, for over the last 20-plus years. Number 357 DAN KECK, Chairman, State Legislative Committee for AARP, testified via teleconference from Sitka in opposition to HB 55, noting that he researched HB 55 to find out whom this would actually affect. He said when you try to find out how much money they make is almost like pulling teeth. He indicated that it hits the people who have lived in the state the longest because they seem to have generated the most money, worked the hardest, and saved some of it. They are actually the people we need to keep in our state because they are a real resource. Mr. Keck said, for that reason, AARP is opposed to HB 55. He also noted that the word has gotten out and a lot more people are talking about it. CHAIR JAMES agreed with Mr. Keck. She said it appears that those are the people that this benefit is really for to thank them for what they've done to build our state. Number 395 JERRY BOHMS, member, Pioneers of Alaska and AARP, testified via teleconference from Fairbanks in opposition to HB 55, noting that he has been in Alaska more than 50 years. He said he read in the newspaper that businesses want the legislature to jump into the permanent fund before any new taxes are approved. He said this is going to affect everyone whether they can afford it or not. Mr. Bohms stated that the longevity bonus was originally instituted to urge the "old-timers" to remain in Alaska instead of moving outside where the cost of living was a little cheaper. He said the money that the state is going to receive from the means testing is going to be quite minimal at best. It seems a tax would be a much fairer and better way to increase state revenues. This would apply to everyone who works and lives in the state - those who live outside and work in Alaska would also contribute. He said lower-income people spend almost every cent they receive in the state which adds to the economy to quite a great degree, whereas the higher-income people take vacations and spend money all over the world. For that reason, he believes HB 55 should not pass. Number 458 BOB HUFMAN, Chairman, Legislative and Government Affairs Committee, Pioneers of Alaska, testified via teleconference from Fairbanks in opposition to HB 55. He noted since the 1996 phase-out of the longevity bonus program the amount paid to recipients has decreased to approximately $10 million. It will continue to go down on an accelerated basis as those older seniors in the $250.00 category pass on. The program is designed to be of a finite nature. He said, "I'll wager that if, in fact, such a program as envisioned by the Administration was instituted another department would be created to peruse tax forms, institute investigations of income sources. Who's going to ensure they don't circumvent income sources set forth in the bill and that exclusions are legitimate? Perhaps the state could hire some IRS agents with expertise in this field. I say let it die naturally and not allow it to be transformed into a needs based supplemental welfare program." MR. HUFMAN cited an article from the Journal of Commerce, "Right Target, Wrong Weapon for Possible Cuts," by former Governor Hammond, which refers to a previous effort to cut the dividends. Mr. Hufman said, "I like in that statement to Governor Knowles continuing effort to cut a targeted group of seniors from the longevity bonus program. I believe the right weapon in this case would be to reduce welfare benefits so they're closer to par with other states at the very least. Those new arrivals ... should receive no more than that paid from the state they came from. As I understand it, a new arrival is almost instantly eligible for welfare and they do not even need a one-year residency requirement. Larger welfare payments, and the prospects of a permanent fund dividend after one year, no doubt serves as a magnet to innumerable prospective welfare recipients. So if you must cut, and I agree that given prevailing circumstances belt-tightening is required, use the right weapon to obtain your goal and let the longevity bonus die a natural death which is assured under existing statutes." Number 514 GLEN FRANKLIN testified via teleconference from Fairbanks in opposition to HB 55, noting that he came to Alaska in 1933 to attend the University of Alaska, at that time the Alaska Agriculture College. He said he believes that he helped to maintain and establish the university because anybody who came up here and became a student helped to develop that part of Alaska. The other part that he is proud to have helped build is the mining industry. He stated that, "When I graduated from college, I went to work for a mining outfit and got bitten by the gold-bug. After the war I decided to do it myself and we formed a partnership and at that time we had ground over in the 40-mile boundary area, but there wasn't any road there. So in 1946 we gathered our 'Cats' and all of our gear at the 40-Mile Cutoff and made an overland haul into the boundary area - it took us 17 days. Today it takes you three and a half hours by the Taylor