Legislature(1995 - 1996)

04/23/1996 08:05 AM STA

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
txt
 CSSB 280(FIN) am - MANDATORY INCORP OF CERTAIN BOROUGHS                      
                                                                              
 The first order of business to come before the House State Affairs            
 Committee was CSSB 280(FIN) am.   Chair James announced that                  
 testimony would be taken today and Thursday, April 25, 1996.                  
                                                                               
 Representatives Caren Robinson and Joe Green arrived at 8:06 a.m.             
 and 8:08 a.m., respectively.                                                  
                                                                               
 CHAIR JEANNETTE JAMES asked Senator John Torgerson, Sponsor, to               
 present SB 280.                                                               
                                                                               
 Number 0228                                                                   
                                                                               
 SENATOR JOHN TORGERSON, Sponsor, thought most legislators had seen            
 similar bills in the past.  His starting point had been to look at            
 bills and committee minutes of previous mandatory incorporation               
 legislation in an attempt to ascertain where the stumbling blocks             
 had been and to address those problems before he introduced SB 280.           
 This bill actually starts with a report by the Local Boundary                 
 Commission of the Department of Community & Regional Affairs                  
 (DCRA), which established what is referred to as the Model Borough            
 Boundary within the state of Alaska.  It took the unorganized                 
 borough and divided it up into 18 suggested boroughs based upon               
 guidance of the Constitution and statutes for social, economic and            
 cultural activities within that area.  The report started in 1988             
 and was completed in 1992 he believed, but nothing was ever done              
 with it.  Therefore, he used that as the starting point for the               
 borough boundaries.  He stated SB 280 started out as a mandatory              
 borough bill and the underlying thought was that those areas of the           
 state that could afford it would start paying for some of the costs           
 of government, particularly education.  As this bill has evolved              
 through the process, it has ended up being basically just an                  
 education funding bill that requires areas of the state currently             
 not contributing a local effort to education to pay that local                
 effort.                                                                       
                                                                               
 SENATOR TORGERSON further stated that it gets a little more                   
 complicated.  In keeping with the formation of boroughs, it                   
 requests that by a time line established in one of the sections,              
 based upon the value of the boroughs, each area would have a vote             
 of the residents on whether to incorporate or not to incorporate.             
 He explained there was a prohibition in the statutes on third class           
 boroughs; the third class borough authority was education and                 
 taxation.  This bill started out as second class borough, which               
 adds planning as a third power, so they would have education,                 
 planning and taxation.  He noted that a lot of people objected to             
 having another layer of government in the mandatory portion so it             
 was decided to have an election.  If the voters elect to                      
 incorporate, they follow the current statutes on how to form a                
 borough which he noted had not changed.  This legislation just                
 directs that the election happen based upon a time line that                  
 reflects back to the assessed valuation of that area.  If the                 
 voters elect not to incorporate, there is a mill levy that is laid            
 upon the area for education.  This bill speaks to a six mill levy.            
 He explained that the education formula is a mandated four mills or           
 35 percent of basic need, whichever is less.  The reason this                 
 legislation speaks to six mills is because there was a problem with           
 separation of powers between the Legislative and Executive                    
 Branches.  He noted the original bill had read four mills plus the            
 cost of collection, or equivalency.  The Legislative Legal staff              
 however, advised that the legislature cannot give the authority to            
 the Executive Branch to set the mill rate which is what the                   
 original language would have done.  He chose the six mill rate, but           
 he believes that may be too high and he had a proposed amendment              
 that would lower it.  He noted there was no fiscal note on what               
 DCRA would plan to charge for that, but conversations with the                
 assessor indicated it would be considerably less than what Senator            
 Torgerson had thought it would be.                                            
                                                                               
 SENATOR TORGERSON said there are currently four boroughs in the               
 state that do not have just a sole property tax, but have a sales             
 tax, bed tax, fish tax, property tax, resources tax or a                      
 combination thereof.  Under this legislation, if the area rejects             
 the borough proposal and decides to remain unincorporated, they               
 will become an unincorporated borough that will follow basically              
 whatever boundaries the Local Boundary Commission would submit,               
 which would probably follow the DCRA report.  From there, DCRA                
 would determine if there is an equivalency.  He noted the bill                
 provides for public hearings in every community with a population             
 of 500 or more and through public input, DCRA will decide how to              
 reach that equivalency; it may be a mill rate, sales tax or                   
 whatever.  The time line in the legislation starts with 1997 for              
 the first proposal for boroughs with an evaluation of $550 million            
 or more.  There hasn't been a recent evaluation in rural Alaska               
 since 1994, which were the numbers he used.  He assumed the numbers           
 are higher since everything else has gone up over that period of              
 time, but this is just a time line of when DCRA would start their             
 proposals and has no other effect in law.  Therefore, anything with           
 a half-billion or more would come on in 1997 as far as when the               
 time line would affect the changes.  That would be two proposed               
 boroughs - Prince William Sound and Copper River.  The time line              
 for boroughs of $350 million to $550 million is 1998; $75 million             
 to $350 million is 1999; and the rest of the state or everything              
 that has less than $75 million is in the year 2000.                           
                                                                               
 SENATOR TORGERSON indicated he had received a lot of calls                    
 regarding this legislation and wanted to address some of the                  
 questions that had been raised.  First, does this bill directly               
 affect existing boroughs?  It does not; this bill speaks only to              
 the unorganized borough.  There are other proposals being looked at           
 by the Local Boundary Commission that affect annexation.  The                 
 legislature has no authority on annexation, only to reject the                
 proposal that might come before it as far as the annexation                   
 proposals.  He believed there were five areas that DCRA was working           
 on that would not be directed by this legislation other than                  
 perhaps overlapping authority in terms of shifting other                      
 boundaries.  He reiterated this bill does not speak to annexation             
 into existing boroughs.  Second, does this legislation enforce the            
 incorporation of boroughs adding another layer of government on to            
 residents in the unorganized boroughs without giving them a choice?           
 This bill does not form boroughs; it puts the vote before the                 
 residents of that area as to whether or not they want to form a               
 borough.  Thirdly, does this bill institute a new tax?  He                    
 commented that he has paid this tax since he was old enough to pay            
 a tax and that was education.  It certainly is a new tax on areas             
 that haven't been taxed, but education tax is not new.  He said               
 currently 87 percent of the state population live in boroughs and             
 are required to pay a local contribution.  That 87 percent receives           
 74 percent of the state foundation formula; 5 percent live in                 
 single site schools or cities outside of boroughs and receive 6               
 percent of the funding; and 8 percent of the population, which is             
 basically what this bill would affect, pays no taxes and receives             
 20 percent of the foundation formula.  Again, this is not a new               
 tax, it's already paid by the majority of the people in the state.            
 There isn't any property value in an unorganized borough and what             
 land there is, is mostly exempt.  He noted that none of the                   
 exemptions in current statute were being changed.  For example,               
 senior citizens will be afforded the senior citizen property tax              
 exemption, like people in his borough.  Low income people are                 
 already covered in statute.  There will be a form to complete for             
 the exemption, the same as people in an organized borough.                    
                                                                               
 SENATOR TORGERSON went on to say that according to the 1994                   
 numbers, there is $3.1 billion in assessed valuation that is not              
 being taxed, of which approximately $1.7 is oil and gas property.             
 A six mill would generate $18.6 million in revenues per year.  This           
 estimate already does not include anything that is assumed to be              
 exempt such as Native land, Native allotment lands, federal land,             
 etc., so it doesn't change any of the requirements as far as                  
 taxation.  Another question he had been asked is why tax the                  
 unorganized borough at all - they don't receive any services?  He             
 reiterated it is basically an education only bill.  If they decide            
 to form to have more powers, that certainly is okay.  What effect             
 does this legislation have on school districts and rural education            
 attendance areas (REAAs)?  It has none the way the bill is written.           
 He said, "Again, this is something that should happen if we form              
 all into organized and unorganized boroughs, then the Department of           
 Education is going to have to look at combining school districts -            
 or they should look, it doesn't mandate that they do - to                     
 consolidate some of the REAAs."  Currently, 16 school districts               
 have 90 percent of the kids and the rest - up to 54 - are for rural           
 Alaska.  Single site schools are their own district, so it takes in           
 a lot of that, too.  If an area forms a borough, then there is an             
 automatic consolidation.                                                      
                                                                               
