Legislature(2007 - 2008)BELTZ 211

02/12/2008 03:30 PM Senate COMMUNITY & REGIONAL AFFAIRS


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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+= SB 204 MUNI TAX EXEMPTION: COMBAT DEATHS TELECONFERENCED
Moved SB 204 Out of Committee
+= SB 235 ALCOHOL: LOCAL OPTION/LICENSING/MINORS TELECONFERENCED
Moved CSSB 235(CRA) Out of Committee
*+ SJR 15 DISAPPROVING KETCHIKAN ANNEXATION TELECONFERENCED
Moved CSSJR 15(CRA) Out of Committee
Bills Previously Heard/Scheduled
            SJR 15-DISAPPROVING KETCHIKAN ANNEXATION                                                                        
                                                                                                                                
4:00:45 PM                                                                                                                    
CHAIR OLSON  announced the  consideration of SJR  15 and  said he                                                               
wanted to move it.                                                                                                              
                                                                                                                                
The committee took an at-ease from 4:02:11 PM to 4:03:11 PM.                                                                
                                                                                                                                
SENATOR STEVENS moved to adopt  the committee substitute (CS) for                                                               
SJR  15,  labeled  25-LS1393\C,  Cook,  as  a  working  document.                                                               
Hearing no objections, Version C was before the committee.                                                                      
                                                                                                                                
4:03:39 PM                                                                                                                    
KACI SCHROEDER,  Staff to Representative Bill  Thomas, said there                                                               
is a similar resolution in the  House. The changes in the CS only                                                               
correct some dates.                                                                                                             
                                                                                                                                
SENATOR  KOOKESH   said  the  Ketchikan  Gateway   Borough  (KGB)                                                               
submitted  an  application for  the  annexation  of 4,731  square                                                               
miles in  2006, increasing the  size of its landholding  by three                                                               
times.  The  application  was  approved  by  the  Local  Boundary                                                               
Commission   (LBC)  despite   the  outcry   of  the   surrounding                                                               
unorganized boroughs and the impacts  it will have. The report by                                                               
the LBC  glosses over  the fact that  the current  application is                                                               
similar  to the  one  submitted by  the KGB  in  1997, which  was                                                               
denied. Those findings  only had a de minimis affect  on the 2006                                                               
decision.  Any annexation  by any  borough is  controversial, and                                                               
every effort must be made to  be clear, fair, and methodical. The                                                               
unorganized  boroughs believe  that proper  steps were  not taken                                                               
regarding a possible conflict of  interest by an LBC commissioner                                                               
who  wrote the  1997  decision,  reversed it  in  2007, and  then                                                               
accepted a job  as the KGB manager before the  final decision was                                                               
written. An independent  review was requested and  denied. Due to                                                               
the lack of  public support, the inconsistency  in decisions, and                                                               
other  abnormal  circumstances  surrounding  the  KGB  annexation                                                               
process, annexation should not be allowed to go forward.                                                                        
                                                                                                                                
MS.  SCHROEDER  said the  annexation  will  have a  $1.2  million                                                               
impact  on  the  unorganized  borough from  the  loss  of  forest                                                               
receipts.  If   the  receipt  program  is   not  reauthorized  by                                                               
Congress, it will  continue at a lower  rate. Additionally, there                                                               
is a  payment in lieu  of taxes (PILT) that  unorganized boroughs                                                               
get, and  $200,000 of that will  be transferred. It will  be felt                                                               
by  16  cities,  12  school districts,  and  2,700  students.  In                                                               
exchange, there  will not be  any additional services  because it                                                               
is mostly uninhabited land that the  KGB is annexing. There are a                                                               
few  lodges  but no  towns.  The  1999  petition and  the  recent                                                               
petition were  substantially similar,  except for  annexing Myers                                                               
Chuck and  Union Bay,  "but in  the end the  LBC did  not require                                                               
them to  annex them,  instead they required  them to  annex Hyder                                                               
within  five years,  and Hyder  has  nothing in  common with  the                                                               
Ketchikan   Borough."   The   president  of   Hyder's   community                                                               
association  said that  the relationship  is nonexistent,  and it                                                               
doesn't want to  be part of the borough.  During public testimony                                                               
36 people spoke  against the annexation and no one  spoke for it,                                                               
except for those on the assembly or borough staff.                                                                              
                                                                                                                                
4:08:13 PM                                                                                                                    
SENATOR STEVENS asked if there are schools that will be annexed.                                                                
                                                                                                                                
SENATOR KOOKESH said  the annexed part has no  people or schools,                                                               
"and the  way the  formula is set  up in the  district -  it's by                                                               
mile, you  receive your  income, and  because they  are selecting                                                               
only those  areas without  any students  or any  schools, they're                                                               
going to get the money but no responsibility."                                                                                  
                                                                                                                                
