Legislature(2015 - 2016)HOUSE FINANCE 519
04/14/2016 08:30 AM House FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| SB196 | |
| SB210 | |
| HB81 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 81 | TELECONFERENCED | |
| + | SB 196 | TELECONFERENCED | |
| + | SB 210 | TELECONFERENCED | |
| += | HB 194 | TELECONFERENCED | |
| + | TELECONFERENCED |
CS FOR SENATE BILL NO. 210(FIN) am
"An Act relating to the community revenue sharing
program; and changing the name of the community
revenue sharing program to the community assistance
program."
9:40:23 AM
SENATOR ANNA MACKINNON, SPONSOR, spoke to the bill. She
related that the legislation changed the program's name
from Community Revenue Sharing Program to the Community
Assistance Program due to the fact that the state currently
"did not have anything to share." She discussed that SB 210
was a step to continue providing assistance to rural
communities. She shared that some members of urban
communities were pointing to rural communities reproving
them of not contributing their fair share in the form of
taxes. In response, she engaged in a dialogue with Senator
Hoffman regarding finding a way PCE could help support
community revenue sharing. She related that the result was
SB 196 proposing the mechanism to provide the support. She
recounted that 50 percent of the extra earning on the PCE
endowment would support community assistance. She
reiterated that the bill changed the name of the program
from revenue sharing to community assistance. She pointed
to page 5, line 3 and explained that the bill changed the
amount from $220 thousand based on the population formula
to $300 thousand in order to create an equitable spread to
account for years of high or low investment and ensure that
the larger communities would still receive assistance in
the same "proportionate way as the smaller communities."
She added that if the revenue sharing program remained
unchanged, she believed her hometown would receive up to 40
percent of revenue sharing and was not attempting to "harm"
her constituents, but felt that the bill struck a "balance"
between rural and urban areas. She stated that SB 196
provided a revenue stream dependent on earnings and
safeguarded that rural communities were contributing to
help with community assistance; the bill reduced the
state's obligation by $30 million. She detailed that the
bills took a $180 million program stepped it down to $90
million within three years, provided $30 million in
assistance and shared the assistance equitably throughout
the state.
Representative Wilson spoke to a handout titled "SB 210:
Community Assistance Payments FY 16-18 with $300,000 Base"
(copy on file) and remarked that the payments were not
based on population. She asked how the percentages were
formulated. Senator MacKinnon answered that the payouts
were based on a mathematical equation on page 5, line 3 of
SB 210. She delineated that the sponsors evaluated the
current distribution under the $220 thousand multiplier for
population and developed a formula that was included in the
original version of the bill. The Senate did not believe
the proportional spread was fair because the new formula
significantly reduced the payment to larger communities and
actually increased assistance to rural communities. The
sponsors chose a formula that spread the proportional
distribution of the reduction more fairly. Under a $20
million, $30 million and $50 million program, the amount of
$300 thousand was the "ideal" number where the decreases
were spread most proportionately.
9:46:27 AM
Representative Wilson pointed out that the city of
Fairbanks received a 66 percent reduction while the North
Star Borough received a 64 percent reduction, and the city
of North Pole was reduced by 44 percent and the North Slope
Borough received a 32 percent reduction. She indicated that
the North Slope Borough was capable of generating more
money than the North Pole. She was having trouble making
sense of the distribution. Senator MacKinnon answered that
the sponsors did not "mess" with the underlying existing
formula that prorated the distribution of a revenue sharing
plan. She stated that the $300 thousand figure created "the
appropriate fairness spread in the reduction" of the
program while creating "the least impact" on small
communities because they possessed "the least ability to
respond" to the reduction in the program. She stated that
the Legislative Finance Division (LFD) was available for
questions.