 Number 1109                                                                   
                                                                               
 CHAIR JAMES noted for the record that Representatives Robinson,               
 Ivan and Green were in attendance.                                            
                                                                               
 Number 1139                                                                   
                                                                               
 SENATOR TORGERSON said lastly, he had heard a lot of comments that            
 this bill requires incorporation to occur too quickly.  He noted              
 the time line in the legislation is subject to discussion.  If an             
 area decides to incorporate, there are already phase-in provisions            
 in the statutes that a mill rate will be paid on a phase-in over a            
 four year period, so he didn't feel that was too encumbering.  If             
 an area decides not to incorporate, then the tax is levied                    
 beginning January 1 following the vote, since all the assessed                
 evaluations need to be in by January 1 by statute.  He distributed            
 a copy of the valuations based on 1994 which breaks down the oil              
 and gas and all the other jurisdictions.  He realized there was a             
 shift in dollars if an area was to incorporate - from pipeline                
 dollars.  He noted the pipeline could be taxed up to 20 mills and             
 if an area was to incorporate and tax that area, that money would             
 actually shift from state government to the local government.                 
 Again, it would be for education and he was willing to make that              
 switch if the money was being taken from the general fund and going           
 directly to education.  There could also be a shift in fish taxes             
 if an area was to incorporate, whereby the state would take the               
 full 3 or 5 percent; if there was a local government, that would be           
 split with the local government.  He invited questions from the               
 committee.                                                                    
                                                                               
 Number 1267                                                                   
                                                                               
 REPRESENTATIVE JOE GREEN questioned why a rural unincorporated                
 borough with a current significant disparity in education                     
 allocation would want to incorporate.                                         
                                                                               
 SENATOR TORGERSON thought the committee would be hearing opposition           
 from 80 percent of the people who live in rural Alaska.  The people           
 in favor of this legislation are the 92 percent of the population             
 that are currently paying for education.                                      
                                                                               
 REPRESENTATIVE GREEN said he could understand why the 92 percent of           
 the population who currently pay would support this bill, but he              
 wondered what could be done to entice the other 8 percent.                    
                                                                               
 SENATOR TORGERSON responded he wasn't aware of any enticement.                
 However, it could be that if they incorporated, they would have               
 more destiny over local government.  On the other hand, most of               
 them don't want a government.  He added there is no incentive other           
 than having local ownership of their education, if they chose to do           
 so.                                                                           
                                                                               
 Number 1384                                                                   
                                                                               
 CHAIR JAMES said if an area incorporated, then automatically                  
 schools within that proposed borough would form a school district.            
 She expressed concern about ownership of the school.  In all of the           
 other boroughs, ownership of the school is with the borough, not by           
 the state.  Therefore, keeping up the buildings and things of that            
 nature was the responsibility of the borough.  She questioned if              
 the borough would own the schools or would the state continue to              
 own the school buildings.                                                     
                                                                               
 SENATOR TORGERSON said this bill was silent on that issue.  He                
 said, "As a rule, the old mandatory borough that most of us were              
 created under transferred ownership of the schools to the boroughs            
 at the time they became incorporated which was 1963."  At that time           
 there were eight boroughs of which four voted to form and four were           
 forced to form.  The mill rate was levied and was given to the                
 schools for maintenance.  One of the considerations that would have           
 to be addressed during the public meeting process would be whether            
 or not to take over the schools.  Most of the boroughs exceed the             
 four mill rate and the funding formula is four mills or 35 percent,           
 whichever is less of basic need.  By statute, it can't go any lower           
 than that.  He thought that would work in some of the rural areas,            
 but in others it might not work.  That determination would have to            
 be made when the Department of Education came forward with their              
 proposals on how to combine, etc.  He explained the time lines were           
 as follows:  The DCRA prepares and submits a request to the U.S.              
 Department of Justice for pre-clearance under the Federal Voting              
 Right Act concerning changes in voting rights, borough                        
 incorporation, dissolution of REAAs, dissolution of city school               
 boards, and dissolution of CRSAs, as well as the date and                     
 procedures for conducting elections.  This is something that would            
 be accomplished through the process done by the DCRA in their                 
 public hearings.  At that time, they would determine what the will            
 is of the people in terms of what to put on the ballot.                       
                                                                               
 Number 1582                                                                   
                                                                               
 REPRESENTATIVE ED WILLIS questioned if a borough votes and rejects            
 forming an organized borough and then goes into an unorganized                
 borough, who would act as their assembly?                                     
                                                                               
 SENATOR TORGERSON responded "us."                                             
                                                                               
 REPRESENTATIVE WILLIS asked if that was in the Constitution?                  
                                                                               
 SENATOR TORGERSON said according to the Legislative Legal staff, it           
 isn't really sitting as an assembly; we can effect it with basic              
 legislation.  He added that a straight mill rate bill could be                
 introduced, but it wouldn't give the local economy or the                     
 ownership.                                                                    
                                                                               
 REPRESENTATIVE WILLIS asked if it had been done historically?                 
                                                                               
 SENATOR TORGERSON replied yes, to some degree.                                
                                                                               
 Number 1665                                                                   
                                                                               
 REPRESENTATIVE CAREN ROBINSON asked why Senator Torgerson didn't do           
 a straight across-the-board school tax as had been done previously?           
 She commented that many people thought that rural communities                 
 really are paying a major share through the PL-874 funds and asked            
 Senator Torgerson what his thoughts were on that.                             
                                                                               
 SENATOR TORGERSON responded that PL-874 are federal funds and he              
 understood their qualifications are because they have federal lands           
 that are nontaxable in their jurisdiction.  He noted there was a              
 zero fiscal note on the PL-874 funds as far as the impact.  There             
 is a shift, but the shift is a zero impact.  In response to                   
 Representative Robinson's first question, he said the mandatory               
 borough part does have its own constituency where everyone thinks             
 the rest of the state should have boroughs, so he basically started           
 there.  He agrees with the people who say they have a problem with            
 another layer of government that doesn't do anything.  The state              
 can go ahead and fund that as long as it's not at a loss, so that             
 was the cost of collection part of the four mills.  He said it's              
 just a judgment call.  He believes there are some areas that need             
 to incorporate and have planning powers; they do that function now.           
 And then there are other areas that need to be put off for quite              
 awhile before they even look at incorporating.                                
                                                                               
 Number 1756                                                                   
                                                                               
 REPRESENTATIVE BRIAN PORTER understood that if an area within a               
 current unincorporated voted to incorporate, they would have an               
 opportunity to go into the third class borough level.                         
                                                                               
 SENATOR TORGERSON said that was correct and added that prohibition            
 was put on about the time the Haines Borough started.  The assembly           
 actually sits as the school district in a third class borough and             
 it is the less power of the local government that we recognize in             
 the state.  For some reason, a prohibition was put in the statutes            
 that said no more; you must at least have the planning capabilities           
 along with education and taxation.  He's recognizing the minimum is           
 to have a local share for education, so it does remove that                   
 prohibition on third class boroughs and directs them to come up               
 with a proposal for third class borough formations.                           
                                                                               
 Number 1805                                                                   
                                                                               
 REPRESENTATIVE SCOTT OGAN asked who in Representative Ivan's                  
 district, for example, would pay taxes?                                       
                                                                               
 SENATOR TORGERSON couldn't give a specific answer, but said it                
 might have been easy to levy a four mill property tax across the              
 board.  The formula would be arrived at by the assessor having to             
 find the full and true value of the proposed borough boundary,                
 which will be multiplied by six mills as indicated in the                     
 legislation.  Then there would be a proposal on how to achieve what           
 that number is.  So, if they have $100 million times six mills, the           
 local effort would be $600,000.  He explained that local effort               
 could be achieved one of many ways; it could be two mills on                  
 property, it could be all sales tax, it could be all resource tax             
 or whatever.  It depends on the proposal that comes forward from              
 the Local Boundary Commission after the public hearing process.               
 For example, the Northwest Arctic Borough just has a severance tax            
 on Cominco, the mining operation; the Aleutians Borough has a fish            
 tax; and the Denali Borough has a bed tax and a severance tax on              
 Healy coal.  They have to match that local effort - the four mills.           
 Because they're organized, the 35 percent affects them; four mills            
 times the basic need or whatever is less.  They have chosen many              
 different ways to achieve that.                                               
                                                                               
