Legislature(2005 - 2006)CAPITOL 106
03/08/2005 08:00 AM House STATE AFFAIRS
| Audio | Topic |
|---|---|
| Start | |
| HJR8 | |
| HB83 | |
| HB144 | |
| HB94 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | HJR 8 | TELECONFERENCED | |
| + | HB 83 | TELECONFERENCED | |
| += | HB 94 | TELECONFERENCED | |
| *+ | HB 144 | TELECONFERENCED | |
HB 144-ADVISORY VOTE ON COMMUNITY DIVIDEND 8:34:00 AM CHAIR SEATON announced that the next order of business was HOUSE BILL NO. 144 "An Act authorizing an advisory vote on whether income of the Alaska permanent fund in the earnings reserve account should be used for a community dividend program." REPRESENTATIVE BILL THOMAS, Alaska State Legislature, as sponsor of HB 144, stated that the bill asks for an advisory vote to decide whether the legislature should appropriate $150 million, adjusted for inflation annually, from the income of the Alaska Permanent Fund for a community dividend program. Representative Thomas said municipalities are in dire straits; the state ended a municipal dividend program years ago, which created significant problems for the local communities. He added that the legislature is under-funding many things important to local communities, such as senior citizen tax exemptions and boat harbors. He stated that it is the intent of the legislation to provide a local tax relief for the residents, either by lowering the mill rate on local property tax, or through a sales tax. 8:36:56 AM REPRESENTATIVE THOMAS said the plan has hardly any effect on the permanent fund dividend (PFD). He stated his understanding of the projections is that it will be 10 years before an impact will be seen, and then it will be approximately "$50-$70." He said, "This will use a small amount of the projected balance of the permanent fund earnings reserve accounts." He said he chose to use a fixed rate so that it would not be as confusing to the people of Alaska when they vote. 8:37:30 AM REPRESENTATIVE GARDNER directed attention to the sponsor statement, which says each municipality would receive a $50,000 minimum base grant, and each unincorporated municipality in the unorganized borough would receive $25,000. She asked, "Does that really encompass all of Alaska?" 8:38:01 AM REPRESENTATIVE THOMAS offered his understanding that the answer is yes. He revealed that it's the format as was used under "the old revenue sharing program." In response to a request for clarification from Chair Seaton, he said, "The amounts are different, but it's the same formula in distribution that's been used before." 8:38:36 AM REPRESENTATIVE GATTO noted that a lot of communities would get $25,000. He said a community with only two families in it would receive that money, even though they don't maintain the roads and may not even have a school. He said he sees an inherent overextension in giving just a few families the money, and questioned "what we would be wanting them to do with this money." 8:39:53 AM REPRESENTATIVE THOMAS indicated that the smallest community he saw listed had a population of 69. Regarding the reason for including the unorganized municipalities, he said, "I feel that this is earnings of oil wealth that was ... put into the permanent fund." He added, "They get equal treatment through the PFDs ..., so we didn't want to stray too far from everybody participating and being eligible to share in this program." 8:40:30 AM REPRESENTATIVE GATTO stated concern that some of the population listed may not be correct, which would affect "how we allocate the multipliers." 8:41:22 AM REPRESENTATIVE THOMAS said the population calculation is done by a state demographer in the Department of Commerce. Some of the indications used include: the [PFD] applications, federal tax filings, and birth and death statistics and surveys. He pointed out that the bill is going to the people for an advisory vote. If they vote yes, the legislature will meet back to draw the guidelines as to "how it's administrated." He mentioned a potential amendment. 8:42:19 AM CHAIR SEATON offered his understanding that "this is not set up so that this goes with a certain year-based population; this would be adjusted every year." 8:42:48 AM REPRESENTATIVE THOMAS answered affirmatively. 8:42:54 AM REPRESENTATIVE LYNN stated that people are concerned about losing any portion of the PFD. He asked Representative Thomas to reiterate for the record how much would be taken out of the PFD in the first ten years of the program. 8:43:48 AM REPRESENTATIVE THOMAS restated his understanding that there will be no impact on the PFD for 10 years, and after those 10 years "it will be about $70." He continued, "In the mean time, if you were to take this $150 million and go backwards, I believe it's around $200-$300 potential impact to them at the local level, if it's used to relieve them of property tax or a sales tax of some sort." 8:44:41 AM REPRESENTATIVE GRUENBERG said he can't find a definition for "community" anywhere in the Alaska code, and he noted that he does not see a definition in the bill. 8:45:25 AM REPRESENTATIVE THOMAS said he is trying to ensure that everybody who is entitled to a dividend gets one, whether they are an organized or unorganized municipality. He said, "I think they all should share in the wealth of the State of Alaska, and that's why we're going this way." He told Representative Gruenberg that he would get a definition for "community". 8:46:04 AM REPRESENTATIVE GRUENBERG recalled that at the time of the "Claims Act" people reestablished longstanding communities so that they could participate, and, as a result, a number of communities were reformed. He said this is not based on longstanding tradition, but he could see smart people in the Bush getting together to make some money. 