Legislature(2017 - 2018)SENATE FINANCE 532

02/20/2018 09:00 AM FINANCE

Note: the audio and video recordings are distinct records and are obtained from different sources. As such there may be key differences between the two. The audio recordings are captured by our records offices as the official record of the meeting and will have more accurate timestamps. Use the icons to switch between them.

Download Mp3. <- Right click and save file as

* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Heard & Held
Heard & Held
+ Bills Previously Heard/Scheduled TELECONFERENCED
SENATE BILL NO. 154                                                                                                           
     "An Act  relating to contributions from  permanent fund                                                                    
     dividends to the general fund."                                                                                            
9:30:10 AM                                                                                                                    
SENATOR  DAVID  WILSON,  SPONSOR,  discussed  the  bill.  He                                                                    
voiced  that  if  enacted,  Senate   Bill  154  would  allow                                                                    
Alaskans  applying for  a Permanent  Fund Dividend  (PFD) to                                                                    
donate  all  or a  portion  of  their  PFD directly  to  the                                                                    
state's  General Fund  (GF). He  related that  he had  heard                                                                    
from  many Alaskans  who  said they  would  not mind  giving                                                                    
"their fair share"  to the State of Alaska.  This bill would                                                                    
create a process  where Alaskans could donate  their PFDs to                                                                    
the State  General Fund  using the  Click.Pick.Give program.                                                                    
He  indicated that  the donations  would be  tax exempt  and                                                                    
exempt from the annual fee  and the 7 percent administrative                                                                    
fee. He furthered  that a provision in the  bill allowed for                                                                    
children in state  custody to hold the donations  in a trust                                                                    
until the child turns 18 years of age.                                                                                          
GARY  ZEPP,  STAFF,  SENATOR  DAVID  WILSON,  discussed  the                                                                    
Sectional Analysis for the bill:                                                                                                
     Section  1: Amends  AS 43.23.62(a)  by  adding "to  the                                                                    
     general  fund"  and  "the  general  fund"  to  allow  a                                                                    
     contribution from the  electronic Alaska permanent fund                                                                    
     dividend to the state general fund.                                                                                        
     Section 2:  Amends AS 43.23.062(b) to  add "the general                                                                    
     fund"   to  the   list   of  organizations,   community                                                                    
     foundations,  or charitable  organizations eligible  to                                                                    
     be added to the contributions list.                                                                                        
     Section 3:  Amends AS  43.23.062(m) by  adding "general                                                                    
     fund or  to the" to  the list of organizations  that do                                                                    
     not have a coordination fee withheld.                                                                                      
Mr.  Zepp noted  that the  DOR fiscal  note covered  all the                                                                    
cost associated with  the bill, which was  why the donations                                                                    
were exempted from fees.                                                                                                        
9:34:59 AM                                                                                                                    
Co-Chair MacKinnon OPENED public testimony.                                                                                     
ANGELA COX,  VICE PRESIDENT  OF EXTERNAL  AFFAIRS, RASMUSSEN                                                                    
FOUNDATION,  ANCHORAGE  (via teleconference),  testified  in                                                                    
opposition to  the bill. She  explained that  the foundation                                                                    
spearheaded   and   funded   the   implementation   of   the                                                                    
Click.Pick.Give program  in 2007  in support of  the state's                                                                    
nonprofit sector.  The program had raised  $20 million since                                                                    
its exemption.  The foundation  felt that  the bill  was not                                                                    
aligned  with  the  "intent  of  the  true  spirit"  of  the                                                                    
program. She  stressed that the  program was  never intended                                                                    
to  fund state  government. She  believed the  contributions                                                                    
should  be subject  to  the  administrative and  application                                                                    
fees if the bill was enacted.                                                                                                   
Co-Chair Hoffman  asked if Ms. Cox's  position represented a                                                                    
formal  action  from the  board.  Ms.  Cox replied  that  no                                                                    
formal action was taken but  the members "weighed in" on the                                                                    
9:37:51 AM                                                                                                                    