 REPRESENTATIVE OGAN said assuming it's a property tax, who owns               
 private property in many of the rural areas.  Native corporations             
 are exempt, but would improvements on Native corporation land or              
 private property owners basically be the only ones to pay if it was           
 a straight property tax?                                                      
                                                                               
 SENATOR TORGERSON responded that was correct if it was a straight             
 property tax.  He noted that any land that is Native owned and put            
 into any kind of development is not exempt.  For example, a lot of            
 the villages still have their initial entitlement that has never              
 been developed and that would be exempt.  However, if that land had           
 been developed, then it would become taxable.  He said all that is            
 in current statute, so the bill was silent on that issue.                     
                                                                               
 Number 1981                                                                   
                                                                               
 CHAIR JAMES said her observation over the last few years is there             
 has been a real market increase in the rural communities in trying            
 to establish some resource development to help themselves.  The               
 focus of the Alaska Federation of Natives convention last year was            
 to be able to help themselves by getting development underway.  She           
 questioned the timing of this issue insofar as having to pay a tax            
 on top of trying to develop their resources.  She wondered if the             
 timetable laid out in the legislation was sufficient to allow these           
 communities to develop their resources so they would be in a                  
 position to pay some taxes.                                                   
                                                                               
 SENATOR TORGERSON thought that would be a judgment call based on              
 the project.  He didn't think there was any operation that was                
 unlucrative to the point where the mill rate for education would              
 affect whether or not the project goes forward.  He commented there           
 were a lot of projects in his borough that were coming on board and           
 it's a consideration as part of the plan that they would pay the              
 full mill rate for everything that happens in the borough.  He                
 thought that a local area - a borough or unorganized borough -                
 would look favorably on paying their share of education.                      
                                                                               
 REPRESENTATIVE GREEN expressed concern that there are at least two            
 areas and perhaps several more that have a potential for gold                 
 extraction and asked Senator Torgerson if mineral extraction is               
 taxed the same way as oil & gas?  In other words, there can be a              
 tax on unproduced proven reserves and this could be catastrophic to           
 a fledgling mine if there was an evaluation made of a large reserve           
 but they've only had a small process (indisc.).                               
                                                                               
 SENATOR TORGERSON said he was not aware of any severance tax on               
 mines for unreserved.  As a general rule, the resource in place is            
 real property and once it's extracted, it becomes personal                    
 property.  Therefore, anything that is extracted and sitting in a             
 pile could be taxed as personal property, but most of the                     
 jurisdictions have exempted inventories and things of that nature.            
 However, it could happen.  With respect to real property in place,            
 he thought that if an area owned the subsurface rights, which in              
 most cases they don't, then that could be taxable as real property.           
                                                                               
 CHAIR JAMES noted the state does have a mining license tax when a             
 mine is in production.                                                        
                                                                               
 SENATOR TORGERSON commented it wasn't the production he was                   
 concerned about but rather what's not produced.                               
                                                                               
 Number 2208                                                                   
                                                                               
 REPRESENTATIVE IVAN IVAN commented that he represented one of the             
 least developed areas in the state.  He said he wanted to address             
 the intent of the legislation and how Senator Torgerson had gotten            
 to this point.  He asked if committee meetings had been held                  
 throughout the unorganized borough areas so that people had an                
 opportunity to testify as the bill had been crafted?                          
                                                                               
 SENATOR TORGERSON responded just teleconference.                              
                                                                               
 REPRESENTATIVE IVAN said he would liked to have seen that done so             
 that individuals, community members and potential resource                    
 developers would have been given the opportunity to testify.  He              
 has heard some concern expressed from potential resource developers           
 and he certainly invited their input.  He has enjoyed attempting to           
 reduce the red tape and/or regulations that prevented development             
 not only in mining, but in other business potentials that would be            
 a foundation for such a proposal.  With legislation such as this,             
 he thought the areas affected should at least have an opportunity             
 to testify and work with the legislature to improve the bill.                 
                                                                               
 SENATOR TORGERSON said this bill pays for education and if an area            
 refuses to pay the education cost now, he didn't know what the                
 benefit would be of holding public hearings; either they want to              
 pay education costs or they don't.                                            
                                                                               
 CHAIR JAMES asked if there were any further questions of the                  
 sponsor.  Hearing none, she invited testimony from Richard Mauer.             
                                                                               
 Number 2388                                                                   
                                                                               
 RICHARD MAUER, Delta Greely School District, said he had a question           
 regarding the property valuation increasing.  He noted that with              
 the closing of the base in his community, property value was not              
 going up.  In fact, in the last 12 years he has lost over $20,000             
 in valuation on his house before the base closure, so he didn't               
 think that coming in with a tax to help pay for education was a               
 good vehicle.  He thought perhaps an income tax would be better               
 because his salary has increased while his property value has gone            
 down.  He believed that was the case in other parts of the state,             
 not just in Delta Junction.  He believed this bill boiled down to             
 forced consolidation of schools to pay for education, but forced              
 consolidation doesn't necessarily save money.  His district just              
 went through that process, not for consolidation, but looking at              
 how to reduce administrative costs, etc.  Many people don't realize           
 that when you try to reduce administrators, under current statute,            
 these people are tenured teachers so they have to be put back into            
 the classrooms.  Lastly, he didn't think this bill was good for               
 children because the span of control from a local area was                    
 broadened.  In his particular case, this would tie them in with the           
 REAA of the Gateway School District which is 120 miles away.  So              
 even if there was an unorganized borough with one school district,            
 which there is some ambiguity....                                             
                                                                               
 TAPE 96-57, SIDE B                                                            
 Number 0001                                                                   
                                                                               
 MR. MAUER continued...wish to remain unorganized, but under the               
 statutes, do they become in essence an unorganized borough and then           
 have to have forced consolidation.  That question had not been                
 adequately answered in his mind.                                              
                                                                               
 CHAIR JAMES thanked Mr. Mauer for his testimony and called on Doris           
 Bender to present her testimony.                                              
                                                                               
 Number 0022                                                                   
                                                                               
 DORIS BENDER, Member, Chugach School District, REAA 21, testified             
 there are 21,000 square miles in their school district with                   
 approximately 15 miles of road.  She objected to the failure to               
 hold hearings because none of their sites fall in the category of             
 having a population of 500 or more and expressed her concern with             
 the public not being informed.  She said that Whittier is working             
 on a lot of economic development for the future.  She was concerned           
 in terms of what would happen to the children in the mean time.               
 There isn't enough private property in Prince William Sound that's            
 completely surrounded by Chugach National Forest or the state,                
 including the Alaska Railroad; Whittier itself has got 99.2 acres             
 of private land.  She said, "I think it's going to cost more to               
 evaluate what little private land is out there than you will get              
 back out in the next 20 years."                                               
                                                                               
 CHAIR JAMES thanked Ms. Bender for testifying.  She called on Trudy           
 Koszarek to testify.                                                          
                                                                               
 Number 0090                                                                   
                                                                               
 TRUDY KOSZAREK, Member, Valdez City School Board, testified in                
 opposition to CSSB 280(FIN) amended.  She represented a small first           
 class city and she did not feel that all the questions had been               
 answered in terms of what would happen to Valdez.  She said they              
 currently pay 20 mills of taxes which pays for over 50 percent of             
 their school budget.  She referred to the Model Borough Boundary              
 Study which would combine them with Cordova and the Chugach REAA              
 and said there are two first class cities in there that already               
 provide for their education.  She was concerned about an added                
 layer of government.  She said she wasn't sure the anticipated cost           
 savings would occur.  Their school district has reviewed it and has           
 found there probably wouldn't be a cost savings.  They could                  
 eliminate two superintendents from the three school districts, but            
 because of the travel involved there may not be a savings.  Also,             
 the three sets of teacher contracts involved would probably come              
 out to the high end.  Thirdly, she was concerned about loss of                
 local control.  Currently, she can get into all the schools in her            
 district and she knows what is happening in each one.  There would            
 be travel costs involved for her to get into Whittier, Cordova and            
 the other schools.  Lastly, she said there were a lot of unanswered           
 questions.  They would be the first ones to vote in 1997 as to                
 whether to consolidate and she believed there were a number of                
 questions that needed to be answered before they could do that.               
                                                                               
 Number 0176                                                                   
                                                                               
 REPRESENTATIVE PORTER said it was his understanding from the                  
 sponsor's testimony that there would be no affect on current school           
 districts.                                                                    
                                                                               
