Legislature(2001 - 2002)

01/31/2001 01:35 PM CRA

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
          SB  48-MUNICIPALITIES:INCORP/PROPERTY VALUATION                                                                   
CHAIRMAN TORGERSON  closed that portion of the meeting  and moved to                                                            
SB 48.  He asked Senator  Wilken, bill sponsor,  to come forward  to                                                            
give  an  overview.   He  acknowledged  that  the   meeting  was  on                                                            
teleconference for listen only.                                                                                                 
SENATOR WILKEN said that  SB 48 tries to answer two broad questions:                                                            
   1. Why is Alaska the only state in the nation that has an                                                                    
     unorganized borough?                                                                                                       
   2. What is the validity of the $125 million that has gone into                                                               
     the educational operations of the unorganized borough in the                                                               
     last six years?                                                                                                            
Number 509                                                                                                                      
SENATOR WILKEN  then delivered the  following sponsor statement  for                                                            
SB 48.                                                                                                                          
     Last   year  the  Department   of   Education  and   Early                                                                 
     Development  distributed over $21 million in General  Fund                                                                 
     money  to fund K-12  educational programs  in 19 Regional                                                                  
     Educational  Attendance Area (REAA) school districts  from                                                                 
     which no local match dollars  were required from its local                                                                 
     residents  to help  support their  children's educational                                                                  
     needs. Meanwhile, citizens  residing in Alaska's organized                                                                 
     municipal  school districts were required by state  law to                                                                 
     contribute  $144 million  local dollars  to support  their                                                                 
     local education.                                                                                                           
     The  reason for this  apparent unfair  disparity in  state                                                                 
     law is simple;  residents of an REAA school district  live                                                                 
     within  a community  or area  of our state  that does  not                                                                 
     have  the  authority   to  levy  or  collect  taxes   and,                                                                 
     therefore,  cannot be mandated by the State to  contribute                                                                 
     any  local  dollars  towards  education.  Senate  Bill  48                                                                 
     recognizes  this unequal level of personal responsibility                                                                  
     and establishes  a procedure  to analyze the readiness  of                                                                 
     the people in unorganized  Alaska to establish a system of                                                                 
     local government  with the powers of taxation  and thereby                                                                 
     the capability of assisting  in funding the K-12 education                                                                 
     of their children.                                                                                                         
     This legislation acknowledges  that, while all communities                                                                 
     of Alaska  are perhaps not financially  able to sustain  a                                                                 
     borough government, some  areas of the state may very well                                                                 
     have  developed the  capacity to operate  boroughs or  may                                                                 
     meet  applicable  standards   for annexation   to current                                                                  
     boroughs.  Senate   Bill 48  directs   the Department   of                                                                 
     Community and Economic Development  to annually present to                                                                 
     the  Local Boundary  Commission  a list  of  areas in  the                                                                 
     unorganized  borough  that reasonably  appear  to satisfy                                                                  
     existing   standards   for   borough   incorporation    or                                                                 
     The  Local  Boundary Commission  will  consider  and  then                                                                 
     select   from   this   list   areas   that   may  warrant                                                                  
     incorporation  or annexation. The Department of  Community                                                                 
     and Economic Development  will then draft an incorporation                                                                 
     or annexation  petition for the selected area,  hold local                                                                 
     public meetings, and finalize  and file the petition. Upon                                                                 
     receipt   of  the  final  petition,  the  Local  Boundary                                                                  
     Commission will hold additional  local public meetings and                                                                 
     either accept or reject  the petition as conforming or not                                                                 
     conforming    to   existing    applicable   incorporation                                                                  
     If,   after  a  thorough   review,   the  Local  Boundary                                                                  
     Commission   accepts  the  incorporation   or  annexation                                                                  
     petition,   the  decision   will  be   submitted  to   the                                                                 
     Legislature  for an additional legislative review.  If the                                                                 
     Legislature  does not reject  the recommendation within  a                                                                 
     prescribed  period of time, the new borough or  annexation                                                                 
     is approved.                                                                                                               
     It is  important to note that  SB 48 merely creates  a new                                                                 
     option  in which a petition for  borough incorporation  or                                                                 
     annexation  is originated.  After the  petition is filed,                                                                  
     the Local  Boundary Commission  will follow a process  for                                                                 
     legislative   review   that  has  been   in  place   since                                                                 
     statehood.   That   is,   the   current   standards    for                                                                 
