Legislature(2017 - 2018)SENATE FINANCE 532

03/27/2018 09:00 AM FINANCE

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
<Bill Hearing Canceled>
<Pending Referral>
Invited Testimony:
David Teal, Legislative Finance Division
Public Testimony - Written Comments for the
Official Public Record Can be Sent to:
9:30 - 10:30: Juneau
10:30 - 11:00: Barrow, Tok, Delta Junction
11:00 - 11:30: Kenai, Kodiak, Dillingham
11:30 - 12:00: Ketchikan, Wrangell, Petersburg
-- Public Testimony Limited to 2 Minutes --
Please Sign in to Testify 15 Minutes Before the
Scheduled End Time for Your Area
<Above Testimony on HB 286 CANCELED>
+ Bills Previously Heard/Scheduled: TELECONFERENCED
Moved CSSB 154(FIN) Out of Committee
Moved CSSB 86(FIN) Out of Committee
SENATE BILL NO. 154                                                                                                           
     "An Act relating to contributions from permanent fund                                                                      
     dividends to the general fund."                                                                                            
9:14:45 AM                                                                                                                    
Co-Chair MacKinnon  relayed that  SB 154  had been  heard on                                                                    
February 20,  2018. The public  hearing had been  opened and                                                                    
closed. The committee had heard  from several members of the                                                                    
public. The  fiscal notes were reviewed.  However, there was                                                                    
a  new fiscal  note that  would  be addressed  later in  the                                                                    
meeting. She  invited Senator  Wilson and  Gary Zepp  to the                                                                    
Vice-Chair   Bishop  MOVED   to  ADOPT   proposed  committee                                                                    
substitute  for  SB  154, Work  Draft  30-LS0081\O  (Martin,                                                                    
Co-Chair MacKinnon OBJECTED for discussion.                                                                                     
GARY  ZEPP,  STAFF,  SENATOR  DAVID  WILSON,  discussed  the                                                                    
Committee Substitute (CS) for SB  154. He explained that the                                                                    
new CS changed  to a new course. In the  previous Version D,                                                                    
they  were going  to use  the Alaska  Community Foundation's                                                                    
Pick.Click.Give.  (PCG) program  to set  up a  mechanism for                                                                    
Alaskans to  donate their Permanent  Fund Dividend  (PFD) to                                                                    
the  state's  general fund.  In  the  course of  the  bill's                                                                    
journey  it  had  been  modified (Version  O)  to  affect  a                                                                    
different set  of statutes (AS.43.23.015) which  covered the                                                                    
application  and  proof  of eligibility.  There  was  a  new                                                                    
section  inserted,   Section  K,  which  directed   the  PFD                                                                    
Division  to  modify the  electronic  PFD  webpage to  allow                                                                    
Alaskans to donate their PFD's  to the state's general fund.                                                                    
It allowed  contributions of  $25 or  more in  increments of                                                                    
$25 up  to the total  amount of  the PFD that  the applicant                                                                    
was  eligible  to  receive.  It  clarified  that  all  PFD's                                                                    
donated by Alaskans were subject  to a 7% administrative fee                                                                    
paid to  the PFD  Division. It structured  the contributions                                                                    
to the state general fund  to appear in the following order:                                                                    
garnishments, the University of  Alaska college savings, the                                                                    
PCG  contributions, and  the state  general  fund. He  noted                                                                    
that AS.43.23.062(e)  stated that  the department  could not                                                                    
use money  from the  fund for administrative  costs incurred                                                                    
in   implementing  the   section   even  if   it  had   been                                                                    
appropriating  for the  cost of  administering the  dividend                                                                    
program. The bill created an  easy mechanism for Alaskans to                                                                    
donate their  PFDs partially or  fully to the  state general                                                                    
Co-Chair MacKinnon  WITHDREW her  OBJECTION. There  being NO                                                                    
further OBJECTION, it was so ordered.                                                                                           
9:18:14 AM                                                                                                                    
SENATOR DAVID WILSON, SPONSOR, thought  Mr. Zepp provided an                                                                    
in-depth analysis of the sectional.  He believed the changes                                                                    
helped  accommodate  some  of   the  issues,  concerns,  and                                                                    
questions that were brought up  in the first hearing held in                                                                    
February. He was available for questions.                                                                                       
Senator  Olson  commented  that  there  seemed  to  be  some                                                                    
adamancy  in  not using  any  money  for the  administrative                                                                    
costs to implement the bill.  He wondered why there was such                                                                    
passionate feelings  about it.  Senator Wilson  thought that                                                                    
it  had to  do  with the  fiscal note  and  issues with  the                                                                    
program. He thought  someone from the PFD  Division might be                                                                    
able to better  address the question. He  mentioned a system                                                                    
that might  work without the use  of PCG and that  might not                                                                    
overburden the user with the fee schedule.                                                                                      
Senator  Olson asked  if the  sponsor  was in  favor of  the                                                                    
last-minute change  to a bill he  originally penned. Senator                                                                    
Wilson  stated he  was amenable  to the  change. He  did not                                                                    
think it changed  the intent of the bill which  was to allow                                                                    
users to more  easily donate their PFD to  the state general                                                                    