 MS. KOSZAREK said that was still unclear.                                     
                                                                               
 REPRESENTATIVE PORTER said Ms. Koszarek was assuming they would be            
 forced to consolidate with an unorganized borough and his                     
 understanding was that would not happen.                                      
                                                                               
 Number 0189                                                                   
                                                                               
 CHAIR JAMES recalled the sponsor had said that if they chose to               
 become a borough, then automatically all the schools within the               
 borough and the borough's boundaries would be put all together,               
 they then in fact would have a consolidated school district.                  
                                                                               
 REPRESENTATIVE PORTER responded that was a local decision that                
 could certainly be made.                                                      
                                                                               
 CHAIR JAMES commented they could decide not to be a borough.                  
                                                                               
 REPRESENTATIVE PORTER assumed no one was going to do this and it              
 would go to Plan B.  Under the Plan B scenario, no existing school            
 districts would be affected.                                                  
                                                                               
 Number 0208                                                                   
                                                                               
 DAVID LAWRENCE, Member, Valdez City School Board, expressed concern           
 with the disparity.  He thought there was disparity everywhere in             
 Alaska as it is now and this may create a greater burden.  He                 
 thought there was a potential of losing the $35 million in federal            
 funding.                                                                      
                                                                               
 CHAIR JAMES thanked Mr. Lawrence for his testimony and called upon            
 Jacqueline Dick to testify.                                                   
                                                                               
 Number 0246                                                                   
                                                                               
 JACQUELINE DICK, Member, Hoonah Public Schools, testified that she            
 and the other board members were not in favor of CSSB 280(FIN)                
 amended.  They do not want to consolidate because it is not good              
 for the school children or the families.  The individual local                
 control would be lost and according to her husband, the mayor of              
 Hoonah, Hoonah is not financially prepared for a borough set up and           
 needs more time to research the issue.  The Hoonah School Board               
 wants to know what the impact would be on the children's education            
 in their district.  They do not view this bill as a cost saving               
 measure to their district; it creates another local government.               
                                                                               
 CHAIR JAMES announced the committee would begin taking testimony              
 from individuals testifying via teleconference.                               
                                                                               
 Number 0339                                                                   
                                                                               
 DENNY WEATHERS testified from Cordova that she was not against                
 paying for education, but against the direction of the bill.  She             
 was confused with Senator Torgerson's statement that school                   
 districts would not be combined.  She referred to Article X,                  
 Section 6 of the Alaska Constitution and said the legislature would           
 be their assembly.  This law is already on the books; the                     
 legislature already is their assembly.  Therefore, at any time if             
 they deemed it necessary according to Article X, they could charge            
 a school tax.  Also, she stated for the record she opposed CSSB
 280(FIN) amended and suggested the legislature look into reimposing           
 a school tax of $100 per person over the age of 18 working in                 
 Alaska and a lower rate for low income individuals.  According to             
 law, the state's requirements for education are supposed to include           
 language arts, social studies, mathematics, science, and                      
 health/physical education.  All the extra subjects should be paid             
 for separately.  She thanked the committee for the opportunity to             
 testify.                                                                      
                                                                               
 CHAIR JAMES thanked Ms. Weathers for her testimony and called on              
 Eric Weathers to present his testimony.                                       
                                                                               
 Number 0438                                                                   
                                                                               
 ERIC WEATHERS testified from Cordova in opposition to CSSB 280(FIN)           
 amended.  He said that most of the local resident fishermen still             
 living there don't have the means of support to pay any additional            
 taxes.  He's not against school tax if it was a flat tax, but he              
 didn't feel there should be a property tax.                                   
                                                                               
 CHAIR JAMES announced the committee would hear testimony from                 
 Bethel.                                                                       
                                                                               
 Number 0479                                                                   
                                                                               
 GEORGE YOUNG read the following statement for Wally Richardson:               
 "Madam Chair, members and hello to Representative Ivan, thank you             
 for giving us this opportunity to testify against SB 280.  I am               
 glad to hear Senator Torgerson's comments that changed the whole              
 concept that was originally presented in SB 280 and if the purpose            
 is to fund education, let's go back to the $10 school tax per                 
 person in the state.  It previously worked.  Perhaps even raise               
 that to $15.  I can predict that our area, like in Delta, would               
 reject this issue if it came to a ballot initiative.  There's                 
 basically no economic base in our area to support it - no oil                 
 development, no timber, no mining, no pipeline and especially this            
 year, no fishery.  Representative Ivan, we need you to stand up for           
 our people; you know this wouldn't work in our area.  Vote against            
 this bill.  Thank you."                                                       
                                                                               
 Number 0523                                                                   
                                                                               
 MYRON NANENG, President, Association of Village Council Presidents,           
 testified representing 56 villages on the Yukon/Kuskokwim/Delta.              
 He said it's ironic this bill is Senate Bill 280; he believed                 
 Public Law 280 takes away a lot of responsibilities from the                  
 villages.  Once again, the state is trying to put more of the                 
 burden on the villages.  He wondered if committee members recalled            
 the days when the schools were being transferred to the state of              
 Alaska from the BIA system.  In the early 1970s, there was a                  
 lawsuit to get the state to provide its responsibility to the                 
 villages by establishing schools.  The state provided only its                
 educational system through the regional school (indisc.-coughing)             
 without allowing a family to even see their children for a number             
 of years and many of them were gone from kindergarten through their           
 adult years.  If this legislation is passed, the schools will be              
 closed.  He urged the committee to reject CSSB 280(FIN) amended.              
                                                                               
 CHAIR JAMES asked Thomas Crafford to testify from Anchorage.                  
                                                                               
 Number 0618                                                                   
                                                                               
 THOMAS CRAFFORD, Vice President, North Pacific Mining Corporation,            
 testified that North Pacific Mining Corporation is a wholly-owned             
 subsidiary of Cook Inlet Region, Inc. and the owners of state mine            
 leases on which the Illinois Creek property near Galena is                    
 situated.  That property is on the brink of development which is              
 anticipated this year by their partner, U.S.M.X.  He mentioned that           
 a question had come up regarding taxation of in situ resources;               
 specifically mineral resources.  He thought that issue had been               
 addressed about three years ago before the legislature and there is           
 a specific exemption against the taxation of those in situ                    
 resources.  His specific comments related to what he perceived to             
 be the impact of this legislation regarding the mining industry.              
 He thought that because of the rural nature of minerals development           
 in Alaska, and in particular the capital intensive nature of that             
 development, the mining industry is going to be disproportionately            
 affected if SB 280 is implemented.  The industry is currently                 
 subject to rents and royalties that are on state lands, the mining            
 license tax and of course, the state income tax.  Many of the                 
 contemplated mineral development projects in the state are going to           
 be fly-in projects and removed from the actual village sites.  They           
 will be in rural locations and not likely to receive any kind of              
 direct services from the borough, organized or not.  Additionally,            
 many of these mining projects will be seasonal and the taxation               
 will be year round.  Finally, this had been addressed in Nevada               
 where there were charges and taxes that had been levied against the           
 mineral development in Nevada.  There were specific exemptions in             
 place for regulatory and environmentally mandated types of                    
 developments that really don't go anywhere towards producing income           
 or profitability for types of developments that are required                  
 through regulation.  He thought those types of considerations                 
 needed to be addressed when considering CSSB 280(FIN) amended.                
                                                                               
 CHAIR JAMES thanked Mr. Crafford for his comments and asked the               
 next individual in Anchorage to present his testimony.                        
                                                                               
 Number 0749                                                                   
                                                                               
 JOHN GLOTFELTY, President, North Pole Borough Planning Committee,             
 testified the North Pole Borough has already assumed the full four            
 mill rate in their proposal; they have no opposition to paying for            
 school tax.  They are diametrically opposed to CSSB 280(FIN)                  
 amended for a couple of reasons.  One, if people vote not to be in            
 a borough, the tax is going to be imposed on them which sounded to            
 him like taxation without representation.  The second reason is               
 that unless the Alaska Constitution has been amended, it clearly              
 states the state will pay 100 percent.  He didn't understand why              
 that was not understood.  He said we should not squelch the rural             
 areas, consolidate them and destroy them through heavy-handed                 
 government at whatever level.  He urged committee members to vote             
 against CSSB 280(FIN) amended and give the rural areas a chance to            
 develop.                                                                      
                                                                               