LAURIE  WOLF,  PRESIDENT,   FORAKER  GROUP,  ANCHORAGE  (via                                                                    
teleconference), testified  in opposition  to the  bill. She                                                                    
conveyed that  the group  was grateful  over the  success of                                                                    
the  program  and the  charitable  spirit  of Alaskans.  She                                                                    
noted the group supported efforts  to enhance the program to                                                                    
better  serve nonprofits  in pursuit  of their  mission. The                                                                    
group was concerned that the  bill was inconsistent with the                                                                    
original intent of the  PFD charitable contributions program                                                                    
and she pointed to the  eligibility criteria. The state's GF                                                                    
was   not   a   charitable   purpose.   She   believed   the                                                                    
contributions should  be subject  to the  administrative fee                                                                    
if   the  bill   was  enacted.   The  fee   exemption  would                                                                    
unfavorably   add   to   the  burden   of   the   charitable                                                                    
organizations  who participated  in  the program  and was  a                                                                    
matter of  fairness. She  maintained that  the bill  posed a                                                                    
clear  policy call  to the  legislature whether  the program                                                                    
should remain  true to its  original intent. She  offered to                                                                    
read the eligibility criteria of the program.                                                                                   
9:41:54 AM                                                                                                                    
RANDY   GRIFFIN,  SELF,   FAIRBANKS  (via   teleconference),                                                                    
testified in support  of the legislation. He  stated that he                                                                    
had  given his  dividend to  the  state for  the last  three                                                                    
years.  He believed  that there  was  a variety  of ways  to                                                                    
administer the  program. He indicated  that he  had endorsed                                                                    
the PFD check and mailed it to  DOR with a list of things he                                                                    
wanted done  and requested a  receipt. He  encouraged people                                                                    
to donate to the state.                                                                                                         
9:43:15 AM                                                                                                                    
WILLIAM  HARRINGTON,  SELF,  SPENARD  (via  teleconference),                                                                    
spoke in support of the bill.  He reported that he had heard                                                                    
many  people endorse  taxation and  wanted to  contribute to                                                                    
government  but  doubted  that  many  people  ever  had.  He                                                                    
characterized the  7 percent administrative fee  as "greedy"                                                                    
and "disgusting."                                                                                                               
9:44:43 AM                                                                                                                    
Co-Chair MacKinnon CLOSED public testimony.                                                                                     
Senator von  Imhof wondered whether  federal taxes  would be                                                                    
assessed on the PFD amount if it was donated to the GF.                                                                         
SARA  RACE,  DIRECTOR,  PERMANENT  FUND  DIVIDEND  DIVISION,                                                                    
DEPARTMENT OF REVENUE, stated that  she was not a tax expert                                                                    
but surmised  that the PFD  amount would be taxed  as income                                                                    
at the  federal level. However, if  donated the contribution                                                                    
could be an itemized  deduction. Senator von Imhof suggested                                                                    
that it  depended on an  individual's tax status  whether it                                                                    
was a  tax deduction. Ms.  Race believed that  the statement                                                                    
was correct.                                                                                                                    
Co-Chair MacKinnon  thought that  Ms. Race  had communicated                                                                    
that the PFD was considered  as income for federal taxes but                                                                    
could be a deduction if applicable to the individual.                                                                           
GLENN GUSTAFSON, ASSISTANT  ATTORNEY GENERAL, ANCHORAGE (via                                                                    
teleconference), answered  in the affirmative  and confirmed                                                                    
the statement.  He referenced the testifier  from Fairbanks,                                                                    
who had  to declare the PFD  as income but take  a deduction                                                                    
as a charitable contribution.                                                                                                   
9:48:44 AM                                                                                                                    
Senator Micciche  thought that if  a person gave  the entire                                                                    
dividend through the program, a  person would have a greater                                                                    