     incorporation  will  be followed  as well  as the current                                                                  
     procedural  requirements   currently  in  state  law.  The                                                                 
     selected   area  population   must  be   suitably  large,                                                                  
     homogenous,  and  demonstrate  the  stability  to support                                                                  
     borough   government   before   it   is   considered   for                                                                 
     incorporation or annexation.                                                                                               
     Delegates  to the Alaska State  Constitutional Convention                                                                  
     clearly  envisioned  in  art. X  that  organized boroughs                                                                  
     would be established wherever  citizens were ready for and                                                                 
     capable   of  assuming  the   responsibilities  of   local                                                                 
     government.  Senate Bill  48 assists  in the formation  of                                                                 
     these  boroughs.   With  the  creation  of  an  organized                                                                  
     borough,  its citizens  will  be empowered  to contribute                                                                  
     local  dollars   to  supplement  State  funding   for  the                                                                 
     operation  of their  schools, assist  in the financing  of                                                                 
     new  schools, and through  cost efficiencies,  be able  to                                                                 
     direct  more local  funds toward student  instruction.  In                                                                 
     other  words,  the  new borough  residents  will  have  an                                                                 
     opportunity  to  improve their  local  educational system                                                                  
     with their own local dollars.                                                                                              
     Senate  Bill 48  continues a  process that  began some  40                                                                 
     years ago  with the passage of the Borough Act  of 1961. A                                                                 
     stronger, financially sound  educational system throughout                                                                 
     all  areas  of  the  State  will   be  one  of  the  major                                                                 
     benefactors of this legislation.                                                                                           
     I respectfully  request your consideration and  support of                                                                 
     SB 48.                                                                                                                     
Number 539                                                                                                                      
SENATOR  WILKEN briefly  addressed  materials  in the  bill  sponsor                                                            
packet. The first page is a two-section memo from Legal Services                                                                
outlining what  the bill would do.  The next two pages show  a chart                                                            
titled "The Structure of  Local Governments in Alaska." It shows the                                                            
options  for  organization   for  both  organized  and  unorganized                                                             
boroughs  such as  home rule  cities,  first-third  class cities  or                                                            
boroughs and unified  municipalities. It is good reference  material                                                            
as  the bill  works  its  way through  the  legislature.  The  third                                                            
section is  a two-part chart titled  "Legislative Review  Annexation                                                            
Process     and     Proposed     New     Option      for     Borough                                                            
Incorporations/Annexations."   This was  included to  make it  clear                                                            
that  there is  a process  by  which an  area  of the  state can  be                                                            
considered for incorporation.  Areas under consideration must pass a                                                            
test   in  order   to  be  successfully   incorporated.   There   is                                                            
constitutional  encouragement  for an organized  Alaska and  Senator                                                            
Wilken believes local governments are most satisfactory.                                                                        
SENATOR   WILKEN  quoted   from  state   statute  saying,   "Borough                                                            
incorporation  must be  in the best  interest of  the state."  It is                                                            
state law that  "Borough residents must be socially,  culturally and                                                            
economically interrelated  and integrated. Population  must be large                                                            
and stable enough  to support a borough government.  Boundaries must                                                            
conform to  natural geography  and include  all areas necessary  for                                                            
development.  There must be adequate  human and financial  recourses                                                            
to provide  services.  There must  be adequate  facilities to  allow                                                            
communities to develop  an integrated rural government." This is the                                                            
checklist to  determine whether or  not an area should be  nominated                                                            
and presented for organization.                                                                                                 
The next page is titled "Profile of the Unorganized Borough" and                                                                
shows a map of the state with unorganized areas highlighted and                                                                 
lists information on unorganized areas.                                                                                         
Number 574                                                                                                                      
SENATOR  WILKEN  said  that  a  frequently  used  argument   against                                                            
organization  is that there  is no  tax base, no  way for people  in                                                            
unorganized  Alaska to provide some  sort of help for education.  He                                                            
said that  he had three sheets  in the packet  to show that  perhaps                                                            
there  is a  way. The  first is  a bar  chart titled  "General  Fund                                                            
Contribution Regional Educational  Attendance Areas FY 97-FY 02." It                                                            
shows what the  unorganized areas cost in terms of  contributions of                                                            
general fund  money over  the last six years.  The chart shows  that                                                            
roughly,  $125 million  in  general  fund money  has  been spent  to                                                            
operate schools  in the REAAs. This  represents about 21  percent of                                                            
the budget.                                                                                                                     