 Number 0797                                                                   
                                                                               
 PAT POLAND, Director, Division of Municipal & Regional Assistance,            
 Department of Community & Regional Affairs, testified the division            
 provides a variety of services to local governments including staff           
 support to the Local Boundary Commission and the office of the                
 State Assessor.   He said generally the division supports the                 
 thrust of this legislation; that is, the implementation of the                
 local government article of the Constitution and local areas and              
 people taking greater responsibility for local services.  However,            
 at this time the division feels there are far too many unanswered             
 questions and too many information gaps to proceed.  While the                
 division has provided some very tentative estimates of taxable                
 property, they feel there is potential for tremendous variance for            
 those.  He understood the Department of Education would be speaking           
 to the education impacts and while the Department of Education is             
 offering a fiscal note that basically shows a wash, DCRA is aware             
 that depending on how that's implemented, there could again be                
 tremendous variation.  He said there's a lot of state land that               
 would potentially be transferred to local governments, there's                
 issues relating to fish tax and pipeline taxes that haven't been              
 answered.  Finally, he thought there was a number of very important           
 ambiguities in the bill that need to be resolved before it moves              
 forward.  He encouraged the committee to gather additional                    
 information and fact finding before moving forward.                           
                                                                               
 CHAIR JAMES thanked Mr. Poland for his testimony and announced the            
 committee would hear testimony from the Delta Junction                        
 teleconference site.                                                          
                                                                               
 Number 0894                                                                   
                                                                               
 PETER RYNARD testified in opposition to CSSB 280(FIN) amended                 
 because it breaks down what the Constitution (indisc.) and the                
 state has to pay 100 percent.  In Delta Junction, people don't have           
 the money to pay this and they would not vote in a borough and pay            
 taxes.                                                                        
                                                                               
 Number 0953                                                                   
                                                                               
 PAUL TROTZKE said he believes that less government is better.  He             
 said he works approximately five months each year to support the              
 government.  People live in unorganized areas because they like it            
 that way - socially, economically and geographically.  Federal                
 taxes pay school bills and costs.  He pays this tax every year.  He           
 said time after time they have expressed their opposition to these            
 efforts.  Another layer of government is not needed.                          
                                                                               
 Number 1060                                                                   
                                                                               
 GLEN MARUNDE testified he has lived in the Tok area for 35 years              
 and had five children go through the school system from                       
 kindergarten through the University of Alaska.  He is a mechanical            
 and electrical contractor in addition to being the Chairman of the            
 Tok area Senate Bill 280 Legislative Action Committee.  He referred           
 to Section 7, lines 17-21 of the committee substitute and said the            
 language in this section says the Department of Community and                 
 Regional Affairs shall develop a proposed method of levying and               
 collecting taxes in separate unorganized boroughs and a proposed              
 method of establishing boards of equalization.  He stated this                
 language is not compatible with Article X, Section 6 of the state             
 Constitution which says specifically the legislature shall provide            
 for the performance of services it deems necessary or advisable in            
 the unorganized borough allowing for a maximum local participation            
 and responsibility.  It may exercise any power in an unorganized              
 borough which the assembly may exercise in an organized borough.              
 He believes this means the legislature must physically sit in                 
 assembly for each one of the possibly 10 or up to 18 of the new               
 unorganized boroughs which may be formed because of this                      
 legislation.  The majority of the legislature - 31 members - would            
 probably have to be present to conduct business.  The legislature             
 is not permitted to pass these responsibilities to the Executive              
 Branch as the bill attempts to do in Sections 6 and 7 wherein                 
 important functions of responsibilities are passed on to the state            
 tax assessor and/or the Department of Community & Regional Affairs            
 which are part of the Executive or Administrative Branch, not the             
 Legislative Branch of state government.  It is probable that the              
 legislature would have to sit in assembly quarterly, with a 31-               
 member majority to administer the local government and taxation               
 they may want to impose on each of the newly created unorganized              
 boroughs.  It is obvious the methods of establishing a taxing                 
 authority and a board of equalization as written in Sections 6 and            
 7 of SB 280 are not in agreement with the language of the state               
 Constitution which says the legislature must follow the specific              
 performance requirements of an organized borough.  He said this               
 legislation is therefore unconstitutional.  If this legislation               
 became law, the legislature would find itself deeply involved with            
 the administrative duties incurred even in the middle-level of                
 government for possibly 10 to 18 newly-formed organized boroughs.             
                                                                               
 Number 1266                                                                   
                                                                               
 BILL MILLER said one of his major concerns with CSSB 280(FIN)                 
 amended is the fact that over the last 40 years, the small                    
 communities and villages within the unorganized borough have built            
 an infrastructure and facilities within their communities.  He                
 questioned whether under this legislation these facilities would be           
 turned over to the borough or whether they would remain within the            
 incorporated communities.  If they are turned over to the borough,            
 the maintenance on these facilities would be degraded because he              
 was sure the facilities would not be maintained.  Many of these               
 facilities were built with capital funds from the state with the              
 agreement they would be turned over to any municipality or any                
 government formed in the area.  Also, revenues to maintain and                
 operate these facilities would be lost.  He was opposed to CSSB
 280(FIN) amended and felt the people in the unincorporated                    
 communities and unorganized boroughs show a lot more organization             
 than a lot of the organized communities in the incorporated                   
 boroughs.                                                                     
                                                                               
 CHAIR JAMES said the committee would now hear testimony from                  
 individuals in Slana.                                                         
                                                                               
 Number 1350                                                                   
                                                                               
 OLE BATES testified from Slana in opposition to CSSB 280(FIN)                 
 amended in its entirety.  He agreed with the comments expressed by            
 individuals in Tok and Dot Lake.                                              
                                                                               
 Number 1379                                                                   
                                                                               
 CECILIA CHMIELOWSKI testified in opposition to CSSB 280(FIN)                  
 amended.  (Note:  Her testimony is indiscernible).                            
                                                                               
 CHAIR JAMES advised the committee would now take testimony via                
 teleconference from Central.                                                  
                                                                               
 Number 1430                                                                   
                                                                               
 LAURAL TYRRELL testified against CSSB 280(FIN) amended.  She felt             
 the legislation could be better written.  She was not against                 
 paying for education but this issue is not just limited to                    
 education.  She felt they needed more input into the organizing and           
 meetings should be held at the local level.                                   
                                                                               
 Number 1505                                                                   
                                                                               
 PAT BUCHANAN testified in opposition to CSSB 280(FIN) amended.  She           
 said no one in Central was opposed to paying for education but if             
 this is truly a bill for education, then there should be an                   
 education tax.  She had seen firsthand what goes on in a borough              
 that taxes people supposedly fairly to support education and how              
 the outlying rural schools do not benefit from any of those taxes.            
                                                                               
 Number 1576                                                                   
                                                                               
 MARY WILLIAMS testified she is a business owner in Central and is             
 opposed to CSSB 280(FIN) amended.  She said that Central is a small           
 community with less than 100 people and two or three businesses.              
 She commented there were a lot of recreational and seasonal people            
 in Central and she wondered if they were going to be taxed.                   
 Central has a very small tax base and she believed it would cost              
 more money to come out and assess people than what the state would            
 take in.                                                                      
                                                                               
 Number 1642                                                                   
                                                                               
 JULIE ROBERTS testified that Tanana is a very small community which           
 seems to get smaller every year.  She has served on the Board of              
 Education for many years and was aware of the consolidation efforts           
 of the legislature.  The people in Tanana survive on very basic               
 needs; there is a high unemployment rate and most of the land                 
 around Tanana is Native land, so there would be very little money             
 produced from taxation in that area.                                          
                                                                               
 Number 1708                                                                   
                                                                               
 RON DELAY testified regarding the huge inequities that Senator                
 Torgerson was speaking of earlier regarding who supports education            
 and who does not and to what degree.  The Senator seems to dismiss            
 the single sites as not providing their fair share.  In the city of           
 Tanana, the city pays about two and one-half times the four mill              
 rate to support education.  He said in terms of the dismissal of              
 PL-874 funds, he owns property in Fairbanks as well as in Tanana              
 and those lands which are tax exempt generate money the state does            
 not have to pay for education about six times what he as a taxpayer           
 in Fairbanks pays to support education.  He didn't think the single           
 site funds or the PL-874 funds should ever be dismissed  as                   
 supporting education to a much higher degree than urban area                  
 supporters.  The studies on consolidation have shown there are no             
 significant savings to consolidation.  He didn't feel this bill               
 would eliminate the huge inequities that were being discussed.  The           
 people in Tanana pay about six times what he as a property owner in           
 Fairbanks has to pay to support education.  He wanted everyone to             
 realize that PL-874 monies are significant in the small villages              
 and they are paying their own way, more so than the urban areas.              
                                                                               
