SENATE BILL 340

Senator Randy Phillips
Eagle River, AK
May 6, 2002

On April 16, Senate Bill 340 passed the Senate by a vote of 12 - 7. This bill eliminates the "hold harmless" provision of the Permanent Fund Dividend program. The hold harmless provision allows welfare recipients who qualify for a Permanent Fund Dividend to receive a dividend check without any reduction to their benefits.

When the Permanent Fund Dividend program was established in 1981, the legislature at that time decided that the dividend should not be considered as income when determining eligibility for public assistance. However, the federal government continued to require that the dividend be considered as income for the purposes of determining benefits. The money from the hold harmless program makes up the difference so that federal benefits programs could continue unaffected during the month those on public assistance received the dividend. This hold harmless provision amounts to a tax on the dividend and is the only such tax on an individual's dividend check. Last year the amount deducted was $27.34 per dividend.

I have introduced similar legislation twice before, in 1993 and 1995. During debate on the legislation those opposed argued that it would take money away from the poorest of the poor - those who are on public assistance and are disabled, blind or elderly. Because I share those concerns, under current legislation (SB 340), Alaskans receiving Adult Public Assistance, federal Supplemental Security Income and Medicaid will still receive their dividend without any impact to their benefits. Only those on ATAP (Alaska Temporary Assistance Program) would have to make the choice whether to apply for the dividend or see a reduction in benefits for the month in which they receive the dividend.

Last year the Medicaid budget was $155.9 million. For the next fiscal year, it is anticipated the Medicaid program will need $193.1 - a $37.2 million increase, or a 24 percent increase over last year's budget. This is the largest requested increase in the operating budget.

The legislature has had to make tough decisions this year. There is not enough money to fund every worthwhile program in the state. It is anticipated that about $5 million will be saved by eliminating the hold harmless program for welfare recipients who are not disabled, blind or elderly. This money will go back into Medicaid, and will help insure continuation of medical benefits for those who need this assistance program.