SENATOR WILKEN  then showed  a 10-year REAA  School Capital  Funding                                                            
History chart.  It shows about $200 million for capital  spending in                                                            
unorganized  Alaska.  He noted  that there  has been  minimal or  no                                                            
local  contribution  on  behalf of  the  residents  of the  REAA  in                                                            
unorganized Alaska.                                                                                                             
SENATOR  WILKEN   believes  there  is  an  asset  base   to  support                                                            
educational   funding.  He   produced  a   November  16   classified                                                            
advertisement from an unorganized  area showing that there are homes                                                            
in that area  that are offered for  sale for more than $200,000.  He                                                            
said that this isn't an amorphous area that has no commerce.                                                                    
The next two  sheets titled "REAA  Wages and Average Employment  (FY                                                            
1999)  & (FY 2000)"  show  that $388,546,000  was  earned by  15,848                                                            
workers  in 1999  in  certain REAA  census  areas. These  are  wages                                                            
reported  under  law to  the Department  of  Labor.  These are  only                                                            
earned wages,  not barter, trade, or dividend earnings.  In 2000 the                                                            
figures were  similar. Although the  workers may not always  live in                                                            
the unorganized area, the paycheck is earned in that area.                                                                      
Number 535                                                                                                                      
SENATOR  WILKEN summarized  the positive  aspects  of the Equity  in                                                            
Education Funding Act as:                                                                                                       
       1. Alaskans who are able to fund education should do so.                                                                 
       2. Existing state law regarding borough incorporation remains                                                            
         in place as an option.                                                                                                 
       3. Local citizen participation in education is increased.                                                                
       4. More money is available statewide to increase the                                                                     
         Education Funding Formula.                                                                                             
       5. Proactive steps are taken to fulfill the intent of art. X                                                             
         of the state constitution.                                                                                             
He considers the upfront costs to be the only drawback. However,                                                                
it is his hope that the long-term costs are carefully considered                                                                
and the short-term costs accepted.                                                                                              
SENATOR WILKEN thanked the committee for hearing the bill and                                                                   
said that he was available for questions.                                                                                       
SENATOR PHILLIPS  asked what percent  of total state enrollment  was                                                            
represented by the REAA group.                                                                                                  
SENATOR WILKEN said it was about eight percent and that several                                                                 
years ago 21 percent of the general fund budget went to eight                                                                   
percent of the students.                                                                                                        
SENATOR  LINCOLN   said  that  the  majority  of  her   district  is                                                            
unorganized.  There  is  concern  in  her  district  because  larger                                                            
communities  are looking at extending  into her district  by pulling                                                            
those areas into their  borough. Of major concern to her is the fact                                                            
that the  people won't have  the opportunity  to vote on the  issue,                                                            
other than to testify.  A few people will make the decision for many                                                            
and she  is uncomfortable  with this  option. She  wondered why  the                                                            
bill wasn't written so that the issue could go to a vote.                                                                       
SENATOR WILKEN  responded  that he wasn't  any fonder of  government                                                            
than  the next  individual. He  suggested  that if you  went to  any                                                            
organized area  and asked if you like government or  not, the answer                                                            
would most  likely be no. With this  in mind, it's not practical  to                                                            
think that individuals  would vote to bring in government when there                                                            
has been  none. However,  83 percent  of the people  of Alaska  live                                                            
under boroughs  that were imposed on them. Just four  percent of the                                                            
people in  Alaska living  in organized Alaska  live under  voluntary                                                            
local government. He takes  great faith in the fact that the LBC has                                                            
shown sensitivity to local  control, that there are five people from                                                            
across the state from each  judicial district that have no political                                                            
agenda  and  are  working  for  the  betterment  of  the  state.  He                                                            
recognizes that it is sometimes  difficult for individuals to accept                                                            
personal responsibilities that government brings.                                                                               
SENATOR WILKEN went on  to say that if the constitutional suggestion                                                            
to organize continues to  be disregarded, the option remains to take                                                            
the process,  as it is today,  with a vote.  However, if that  isn't                                                            
done, there  has to be a process by  which it is accomplished.  That                                                            
is SB 48, which provides another way to choose government.                                                                      
Number 45                                                                                                                       
SENATOR LINCOLN said she  was certain that would be debated further.                                                            
She then asked  if there has been consideration given  to the amount                                                            
of federal monies brought  in by the REAAs that would be lost to the                                                            
state if they  were in a borough. She referenced payment  in lieu of                                                            
taxes (PILT)  money  in particular.  She said there  was also  money                                                            