 CHAIR JAMES inquired if there was anyone in Skagway wishing to                
 testify.                                                                      
                                                                               
 Number 1850                                                                   
                                                                               
 SIOUX PLUMMER, Mayor, City of Skagway, testified in opposition to             
 CSSB 280(FIN) amended.  She thought that initially this legislation           
 was well intended to help support education, but as many people               
 have testified, there are a lot of serious problems as it stands              
 now.  The city of Skagway could not support it primarily because              
 they already contribute significantly to their own school district.           
 It doesn't seem fair and equitable that they should be punished by            
 being levied a further tax if they chose not to be part of a                  
 borough.  She urged the committee not to pass CSSB 280(FIN) amended           
 out of committee.  She suggested going back to the drawing board              
 and solve education's problem in a much more equitable way.  She              
 felt this was another form of government that doesn't serve the               
 people well.  She thanked the committee for the opportunity to                
 testify.                                                                      
                                                                               
 Number 1967                                                                   
                                                                               
 JAMES FILIP testified from Skagway on a couple of issues that were            
 unique to Skagway.  First, there is no support for borough                    
 incorporation in Skagway at the present time.  Their proposed                 
 contribution to education in FY 97 is $619,000 which is equivalent            
 to 6.25 mills or $763 per capita for the year.  They feel that                
 force in the form of political or economic sanctions should not be            
 used to foster borough creation and Section 6 of the bill appears             
 to do just that.  Borough development should be left to the                   
 communities and the areas in which they serve to make decisions of            
 this magnitude.  He thanked the committee for the opportunity to              
 testify.                                                                      
                                                                               
 CHAIR JAMES announced the committee would now take testimony from             
 Glennallen.                                                                   
                                                                               
 Number 2063                                                                   
                                                                               
 JULIAN PAUL WEIR testified from Glennallen in opposition to CSSB
 280(FIN) amended, specifically the six mill tax.  He was opposed to           
 any type of property tax and felt the old school tax should be                
 reimposed.  A property tax is very unequal in that it punishes                
 businessmen because they would pay a lot more than the average                
 citizen.  He believed a school tax with no exemptions would be more           
 appropriate.  He commented there wasn't much land owned by private            
 individuals in that area; most of the land is Native land or state            
 and federal land.                                                             
                                                                               
 Number 2170                                                                   
                                                                               
 NICK ZERBINOS testified that many (indisc.) cannot even afford to             
 support their local communities and school districts.  Note:  Mr.             
 Zerbinos testimony is indiscernible.                                          
                                                                               
 Number 2349                                                                   
                                                                               
 HARRY TERMIN testified against CSSB 280(FIN) amended.  He couldn't            
 understand why the legislature would not listen when the public               
 spoke.  He said any time another layer of bureaucracy was                     
 introduced, there were additional costs which ended up with less              
 revenues and higher costs.                                                    
                                                                               
 TAPE 96-58, SIDE A                                                            
 Number 0013                                                                   
                                                                               
 LEE ADLER testified that he didn't know very much about this issue,           
 but he didn't feel they were at all ready for this legislation so             
 he was definitely opposed to CSSB 280(FIN) amended.  He wondered              
 where the money would come from to cover the high cost of the                 
 appraisal in that every piece of private property or land would               
 have to be appraised.                                                         
                                                                               
 CHAIR JAMES stated the committee would next take testimony from the           
 Fairbanks teleconference site.                                                
                                                                               
 Number 0105                                                                   
                                                                               
 ART GRISWOLD testified in opposition to CSSB 280(FIN) amended.  He            
 referred to the combination of the Gateway and Delta Borough                  
 situation and said it just barely meets the requirements for the              
 first year by combining those two areas that are not economically             
 or sociologically compatible; one is agriculture and one is Native            
 lands and tourism.  He was also concerned that this value goes on             
 a pipeline that is going to depreciate down to zero in the near               
 future, so that means the value of those lands would drop                     
 considerably.  He questioned how a tax would be figured on state-             
 owned farm land that farmers rent only under the land use agreement           
 for agriculture as it stands currently.  He felt this legislation             
 had too many holes in it and needed a lot of work.  He also                   
 questioned who would be funding the start up of all these new                 
 borough governments.                                                          
                                                                               
 Number 0256                                                                   
                                                                               
 AL KETZLER, Chief Administrative Officer, Tanana Chiefs Conference,           
 testified in opposition to CSSB 280(FIN) amended.  He said Tanana             
 Chiefs Conference agreed with many of the comments made in                    
 opposition by previous testifiers.                                            
                                                                               
 CHAIR JAMES asked Alan Lemaster to present his testimony.                     
                                                                               
 Number 0307                                                                   
                                                                               
 ALAN LEMASTER testified there appeared to be little support for               
 CSSB 280(FIN) amended in Alaska outside that of the legislature.              
 He understood that if they didn't form a borough, the state would             
 tax them at four mills.  He said that would be about $4 million of            
 the $668 million that is assumed to be the value of their lands.              
 He noted their school budget is over $5 million so that means they            
 would be funding somewhere around 75 or 80 percent of the total               
 budget with these taxes.  The rest of the boroughs pay less than 40           
 percent and he thought that was an inequity.  He questioned if the            
 funds from the taxes would be placed in the general fund of the               
 state or  dedicated to schools.  If so, what would happen to the              
 dollars being spent on the services provided by the state                     
 currently?  Will those dollars continue to go to the borough or               
 would the state take them away?  He referred to the constitutional            
 burden the state would be under when this was challenged in the               
 courts on the basis of the inequities that arise from taxing some             
 of the people and not taxing everybody.  There appears to be                  
 another inequity in that if they don't vote for a borough, then               
 they would have to pay taxes to the state where other people do               
 not.  He wasn't sure that was constitutional.  He asked where the             
 mythical figure came from that indicated the Copper Valley was                
 worth $668 million on the tax rolls.  To his knowledge, none of the           
 businesses nor the individual property holders in that area have              
 ever been approached by a tax assessor.  In listening to the                  
 testimony that has been presented today, he said there is virtually           
 no support for this issue except for those in the legislature.  He            
 urged the legislature to listen to the people rather than force               
 court challenges that neither the state nor the people in the                 
 unorganized boroughs can afford.  He thanked the committee for the            
 opportunity to testify.                                                       
                                                                               
 CHAIR JAMES announced the committee would now take testimony from             
 the Nome teleconference site.                                                 
                                                                               
 Number 0533                                                                   
                                                                               
 JOHN HANDELAND testified the Nome City Council the previous evening           
 had passed a motion unanimously opposing the passage of CSSB
 280(FIN) amended and urging its defeat.  The Nome City Council had            
 some major concerns about the substantial cost savings of the                 
 consolidation alleged to in the sponsor's briefing paper.  They               
 believed it would simply add an additional level of government that           
 would not save any cost.  He also expressed concern about the                 
 proposed borough boundaries as drafted.  According to the                     
 Constitution, it should be social, cultural and economic activities           
 integrated and there is certainly some diverse area in this                   
 proposed borough which he didn't believe met that challenge.                  
 Third, if the state was looking to gain some additional property,             
 this was probably a good bill.  In the Nome area, there would be a            
 lot of property the state would have to take in foreclosure because           
 the villages in the area do not have the economic base to pay this            
 tax.  Even though it has been indicated there would be no affect on           
 the Nome School District, they believe there would be whether they            
 voted for the plan or against the plan.  The people in Nome are not           
 opposed to paying taxes to support their school district.  In fact,           
 according to the city clerk, the equivalent millage they paid this            
 last year was 9.25 mills as a single site.  They are not opposed to           
 taxation, but they are opposed to this borough plan and urged the             
 committee to hold this bill because it needed a lot of work.  He              
 thanked the committee for allowing him to testify.                            
                                                                               