SENATOR WAGONER asked about children living in Myers Chuck.                                                                     
                                                                                                                                
MS. SCHROEDER said there are people  there, but it is not part of                                                               
the annexed area.                                                                                                               
                                                                                                                                
SENATOR KOOKESH said he thinks that area will go into Wrangell.                                                                 
                                                                                                                                
4:09:39 PM                                                                                                                    
LYNN CHRYSTAL,  Member, Local Boundary Commission,  Department of                                                               
Community &  Economic Development, said there  are three elements                                                               
to an  annexation decision: the procedures  and standards defined                                                               
by law  and the facts. The  LBC decision reflects those.  He said                                                               
the LBC submitted a letter opposing  SJR 15, and it notes several                                                               
misstatements  in  the  resolution.   The  letter  addresses  the                                                               
dissimilarities  of  the  borough's 1999  and  2007  annexations,                                                               
especially  regarding the  reliance of  model-borough boundaries.                                                               
It  addresses national  forest receipts  as well.  Those receipts                                                               
are temporary and may change  over time, whereas the formation of                                                               
a  borough   is  permanent.  The   LBC  is  guided   by  Alaska's                                                               
constitution and statutes, which make  little or no provision for                                                               
the fiscal affects  from such transitory programs.  He noted that                                                               
the loss  of the  forest receipts  was the  focus of  written and                                                               
oral  public comments.  "The commission  is  very sympathetic  to                                                               
that loss. It is a factor  that was analyzed when considering the                                                               
best  interests   of  the  state.   The  [assertions]   that  the                                                               
commission did not  consider the impact of the  annexation on the                                                               
surrounding unorganized  borough is simply not  true." The Secure                                                               
Rural Schools  Act is  sunset, which is  what drives  the funding                                                               
that is being  shifted to Ketchikan. The  reauthorization of that                                                               
act is before  Congress. The legislature is aware  of this matter                                                               
through  its  joint  Legislative Education  Funding  Task  Force,                                                               
which  recommended  that  the standing  committees  on  education                                                               
monitor federal  actions regarding  the national  forest receipts                                                               
program.  To  date, the  funding  has  not been  reauthorized  by                                                               
Congress. If it is, the  earliest that Ketchikan will receive the                                                               
money is 2010.                                                                                                                  
                                                                                                                                
4:12:55 PM                                                                                                                    
SENATOR STEVENS asked what Ketchikan gets out of the annexation.                                                                
                                                                                                                                
MR. CHRYSTAL said  obviously it will have  more control regarding                                                               
timber harvesting  or recreation  in the surrounding  lands. What                                                               
they want to do with their own land is up to them.                                                                              
                                                                                                                                
CHAIR OLSON asked about the conflict of interest.                                                                               
                                                                                                                                
MR.  CHRYSTAL said  he hasn't  been  on the  commission long  but                                                               
doesn't feel  that there  were improper  actions. When  Mr. [Dan]                                                               
Bockhorst transferred  to Ketchikan, he recused  himself from any                                                               
activities with  the LBC. Mr.  Chrystal sees no possibility  of a                                                               
conflict. There are  so many laws and regulations the  LBC has to                                                               
follow that he  doesn't feel it is an  issue, "although obviously                                                               
some people are trying to make it one."                                                                                         
                                                                                                                                
4:14:56 PM                                                                                                                    
SCOTT BRANDT-ERICHSEN, Attorney,  Ketchikan Gateway Borough, said                                                               
the KGB opposes SJR 15. The  legality of LBC's actions is subject                                                               
to an appeal before the courts. LBC  has to look at the facts and                                                               
the  standards,  and  the court  reviews  that.  The  legislative                                                               
review process gives the legislature  the opportunity to veto the                                                               
action. Rejecting  this annexation  petition sends a  bad message                                                               
to others seeking  to form or expand a borough.  KGB followed the                                                               
process,  and the  area  sought to  be  annexed is  substantially                                                               
similar,  with  the exception  of  Hyder,  to the  model  borough                                                               
boundaries  that were  proposed  for the  region.  KGB began  the                                                               
process about 10 years ago and  sought to exclude Hyder and Myers                                                               
Chuck, but  the LBC said it  would approve the application  if it                                                               
included  those two  communities. The  KGB chose  not to  include                                                               
them then,  but was leaving it  up to the  LBC to add them  if it                                                               
wanted to. The  LBC rejected the petition. This  time Myers Chuck                                                               
was included,  a geographic  error was  corrected for  Hyder, and                                                               
KGB  made a  much stronger  case for  excluding Hyder  based upon                                                               
Hyder's  connection  to  Canada.  The LBC  did  not  approve  the                                                               
blanket exclusion  of Hyder, but  it said it expected  a petition                                                               
to include Hyder within five years.                                                                                             
                                                                                                                                
