JUNEAU — State Senate and House lawmakers voted Thursday to end the practice of administering their own office spending accounts, which had allowed them to keep whatever cash was leftover at the end of the year.
The Legislative Council, which handles administrative issues for lawmakers, voted to move all 60 lawmakers to a plan in which the Legislative Affairs Agency administers the accounts.
Previously, lawmakers could handle their own accounts, let the agency handle it, or do a combination of both. But the previous Legislative Council last December opted for a so-called non-accountable plan for office allowance accounts in 2013. That means expenses weren’t run through the Legislative Affairs Agency, allowing lawmakers to administer their own accounts, with taxes and deductions taken out.
That change was made after concerns were raised by a tax attorney and auditor. Lawmakers were told in an October 2012 memo that when expenses are run through accounting and any remaining funds after taxes are paid out, that could be viewed by the Internal Revenue Service as a “recharacterization of income,” and cause “even the substantiated amounts to be taxable.”
While some legislators preferred handling expenses on their own, others said there should be a full accounting of how money is spent. Some also complained about having less money to work with, given the tax hit. When lawmakers administered their own accounts, it was considered taxable income.
Rep. Mike Hawker, who took over as council chairman earlier this year, researched the issue and solicited input from a tax and auditing firm. He said he concluded that having the agency handle all accounts was the way to go to ensure compliance with the law. The law does not list leftover office money as part of a legislator’s compensation, and a provision allowing for annual allowances for things like postage, stationery and other expenses doesn’t address it.
Hawker, R-Anchorage, told the council the option provides accountability and transparency around the use of state funds. He said it also addresses concerns with the IRS.
The council, which met Thursday in Anchorage, unanimously approved the change, which Hawker said will take effect for 2014. Lawmakers will have to submit receipts for qualified business expenses to Legislative Affairs for payment or reimbursement. Any unused money would go to the general fund, Legislative Affairs executive director Pam Varni said by email.
Sen. Donny Olson, D-Golovin, who is not a voting member of the council, said using this plan would cause him “somewhat of an undue hardship.” In his large, rural district, costs are high and “legitimate receipts” are hard to come by because vendors often deal in cash, rather than using credit card machines, he said.
Sen. Kevin Meyer, R-Anchorage, raised the issue of whether the allowance amounts need to be adjusted. He said he usually exceeds his allotted amount, with mailings eating up much of it. He asked if senators should get twice as much as representatives, given the size of their constituencies.
Rep. Lance Pruitt, R-Anchorage, said if anyone needs more money it’s probably newer members, who have the costs of getting an office up and running, in addition to things like constituent outreach.
Hawker said that issue could be addressed at another time.
Representatives can choose to receive $8,000 or $16,000 for their office accounts and senators, $10,000 or $20,000.