 Number 0705                                                                   
                                                                               
 CHOW TAYLOR, City Manager of Galena, testified that she agreed with           
 the remarks of Pat Poland and those of Mr. Handeland.  She said the           
 language in Section 6 states that funds may be appropriated for               
 funding regional educational attendance areas; however, that also             
 implies that funds may not be appropriated.                                   
                                                                               
 Number 0802                                                                   
                                                                               
 MARY MOSES, City Manager, City of Tanana, agreed with the remarks             
 of the individuals who testified in opposition to this bill.  She             
 said that no one had touched on the impact this legislation would             
 have culturally and to the people living in rural communities; that           
 being further dividing the state's Native and non-Native                      
 population.  This is particularly true because all the Native land            
 could be held in trust and that would create a situation in which             
 only lands held by non-Native people would be taxable which creates           
 a form of segregation and discrimination.  There is no guarantee              
 that it won't actually force reorganization of education and                  
 government.  If it does, in most of the rural areas it will be                
 along lines that would decrease the local control and cause                   
 controversy and division among the community.  Also, the city of              
 Tanana does not believe that holding hearings in communities over             
 500 in population only is fair in the rural areas because their               
 population is spread very thinly over a wide area.  Also, the city            
 of Tanana contends this legislation does not consider the people              
 who live on subsistence land.  To those individuals, the land is              
 their job and it would create a situation whereby their income                
 would be taxed at both ends.  She thanked the committee for                   
 allowing her to testify.                                                      
                                                                               
 Number 0963                                                                   
                                                                               
 JOHN GILL, Nenana City Public Schools, testified there would be a             
 loss of local control and parental involvement if some of the                 
 smaller districts were taken over by the larger ones.  There would            
 be tremendous legal costs concerning compensation of school boards            
 and taxation.  There would be costs for tax assessment and tax                
 collection even if it was done at the local level.  He referred to            
 the six mills as an alternative if the people do not wish to become           
 an unorganized borough and said that would only be $600 per                   
 $100,000 so he didn't think there would be any large increase in              
 savings.  He believed a school tax should be considered as an                 
 alternative.                                                                  
                                                                               
 Number 1042                                                                   
                                                                               
 SCOTT JANKE wasn't able to wait to testify so Chair James read the            
 following facsimile statement from Mr. Janke:  "He opposes six mill           
 level.  Not consistent with current law.  Opposed time line for               
 formation of Prince William Sound Borough.  That communities of               
 Prince William Sound are currently investigating the formation of             
 a borough and SB 280 time line causes undue pressure.  If local               
 vote fails to create an organized borough, what happens to the                
 Cordova City School District which is funded locally?  Do we lose             
 local control of education or are we forced to consolidate?  Most             
 residents of Prince William Sound already pay a local contribution            
 for education."                                                               
                                                                               
 CHAIR JAMES asked Larry LaBolle to present his testimony.                     
                                                                               
 Number 1098                                                                   
                                                                               
 LARRY LaBOLLE, Lower Yukon School District, testified in opposition           
 to CSSB 280(FIN) amended as it currently stands.  He thought there            
 was an economic issue and said in the Lower Yukon School District,            
 10 of the 11 villages are second class cities which charge sales              
 taxes and are having problems meeting their city budgets currently.           
  Over 90 percent of their students live on federal property, so               
 they receive impact aid for those students.  If the church property           
 and school district property is taken out, almost 100 percent of              
 their students live on property that would be tax exempt if a                 
 borough was formed.  A feasibility study was done in this region in           
 the late 1980s or early 1990s which showed there was not a                    
 significant tax base for the Lower Yukon region to support a                  
 borough.  He commented that the boundaries of the borough do make             
 sense.  He believed that a school tax or an income tax was much               
 more realistic if the legislature was looking for additional                  
 funding.  On the other hand, if the legislature was looking for               
 school consolidation, he didn't believe this should be the vehicle            
 because blanket school consolidation does not make sense.                     
 Disbursed districts, such as the Lower Yukon, are very expensive to           
 operate.  The Lower Yukon School District's travel each month is              
 $100,000 for curriculum meetings, student activities which is not             
 a big part, supervision of school sites, school board meetings,               
 meetings of district-wide committees, et cetera which all involve             
 air transportation.  He suggested the legislature look at the                 
 economic feasibility before taking action on this legislation.  He            
 believed there were better vehicles for raising additional funds.             
                                                                               
 Number 1246                                                                   
                                                                               
 PAUL SMITH, President, Tok Chamber of Commerce, testified that all            
 37 members of the Tok Chamber of Commerce were opposed to CSSB
 280(FIN) amended.  In terms of the senior citizen exemption, he is            
 a senior citizen in addition to being a businessman and questioned            
 what would happen in his particular case.  Also, tourism has been             
 a big impact on Tok and it will continue to grow, so should the               
 tourists be taxed?  He remarked that out-of-state workers on the              
 pipeline are taking home a large paycheck every couple of weeks and           
 not being taxed at all.  He encouraged the committee to consider a            
 school tax or a state income tax.  He said it had been pointed out            
 that people living in the rural areas don't contribute anything to            
 the urban areas.  He said that was totally false.  He personally              
 spends thousands of dollars every year in Anchorage or Fairbanks on           
 bed tax, sales tax or whatever the tax happens to be.  He thanked             
 the committee for the opportunity to testify.                                 
                                                                               
 Number 1331                                                                   
                                                                               
 KIM ROTH testified that almost everything she had to say had                  
 already been said, but she wanted to add a few comments.  First, a            
 few years ago the Hickel Administration did a feasibility study.              
 The commission came around and looked at the actual tax base that             
 was available and concluded it would cost the state more money than           
 it would receive by forming a borough and collecting taxes.  The              
 issue was dropped.  She didn't understand why the legislature                 
 continued to push an issue that was not feasibly possible.  All the           
 rural areas with a tax base; i.e., Prudhoe Bay, Red Dog Mine, etc.,           
 are already a borough.  She said if the state wants us to form a              
 borough, they have to allow us an economic (indisc.-coughing).  The           
 only thing that would be in the perfect borough as designed by the            
 Department of Community & Regional Affairs, is the pipeline and               
 that's already taxed at 20 mills.  The only other thing they have             
 is timber, because over 90 percent in that borough would be the               
 state, federal or Native land.  The legislature not only needs to             
 look at their constituency, but must look at the good of the state            
 as a whole and this was not for the good of the state as a whole.             
 She referred to the disparity issue and said she thought most of              
 the school districts south of the Alaska Range and in Southeast               
 Alaska would blanch at the heating bills of the Tok school.  In               
 looking at the money received as total (indisc.) education per                
 student is much more in the Bush than it is in urban areas.  For              
 example, the heating and maintenance bills are much higher in the             
 rural areas than in urban areas because of being in the middle of             
 no where.  No one objects to paying a tax for their children's                
 education, but something that hasn't been looked at is the                    
 dividend.  She thanked the committee for the opportunity to                   
 testify.                                                                      
                                                                               
 Number 1453                                                                   
                                                                               
 MICHELLE STOUT testified from Tok and requested that before this              
 bill goes one more step, there be a complete accounting provided to           
 their representative of what the total cost would be to assess "all           
 taxable property" in the vast unorganized areas of the state.  She            
 pointed out that in an era of strict budget cutting, the state                
 should carefully weigh the priorities for the use of the extremely            
 limited funds.  She expressed concern about cutting out things that           
 enhance revenue production in rural areas; i.e., the public lands             
 and tourism offices, and then on the other hand spending this kind            
 of money to implement a plan which year after year had been proven            
 to be economically unfeasible.  She said in conclusion, it seems              
 this bill would not only close down any development in the rural              
 areas, it could also open the state of Alaska to numerous losses,             
 which along with the practical impossibility of the assessment                
 process described in the bill, would end up costing the state of              
 Alaska far more than could ever be collected.                                 
                                                                               
 Number 1535                                                                   
                                                                               
 JOHN KUNIK testified from Glennallen that in the Glennallen area,             
 there are 632 students; they have a total budget of $5.4 million;             
 and total acreage of 21 million acres.  Sixty percent of the                  
 state's administration budget goes to six boroughs; the other 40              
 percent goes to the remainder of the state, which is nothing.  He             
 said based on the state assessor's figures, of a 20 mill rate they            
 get about $12 million from their area.  He pointed out there is no            
 tax base in their area.  The majority of the property is not                  
 taxable; less than 1 percent is taxable.  Their unemployment rates            
 are among the highest in the state, yet they pay the highest                  
 electrical rates and gasoline prices.  He referred to Section 6,              
 page 3, line 10 of CSSB 280(FIN) am which states, "...may be                  
 appropriated for funding for regional educational attendance areas"           
 and asked Senator Torgerson where the money would go if it didn't             
 go to the schools.                                                            
                                                                               