coming  in  that wouldn't  necessarily   be lost,  such  as  revenue                                                            
sharing,  the  national  forest  receipts,  fisheries  business  tax                                                            
program and landing tax  monies. However, the PILT monies brought in                                                            
by  the REAAs  would  no  longer be  available  if  they  were in  a                                                            
SENATOR WILKEN  was not aware  of any monies  that would be  lost by                                                            
choosing local  government. He asked Senator Lincoln  to provide her                                                            
list and  he would address  it. He wanted  to know if PILT  money is                                                            
874 money.                                                                                                                      
SENATOR LINCOLN  said PILT money is payment in lieu  of taxes. Delta                                                            
Junction,  for example, has  $235,433 contributed  that wouldn't  be                                                            
there if they are forced into a borough.                                                                                        
SENATOR LINCOLN  said that there are areas such as  Deltana that did                                                            
petition  for consideration  in a  borough. They  apparently  didn't                                                            
meet  the guidelines  but the  commission  did review  and accept  a                                                            
number of communities  that wanted  annexation or consideration  for                                                            
borough status.  She doesn't believe  that communities are  choosing                                                            
to  not organize  because  someone else  is  paying the  tab; it  is                                                            
because they can't afford to do so.                                                                                             
SENATOR WILKEN  couldn't speak to  the Deltana situation  other than                                                            
that there were some provisions  in the petition that weren't in the                                                            
best interest  of the  state. He went  on to say  that SB 48  allows                                                            
people to help their schools with local governance.                                                                             
SENATOR  WILKEN told  members that  education  reform studied  about                                                            
three years ago used LBC  analysis of the worth of certain areas and                                                            
came  up with  a rough  estimate  of property  values,  given  other                                                            
assets available to that  particular area of the state. That area is                                                            
now a second-class city  and doesn't assume responsibility for their                                                            
education.  If you took  the assessed  value and  divided it  by the                                                            
number of students  you would have had the fifth richest  borough in                                                            
the state  in terms of asset  value per student.  That area  has the                                                            
ability to  fund education  but has chosen  not to do that.  He said                                                            
that those  that can't afford  shouldn't and  those that can  afford                                                            
SENATOR  LINCOLN asked  about improving  local  educational  systems                                                            
with local  dollars. She  thought that money  brought in by  borough                                                            
formation would go into  the general fund and then legislators would                                                            
determine how that money is distributed.                                                                                        
SENATOR WILKEN said that  was correct and that the educational lobby                                                            
is one of the  strongest. He would support every dollar  coming from                                                            
unorganized  Alaska to help  fund education  would be a dollar  that                                                            
goes to education.                                                                                                              
SENATOR  LINCOLN  asked  if educational  dollars  could  be  tracked                                                            
carefully  enough  to ensure  that  every  dollar collected  from  a                                                            
specific area would be returned to that area for education.                                                                     
SENATOR WILKEN  said it was difficult  to track the dollar  that way                                                            
but that the hypothetical  community would not lose  any educational                                                            
dollars because of the  legislation. Local communities will get more                                                            
money through 874 and through more money in the formula.                                                                        
SENATOR LINCOLN  said that  was more a question  of improving  their                                                            
quality of education  because of additional dollars  coming into the                                                            
Number 384                                                                                                                      
SENATOR  WILKEN  said there  were  two ways  to  improve  education.                                                            
First, more money is put  in and more accountability is expected and                                                            
capital  and operations  improvements  are expected.  Second is  the                                                            
link between  the parent's  checkbook  and the child  in school.  He                                                            
believes  that people care  more about their  schools when  they are                                                            
contributing to them financially.                                                                                               
SENATOR KELLY  was also interested  in loss of funds if unorganized                                                             
areas were to become organized.                                                                                                 
CHAIRMAN TORGERSON said  that "there is a potential reclassification                                                            
of an  allocation of  funds to an  unorganized area  to one  that is                                                            
organized, such  as the fish tax, may go to a larger  group versus a                                                            
smaller  focus  group  that  hasn't  organized,   depending  on  the                                                            
boundaries.  PILT payments  won't  be lost  but they  will lose  the                                                            
classification of having  PILT money come into the total unorganized                                                            
borough   and   then    being   hypothetically,   mechanically    or                                                            
mathematically  divided by the department.  It will be given  to the                                                            
organized   area  of  the  new  borough   based  upon  geographical                                                             
boundaries  and  how much  federal  land is  located  with in  those                                                            
boundaries."  There could  be a loss,  but not  directly related  to                                                            
this  but by  directly  relating  a  different  allocation  formula.                                                            
