Legislature(2003 - 2004)

04/30/2003 09:00 AM Senate FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
     SENATE BILL NO. 117                                                                                                        
     "An Act eliminating the longevity bonus program and making                                                                 
     related conforming changes; and providing for an effective                                                                 
This  was the first  hearing  for this  bill in  the Senate  Finance                                                            
Co-chair  Wilken  explained  that  the  elimination  of  the  Alaska                                                            
Longevity   Bonus  Program  would   save  the  State  approximately                                                             
$47,500,000.  He stated that  the committee  substitute, CS  SB 117,                                                            
Version  23-GS1100\I  would  provide  for the  continuation  of  the                                                            
program as a needs-based  program for Alaskan seniors with a monthly                                                            
income of 150 percent over the Alaska federal poverty level.                                                                    
Senator Bunde  moved to adopt CS SB 117, Version 23-GS1100\I  as the                                                            
working document.                                                                                                               
Senator  Taylor  objected.  He voiced  the  concern that  while  the                                                            
original  version  of the  bill  would terminate  the  program,  the                                                            
committee  substitute  would "convert  the  program  basically to  a                                                            
welfare program"  based on specific standards. He  announced that he                                                            
opposes both of  these options, "but if in fact the  final result of                                                            
the Committee  or legislative action is: rather than  destroying the                                                            
program we end  up with a program that still exists  in part for the                                                            
most needy  Alaskans, then  that is the  preferred alternative."  He                                                            
opined  that, "it is  preferable to  save a portion  of the  program                                                            
rather than destroying the whole program."                                                                                      
Senator Taylor withdrew his objection.                                                                                          
Senator  Hoffman  objected. He  stated  that while  the opportunity                                                             
exists  to make  the longevity  program  a needs-based  program;  he                                                            
asserted,  "that the problem  is that  this bill  goes too far."  He                                                            
stated; therefore,  that while he supports the concept  of providing                                                            
the State "with  some savings," he  could not support the  committee                                                            
Senator Hoffman withdrew his objection.                                                                                         
There being no further objection, Version "I" was adopted as the                                                                
working document.                                                                                                               
JOE BALASH, Staff to Senator Therriault, presented testimony as                                                                 
          The  Governor's proposal - the original  version of SB 117                                                            
     - eliminated the Longevity Bonus program in its entirety.                                                                  
          In  public  testimony  before  the  Senate  State  Affairs                                                            
     Committee  - and its counterpart  in the House - recipients  of                                                            
     the Bonus made it  clear that they depend on the monthly checks                                                            
     they receive to make ends meet.                                                                                            
          The  Committee Substitute  in front  of you preserves  the                                                            
     program,  but applies  a two-part means  test in order  to make                                                            
     sure those  recipients that need the Bonus continue  to receive                                                            
          The first test is on income                                                                                           
          The second test is on assets                                                                                          
          In   order  to   make  the  revised   program  easier   to                                                            
     administer, the CS  adopts the same definitions for calculating                                                            
     income  and  assets  as the  current  Adult  Public  Assistance                                                            
     program.  That means there are items that are  disregarded when                                                            
     the respective calculations are made.                                                                                      
          For  income purposes, the  PFD, 50% of earned income,  the                                                            
     first  $2000 of an  ANCSA dividend,  and any other needs-based                                                             
     state assistance received by the person are all excluded.                                                                  
          For  assets purposes, one home, one car, personal property                                                            
     (clothes,  furniture, etc.),  funds set aside for burial,  non-                                                            
     cash    ANCSA    distributions,    Native    allotments,    and                                                            
     reparations/settlements are all excluded.                                                                                  
          The  reason for an  asset test is  that people have  large                                                          
     assets  available  to  them and  are  able to  structure  their                                                            
      finances so they have relatively lower monthly income.                                                                    
          When  we began looking into how to apply  a means test, we                                                            
     first looked  at the requirements for Adult Public  Assistance.                                                            
     However,  those income  and asset  levels appeared  to be  very                                                            
     modest…just  over $1,000 in monthly income for  a single person                                                            
     and just over $1500 for a couple.                                                                                          
          This  CS sets  each of  those figures  approximately  $400                                                            
     higher and also doubles  the assets test threshold to $4000 per                                                            
     person and $6800 per couple.                                                                                               
          In  order to qualify for the revised program,  individuals                                                            
     and couples will need  to go through an annual review to verify                                                            
     their  eligibility. It  is projected  that roughly 4300  people                                                            
     will qualify under these conditions.                                                                                       
          So  that we can cut down on the administrative  expense of                                                            
     this review,  eligibility for  APA constitutes eligibility  for                                                            
     the  Longevity Bonus.  That should eliminate  the necessity  to                                                            
     review  approximately 2/3  of the recipients.  That leaves  the                                                            
     cohort of people who  exceed the APA thresholds, but fall under                                                            
     the  ALB  thresholds   (approximately  1600   people)  who  the                                                            
     departments will need to review.                                                                                           
          After  the initial  review, recipients  will only  need to                                                            
     check off  on their monthly residency forms that  they continue                                                            
     to meet the income/asset requirements.                                                                                     
          Now,  when the program goes  into effect later  this year,                                                            
     there will be some implementation issues.                                                                                  
          Currently,  when a check arrives in the mail for the month                                                            
     of May, it is based  on residency two months prior (March). So,                                                            
     if the  new edibility  requirements go  into effect on  July 1,                                                            