deduction  than  if  the check  was  sent  and  subsequently                                                                    
contributed  to the  state. Mr.  Gustafson confused  Senator                                                                    
Micciche's  question  with  a   deduction  regarding  the  7                                                                    
percent   administrative  fee   and  how   it  impacted   an                                                                    
individual's deduction. He concluded  that there would be no                                                                    
net  effect of  contributing  the PFD  and additional  taxes                                                                    
were not owed.                                                                                                                  
Co-Chair  MacKinnon  asked  if   Mr.  Gustafson  was  a  tax                                                                    
attorney.   Mr.  Gustafson   specified   that   he  was   an                                                                    
accountant,  and  not  a tax  attorney.  Co-Chair  MacKinnon                                                                    
thought  it  was important  to  ensure  the information  was                                                                    
accurate on the public's behalf.                                                                                                
Senator Micciche clarified that  if an individual denied the                                                                    
check  as a  contribution  back  to GF,  then  there was  no                                                                    
income  to report.  He added  that charitable  contributions                                                                    
were worth a proportion of the contribution as a deduction.                                                                     
Co-Chair  MacKinnon  stated  that  currently,  there  was  a                                                                    
process  at  the  PFD  Division  by  which  residents  could                                                                    
withdraw the application,  so a check was  not received. She                                                                    
noted that the  way Mr. Griffin contributed  was complex and                                                                    
noted the  tax effect would impact  individuals in different                                                                    
ways.  She  informed  the  committee  that  everyone  else's                                                                    
dividend would proportionately increase  by the total amount                                                                    
of  everyone who  chose to  withdraw  their application  and                                                                    
forego  a dividend.  She  noted  that approximately  700,000                                                                    
Alaskans  applied  for  a  dividend   out  of  a  population                                                                    
735,000. She asked Ms. Race whether she was correct.                                                                            
9:53:03 AM                                                                                                                    
Ms.  Race answered  in the  affirmative. She  commented that                                                                    
once the  dividend was paid  out, it became  taxable income.                                                                    
Co-Chair  MacKinnon asked  whether the  PFD was  reported as                                                                    
income on  the form 1099  from the state. Ms.  Race answered                                                                    
in  the affirmative.  She assumed  that  the testifier  from                                                                    
Fairbanks  received a  1099  and wanted  a  receipt for  tax                                                                    
Senator von  Imhof wondered  what "accounting  mechanism was                                                                    
triggered for  the filer" by  applying for the PFD  and then                                                                    
checking  the  box  to  donate   it  to  the  GF.  Ms.  Race                                                                    
reiterated that in the scenario  provided an individual that                                                                    
applied for  the PFD  would still receive  a 1099.  The 1099                                                                    
would  include  a  breakdown of  distribution,  which  would                                                                    
include  the  donation   to  the  GF.  She   added  that  an                                                                    
individual   applicant    could   be   subject    to   other                                                                    
garnishments,  which would  be paid  before the  donation to                                                                    
the state.                                                                                                                      
9:55:24 AM                                                                                                                    
Co-Chair Hoffman thought that  the problem with not applying                                                                    
for  the dividend  did  not benefit  the  state, but  rather                                                                    
benefitted the other recipients since  it did not go back to                                                                    
the GF, but rather made each dividend larger.                                                                                   
Senator  Micciche   thought  it  would  be   beneficial  for                                                                    
individuals to  be able  to donate a  dividend to  the state                                                                    
without having a tax liability.  He communicated that he was                                                                    
a  donor to  the Pick.Click.Give,  and a  board member  to a                                                                    
"couple"  of nonprofits  that benefit  from the  program. He                                                                    
thought  it   appeared  that   there  were   concerns  about                                                                    
competition  regarding   the  bills  proposed  use   of  the                                                                    
program.  He  understood  the concern  among  the  Rasmussen                                                                    