8:46:52 AM REPRESENTATIVE THOMAS said hopefully the department that would administrate the program would be shrewd enough to figure that out. He noted that there will probably be new municipalities sprouting up around new gas or oil developments if there are none there already. 8:47:05 AM REPRESENTATIVE GRUENBERG said people would basically be voting on a distribution from the permanent fund; therefore, he recommended that "a term like that" should be defined in the bill itself so people know what they are voting on, and so future legislatures would have some guidance. 8:47:58 AM REPRESENTATIVE THOMAS stated his understanding that if the advisory vote is passed, the legislature would decide how to administrate the program. 8:48:26 AM CHAIR SEATON questioned specifying $150 million and suggested that perhaps it should read "up to $150,000,000" so that people do not have an expectation that it be that amount. 8:49:36 AM REPRESENTATIVE THOMAS stated his understanding that if the money is not available, then it will not be possible to appropriate it. He said, "If there are no earnings, there is no money to give." He said the municipalities would have to be very careful that they don't spend what might be called a windfall, without consideration. 8:50:21 AM CHAIR SEATON asked the sponsor to consider changing the language to "up to $150,000,000". 8:51:10 AM CHAIR SEATON directed attention to the language on page 1, line 13, which read, "adjusted to inflation". He stated his concern that the voters could have expectations based upon a certain inflation rate. 8:51:41 AM REPRESENTATIVE THOMAS indicated that although he could live without that language, he thinks it would be better left in. He said, "If we don't inflation-proof this, taxes will definitely go back up on the rise and ... hurt the people we're trying to help now." 8:52:50 AM CHAIR SEATON clarified, "We're not ... inflation-proofing the PFD, we're just inflation-proofing the principle of the dividend." 8:53:12 AM REPRESENTATIVE THOMAS responded that Chair Seaton's comment is a good one. He said between now and the next time [the bill is heard] "we'll probably have people telling us where we should be going." 8:53:24 AM REPRESENTATIVE GATTO noted that, currently, the amount given out as the PFD is equal for everyone. He observed, "This dividend would be an unequal amount, even though it's using the same permanent fund dividend and permanent fund ... that we started with." He said that is an issue of inequality. 8:54:19 AM REPRESENTATIVE THOMAS noted that "the old municipal aide grant" was unequal. He said, "All wealth comes from oil right now, and I believe everyone in Alaska should have an equal ... share of that." He reiterated that he is trying to help out the municipalities. 8:54:54 AM CHAIR SEATON said the committee should be prepared to talk about municipalities and nonmunicipalities. He said what is being discussed is the issue that it would not be necessary to be a municipality or subdivision of the state to qualify for the community dividend. Chair Seaton said people will want to talk about that. 8:55:40 AM JON BOLLING, Administrator, City of Craig, testified in favor of HB 144. He said the bill would essentially recreate the no- longer-existing revenue sharing, municipal assistance program, using funds from the earnings reserve account. He said the proposed legislation would not negatively affect PFDs for approximately 10 years. He opined that cities across the state would be grateful to the legislature; the community of Craig has responded to reduced sales and property taxes by eliminating full-time staff by about 10 percent over the last 24 months due to lagging revenues, particularly due to reductions in property tax receipts. Creating a community dividend program would be an enormous financial help. He highlighted that the bill would provide for a statewide vote in the matter, allowing the public to ultimately decide on the merits of "this important program." 8:57:34 AM MR. BOLLING, in response to a question from Representative Gatto, stated his belief that the current population of the City of Craig, according to the Department of Commerce is 1,127. 8:58:02 AM MR. BOLLING, in response to a question from Representative Ramras, listed all the positions that the City of Craig eliminated to adjust to its loss of revenue. He noted that the alternative is raising taxes, but at this point, the city council would rather attempt to [cut back] personnel, which will mean some reduction in services. In response to a question from Chair Seaton, Mr. Bolling reported that the City of Craig currently has four police officers. 8:59:06 AM JACK SHAY, Assembly, Ketchikan Gateway Borough; past president, Alaska Municipal League, testified as follows: We are extremely in favor of sending this advisory vote to the people, especially when they can understand what the impact on their local tax situation is going to be. What this bill does, essentially, is replace some of the former municipal aide programs which have already been alluded to. As a matter of fact, here, in our Borough and City of Ketchikan, 18[-plus] years ago ... we received somewhat over $4 million in state aide. And this is not unusual; this is afforded to every municipality in virtually every state in the Union. A little over $4 million, which today would be around $6 million. MR. SHAY explained that the proposed legislation, if passed after the advisory vote, would restore about half of what Ketchikan has lost over the last 18-19 years. He noted that the borough dropped from over $4 million to just a few hundred thousand "this last year." He echoed the statements of Mr. Bolling that "this has put a real crunch on our local governments." Mr. Shay said the borough has received a cut of over 90 percent in state aide. The bill would afford local tax relief. 