Co-Chair MacKinnon OPENED public  testimony. She shared that                                                                    
her office  had reached  out to  previous testifiers  to let                                                                    
them know the bill would be back before the committee.                                                                          
Co-Chair MacKinnon CLOSED public testimony.                                                                                     
9:20:40 AM                                                                                                                    
Vice-Chair  Bishop   discussed  a   new  fiscal   note  from                                                                    
Department of  Revenue (DOR). The  fiscal note  reflected an                                                                    
appropriation for  taxation and treasury; an  allocation for                                                                    
the  Permanent  Fund Dividend  Division;  and  an Office  of                                                                    
Management and  Budget component  number of 981.  The fiscal                                                                    
impact  was indeterminate  because revenue  was unknown.  It                                                                    
also  reflected  costs  in  the  out  years  of  $9,600.  An                                                                    
analysis would be required on  the PFD application, as a new                                                                    
section  would be  created.  It would  be  the third  option                                                                    
along  with  the UA  college  savings  program and  the  PCG                                                                    
Senator Bishop  continued that additionally  the application                                                                    
programming  and modifications  would  be  necessary in  the                                                                    
division's database to update  the deduction priority order.                                                                    
Both  the general  fund and  the 7  percent breakdown  would                                                                    
need to be  added to the division's  monthly payment reports                                                                    
that  were generated  from  the  financial transactions  and                                                                    
would increase.  The division would  be the  primary contact                                                                    
for all questions and concerns related to the new option.                                                                       
Senator  Bishop   continued  that  revenue   generated  from                                                                    
individuals that  chose to  contribute all  or a  portion of                                                                    
their  dividend from  the program  was indeterminate.  Using                                                                    
PCG as an  example, annual contributions ranged  from $25 to                                                                    
$123,000.  Presently, the  estimated  number of  individuals                                                                    
that would contribute to the  general fund were in the lower                                                                    
end  of the  range,  but precisely  where  the general  fund                                                                    
would fall out was unknown.                                                                                                     
Co-Chair MacKinnon asked Ms. Race to the table.                                                                                 
SARA  RACE,  DIRECTOR,  PERMANENT  FUND  DIVIDEND  DIVISION,                                                                    
DEPARTMENT   OF  REVENUE,   thought  that   Senator  Olson's                                                                    
question  pertained to  why funds  from  the Permanent  Fund                                                                    
would not be  used to support the program.  Although she was                                                                    
not there  when it  was initially implemented,  she believed                                                                    
the intent  was that  the primary  mission of  the Permanent                                                                    
Fund was  to administer dividends. The  proposed legislation                                                                    
would be a subset of the primary mission.                                                                                       
Senator Micciche noted the primary  purpose of the permanent                                                                    
Fund was  to administer dividends.  He asked her  to restate                                                                    
what she had said. Ms.  Race stated that the primary mission                                                                    
of  the Permanent  Fund Dividend  Division was  to determine                                                                    
eligibility and to administer dividends.                                                                                        
Senator Olson  was glad for  the clarification  gleaned from                                                                    
the  answer to  Senator  Micciche's  question. He  mentioned                                                                    
that  the  Permanent  Fund Dividend  Division  had  a  large                                                                    
administrative  force. However,  when  things  like the  PCG                                                                    
component, there would be  significant costs associated with                                                                    
it.  He wondered  if  there was  enough  reserve within  the                                                                    
administration  of  the  division  to  absorb  the  workload                                                                    
without  any  increased  costs. Ms.  Race  relayed  that  in                                                                    
talking  about  the  PCG  program,   there  were  two  fees.                                                                    
Pick.Click.Give. had  a fee  of $250  fee to  participate in                                                                    
the   program  and   once  contributions   were  made   from                                                                    
individual's dividends,  7 percent  was collected.  The bill                                                                    
would be a 7 percent charge collected from contributions.                                                                       
9:25:24 AM                                                                                                                    
Co-Chair  MacKinnon noted  that there  were students  in the                                                                    
gallery.  She  discussed  the history  of  the  bill,  which                                                                    
proposed  to create  a  method for  citizens  to donate  the                                                                    
entirety  of their  dividend. The  bill proposed  by Senator                                                                    
Wilson indicated that  if people wanted to  donate their PFD                                                                    
to  state government,  they should  be  able to  do so.  The                                                                    
original bill had it happening  through the PCG program. The                                                                    
committee  substitute created  a  separate  process for  the                                                                    
Permanent Fund Dividend Division  but paid for it separately                                                                    