MR. BRANDT-ERICHSEN said the Department  of Education objected to                                                               
the first effort, but it is  not doing so now. The objections are                                                               
based on timber  receipts, but they are not a  reliable stream of                                                               
funds. The  objections are coming  from people who are  not being                                                               
annexed. They  aren't going to be  charged taxes by the  KGB. The                                                               
KGB  is not  seeking to  add  or take  away services,  but it  is                                                               
seeking  to better  protect  the interests  and  concerns of  the                                                               
people  of  Ketchikan.  The 2,700  students  in  the  unorganized                                                               
borough  are currently  receiving the  equivalent of  over $1,000                                                               
per  student from  the national  forest receipts,  and the  2,000                                                               
students  in the  KGB are  getting $157  per student.  Annexation                                                               
will make it more equitable.  The unorganized borough per-student                                                               
receipts - if  the funding stays at the same  level -- will still                                                               
be more than twice the amount that each Ketchikan student gets.                                                                 
                                                                                                                                
4:18:44 PM                                                                                                                    
SENATOR KOOKESH said he sees  clearcuts on Prince of Wales Island                                                               
- they  have clearly been  impacted by forest cutting.  There are                                                               
no clearcuts  near Ketchikan.  "Why would  you have  this analogy                                                               
that says we  want more impact aid, and it's  not correct that we                                                               
get less  than Prince of Wales  students, when you had  no impact                                                               
in Ketchikan?" That is where that money comes from.                                                                             
                                                                                                                                
MR. BRANDT-ERICHSEN said the receipt  program has been around for                                                               
100 years, "and it's based  upon the revenues from timber cutting                                                               
being  distributed."  The  current  high  level  of  funds  is  a                                                               
separate Congressional appropriation. There  are clearcuts in the                                                               
Ketchikan  area. The  ones  on Prince  of  Wales Island  provided                                                               
revenues that  were distributed in  the past. There will  have to                                                               
be  additional  logging  to  directly tie  the  money  to  forest                                                               
service receipts. The KGB hopes to see more of those clearcuts.                                                                 
                                                                                                                                
4:20:13 PM                                                                                                                    
SENATOR  KOOKESH asked  why Ketchikan's  attorney is  making this                                                               
presentation instead of the mayor.                                                                                              
                                                                                                                                
MR. BRANDT-ERICHSEN said  the process has been going  on for some                                                               
time, and there  has been turnover in  staff. Mr. Brandt-Erichsen                                                               
said he has been  with the borough for 13 year, and  so he is the                                                               
institutional knowledge. The current manager  of KGB used to work                                                               
for the LBC so he is insulated from the process.                                                                                
                                                                                                                                
SENATOR  KOOKESH said  it would  be nice  to see  someone on  the                                                               
council or the mayor.                                                                                                           
                                                                                                                                
SHERRI HAYWARD, Annette Island  School District, Metlakatla, said                                                               
she  has two  children  who  are members  of  the Annette  Island                                                               
Reserve, and  she is not  here to talk  about the effects  of the                                                               
annexation on  that district, but  she wants to advocate  for all                                                               
the children  in the  Southeast islands.  She has  researched and                                                               
testified on this  topic. She has heard accusations  of money and                                                               
land grabs,  and "this  is wrong."  Every child  matters. Denying                                                               
this annexation will not affect  Ketchikan or anyone else, but if                                                               
it is  approved it will  affect the  education and future  of all                                                               
children in the Southeast.                                                                                                      
                                                                                                                                
4:23:38 PM                                                                                                                    
SENATOR STEVENS asked how it affects children.                                                                                  
                                                                                                                                
MS. HAYWARD said, "I think with  the forest receipts and the loss                                                               
of  money   and  the   dependency  they   need  in   these  small                                                               
communities."                                                                                                                   
                                                                                                                                
SENATOR STEVENS  asked if  the receipts that  have been  going to                                                               
those children will now be going to Ketchikan children.                                                                         
                                                                                                                                
MS. HAYWARD  said she  is under  the impression  that one  of the                                                               
districts will lose $83,000.                                                                                                    
                                                                                                                                
SENATOR KOOKESH said the amount  of money from forest receipts is                                                               
$1.2  million,  and  there  is  also  PILT  money  that  will  to                                                               
Ketchikan instead of  Prince of Wales Island  and Metlakatla. "So                                                               
it is almost $1.5 million."                                                                                                     
                                                                                                                                