9:01:15 AM MR. SHAY continued: You need to understand that the permanent fund ... is taxed by the federal government. If this legislation comes to fruition and this dividend program is adopted, it means the local tax payer will not pay one cent - or a local tax relief which would be in the realms of hundreds of dollars annually - ... until the year 2010, and then there would be a ... reduction of approximately $10, ... growing until the year 2015. And then it would be about $50 at that point. In other words, during ... the next ... 10 years or so, for a cost of approximately $170 dollars, the local tax payer would get a relief of over $2,000 in ... less taxes. So, this is an important factor to consider. MR. SHAY said if people realize that they will save money both in federal and local taxes, it should make [the program] much more palatable. He stated, "When it comes to ... the communities [that] might scheme to get this money, or who otherwise would artfully maneuver the procedure, well that wasn't apparent in the old formulas and in the old distribution of the state monies for municipal aide and safe communities, and so forth." He admitted that it might be "a hard sell" to convince people that the plan will not cost a tremendous amount from their dividends. Notwithstanding that, for all the previously stated reasons, he said [HB 144] is excellent legislation and should be moved out of the committee. 9:03:09 AM MR. SHAY, in response to a question from Representative Gatto, reported that - according to the statistics from the Permanent Fund Corporation based on [reports from] the Department of Community Economic Development - the population of the City of Ketchikan is 7,691, while the population of the Ketchikan Gateway Borough is 4,948, which totals 12,639. He added, "I think we're a little more than that, but those are the figures that are currently in place." He noted that the area has lost numbers since its pump mill shut down, but "we're working hard to replace them." 9:03:39 AM TOM BOEDEKER, Manager, City of Soldotna; Legislative Committee Chair, Alaska Municipal League (AML), stated his general support of HB 144. He explained he thinks it's important to find a balance between providing enough details for advisory votes, but not to the point where voters feel locked in by a certain feature. He suggested that many people might support the program if the inflation-proofing language did not exist. He posited that voters may think there is too much detail in specifying the annual appropriation of $150,000,000, because that sounds like a fixed amount. He remarked that the public often doesn't recognize the discretion of the legislature to appropriate lesser amounts and the existing language may look like a mandate "to do $150,000,000." He expressed concern that people might react to that, rather than looking at the overall concept and its appropriateness in the context of funding local government. 9:05:49 AM KEVIN RITCHIE, Alaska Municipal League (AML), testifying on behalf of AML, noted that there is a letter from AML in the committee packet. In response to Representative Gatto's previous attention to the populations in various municipalities, Mr. Ritchie proffered, "I think if you add up Matanuska-Susitna (Mat-Su) Borough, plus Palmer, plus Wasilla, plus Houston, that will probably be the total you're looking for. So, I think what they did was they took out some of the population from Mat-Su, so you don't double [count]." MR. RITCHIE noted that several years ago there was a tax cap campaign that would have disallowed any municipality in the state from charging, basically, over 10 mills of property tax to support schools, and so on. When that effort started, the polls showed that approximately two-thirds of the people thought limiting taxes was a good idea. He said AML was instrumental in getting together a coalition across the state comprised of schools, chambers of commerce, and business organizations that saw the downside of municipal governments not being able to raise money necessary to run their operations. He said the vote ended with three out of four Alaskans saying it is not a good idea to make that limit, because they wanted the freedom to be able to provide the kinds of services needed in their communities. 9:07:33 AM MR. RITCHIE indicated that the municipalities are the governments closest to the people and he thinks that there is a great opportunity for local government discussion and decisions made on the kind of taxes and services needed in each community. He mentioned the loss of police officers in the City of Craig, and he said there are a number of cities throughout the state that have no public safety whatsoever, unless a trooper can get there at some point. He revealed that there are currently at least 10 cities with no insurance coverage whatsoever, because they do not have the local revenue to pay for it. He said that liability affects everybody in the state. 9:09:01 AM MR. RITCHIE said the community dividend is approximately 4 mills of property tax relief across the board, for every community in the state, and puts money into local government. That money could be used in a variety of ways, including: local contributions to schools, rebuilding the police force, or straight tax relief. There is no cost until 2010, at which point, according to calculations, the cost will be far less than the tax relief that will be received every year. Mr. Ritchie said, "We think that conversation is worth having with the public." MR. RITCHIE echoed the previous testimony of Mr. Shay and pointed out that the money people give to pay their local taxes has already been taxed by the federal government. Even the PFD Alaskans earn is taxed. Mr. Ritchie estimated people pay 20-30 percent of what they earn in taxes. In contrast, he noted, "by providing direct tax relief to communities through this process, none of that money is taxed." Mr. Ritchie offered further details. 