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Alaska lawmakers see sizable pay boost as result of office expense change

Lisa Demer

Most Alaska state legislators are seeing sizable pay boosts this year through a change quietly approved by a legislative panel in December that transforms their state-paid office allowances into personal income rather than have state accountants manage office spending and check receipts.

That amounts to an extra $16,000 in income a year for state representatives and $20,000 for senators, on top of their base $50,400 salary, for the majority of legislators. During the legislative session, they also get payments for living expenses in Juneau at a current rate of $234 a day.

For a senator, the change in allowance amounts to a nearly 40 percent boost in pay with no accounting for the money.

"The citizens of Alaska didn't know they were giving us a big pay increase," said state Sen. Berta Gardner, D-Anchorage.

She has proposed a measure, Senate Bill 34, to revamp the system once again so that each legislator's allowance money is administered by the state and anything not spent reverts to the general fund.

And one key Republican lawmaker, Rep. Mike Hawker of Anchorage, said Monday he's thinking the change may need another look.

In the past, legislators had wide discretion in how to claim the money. As of 2011, nine of the 60 legislators took their allowance money as income, and paid federal taxes on it, according to a news story from the time.

The remaining 51 legislators opted for an "accountable" allowance, which avoids federal income taxes. They opted to have the money administered through the Legislative Affairs Agency, submitting receipts for reimbursement, or took some of the money as taxable income with most administered by the legislative accountants.

Legislators say the office allowance is needed. It covers the costs of business cards and letterhead stationery, mailings to constituents and pizza parties in home districts, coffee, cookies and flowers in the office, and occasional travel for state business. Subscriptions and memberships are covered, too.

The Legislative Council -- the joint Senate-House committee that manages the Legislature's business -- approved the change on Dec. 13. Then-Sen. Linda Menard, R-Wasilla, who was at that point the council chairwoman, told the panel that an independent accounting firm determined the current system of allowing legislators to choose how to claim the money ran afoul of IRS rules.

Under the new interpretation of IRS regulations, for any legislator to spend the money tax-free, all had to be under the same administrative business expense plan -- or it's "not considered a valid plan," Jessica Geary, finance manager for the Legislative Affairs Agency, said in a brief interview last week. "It's a very convoluted issue."

Last year, legislators were advised of the IRS issue and surveyed about how they wanted to handle the money, she said.

The poll found that 25 legislators wanted to take the money as income -- the "non-accountable option," Geary told the Legislative Council in December. Another 17 preferred letting legislative accountants handle all of it and sending unused allowance money to the state general fund -- "the fully accountable option." Six wanted to do some of each.

Neither she nor agency executive director Pam Varni were able to provide current figures by Monday for how many legislators in 2012 took the money as income, or the survey results by legislator. Geary said she was under a tight deadline to compete the annual legislative travel and pay report by Jan. 31, but would provide more information once that document was published.

Not all legislators take the full allowance. The amount was doubled in 2011 to the current level. State Rep. Bill Stoltze, R-Chugiak, received $8,000 last year and hasn't yet filled out the paperwork for 2013, an aide said.

State Rep. Les Gara, D-Anchorage, said he also turned down the extra $8,000 in 2012. While he didn't do the same this year, he and some other House Democrats are protesting the conversion of the allowance to income as contrary to state law, he said Monday evening.

State Rep. Lindsey Holmes of Anchorage, who just switched party affiliation from Democrat to Republican, was on the Legislative Council last year and made the procedural move to require all 60 legislators to take the money as taxable income.

She said Monday that she was uncertain the new way is the answer. She said that she only made the motion "in a secretarial role" because the committee vice chairman -- who usually offers procedural moves -- was participating by telephone and the matter needed to be addressed.

It passed the Legislative Council with no objection -- reflecting what a majority of legislators surveyed wanted, Holmes said -- and didn't require any further approvals.

Rep. Hawker is a former certified public accountant who now chairs the Legislative Council. Though the change appears to have minimized risk of IRS trouble and followed the wishes of legislators, he's giving it a fresh look.

"I believe this issue bears more research and consideration. I am not convinced that the historic method of managing office allowance accounts is necessarily placing the state at a unnecessary risk," Hawker said Monday.

He was one who used a mixed approach -- accounting for much of his allowance money through Legislative Affairs and taking leftover money as income, essentially paying himself back for furnishing office coffee, his cellphone bill, and the like.

Some number of legislators don't like losing much of their allowance to income taxes and will now have to keep careful records if they want to deduct the spending from their federal tax returns.

Holmes, who is no longer on council, said she would rather see the allowances run through legislative accounting, at least in part.

"I've heard a lot of grumbling, and myself included," she said. Managing the spending and keeping records to write off legislative expenses will be complicated. "Do you co-mingle it with your personal funds, do you keep it separate?"

House Speaker Mike Chenault, R-Nikiski and a member of the Legislative Council, said he long has taken his allowance money as taxable income.

"I felt that it was my responsibility to manage that money. It's been allotted to me," Chenault said. The state shouldn't pay workers to administer it for him, he said.

How can the public be assured the money goes for a public purpose? Some of the spending is visible, Chenault answered.

"I have stationery requirements. I have to buy business cards and letterhead, things like that," the speaker said. He sends out newsletters, too. "That all costs money."

But there may not be a realistic way to account for an extra $16,000 or $20,000 per legislator, in the new system.

"I guess, certainly, they could ask their representative 'Give me your bank account so that I know exactly how you've spent every dollar that you've ever earned in your life.' So we'll see what comes out of that," Chenault said.

He said if Gardner's bill to change the system passes the Senate, the House will look at it.

In the new system, a lawmaker could spend the money on anything -- a car, a TV, a trip to Vegas.

But if legislators don't use their allowances to connect and communicate with their district through newsletters, meetings and the like, Holmes said, "you might not be here in two years."

 

Reach Lisa Demer at ldemer@adn.com or 257-4390.

 

 


By LISA DEMER
ldemer@adn.com
Contact Lisa Demer at LDemer@adn.com or on