4:24:42 PM                                                                                                                    
SENATOR WAGONER said it is mixing  apples and oranges to mix PILT                                                               
and  timber receipts.  "It's  not about  affecting  one group  of                                                               
children over another group of  children, but how much each group                                                               
of  children are  affected, because  I  don't know  what the  per                                                               
child is in the unorganized  borough versus the per-child cost in                                                               
Ketchikan -  I haven't had  time to weed  through this --  but it                                                               
seems  to  me like  this  money  is what  we're  going  to do  if                                                               
annexation takes  place - we're  going to have  a reapportionment                                                               
of  the funds  that are  currently available  through the  timber                                                               
receipts. Is that correct?"                                                                                                     
                                                                                                                                
MS. HAYWARD said she is not aware of that.                                                                                      
                                                                                                                                
SENATOR  KOOKESH said  that is  what is  going to  happen; "we're                                                               
going to lose  $1.2 million in forest receipt  money that's going                                                               
to go to  the Ketchikan borough. That's not all  the money that's                                                               
available, but it's a good portion of it."                                                                                      
                                                                                                                                
SENATOR WAGONER  said he understands  that, but the money  is not                                                               
being taken  away from children;  it's shifting to  the Ketchikan                                                               
children.  "So we're  talking  about the  fairness  of that."  He                                                               
asked how much  each student gets in the  unorganized borough and                                                               
in the KGB.                                                                                                                     
                                                                                                                                
4:26:46 PM                                                                                                                    
SENATOR KOOKESH said the school districts can provide that.                                                                     
                                                                                                                                
DICK COOSE,  Ketchikan, said he opposes  SFR 15. He is  a retired                                                               
forest  service employee.  He  served two  terms  on the  borough                                                               
assembly from 1997  to 2003, and that is when  he started pushing                                                               
for  annexation. Local  governments  can  impact national  forest                                                               
uses, and the bigger the borough  the better. The borough is just                                                               
trying to  expand to the  model-borough boundary. "We  didn't try                                                               
to  go land  grabbing  or  anything like  that;  it was  strictly                                                               
following the  state constitution."  He doesn't think  the secure                                                               
rural schools will  get "re-upped." It will go  down to basically                                                               
nothing  because the  national  forest is  cutting  less than  10                                                               
percent of what was cut in the  "good days." "All of us are going                                                               
to be  bitten by a  lack of receipts."  He thinks every  piece of                                                               
land in the state should be in  a borough to be able to influence                                                               
what happens on federal land.                                                                                                   
                                                                                                                                
4:28:50 PM                                                                                                                    
MR. COOSE  asked about the signal  it sends to other  boroughs if                                                               
this annexation is denied. He is now on the city council.                                                                       
                                                                                                                                
RONALD  ERIKSON, Superintendent  of  Schools,  Craig City  School                                                               
District, said  he supports  SJR 15. Craig  is a  small community                                                               
with a very  low tax base. It doesn't have  much land or revenue-                                                               
generation; much of  its money comes from the  forest service and                                                               
the logging,  which no  longer exists.  The forest  receipts were                                                               
put in place  to help correct that. That bill  has sunsetted, but                                                               
if it does  come back, the impact  will be a loss  of $165,000 to                                                               
the community. That is 35 percent  of the local match. He doesn't                                                               
know  if the  community will  get that  money in  the future.  If                                                               
there is an  expansion of logging in the  Tongass, the annexation                                                               
will allow the  KGB to take advantage  of it and less  will go to                                                               
the unorganized borough.                                                                                                        
                                                                                                                                
4:31:08 PM                                                                                                                    
DON JOHNSON, Superintendent of Schools,  Hydaburg, said last year                                                               
cuts were  made and the  superintendent and principal  became one                                                               
position and one elementary teacher  will be cut - decisions made                                                               
before  any of  this came  about.  There is  one vocational  tech                                                               
program,  which  has  been  instrumental  to  many  students.  It                                                               
includes a  diving program that  has turned out  certified divers                                                               
and instructors.  That program might  be lost. Hydaburg  has high                                                               
unemployment.  It would  be very  devastating  to take  something                                                               
away  from the  kids who  actually have  a chance  to succeed  in                                                               
something that they have been taught in school.                                                                                 
                                                                                                                                
SENATOR WAGONER asked how many students are in Hydaburg.                                                                        
                                                                                                                                
MR. JOHNSON said there are 72, and there are 450 in Craig.                                                                      
                                                                                                                                
4:33:17 PM                                                                                                                    
KAREN CLEARY, President,  Klawock City School Board,  said she is                                                               
the  vice president  of the  Prince  of Wales  Island Chamber  of                                                               
Commerce, which  represents 10 communities  that are  impacted by                                                               
the annexation. Losing  the forest receipts will  cost her school                                                               
district $60,000,  which may not sound  like a lot but  it is one                                                               
teaching position.  For a  school with  135 students,  losing one                                                               
teacher  is  losing one  program.  It  could be  the  vocational,                                                               
music, or other  program. The small amounts of money  "mean a lot                                                               
to  us." As  a chamber  of commerce  person, she  knows that  the                                                               
schools are  the major employers. A  loss of employees is  a loss                                                               
to  the  business,  "and  it  damages the  whole  fabric  of  our                                                               
society."  She  doesn't  begrudge  Ketchikan the  land,  but  she                                                               
wishes  they wouldn't  take  the  money. The  money  is what  the                                                               
little schools  need to give  a good opportunity to  the children                                                               
and it is what the communities need to stay vibrant.                                                                            
                                                                                                                                