Foundation and  Foraker Group. He believed  that the program                                                                    
was a good mechanism to employ  for ideas like the one in SB
154. He hoped  the committee and organizations  could find a                                                                    
way  for   the  appropriate  use  of   the  program  without                                                                    
complicating the "good ideas" presented during the meeting.                                                                     
Senator  Olson  thought  his   constituents  would  find  it                                                                    
peculiar that an  individual would apply for  a dividend and                                                                    
then  surrender  it   to  the  state.  He   asked  how  many                                                                    
individuals  had  done so.  Ms.  Race  relayed that  only  a                                                                    
handful  of  individuals  had contacted  the  division.  She                                                                    
indicated  that when  the request  was made  a staff  member                                                                    
provided  instructions  that  the person  must  endorse  the                                                                    
check and send  it to DOR with a directive  to deposit it to                                                                    
the GF.                                                                                                                         
9:58:54 AM                                                                                                                    
Co-Chair  MacKinnon directed  attention  to  the DOR  fiscal                                                                    
note, FN2 (REV).                                                                                                                
Ms.  Race addressed  the fiscal  impact note.  She indicated                                                                    
that the  bill was  associated with  costs in  FY 19  and in                                                                    
ensuing years. She read from the analysis on page 2:                                                                            
     Currently,  funds  collected through  the  coordination                                                                    
     fee   and   the   application    fee   are   used   for                                                                    
     administrative costs. AS  43.23.062(e) states that "the                                                                    
     department  may not  use money  from the  dividend fund                                                                    
     for administrative costs  incurred in implementing this                                                                    
     section, even if it has  been appropriated for costs of                                                                    
     administering the  dividend program." For  that reason,                                                                    
     financial  costs  will  be associated  with  this  bill                                                                    
     because  no  fees  will  be   collected  to  cover  the                                                                    
     administrative costs.                                                                                                      
Ms. Race  stated that because  all other  organizations were                                                                    
philanthropic, and  the proposed state program  was not, the                                                                    
department  would  administer  the program  instead  of  the                                                                    
Alaska Community  Foundation. The  cost was  for programming                                                                    
time,  application  processing,   financial  reporting,  and                                                                    
general administration of the program.                                                                                          
Senator Micciche  asked if  Ms. Race had  an opinion  on the                                                                    
matter. He  thought that  it would  be beneficial  to employ                                                                    
the same 7 percent administrative  fee versus a fiscal note.                                                                    
Ms. Race replied that a  7 percent coordination fee would be                                                                    
one way to reduce ongoing costs for the bill.                                                                                   
10:01:36 AM                                                                                                                   
Senator Wilson  thought many  people had  different opinions                                                                    
as to  what government  was. He  listed the  many government                                                                    
services the  state provided. He  envisioned the  program to                                                                    
work  similarly to  the Pick.Click.Give  program with  a one                                                                    
click option to contribute to the state.                                                                                        
SB  154  was  HEARD  and   HELD  in  committee  for  further                                                                    
Co-Chair MacKinnon asked  for amendments to be  turned in to                                                                    
her  office by  5:00  p.m. on  the  following Thursday.  She                                                                    
stated that  her office  would work  with the  department to                                                                    
modify the fiscal note.                                                                                                         

Document Name Date/Time Subjects
SB 8 Sectional Analysis.pdf SFIN 2/20/2018 9:00:00 AM
SB 8
SB 8 Summary of Changes.pdf SFIN 2/20/2018 9:00:00 AM
SB 8
SB 8 Sponsor Statement.pdf SFIN 2/20/2018 9:00:00 AM
SB 8
SB 8 support letters.pdf SFIN 2/20/2018 9:00:00 AM
SB 8
SB 154 pick click give flow chart.pdf SFIN 2/20/2018 9:00:00 AM
SB 154
SB 154 Pick Click Give Program overview.pdf SFIN 2/20/2018 9:00:00 AM
SB 154
SB 154 Sectional Analysis, ver D.pdf SFIN 2/20/2018 9:00:00 AM
SB 154
SB 154 Sponsor Statement.pdf SFIN 2/20/2018 9:00:00 AM
SB 154
SB 8 - Opposition Bishop.pdf SFIN 2/20/2018 9:00:00 AM
SB 8