     current  recipients will continue  to receive checks  into July                                                            
     and  August of this  year due to their  eligibility in  May and                                                            
          Which  brings me  to a technical  amendment to this  draft                                                            
     that's  necessary for implementation.  On page 2, line  17, the                                                            
      language needs to read September 1 rather than July 1.                                                                    
          Once  we  get  to  implementation,   there  will  be  some                                                            
     Longevity  Bonus recipients who  do not qualify under  this set                                                            
     of  tests.  However,  if  at  some point  down  the  line  that                                                            
     person's circumstances  change and they do meet the thresholds,                                                            
     they will be able to resume their participation.                                                                           
          Finally  mister chairman,  we get  to the fiscal  note and                                                            
     costs of the new program.                                                                                                  
          Due  to the two-month  lag in payments,  we will  have two                                                            
     months worth  of status quo payments - $4.1 million  each month                                                            
     for  a total of  $8.2 million.  For the balance  of the  fiscal                                                            
     year,  monthly costs  for the  payments will  be just under  $1                                                            
     million  per  month  for a  total  of $9.5  million.  With  the                                                            
     additional  administrative costs  added in, the total  costs of                                                            
     the ALB for FY 04 will be around $18 million.                                                                              
          Based  on the $44.8 million  in both the House  and Senate                                                            
     approved operating  budgets, this amounts to an overall savings                                                            
     of nearly $27 million for FY 04.                                                                                           
          Due   to  the  2-month  lag  factor,  there   will  be  an                                                            
     additional savings  of $4 million in FY 05 and then the program                                                            
     will resume its gradual erosion over time.                                                                                 
          That concludes my testimony Mr. Chairman.                                                                             
Senator  Bunde asked  for  an explanation  regarding  the  disparity                                                            
between  the Department  of  Administration  fiscal  note #1,  dated                                                            
March 5, 2003,  which reflects a $47.5 million savings  reduction as                                                            
opposed  to Mr.  Balash's  testimony referencing  a  savings of  $44                                                            
Mr. Balash  clarified that the $47  million fiscal note is  based on                                                            
the  FY 03  cost of  the Longevity  Bonus  program  while the  $44.8                                                            
million is  the amount approved  for the FY  04 operating budget  by                                                            
both the House of Representatives and the Senate.                                                                               
Senator  Bunde asked  for  confirmation  that, were  this  committee                                                            
substitute approved, the  cost of the program would be $11.3 million                                                            
in FY 04.                                                                                                                       
Mr. Balash  responded that the $11.3  million would support  "twelve                                                            
months worth of the revised program's costs."                                                                                   
Senator  Bunde  surmised  that  the  twelve-month   timeframe  would                                                            
commence in September 2003.                                                                                                     
Mr. Balash concurred.                                                                                                           
Senator Olson  noted that many Native elders who reside  in the Bush                                                            
areas  of the  State  have  such things  as  snowmobiles  and  four-                                                            
wheelers   rather  than   a  licensed  automobile.   Therefore,   he                                                            
questioned   whether  these   items   would  be   included  in   the                                                            
determination of the asset list language that reads as follows.                                                                 
     Sec. 5 AS 47.08.060(c) is amended to read:                                                                                 
          (c) In applying the formula to determine the applicant's                                                              
     share,  the total  gross  income and  the total  assets of  the                                                            
     family  of the applicant  may be taken  into account,  with the                                                            
     following exceptions:                                                                                                      
                (1) the applicant's permanent place of abode;                                                                   
                (2) one noncommercial vehicle;                                                                                  
                (3) tools, equipment, vehicles, and other assets                                                                
                     required in a trade or business;                                                                           
                (4) ordinary household and personal effects;                                                                    
                (5) (5) $1,000 of liquid assets;                                                                                
                (6) all nonliquid assets unless this exclusion                                                                  
                     would  bring   about  an  inequitable   result;                                                            
                     however, all income derived  from this property                                                            
                     shall   be   taken   into   consideration    in                                                            
                     determining the recipient's gross income;                                                                  
                (7) inalienable shared in a Native corporation                                                                  
                     created  under  43  U.S.C.  1601-1628   (Alaska                                                            
                     Native Claims  Settlement Act), for  the period                                                            
                     of their  inalienability  as  specified in  the                                                            
                (8) Alaska longevity bonus payments under former                                                                
                     AS 47.45                                                                                                   
                (9) any other assets specifically restricted for                                                                
                     the use  of the recipient  by state or  federal                                                            
Mr.  Balash clarified  that  were  the mode  of  transportation  not                                                            
factored against someone  qualifying for the adult public assistance                                                            
program, then  that same exemption  would apply in this program.  He                                                            
stated that  the adult public assistance  program's definitions  and                                                            
regulations are being applied  to this program for "simplicity sake"                                                            
rather than creating a whole new set of exemptions.                                                                             
Senator Olson clarified  that the adult public assistance guidelines                                                            
would be used in this program.                                                                                                  
Mr. Balash confirmed.                                                                                                           
Co-chair Wilken informed  the Committee that copies of the committee                                                            
substitute  have been distributed  to Pioneer Homes, the  Commission                                                            
on Aging,  and to  the Legislative  Information  Offices. He  stated                                                            
that public testimony on the bill would commence this evening.                                                                  
Co-Chair Wilken ordered the bill HELD in Committee.                                                                             
AT EASE 9:36 AM / 9:38 AM                                                                                                       

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