4:35:20 PM                                                                                                                    
SENATOR STEVENS asked how the money fits into the match.                                                                        
                                                                                                                                
MS.  CLEARY said  nearly the  entire local  match does  come from                                                               
this because  Klawock is  not wealthy. Klawock  has a  sales tax,                                                               
but it  doesn't come  close to  covering community  services, let                                                               
alone the match.  The municipality uses a chunk of  the money for                                                               
the match. "Where  they're going to find that if  this goes away,                                                               
I can't even imagine."                                                                                                          
                                                                                                                                
JAMES GOULD,  Mayor, Thorne Bay,  said he  has been there  for 21                                                               
years, and he  is retired from the forest service.  He said he is                                                               
quite familiar  with forest receipts  and PILT payments.  He will                                                               
speak  to the  impact to  small communities.  Thorne Bay  has 467                                                               
people. The  school has gone from  92 to 60 students  in the last                                                               
few  years.  The  numbers  look  very small,  "but  they  are  so                                                               
important  to  us."  The  $28,000 that  Thorne  Bay  receives  is                                                               
extremely critical. It is a  maintenance position, he said. There                                                               
are 21 miles of road that the $23,000 helps maintain.                                                                           
                                                                                                                                
4:37:55 PM                                                                                                                    
MR. GOULD  said Thorne  Bay's economy  has been  devastated since                                                               
the loss of  "the contract." Thorne Bay got the  short end of the                                                               
stick when  it came  to helping  communities at  the end  of that                                                               
contract.  The  national forest  receipts  are  important to  the                                                               
Southeast  Island  School District,  "and  we  have a  number  of                                                               
families associated with that. I  can't speak to exactly how that                                                               
affects  them."  But  speaking  as   the  Mayor,  one  thing  the                                                               
community  can't afford  to lose  is more  families. It  would be                                                               
simple for Ketchikan  to take the lands and not  the money, "so I                                                               
urge you to  pass this joint resolution." Whether or  not the LBC                                                               
met all of the legal  requirements, it certainly goes against the                                                               
grain of the people that it affects. It is a money grab.                                                                        
                                                                                                                                
4:39:41 PM                                                                                                                    
DENNIS  WATSON,  Mayor,  Craig,  said he  supports  SJR  15.  The                                                               
primary  issue is  the redistribution  of  forest receipts.  What                                                               
kind  of  policy  would  allow   financial  gain  to  a  singular                                                               
municipality to the  detriment of schools and roads  for 16 small                                                               
Southeast  communities?  This   is  a  money  grab,   and  it  is                                                               
particularly  egregious   because  the  KGB  is   not  increasing                                                               
services  or  school  enrollment.  Ketchikan is  the  number  two                                                               
economy in  Southeast, and they  have touted the large  amount of                                                               
sales  tax they  have collected.  "People are  lining up  to help                                                               
them  spend  it." They  have  two  competing forms  of  municipal                                                               
government. "What  is it  that compels a  municipal unit  of this                                                               
size and affluence  to take money from  smaller communities?" The                                                               
economies of  nearly all 16  communities are hanging by  a thread                                                               
or  already in  financial trouble.  If this  money is  taken away                                                               
from these school districts and  road programs, those needs won't                                                               
change but  there will be  no way to  fund them. Craig  and other                                                               
Prince  of  Wales  communities  have  no  means  to  recoup  this                                                               
funding. Becoming  a borough is  not an option for  Craig because                                                               
it  cannot generate  enough revenue  to fund  very basic  borough                                                               
services. Prince  of Wales Island  was dropped from  the recently                                                               
passed  mandatory "boroughization"  legislation. The  legislature                                                               
is the assembly  of the unorganized borough  communities, "and if                                                               
you do  the right  thing and  protect from  what is  nothing more                                                               
than a bald-faced expansionism by  voting to move this resolution                                                               
out  of this  committee, and  if you  should feel  that there  is                                                               
merit  in  letting the  annexation  proceed,  that you  hold  the                                                               
impacted rural communities financially harmless."                                                                               
                                                                                                                                