ALEXI PAINTER, ANALYST, LEGISLATIVE FINANCE DIVISION,
ALASKA STATE LEGISLATURE, explained that the community
assistance program provided two payments; a per capita
payment and a basic amount. The basic amount was
distributed to all communities regardless of population,
the $300 thousand was the base amount, cities and
unincorporated municipalities received differing fractions
of that amount. Additionally, there was a per capita
distribution. The bill reduced the base amount from $384
thousand to $300,000 and changed the manner of the
proration. In the current formula, the base began at $384
thousand but if the distribution was below $60 million the
base was reduced pro rata to a floor of $220,000. He
recounted that the bill changed the base to $300 thousand,
the exact middle amount, and did not prorate as long as a
sufficient amount of funding was available to pay the basic
amount.
Representative Wilson did not have a problem with the bill
due to the fact that she did not think excess funds would
be available except in years experiencing exceptional
returns. She asked that based on the numbers on the chart
provided, what was the assumption regarding the amount that
was distributed into the program "first."
9:50:29 AM
Senator Mackinnon replied that in FY 2016 the state
distributed $57.3 million. In SB 210, the distribution was
proposed at $38.2 million. She explained that the $300
thousand figure was a new multiplier. She pointed to page
5, line 1 of the bill that designated deletion of the $384
thousand number. She reiterated that two formulas were
employed. The "larger communities may feel like" the
distribution was "unfair." The state did not have enough
revenue to share and based on a comparison exclusively of
the changes of the percentages it would be difficult to
find a rational reason for the distribution. She delineated
that two formulas applied between the borough and the
population and a different spreadsheet was necessary to
show how it worked. "Larger communities were impacted to a
greater degree." The Senate believed that "larger
communities' had a way to react" to reduction in revenues.
The Senate wanted to ensure smaller communities could
retain firefighters or police officers and therefore,
offered additional assistance while transitioning into the
reality of state budget shortfalls.
Mr. Painter elaborated that most of the distribution larger
communities received were through the per capita payment.
Altering the formula reduced the amount of the per capita
payment and proportionately increased the payment through
the base amount. A larger community that mostly received
its distribution from the per capita payout received a
larger reduction than a smaller community that mostly
received payments from the base amount.
Representative Wilson noted that North Pole only had 2,100
people. She pointed to the North Slope Borough with a
population of 2870 and "a lot of infrastructure, business,
oil, and gas" and compared it to the North Pole that lost a
big industry but received a higher reduction. She did not
believe the numbers "seemed fair." Senator MacKinnon
replied that the numbers for the unorganized boroughs were
"very different." She relayed that the Senate Finance
Committee discussed that boroughs received more money. She
warned that the population numbers were not actual and were
not included in the borough population. She stated that a
percentage of borough money was also distributed to the
North Pole based on the formula for boroughs. Another
formula used for boroughs shared revenues with its cities
in another portion of the revenue sharing program.
Mr. Painter delineated that the population count in the
formula did not double count citizens. The population
within the North Pole city limits was counted in its
population but not in the borough. The North Slope Borough
received its distribution from the full base figure. The
city of North Pole received one quarter of the base set in
statute but also received funding from the borough formula.
9:56:03 AM
Representative Wilson announced that most of the cities had
charters that limited the amount of property tax it could
raise and some already charged a sales tax. She wondered
why the reduction discrepancy between the City of Fairbanks
and the North Star Borough of 2 percent existed in the new
formula.
Co-Chair Thompson noted that the bill would be heard before
the committee again.
Mr. Painter answered that a borough received a distribution
from the full base of 300 thousand and the city received
one quarter of the base. The different treatment was due to
the split between the per capita amount and the base
amount.
Senator MacKinnon elaborated that the program was at a
"stair step down stage." She recounted that the legislature
did not recharge the fund with the yearly $60 million
appropriation and the fund dropped to a $57.3 million
program. She expounded that currently, the program was in
the second stair step down headed towards elimination and
eventually the cities will not receive anything. The stair
step had dropped from $57.3 million to $38.2 million for
the current fiscal year's budget. The largest factor
affecting the proration was the reduction in the
distribution in FY 16 of $57.3 million down to $38.2
million currently. The proration was not the significant
portion of the change to municipalities it was the stair
stepping reduction to the program.