9:10:47 AM MR. RITCHIE said [AML] needs time to talk to municipalities, school districts, and other organizations to see if they want to "buy on." He repeated the sentiments of Mr. Boedeker that getting the specifics down is important for the public. In order to get people in a coalition to support the program, [AML] needs assurance that the program will actually happen approximately as stated. He expressed his hope that legislators "would either be neutral or supportive of this when it becomes a discussion item before the public." He said the question to ask before final adoption is, "Can we get the quality of support behind this that's going to really create a good conversation with the public?" 9:12:11 AM CHAIR SEATON stated concern that there are two issues: municipal revenue sharing, which is to subdivisions of the state; and community revenue sharing, which "is much more broad." He said he doesn't know if that's a discussion that AML can have, but he said the committee would have it and AML's input would be helpful. He stated his intent to ask the Department of Commerce, Community, & Economic Development (DCCED) to give its input regarding the distribution to nongovernmental communities. 9:13:19 AM REPRESENTATIVE GATTO asked if there is a working definition of "community". 9:13:32 AM MR. RITCHIE said there is a current definition "in the old revenue sharing" of what a community is and that definition "could get transferred over." He said he thinks the question asked by Chair Seaton is, "How do we provide services to unorganized parts of the state, and how do we do it equitably?" He said small towns try hard; most of them have a sales tax, but can't have a property tax because they don't have enough taxable property to make that effort worthwhile. He said some base of support is necessary to buy insurance and to have a modicum of public safety. He said, "Some base of funding is required. If not through this type of program, you basically will have virtually no services in the unorganized borough - people will get nothing - which is a problem for a small community." He offered an example. 9:15:32 AM CHAIR SEATON reiterated the need for the committee to consider governmental agencies and nongovernmental agencies. He said that the committee would not take action on HB 144 today. 9:16:09 AM REPRESENTATIVE RAMRAS asked how much money would result from keeping the $150 million in the fund and allowing it to appreciate with compound interest over 10 years. 9:17:15 AM CHAIR SEATON said he would like the Permanent Fund Division to address that later. 9:17:30 AM REPRESENTATIVE GARDNER noted that according to the "Municipal Officials Directory," the City of Anvik has a population of 108, no sales tax, property tax, or special taxes, and yet there are 11 city employees listed. She asked, "So, how would a community like that -- how did this happen?" 9:18:05 AM MR. RITCHIE reiterated that there is not much commerce going on in the small communities and literally no ability to have a property tax because of all the Native allotment land, federal land, and small houses. There may be some ability for sales tax if there happens to be a store in the town. He explained as follows: What normally happens is, they get a small amount of money from the federal government, called a 'payment in lieu of taxes,' and when there's federal land - I mean the federal land that the federal government does not pay property taxes on - they provide about a $15 million payment that's spread throughout the boroughs, and then the organized cities within the unorganized borough. [It's] not a lot of money, but I'm guessing that what happens in these small towns is: Because they have so little commerce, the money that they get to support their services comes from washeteria fees, utility fees, Bingo, and some other creative ways of raising money if you're tax base is very, very low. 9:20:16 AM MR. RITCHIE, in response to a question from Representative Gruenberg, said the definition for community is in Title 29, under municipal programs. He said he would get that information to the committee directly after the meeting. 9:20:34 AM REPRESENTATIVE GATTO commented, "There's always a school, and so as far as jobs are concerned, there's bound to be a few employees that are paid because of the money that follows the students." 9:20:42 AM REPRESENTATIVE LYNN moved to adopt Amendment 1, which read as follows [original punctuation provided]: Page 2, Line 4, after "community" delete period; add comma, then phrase "except that no less than 50% of such community dividend shall be used to lower residential property taxes." 9:21:21 AM CHAIR SEATON objected. 9:21:27 AM REPRESENTATIVE LYNN stated that at the top of people's list of concerns is that regarding property tax; therefore, he said he thinks Amendment 1 is necessary to provide property tax relief, and would help sell the idea of the advisory vote to voters. 9:22:59 AM CHAIR SEATON noted that there are a number of communities that don't have personal property tax and, in those cases, he doesn't know if they would not get the dividend. He said the committee would consider [Amendment 1] and bring it up at the next hearing. REPRESENTATIVE LYNN noted that he was going to add "or to relieve sales taxes"; however, Representative Thomas suggested just leaving it at property taxes. CHAIR SEATON announced that HB 144 [was heard and held].
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