4:43:03 PM                                                                                                                    
BRETT AGENBROAD, Superintendent,  Annette Island School District,                                                               
said the concern  is the money grab and the  best interest of the                                                               
state.  He   doesn't  understand   why  Ketchikan   enclaved  and                                                               
eliminated Hyder  and Myers Chuck  in its 1998  application. They                                                               
are the only  two communities within the 5,000  square miles that                                                               
would  benefit  from borough  services.  The  KGB was  offered  a                                                               
chance to  amend the application,  and it  chose not to.  It came                                                               
back  in 2006  and  chose to  annex Myers  Chuck  with no  school                                                               
children,  and the  LBC  took it  and gave  it  to Wrangell.  The                                                               
application remains  about the  same as  in 1998.  "They excluded                                                               
Hyder; they  don't have to  worry about Myers Chuck  anymore, and                                                               
as the  mayor previously  said they incur  about $1.5  million in                                                               
new  revenues,  and  they  are  not  required  by  law  -  to  my                                                               
understanding  --  to apply  those  new  revenues to  school-aged                                                               
children."  It is  not fair  if the  money is  not earmarked  for                                                               
education. There  is an appearance  of a conflict of  interest in                                                               
the 2006 preliminary report. One of  the senior staff is making a                                                               
six-figure salary as a manager  of Ketchikan. He has heard people                                                               
say  it wasn't  a  conflict,  but it  hasn't  been  proven by  an                                                               
independent investigation. It looks  like a conflict of interest.                                                               
Without the  annexation of Hyder,  the responsibility  to educate                                                               
those students will still be  left to the Southeast Island School                                                               
District,  which  will  lose   $83,000.  "We'll  lose  $161,000."                                                               
Ketchikan gets a windfall with no new students to care for.                                                                     
                                                                                                                                
4:46:34 PM                                                                                                                    
ERIC  GEBHARDT,  Superintendent  and Principal,  Kake,  Kupreanof                                                               
Island, said  his district will  lose about $40,000  in education                                                               
funding. The school has trimmed  administrative personnel to keep                                                               
services  for  kids.  Every  little bit  helps  provide  for  the                                                               
students. With Ketchikan  not taking on any new  children, and no                                                               
new  money, it  becomes reapportionment  of existing  money. "Our                                                               
kids  are  losing  and  giving money  to  the  Ketchikan  Gateway                                                               
Borough for their  kids." It doesn't make sense and  isn't in the                                                               
best interest of the state.                                                                                                     
                                                                                                                                
4:48:41 PM                                                                                                                    
SENATOR WAGONER asked how many students are in Kake.                                                                            
                                                                                                                                
MR. GEBHARDT said there are 101.                                                                                                
                                                                                                                                
SENATOR WAGONER said  he is from an area similar  to Kake, except                                                               
he is from a second-class  borough. He has 9,000 students borough                                                               
wide,  with 22  schools and  one superintendent.  He asked  about                                                               
forming a second-class borough.                                                                                                 
                                                                                                                                
4:50:06 PM                                                                                                                    
MR. GEBHARDT  said Kake  has talked  with other  communities, has                                                               
written a  borough charter,  and has  sent it to  the LBC  for an                                                               
opinion.  "So  we realize  that  it  is certainly  worth  looking                                                               
into."  He said  he heard  that  Southeast Island  was taken  out                                                               
because it would not be profitable  to form a borough. Kake is in                                                               
the process, but he doesn't know if it will be approved.                                                                        
                                                                                                                                
4:51:16 PM                                                                                                                    
BUD  BURNETT,  President,  Hollis   Community  Council,  said  he                                                               
supports SJR 15. The LBC  decision favoring the KGB annexation is                                                               
not equitable and it is poor  public policy. It benefits only one                                                               
community  and  collectively  robs $1.2  million  in  educational                                                               
funding yearly  from 16  cities, 12  school districts,  and 2,700                                                               
students in Southeast Alaska. It  doesn't sound like much, but it                                                               
means  a great  deal to  these communities  and schools.  It will                                                               
adversely  affect   the  quality  of  education,   which  is  the                                                               
governor's top priority, as it  should be. He asked the committee                                                               
to put education at the top of the list and pass the resolution.                                                                
                                                                                                                                
4:53:10 PM                                                                                                                    
JOE WILLIAMS, Mayor, Ketchikan Gateway  Borough, gave his Tlingit                                                               
name and  said the process is  to expand the borough  "so that we                                                               
can  do  more  things  for  our community  as  a  borough."  This                                                               
language of  expansion was put in  long ago; "it was  done within                                                               
the realms  of what's allotted  us -  and we're taking  that." He                                                               
said several communities  will be hurt because  of what Ketchikan                                                               
is asking  for, and  they are all  legitimate. It  is unfortunate                                                               
that the  topic is  money. Talking about  money always  creates a                                                               
problem, but  people should think  outside the box. He  has heard                                                               
that it  is about educational  dollars. The  fix might be  in the                                                               
Department of Education  -- not here. He said  he supports giving                                                               
the  best education  to  our  children, because  as  a child  his                                                               
aunties and  uncles said  when they were  donating money  that is                                                               
was  for   their  grandchildren  and  great   grandchildren.  The                                                               
grandchildren are 20  years old, and education  is important. The                                                               
fix is  not in  this room,  but in  the Department  of Education.                                                               
"We're talking  about funding  that has a  lifeline of  maybe six                                                               
years at best  - if it's even approved."  The communities talking                                                               
about Ketchikan  taking their  funding will  be back  looking for                                                               
more educational funding anyway.                                                                                                
                                                                                                                                