Co-Chair Thompson interjected that "otherwise" revenue
sharing was being eliminated.
Senator MacKinnon agreed and restated that SB 196 was an
effort to support the program outside of general fund
appropriations.
Co-Chair Neuman asked how equitably the current version
distributed revenue sharing dollars to communities. Senator
MacKinnon answered that the new program gained more equity
through lowering the base amount to $300 thousand. She
indicated that the formula would still work if additional
appropriations were made to the community assistance
program. She restated that the bills were "a way to
stabilize a program in recognition" that there was no
revenue to share.
Co-Chair Neuman asked why the provisions did not allocate
100 percent of excess PCE funds into revenue sharing, since
PCE was funded via general fund dollars, and further
preserve the draw on GF. He voiced that his goal was to
reduce GF draws.
10:01:18 AM
Senator MacKinnon responded she shared the same goal but
employed a different method to attain it. She detailed that
LFD determined that $17 million was the amount of excess
earnings of the PCE fund from FY 2018 through FY 2022.
Through discussions with Senator Hoffman and the entire
Senate in an effort to stimulate support for some of the
programs rural Alaska received, 50 percent up to the
maximum of $30 million would support community assistance.
She emphasized that $30 million would fund the assistance
program at 100 percent and larger communities would be
receiving a profit from the PCE receipts. She believed the
provisions were "a good compromise." She explained that
historically the PCE fund was founded because a significant
amount of money was invested in large hydro projects that
exclusively benefitted urban areas and rural communities
did not see relief from energy costs. She mentioned that
her goal was to reduce general fund spending with the
bills. She noted that the state was spending GF on Alaska
Energy Authority (AEA) programs. She remarked that the bill
was a compromise and that the initial bill did assign all
of the excess to the GF but rural Alaska's needs were
different than urban Alaska's needs and the current version
attempted to strike a balance.
Co-Chair Neuman understood the rationale. He spoke to the
population in the Mat-Su region growing at "an
extraordinary rate." He cited a figure of 100 thousand from
"state economists." He noted that the Mat-Su school
district experienced an increase of 708 students but its
revenue sharing was going down "disproportionately compared
to how other communities were affected." He had issues with
the bill. His goal was to get the excess funds to go back
into communities with lowered GF. He stated that the bill
did not contain a mechanism that adjusted for communities
with a high growth rate. He felt that the amount of people
affected by the reduction in revenue sharing was "very
disproportionate compared to the needs" in a rapidly
growing community.
10:05:15 AM
Representative Pruitt favored the program's name change to
community assistance. He wanted to better understand the
impact to his community. He asked about how the change
affected the individual tax payer. Senator MacKinnon
replied that she was uncertain. She offered that the other
choice eliminated the program completely. The result would
be a cost to everyone's community and her community would
lose $7.8 million directly. She said there was simply no
revenue and the legislation's intention was not to shift
costs. In FY 18, only $8 million was left to share and
urban areas would take 40 percent to 50 percent of the
funds. The sponsors were not attempting to impact local
communities but wanted to sustain the program in
"perpetuity." She commented that $8.5 million out of the
projected $17 million of excess PCE funds would "standup"
the community assistance program. She acknowledged that the
issue was contentious. She reiterated that she and Senator
Hoffmann had been searching for a way that some of the
receipts from the $1 billion PCE fund would be utilized
fairly while protecting the $1 billion balance in the fund.
She stated that once the PCE fund was spent it would be
impossible to replenish the fund.
10:09:10 AM
Representative Kawasaki asked about additional changes to
the revenue sharing program listed on page 5 of the bill.
He noted that the provision that changed the base to $300
thousand rounded the amount off to the nearest dollar
instead of nearest thousand. He wondered whether the
provision was the only change besides the total amount.