 Number 1743                                                                   
                                                                               
 BERNARD GOODNO testified from Delta Junction that the citizens are            
 already paying and when the state can't live within their budget,             
 then it's time to downsize until they can.  He said no new taxes              
 until then.  He opposed CSSB 280(FIN) amended.                                
                                                                               
 CHAIR JAMES announced this would conclude the teleconference and              
 thanked everyone for testifying.  She asked Senator Torgerson for             
 his wrap-up comments.                                                         
                                                                               
 Number 1765                                                                   
                                                                               
 SENATOR TORGERSON said he had made note of some of the questions              
 that had been raised.  First, this legislation does not force                 
 school districts to consolidate.  He, however, thought that school            
 districts and REAAs should consolidate.  He said, "across the                 
 board, if you take the administrative costs and you have one school           
 district per organized borough, it's a savings of $17,700,000."               
 The Department of Education disputed those figures and indicated              
 the savings would be somewhere between $3.3 million and $5.1                  
 million.  In terms of disparity, the Senate had just recently                 
 passed SB 244 which is the Governor's fix to the disparity problem            
 on the federal level; it doesn't speak to the foundation formula.             
 Basically, the Governor's remedy is to tax the taxed based                    
 community some more and give the untaxed based communities $500               
 more unit value.  He commented that a school tax or some other type           
 of tax would just throw the problem even further; the majority of             
 that statewide tax would still come from tax based communities and            
 87 percent of the population lives in those tax based communities.            
 It would raise more money from the people already paying it and               
 shifting that money out again under our own formula foundation                
 disparity of 8 percent of the people get 20 percent of the money.             
 The comment that the burden is greater because you have more exempt           
 property within your area, is not true.  It is assessed evaluation,           
 times the mill rate, equals what is paid; if you're already exempt,           
 you're exempt.  It isn't to try to match the total burden for                 
 education; the basic need in all that comes from the mill rate and            
 its full and true value is found by the assessor.  In terms of SB
 280 being unconstitutional, he didn't share that thought.  The                
 actual levying of a tax rests with the legislature which would                
 serve as an assembly in all the areas that chose to be unorganized            
 when the mill rate was set.  With regard to how much money it would           
 cost to assess all the property in rural Alaska, in his opening               
 comments he had indicated the mill rate could be lowered from 6               
 mills to 4.5 mills.  The state assessor had told Senator Torgerson            
 that it would be about $240,000 the first year and then it would go           
 up to $300,000+ for the additional years with approximately four              
 people being hired to do the evaluation.  It wouldn't be the                  
 millions of dollars the public thought it would be.  He referenced            
 page 4, lines 9 and 10 which state, "Money from taxes levied under            
 this section may be appropriated for funding for regional                     
 educational attendance areas" and said the legislature cannot                 
 dedicate funds without a vote of the people.  Relating to the                 
 question of where does the money go if it isn't dedicated to                  
 education, he said it may be appropriated back to the REAAs which             
 is done through the appropriation process currently in statute.  He           
 said the legislature certainly doesn't have the authority to direct           
 that back to the REAAs if they collect the tax.  However, if they             
 formed their own jurisdiction, in a third class borough they'd be             
 taxing for education.  He pointed out that the senior property tax            
 exemption extends to seniors for their primary residence; it does             
 not extend to their property that is revenue enhanced like rental             
 property, for example.  In conclusion, he said, "I was kind of                
 keeping track of the testimony.  I know everyone was opposed that             
 testified but they weren't opposed to the tax.  That number was               
 about even in my thought.  So if the committee would like to just             
 gut the bill and come forward with an education tax of 4.5 mills,             
 that is certainly what the intent is of this legislation.  By doing           
 so, you would be taking out the local economy and you would be                
 doing some of the horrible things that you heard these people                 
 testify to.  The intent of this bill was to give the maximum local            
 input to how they should pay their share of education costs."                 
                                                                               
 Number 2014                                                                   
                                                                               
 CHAIR JAMES said that some of her concerns had been the cost of               
 getting the assessed valuation done, the method of using assessed             
 valuation, whether or not they use the cost basis or fair market              
 value basis and what kind of a percentage because almost always in            
 the local governments, there's a percentage of either fair market             
 value and/or cost basis.  She also questioned how  appeals to the             
 assessments would be handled.  Finally, she expressed concern                 
 regarding the requirement of only holding hearings in communities             
 with a population of 500 or more.  She believed there were lots of            
 communities with a population of less than 500 and many times                 
 people in the Bush don't hear about what is going on.                         
                                                                               
 Number 2082                                                                   
                                                                               
 SENATOR TORGERSON responded that the requirement of the hearing in            
 communities with a population of 500 or more was an amendment made            
 on the Senate floor by a Senator from one of the rural areas.  The            
 language in the original bill indicated it would be left up to the            
 Department of Community & Regional Affairs.  The fiscal note                  
 submitted by the Department of Community & Regional Affairs                   
 estimated the cost to be $1,000 per meeting.  The department's                
 response to how they intended to handle this was to use local radio           
 and broadcast media as much as possible and then advertise when               
 those meetings would take place.  He doubted the department could             
 effectively go out and talk to everyone.  But again, their methods            
 of getting information out to rural Alaska have been the same since           
 statehood.  He understood there may be an amendment to reduce it to           
 300 or more and he really had no objection to that; it was up to              
 the department.  He said, "As far as the tax and what way to put              
 the tax on, you know I don't think I'd be in favor of doing a                 
 special way of doing taxes that's different for my borough than the           
 rest of Alaska."  It's already in statute and this bill does not              
 affect how property is assessed or instruct the assessor to treat             
 people in rural Alaska differently than in other parts of the                 
 state.  The assessed valuations are set in statute for oil and gas            
 property, mining property, et cetera, as well as the exemptions.              
 It should apply to everyone equally.                                          
                                                                               
 Number 2170                                                                   
                                                                               
 CHAIR JAMES said, "I think it was the fellow from Skagway who was             
 concerned because at a four mill rate, the amount that that would             
 collect because of the values they have there was a much larger               
 percentage of their money they spend on schools and this bill in              
 its own present form allows people to pay in any old way.  It                 
 doesn't say they have to have a property tax; it says they could              
 have fish tax, a bed tax, a sales tax, whatever, but it does say              
 the tax would be four mills times this appraised value, whatever it           
 is.  So, in that particular case, if the appraised value is more              
 and 4 percent is a larger percent of what they're spending for                
 schools, how could we provide that kind of flexibility so that it             
 wouldn't unfairly treat that group."  She believed it should be an            
 either/or situation such as the current four mills or the 30 or 35            
 percent as a maximum.                                                         
                                                                               
 Number 2212                                                                   
                                                                               
 SENATOR TORGERSON said this bill doesn't actually address Skagway;            
 Skagway is under an annexation proposal.  He pointed out the bill             
 doesn't call for just a 4.5 tax; it must be the equivalency and the           
 proposal submitted from the Department of Community & Regional                
 Affairs would have all that laid out as to how they'd match that.             
 If they are an unorganized borough, first and second class cities             
 which Skagway is, will be exempt because they are currently already           
 collecting taxes.  He said, "I know of none of them that are paying           
 below their requirement by state statute of the single site schools           
 or in this case the first and second class cities."  When they                
 formed a first and second class city, one of the powers that was              
 given to them by statute was to have a city school district.  So,             
 they are currently doing that already.  He found it interesting               
 these people were opposed to these bills because most of the first            
 and second class cities have a large number of students coming from           
 outside their jurisdiction and basically this would help reimburse            
 for that.                                                                     
                                                                               
 Number 2274                                                                   
                                                                               
 CHAIR JAMES said she understood that.  Her summation of the                   
 testimony heard today was that people really resist another level             
 of government and resist being told they must do something, but the           
 bottom line is they don't really mind paying the tax.  She herself            
 was not totally convinced that property tax was the right way to              
 go.  She announced the bill would be held over until the following            
 Thursday.                                                                     

Document Name Date/Time Subjects