4:57:01 PM                                                                                                                    
MR. WILLIAMS  said he was  asked to  come to the  meeting because                                                               
there was  an outcry  asking for  Ketchikan's mayor.  "I'm here."                                                               
But there are folks  who spoke on behalf of the  KGB who are more                                                               
educated  regarding  the process.  When  applying  to expand  the                                                               
borough,  it  never  occurred  to  him that  it  would  create  a                                                               
financial  challenge for  other communities.  "You're sitting  in                                                               
the seat  that could  correct that  challenge, and  that's fixing                                                               
the educational funding."                                                                                                       
                                                                                                                                
4:57:56 PM                                                                                                                    
SENATOR  WAGONER  asked  if  these   funds  are  exclusively  for                                                               
education.                                                                                                                      
                                                                                                                                
MR. WILLIAMS said no.                                                                                                           
                                                                                                                                
SENATOR  WAGONER said  each  district that  has  come before  the                                                               
committee  today is  funded  through the  same  formula as  every                                                               
other  school in  Alaska. Is  the formula  reduced when  a school                                                               
receives the [forest receipt] funds?                                                                                            
                                                                                                                                
MR. WILLIAMS said it  would seem to him that it  would have to be                                                               
added, because other districts would protest.                                                                                   
                                                                                                                                
SENATOR  WAGONER  said all  schools  are  funded at  100  percent                                                               
through  the formula  by the  state  or locally.  Does this  give                                                               
these schools 105 percent of funding or will it be adjusted?                                                                    
                                                                                                                                
4:59:57 PM                                                                                                                    
RACHEL  WITTY,  Attorney,  Civil  Division,  Department  of  Law,                                                               
Anchorage, said she doesn't know.                                                                                               
                                                                                                                                
SENATOR KOOKESH said he didn't think  there was an outcry to hear                                                               
from Mr.  Williams, but he  wanted to  see the face  of Ketchikan                                                               
not  an attorney.  The mayor  should have  been present  from the                                                               
beginning, but he is  glad to see him there now.  He asked if the                                                               
mayor  would have  gone forward  with the  application if  he had                                                               
known the impacts on other children.                                                                                            
                                                                                                                                
MR. WILLIAMS said he doesn't  believe that a financial impact was                                                               
discussed at the time.                                                                                                          
                                                                                                                                
SENATOR KOOKESH  said some  witnesses said it  would be  okay for                                                               
KGB  to  annex the  land  without  getting  the money.  Have  you                                                               
considered waiving the money?                                                                                                   
                                                                                                                                
MR. WILLIAMS said no.                                                                                                           
                                                                                                                                
SENATOR KOOKESH said the question  of being a good neighbor comes                                                               
up. Surrounding communities are  offended and hurt by Ketchikan's                                                               
actions. Is that the direction the KGB wants to go?                                                                             
                                                                                                                                
MR. WILLIAMS said  he never intended to offend  his neighbors. By                                                               
thinking  outside the  box, some  of  the funding  that is  being                                                               
discussed can be recaptured.                                                                                                    
                                                                                                                                
5:02:48 PM                                                                                                                    
SENATOR THOMAS asked if there  is another resolution now that the                                                               
impacts are known.                                                                                                              
                                                                                                                                
MR. WILLIAMS said the fix is  in the Department of Education, and                                                               
he  doesn't  support  SJR  15.  Six years  from  now  the  timber                                                               
receipts will be  gone. The leaders who spoke  today should think                                                               
in  those terms.  He will  support  those schools  trying to  get                                                               
funding from the Department of Education.                                                                                       
                                                                                                                                
5:04:15 PM                                                                                                                    
SENATOR  KOOKESH said  most school  districts  are worried  about                                                               
surviving now, and the six-year window is far in the future.                                                                    
                                                                                                                                