Highway. So, during the period that we were in business as miners, we developed that part of the world and the road came in because we were there, partly, and it extended itself to Eagle. So it's a very important part of Alaska's road structure serving the tourist industry which is putting more money than any of us miners ever did. So I think that I can qualify to having contributed to my part in getting the longevity bonus. We didn't ask for it - the legislature decided that perhaps we deserved it because in today's world, anybody who works for the state in any capacity, and in any way after five years I think is vested - automatically gets a pension and there's no question about whether he gets it or not if he makes a million dollars. So let's get off this kick about putting a lid on the longevity bonus. I'm not sure if I would get knocked off or not, because I'm not going to tell you, it's none of your business. But I think I've made a contribution to this state in the 60-plus years that I've been here, so let that thing die in committee where it belongs, to be dead!" Number 573 ART BUSWELL testified via teleconference from Fairbanks in opposition to HB 55, noting that he came to Alaska originally with the university in 1951 and stayed for 20 years and then left for personal reasons for 13 years and then came back in 1984 because it's the best place in the world to live. He said he joins his friends who have expressed opposition to HB 55 and endorses their reasons without going through all of them except to say, "I think it would be costly, I think it's unnecessary since it is being phased-out, I think it's an invasion of privacy, and I think people that have been planning for it should be able to continue to expect it. I find it particularly offensive one part in here that says that, if some inheritances would be included in the gross income, so that if a couple were making $76,000 gross income and (indisc.) less than $5,000 in her will they would be ineligible for the $6,000 from the bonus and that seems to be a kind of an unfair stipulation as it would be carried out." Number 600 JOE STRUNKA testified via teleconference from Fairbanks in opposition to HB 55, noting that he is approaching age 62 and is not a recipient of the longevity bonus program. He read excerpts from a letter which he sent to approximately 12 legislators on February 23, of which he received three responses and the first response was from Representative James, Senator Miller and Pearce were the others who responded. I do not support HB 55 or SB 40 and primarily the reason for this is that the present program is unfortunately going to expire in the near future, and you're going to be missing out a great deal in terms of stability and wisdom from our old-timers. Since, as it was mentioned, the legislature was the one that initiated this particular program, I wish to quote Robert Service ... "A promise made is a debt unpaid," and this is from The Cremation of Sam McGee. I had the good fortune, when I first came to Alaska in 1962, to spend my first winter with a "Klondiker" by the name of Robert Henry Jones, and known as Bobby, he was age 79 at the time and we lived in a 12 by 14 cabin on Nolan Creek which is situated approximately six and a half miles northwest of Wiseman. And I gained a lot from his wisdom. One of the words that I heard often times during the winter was the term "fair play," meaning in his terms is it fair to all parties that are involved. And Governor Knowles' fourth attempt to attack the senior citizens of our state does not meet the fair play standard in my estimation. Many seniors, especially those who have spent a major portion of their lives in Alaska, have contributed dearly to the stability and development of this country. Many, using their hard earned money to foster business ventures, benefited everyone that touched their enterprises. If by chance the venture prospered and they eventually sold it for whatever reason that could be for profit, poor health, old age, et cetera, why should they be penalized for having a nest-egg in their old age. Enough said, just leave the seniors alone. Number 650 MR. STRUNKA mentioned that he had asked one of the legislators for specific information about the program as far as the demographics but he has not received anything. For example, since the moratorium and the Hickel Administration was placed on the longevity bonus program, how much has it gone down in payments to seniors as well as, how much of a reduction in staffing of the respective administrative office which oversees the program has occurred - that's a good question. And in terms of the demographics, I it would be nice to know the number of recipients in the program, the number of recipients by age and/or age groupings, number of recipients by gross and net incomes (if you can find that out) and make that in small increments, number of recipients by residential groupings - that is village, urban, isolated, and then finally the number of years of residency in the territory and the state of Alaska. The above statistics