Communities are still eligible for the same thing.                                                                              
Number 365                                                                                                                      
SENATOR WILKEN  said that there is  a suggestion that the  874 money                                                            
is  a  local  contribution  and  that  is  the  unorganized   area's                                                            
contribution to education.  Understanding 874 money is a subject for                                                            
another day but he is ready to discuss it.                                                                                      
CHAIRMAN  TORGERSON  invited   Senator  Fischer,  a  member  of  the                                                            
Constitutional Convention, to come forward for testimony.                                                                       
MR. VIC  FISCHER, a former  Alaska Senator,  said that SB 48  was an                                                            
important step  toward implementing Local Government  Article of the                                                            
Alaska   Constitution.   He   gave   a  bit   of   background   from                                                            
Constitutional  Convention  days, 35  years ago next  week. At  that                                                            
time, Alaska  had no regional  structure  of governance. In  passing                                                            
the  Organic   Act  in   1912,  Congress   specifically  said   that                                                            
territories  could not establish counties.  The purpose of  this was                                                            
to avoid any possibility  of taxes being levied on mining properties                                                            
and fish plants.                                                                                                                
He said the Constitutional  Convention Committee on Local Government                                                            
essentially had  a blank slate. They looked at other  states, Canada                                                            
and Finland for guides.  They set certain parameters and the borough                                                            
concept was developed.                                                                                                          
The Constitutional  Convention  had  in mind  that, upon  statehood,                                                            
there  would be a  gradual evolution  of regional  governments.  The                                                            
state had a  major interest in effective  local government  in terms                                                            
of furthering  the purpose of maximum local government  with minimal                                                            
overlapping  and separate  taxing jurisdictions  and  as a means  of                                                            
regionalizing  and decentralizing  the state roll. The entire  state                                                            
was to be divided into separate regional borough units.                                                                         
There were  provisions for organized  and unorganized boroughs.  The                                                            
single unorganized  borough  is essentially  unconstitutional  under                                                            
the  state  constitution.  The  concept  was  that  there  would  be                                                            
unorganized  boroughs  all  over  the  state  that  would  gradually                                                            
organize, voluntarily,  by local initiative. The state would provide                                                            
incentives  and support for organization.  The expectation  was that                                                            
people would want this kind of regional self-government process.                                                                
Number 280                                                                                                                      
MR. FISCHER said  that the 1964 Mandatory Borough  Act provides that                                                            
only boroughs and cities  can exercise local government and taxation                                                            
powers  and that special  districts  will be  dissolved. This  meant                                                            
that  independent  school districts,  outside  of cities,  could  no                                                            
longer exist.  The State of Alaska told schools that  bonds could no                                                            
longer be sold because  the districts didn't exist constitutionally.                                                            
In  the  eight  situations  where  there  were  independent   school                                                            
districts,  the legislature  said  "Thou shalt  have boroughs."  and                                                            
that is how those original  boroughs were organized. It was by state                                                            
mandate.  Although it was  expected that  areas would organize,  the                                                            
state could exercise  its authority and mandate organization  of the                                                            
Number 249                                                                                                                      
MR. FISCHER  told members  that when  oil wealth  came to the  state                                                            
there were proposals  to do what was discussed in  the convention to                                                            
regionalize the  entire state and use the organized  and unorganized                                                            
areas  as a  means of  sharing  the expected  wealth  coming to  the                                                            
state. He said  the pipeline hadn't  been built yet and that,  for a                                                            
variety of reasons that he wouldn't go into, this didn't happen.                                                                
MR.  FISCHER commented  specifically  of  SB 48  saying  that he  is                                                            
concerned  about  the title  of  the  bill. Rather  than  Equity  in                                                            
Funding  Education,  he thought  it preferable  to call  it a  local                                                            
government  act. The  existence of  the eight  boroughs established                                                             
under  mandate is  not under question  today.  Something that  seems                                                            
controversial  now,  will be  part of  the Alaska  scene  in ten  to                                                            
twenty  years. Another  area  of concern  is that  the language  and                                                            
explanations of  this legislation must not give the  impression that                                                            
it is punitive in nature.                                                                                                       
MR. FISCHER said  that the legislature does have an  alternative. It                                                            
is the  assembly for the  unorganized borough,  for all the  service                                                            
areas and all  the REAAs and could  go out and establish  a property                                                            
tax in the unorganized areas.                                                                                                   
SENATOR LINCOLN  said she continues  to struggle with the  idea that                                                            
the 60 legislators  determine the  fate of the unorganized  area and                                                            
wondered what the framers had in mind.                                                                                          