LAUREN BURCH,  Superintendent, Southeast Island  School District,                                                               
said there are eight schools  in his district, and the annexation                                                               
will directly  impact them.  "Hyder is  one of  our schools  … It                                                               
sits over to  the side there, not including that,  it takes about                                                               
$82-83,000 in  timber receipts  from us, but  leaves us  with the                                                               
obligation  of  the  school."  He would  like  to  maintain  that                                                               
school. "The community  is happy with us. Parents  are happy with                                                               
us …  they don't want  to go to school  in Canada." Hyder  is not                                                               
interested  in  joining Ketchikan.  His  eight  schools meet  AYP                                                               
[adequate yearly  progress] and there are  two in the top  ten in                                                               
the  incentive program.  "We do  small schools  very well.  We're                                                               
very  proud of  that, and  were Ketchikan  to take  it, that's  a                                                               
different beast than  having a school of 1,500  kids." The timber                                                               
receipt  money is  additional resources  and  doesn't impact  the                                                               
foundation formula.  The ISER [Institute  of Social  and Economic                                                               
Research]  money  is  helpful,  "but we're  pretty  much  on  the                                                               
ropes." There  was a time  when the district had  20-some schools                                                               
with their  own plane -  those days  are long gone.  Students are                                                               
down  20  percent.  There is  no  administrative  fat.  Combining                                                               
school districts  would not bring  much of a cost  savings. There                                                               
are plenty  of principals  within 50 miles  that make  more money                                                               
than  he makes,  so  somebody has  to be  sitting  in his  chair,                                                               
whether it is a superintendent or  someone else. "I drive the bus                                                               
and I  cleaned more than  one toilet  and do principal  duties as                                                               
well." There's no fat. There are 160 students in his schools.                                                                   
                                                                                                                                
5:08:37 PM                                                                                                                    
MR. BRANDT-ERICHSEN  said in the  hearing on  HJR 30 there  was a                                                               
spreadsheet of  enrollments and  funding. The KGB  wants to  be a                                                               
good  neighbor  and   has  had  a  good   relationship  with  the                                                               
communities  on Prince  of Wales  Island in  the past.  Ketchikan                                                               
posted security for  a ferry, jointly pursued  timber issues with                                                               
the forest  service with  the city  of Craig, and  it has  a long                                                               
history  of   cooperation.  It  doesn't   want  to   damage  that                                                               
relationship, "but at the same  time we're concerned about things                                                               
that are  going on just  outside of our boundaries."  Activity in                                                               
Misty  Fjords  is  impacting   Ketchikan.  There  are  legitimate                                                               
reasons,  completely  independent  of   timber  receipts,  to  be                                                               
pursuing  this  annexation,  and  the  community  wants  to  move                                                               
forward with it.                                                                                                                
                                                                                                                                
SENATOR WAGONER said  the two communities that stand  to lose the                                                               
most are Petersburg and Wrangell. Why aren't they here?                                                                         
                                                                                                                                
MR. BRANDT-ERICHSEN  said he doesn't  know. In terms of  the $1.2                                                               
million  that  has been  mentioned,  about  one third  represents                                                               
funds  that currently  go to  Wrangell  and Petersburg.  Wrangell                                                               
will take  about $250,000  of timber  receipts above  its current                                                               
level  if its  petition  to  form its  own  borough is  accepted.                                                               
Petersburg is  trying to form a  borough, as well. That  might be                                                               
why they didn't object to Ketchikan's petition.                                                                                 
                                                                                                                                
CHAIR OLSON removed his objection.                                                                                              
                                                                                                                                
5:11:40 PM                                                                                                                    
SENATOR KOOKESH  moved to report the  CS for SJR 15,  labeled 25-                                                               
LS1393\C,  from  committee  with individual  recommendations  and                                                               
attached fiscal note(s).                                                                                                        
                                                                                                                                
SENATOR WAGONER objected. He said he  has been here for six years                                                               
and he  continues to  hear about the  LBC forming  boroughs, "and                                                               
here's a  borough willing to  go out  - they've already  formed a                                                               
borough --  and take in  more land to  be responsible for,  and I                                                               
don't know  what's going to  be on that  land in the  future." It                                                               
may be developed and cost that  borough money or increase its tax                                                               
base.  The borough  might help  develop  the land  for mining  or                                                               
other things.  He said that is  what "we" have been  trying to do                                                               
for  years. A  lot of  the rural  areas resist  forming boroughs.                                                               
Kenai would have  been a mess without a  borough. The communities                                                               
were very small at that time,  and it grew and prospered. "We pay                                                               
our  borough taxes  and  we  have borough  services,  so I  think                                                               
that's the way to go."                                                                                                          
                                                                                                                                
5:13:43 PM                                                                                                                    
A roll  call vote was  taken. Senators Kookesh,  Thomas, Stevens,                                                               
and  Olson voted  in  favor and  Senator  Wagoner voted  against.                                                               
Therefore, CSSJR  15(CRA) moved out of  committee on a vote  of 4                                                               
to 1.                                                                                                                           
                                                                                                                                

Document Name Date/Time Subjects