Senator MacKinnon replied that was the only change in
addition to the name change of the program.
LAURA CRAMER, STAFF, SENATOR ANNA MACKINNON, affirmed that
they were the only changes. She confirmed that the rounding
was changed to the nearest $1.00 so the fund would not go
negative. Representative Kawasaki agreed that the
distribution formula between rural and urban communities
was disproportionate. He spoke to the revenue sharing
change to community assistance. He did not favor the name
change and thought it sounded like public assistance.
Representative Edgmon stated that he supported the bill
even though it was not a "perfect." He viewed the
legislation as a measure that incorporated urban and rural
members of the Senate working together to find a solution
in times of downsizing the budget. He pointed to page 6 of
the spreadsheet handout and noted that after the first six
listed communities the rest of the 59 communities had a
population under 10 thousand. He thought the program saved
the state money. He maintained that without revenue
sharing, costs would shift form the operating budget to the
capital budget. He voiced that in all of the other revenue
measures there were disparate numbers as well.
Representative Munoz stated that Fairbanks, Ketchikan, and
Kodiak were listed twice on the spreadsheet, as
municipalities and as parts of boroughs. Juneau and
Wrangell were also municipalities that were part of
boroughs and were only listed once. She wondered why Juneau
and Wrangell were only listed once. Co-Chair Thompson
clarified that boroughs contain cities inside it such as
the Mat-Su borough that contained Palmer and Wasilla. He
added that cities did not exist inside municipalities.
Representative Munoz ascertained that Juneau was
incorporated as one municipality with one city government
and therefore, was only listed once. Co-Chair Thompson
replied in the affirmative.
Senator MacKinnon referenced Representative Kawasaki's
concern that some of the rural payments were very high
relative to the low population numbers. She reminded the
committee that some of the rural communities were listed
separately and were also part of a borough where some of
its population existed within a borough. She reiterated
that the formula did not double count population and
cautioned against using population numbers to compare
proportionality. She offered to send an analyst from LFD to
member's offices to explain the breakdown in each member's
district.
Co-Chair Thompson noted that the Fairbanks North Star
Borough listed population along with the listed populations
of Fairbanks and North Pole on the spreadsheet equaled the
actual population of the Fairbanks North Star Borough.
10:16:37 AM
Representative Gara stated that the revenue sharing program
had changed many times over the years. He asked why the
current formula was eventually stepped down to zero by FY
2019. Senator MacKinnon answered that most likely the
reason was due to the legislature's decision to not
recharge the fund. She recounted that the fund was
originally set up at the full allocation of $180 million;
$60 million was drawn and paid according to the pro rata
formula.
Mr. Painter expounded that annually one-third of the
balance was distributed which amounted to $60 million. The
previous year the legislature appropriated $52 million into
the fund; not the full $60 million and distributed $57.3
million. Without another appropriation, one third of the
funds balance of approximately $115 million was $38 million
and eventually decreased to $25 million. Current statute
prohibited any distribution if the fund's balance was below
$20 million. Representative Gara asked for further
clarification. Mr. Painter replied that the legislature did
recharge the fund during the last fiscal year in the amount
of $52 million. He added that the formula using
progressivity was no longer in effect. Representative Gara
asked what amount was necessary to recharge the current
fund. Mr. Painter answered that the balance was currently
$115 million and an appropriation of $75 million was
necessary.
Co-Chair Thompson OPENED public testimony.
SHIRLEY MARQUARDT, MAYOR, UNALASKA, believed the name
change was very significant and agreed that the state did
not have the revenue to share anymore. She opined that the
revenue sharing program had always been assistance to
communities to "keep the lights on." She referenced the
community of Atka that literally had a difficult time
keeping the lights on and the money they received under the
continuation of the program assisted them with power
generation. She noted the difficulty in providing services
in rural communities. She supported the bill.