would be interesting and necessary when considering any reduction in seniors receiving the benefits. Ultimately some seniors are eliminated. If you have to do this, cut out the most recent arrivals to this program and that would include more of the one-year residents. When I first came up here in [19]62, there were very few old-timers and the thing that I have seen over the 30-some years I've been here is many of the old-timers that used to go south are now staying here and they certainly provide a great deal of a foundation for our youth and for the community in general. Number 679 I prefer seeing the Governor's salary and benefits and perks reduced before touching the seniors. Just cut the Administration's funding overall and then see where you go from there. MR. KECK suggested Mr. Strunka contact Ruth Bohms for the statistical information. RUTH BOHMS noted that she only has the numbers of persons in each category, she does not have information on the incomes. CHAIR JAMES said she doesn't think the incomes are available and she doesn't believe the legislature needs that information. MR. KECK remarked that getting the senior's income information is not easy, "that's kind of a secret thing like how many fish they catch." CHAIR JAMES said that information is close to everybody's pocket book, but it's also close to their heart. She said she understands that concern because she has spent most of her life doing accounting and taxes for folks. Chair James noted that she is not looking for a motion to move HB 55 out of committee. REPRESENTATIVE HUDSON asked Ms. Elgee what happens when an elderly couple come into the state, who are 70 today, are they eligible to come into the program. Number 718 ALISON ELGEE, Deputy Commissioner, Department of Administration, explained that when the department phased the program out, they phased it based on the year of eligibility, not the age of the recipient. So individuals that were in the state for the year prior to the December 31, closing date, were eligible for that last $100 bonus level regardless of their age. After that date - again regardless of their age, no one is eligible. CHAIR JAMES recalled when it was phased out, it was a very painful vote. She said, "The statistics of, I believe 1992, when 40 percent of the recipients of the longevity bonus [program] had not been in the state more than three years was the driving factor of having to phase it out. And quite frankly, I feel we've done it, we've been there, we've done that, we don't need to do anything anymore. I've been very vocal about that and I remember that painful vote." REPRESENTATIVE SMALLEY emphasized that he does not support HB 55 because it's not a fair way to treat those who basically made Alaska what it is. It requires a disclosure of information that others are not required to disclose in this manner which really is a penalty as he sees it. CHAIR JAMES mentioned the members provided their conflict of interest for the record on Tuesday. Number 757 REPRESENTATIVE KERTTULA stated, "Maybe on behalf of Representative Coghill and myself, we were lucky enough to grow up here, that we benefited greatly from all of you and all of the people who have testified. And I thought that one of the best comments ... was the point about, If you're working for the state at five years - now it's ten, you vest and you get a retirement and there isn't any question. And, to me, that's what the whole program was about - with people who were here, who couldn't get Social Security, who worked hard to build the state into what it is. And as you point out, with the phase-out and with unfortunately, all of us aging, at some point the program will be out completely. So I think you're right, we've done our part, it's going to go out of existence with a minimal amount of money that this would bring in, I don't think any of us would support it." REPRESENTATIVE COGHILL said, "Just to add to that, and I thank you for those comments Beth [Kerttula]. One of the things that is going to happen (if this bill goes forward) is it changes something that we have done to try to honor folks that have built into our society, and it turns right around and puts a hook in them. That takes away that honor and I think that would be a crying shame. I think that that would be very dishonorable and so, to let it die the natural death like it's been said on so many of the comments, I think is probably the more appropriate thing to do. Also, it fuels our bureaucracy for more work - I'm not interested in that and I think that the cost differential would put more work into our bureaucracy than necessary. So, just based on those two things, I would sure hate to see a program meant to honor people, turn around to dishonor people, so I'm not going to support moving this thing." Number 786 REPRESENTATIVE OGAN said he wanted to thank the Governor for showing what his true agenda is. [HB 55 was heard and held]. ADJOURNMENT Number 788 There being no further business before the committee, the House State Affairs Standing Committee meeting was adjourned at 8:47 a.m.