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Alaska legislators not allowed to use expense accounts for personal income boost

Pat Forgey

JUNEAU -- Worried legislators have backed off the back-door pay raises they'd earlier given themselves, and will no longer be able to dip into their office expense accounts for personal money.

The move will likely cost the average legislator $9,000, and some as much as $20,000, but it will ensure compliance with both federal tax rules and Alaska statutes.

Alaska legislators, long believing they weren't paid as much as they should be, gave themselves the option of taking their individual office expense accounts as income. Not everyone did so, but the majority took some or all as income instead of proving that they were spending it on office expenses.

State law gives legislators money to be used on office expenses, which statute describes as "postage, stationery, stenographic services and other expenses."

These days, much of that is used for mailing district newsletters, along with office or constituent snacks, extra office equipment or travel. Each senator is authorized to receive $20,000 per year; representatives get $16,000.

Not appropriate 

Nearly all legislators took at least some of that amount as income, and several took the entire amount. They were allowed to pocket any money left over after legitimate expenses were paid.

That's not appropriate, said Rep. Mike Hawker, R-Anchorage, chair of the Legislative Council, the joint House-Senate committee that oversees the day-to-day business of the Legislature.

“The intent of the statute authorizing office expenses allowances was not to provide additional compensation to legislators,” Hawker said, in a press release announcing the decision by the Legislative Council to change the policy.

Legislators will now be required to submit receipts and be reimbursed for legitimate office expenses.

Defending previous system

House Republican Majority spokesman Will Vandergriff defended the previous method in the press release announcing the change.

"Historically it was considered acceptable to take all or a portion of the office account as income, in light of low legislative salaries and the myriad costs associated with legislators’ official duties," he wrote.

Hawker himself took $12,000 of his allotted $16,000 as personal income, according to information provided by the Legislative Affairs Agency.

Legislators have for many years had the option of taking their expense money as income, but when the State Officers Compensation Commission raised legislators' base salaries from $20,400 to $50,400 in 2010, they retained that policy.

The next year the commission did not give legislators a cost-of-living raise, but the Legislative Council doubled the office expense accounts to the present amount.

'Flawed and possibly illegal' 

The issue became controversial recently when accountants raised concerns about whether the previous system of accounting for office expenses complied with federal tax law. In response, the Legislative Council last year streamlined the system and required all legislators handle it the same way and take the expense money as income.

Rep. Les Gara, D-Anchorage, called the policy "flawed and possibly illegal under state law."

Gara was one of a handful of legislators who thought it was inappropriate to take the money as income and did not do so. Rep. Scott Kawasaki, D-Fairbanks, also declined to take it.

Current Anchorage Sens. Fred Dyson, Bill Wielechowski, Cathy Giessel and Berta Gardner were the other legislators taking none of their expense money as income last year.

Of further concern to Gara: While he returned the expense money to the Legislative Affairs Agency, they'd taken out taxes and retirement contributions, which might also benefit him personally through retirement or tax refund checks.

The withholding also means taxes go to the federal government that wouldn't if all the money was spent on legitimate office expenses, he said.

"We are taking state funds, and giving roughly 25 percent of them to the federal government in taxes -- something that I think is an unwise expenditure of state funds," Gara said.

The new policy will reduce pay for legislators next year. While 2013 numbers are not yet available, the change would reduce 2012's average legislative salary of $80,000 by about $9,000, according to an Alaska Dispatch analysis of Legislative Affairs Agency data.

Contact Pat Forgey at pat(at)alaskadispatch.com