KATHIE WASSERMAN, ALASKA MUNICIPAL LEAGUE, relayed that the
league examined the formula regularly and the inequities
shifted between all areas. The previous version contained
larger decreases to the Fairbanks North Star Borough.
Manipulating the formula was very difficult and she opined
that at some point it had to become acceptable with
existing inequities. Her only concern was the absence of an
effective date and the league "was not certain that the SB
210 formula can operate" under the $38.2 million provision
that was effective in July 2016. She recommended using the
old formula to distribute the $38.2 million in FY 18.
10:24:22 AM
RICK KOCH, CITY MANAGER, CITY OF KENAI (via
teleconference), voiced that currently a variable base was
built into the formula and the legislation did not contain
a variable base. He believed eliminating the variability
created the problem with the calculation. He deduced that
at $30 million the base of $300 thousand worked but noted
that as the distribution dropped the formula "went
completely out of whack." He cited that at an allocation of
$30 million with the base of $300 thousand the distribution
for Fairbanks was roughly $877 thousand but at a $20
million distribution it would drop to $78 thousand which
was a 91 percent drop. He added that Anchorage would
experience a 95 percent drop from a distribution of $7.8
million to $406 thousand under the same allocations. A
small community of 322 would receive $83 thousand or $75
thousand and only experience slightly less than a 10
percent reduction under the same distribution factors. He
believed the disparity was too wide and a variable
distribution provision would resolve the issue. He offered
to provide a proposed plan to the committee members.
10:27:11 AM
DR. JON ERICKSON, MANAGER, CITY AND BOROUGH OF YAKUTAT (via
teleconference), spoke in support of SB 210. He stated that
revenue sharing made up 16 percent of the borough's budget.
He reported that Yakutat collected $350 thousand in
property tax and in order to make up the difference he
needed to increase property tax two and one half times. In
addition, Yakutat was funding the school at the full
contribution rate at $503 thousand. Yakutat had been using
revenue sharing to make up the differences in its various
budgets. He indicated that if revenue sharing was
eliminated he would be forced to reduce the administrative
staff from 6 to 3 employees. He understood that "everyone
had to pitch in and make it work somehow."
Co-Chair Thompson CLOSED public testimony.
CSSB 210(FIN) am was HEARD and HELD in committee for
further consideration.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB 194 CS WORKDRAFT FIN GH1060-S.pdf |
HFIN 4/14/2016 8:30:00 AM |
HB 194 |
| HB 81 CS WORKDRAFT vP.pdf |
HFIN 4/14/2016 8:30:00 AM |
HB 81 |
| House Members - SB 196ce.pdf |
HFIN 4/14/2016 8:30:00 AM |
SB 196 |
| SB 196 Fin updated sectional.pdf |
HFIN 4/14/2016 8:30:00 AM |
SB 196 |
| sb 196 Leg finance spread sheets.pdf |
HFIN 4/14/2016 8:30:00 AM |
SB 196 |
| CSSB 210(FIN) AM - Sectional Analysis.pdf |
HFIN 4/14/2016 8:30:00 AM |
SB 210 |
| CSSB 210(FIN) AM E.A.PDF |
HFIN 4/14/2016 8:30:00 AM |
SB 210 |
| CSSB 210(FIN) AM Sponsor Statement.pdf |
HFIN 4/14/2016 8:30:00 AM |
SB 210 |
| CSSB210(FIN) AM - Community Assistance Distribution.pdf |
HFIN 4/14/2016 8:30:00 AM |
SB 210 |
| HB 81 Summary of Changes Pversion 8 March 2016.pdf |
HFIN 4/14/2016 8:30:00 AM |
HB 81 |
| 196 new sponsor statement.pdf |
HFIN 4/14/2016 8:30:00 AM |
SB 196 |
| 4 14 16 SB 210 by Borough.pdf |
HFIN 4/14/2016 8:30:00 AM |
SB 210 |