from the dividend fund.                                                                                                         
Senator Micciche further explained that  it was not the same                                                                    
as  a person  simply  not accepting  the  dividend. In  that                                                                    
case, the  money would be  left in  the fund and  divided by                                                                    
the  remaining folks  that wanted  their dividend.  The bill                                                                    
provided a system for people  to be able to contribute their                                                                    
dividend and have a record  of it. The contribution would go                                                                    
into the  general fund rather  than staying in  the dividend                                                                    
Co-Chair MacKinnon  suggested that  people check  with their                                                                    
accountants,  as   the  money  was  still   taxable  income.                                                                    
According  to her  research, the  contribution  should be  a                                                                    
deduction  on a  person's taxes.  Although governments  were                                                                    
not  considered  non-profits,  they  were  included  in  the                                                                    
federal internal  revenue service code. The  bill was trying                                                                    
to provide an  opportunity for Alaskans to  donate their PFD                                                                    
should they choose to in  order to provide services to other                                                                    
Senator Bishop requested a brief at ease.                                                                                       
9:27:47 AM                                                                                                                    
AT EASE                                                                                                                         
9:30:47 AM                                                                                                                    
Co-Chair  MacKinnon  relayed  that   there  had  been  brief                                                                    
dialogue  about the  issue and  notion of  whether a  parent                                                                    
could  donate their  child's dividend  to state  government.                                                                    
She  wanted  to  hear  from  committee  members  about  this                                                                    
concept.  She  asked the  bill  sponsor  to comment  on  the                                                                    
issue. Senator Wilson  stated that the bill  concept did not                                                                    
change   the  guardianship   rights  of   parents,  parental                                                                    
figures,  or  guardians  regarding  their  rights  to  their                                                                    
children's   PFD.   A   statute  was   already   in   place,                                                                    
AS.47.10.115, requiring that PFDs  of children in custody of                                                                    
the Office  of Children's Services (OCS)  or guardianship of                                                                    
the State of Alaska go into a trust.                                                                                            
Senator  Micciche  did  not  think   there  was  much  of  a                                                                    
difference.  The  current  structure  allowed  a  parent  or                                                                    
guardian to do almost  anything with their child's dividend,                                                                    
good or bad. He did not  believe the bill changed a parent's                                                                    
or guardian's right to manage their children's dividend.                                                                        
Senator von  Imhof echoed the comments  of Senator Micciche.                                                                    
Currently dividend  checks were  under the  absolute control                                                                    
of  parents  to  do  with  as  they  wished.  She  mentioned                                                                    
inserting  a provision  for children  over 18.  She wondered                                                                    
whether  it would  change other  freedoms  noted by  Senator                                                                    
Micciche previously.                                                                                                            
Co-Chair MacKinnon thought that if  a parent was in a higher                                                                    
income bracket and could provide  for themselves, they might                                                                    
want  to  have  the  additional  write-off  for  reasons  of                                                                    
personal decisions  versus reasons of child  protection. She                                                                    
believed  the  issue  was  raised to  her  as  the  chairman                                                                    
because perhaps  a child would  want to retain  their assets                                                                    
but did  not have a voice.  She wanted to have  a discussion                                                                    
on the issue prior to moving  the bill out of committee. She                                                                    
asked   if  Ms.   Race  if   she   could  offer   additional                                                                    
perspective.  Ms. Race  stated that  parents were  currently                                                                    
allowed to determine where children's dividends went.                                                                           
9:35:30 AM                                                                                                                    
Vice-Chair  Bishop  MOVED to  report  CSSB  154(FIN) out  of                                                                    
Committee   with   individual    recommendations   and   the                                                                    
accompanying fiscal notes.                                                                                                      
There being NO OBJECTION, it was so ordered.                                                                                    
CSSB  154(FIN) was  REPORTED  out of  committee  with a  "do                                                                    
pass" recommendation  with one  new fiscal impact  note from                                                                    
Department  of Revenue;  and with  one previously  published                                                                    
zero fiscal note: FN 1(ADM).                                                                                                    
9:36:07 AM                                                                                                                    
AT EASE                                                                                                                         
9:40:07 AM                                                                                                                    

Document Name Date/Time Subjects
SB 86 work draft v. U.pdf SFIN 3/27/2018 9:00:00 AM
SB 86
SB 154 work draft v. O.pdf SFIN 3/27/2018 9:00:00 AM
SB 154
SB 86 - Sectional Version U.pdf SFIN 3/27/2018 9:00:00 AM
SB 86