MR.  FISCHER  said  that  they   did  not  have  in  mind  that  the                                                            
legislature  would  sit in  joint  session as  the assembly  of  the                                                            
unorganized  borough.  The evolution  was  seen as  the state  being                                                            
divided into  regions. Each region  would move toward maximum  self-                                                            
government  that it could  support and accommodate.  There  would be                                                            
local participation  in the provision of services  to the area. Each                                                            
region  would be looked  at separately  with much  local input.  The                                                            
assembly  was  written in  to  fill a  void  until there  was  local                                                            
participation organized.                                                                                                        
SENATOR  KELLY asked  about mining  properties  and fish  processing                                                            
MR. FISCHER said that Congress  imposed taxation restrictions on the                                                            
mining and fishing properties  in territories. Counties could not be                                                            
formed in  territories becoming  states making  it clear that  taxes                                                            
could not be collected from these areas.                                                                                        
CHAIRMAN  TORGERSON said  they would  return to  Mr. Waring for  his                                                            
comments of SB 48.                                                                                                              
Tape 01- 2 side A                                                                                                               
Number 72                                                                                                                       
MR. WARING opened by saying  that he would skip most of his prepared                                                            
remarks.  He then referred  members to the  two handouts. The  first                                                            
lays  out the  background  considerations  for  reform  of  existing                                                            
legislation.  The  second  is a  time  line showing  the  series  of                                                            
actions  involved  from  beginning   to  conclusion  of  a  petition                                                            
MR. WARING moved to page three of his prepared remarks expressing                                                               
the commission's view of its role in implementing SB 48.                                                                        
     First,  in the view  of the Commission,  SB 48 is not  the                                                                 
     second  coming of the 1963 Mandatory  Borough Act, or  any                                                                 
     similar legislation. Unlike  the Mandatory Borough Act, SB
     48  authorizes  a  measured,  case-by-case  evaluation  of                                                                 
     proposed incorporations.  Each petition will be  evaluated                                                                 
     on its  merits. Proposals that  do not meet the standards                                                                  
     will not be  approved. And, as under current law,  even if                                                                 
     a petition  meets statutory standards, the Commission  can                                                                 
     reject  the  petition if  there  are sound  public policy                                                                  
     grounds to do so.                                                                                                          
     I  want to assure  the  legislature and  other interested                                                                  
     parties  that the commission  does not  have a mission  to                                                                 
     foster  boroughs for  the sake of boroughs.  We don't  see                                                                 
     any purpose in worsening  the standing of local government                                                                 
     in   rural  Alaska   by   prematurely   creating  borough                                                                  
     governments  that are destined to fail. In this  regard, I                                                                 
     will point  to the commission's  record. The record  shows                                                                 
     that in recent  years the commission has rejected  several                                                                 
     petitions  to incorporate  boroughs or  annex unorganized                                                                  
     areas  to boroughs because  those petitions  did not  meet                                                                 
     applicable  standards. Commission  staff, with commission                                                                  
     concurrence,  also returned  two incorporation  petitions                                                                  
     that were deficient in content.                                                                                            
     The commission  recognizes that some rural regions  do not                                                                 
     have the economic  and financial resources needed  to fund                                                                 
     borough  governments.  The fiscal  note  that accompanies                                                                  
     this   bill  reflects   the  concern   that  any  borough                                                                  
     established  under SB 48 has  a solid chance for success.                                                                  
     The  only new cost  identified in the  fiscal note,  apart                                                                 
     from already mandated organization  grants, is the expense                                                                 
     of conducting  a thorough and independent analysis  of the                                                                 
     fiscal viability of each proposed borough.                                                                                 
     Establishment of borough  governments has been a matter of                                                                 
     conflict  for as  long as Alaska  has been  a state.  With                                                                 
     that contentious history,  it is easy to lose sight of the                                                                 
     fact that  borough governments  have played an enormously                                                                  
     positive role in Alaska's  development. Boroughs have been                                                                 
     our  main  tool  to influence  economic  development   for                                                                 
     community  benefit.  For example,  it is  hard to believe                                                                  
     that urban and rural communities  affected by oil pipeline                                                                 
     construction,   oil  and  gas   and  mining  development,                                                                  
     management  of  forestry and  fishing  resources, growing                                                                  
     energy demands, growth in  tourism, and rapid urbanization                                                                 
     would  have managed  better  without  borough government.                                                                  
     Likewise,  boroughs  have  been  the  means  to  fund  and                                                                 
     deliver  better  public  services,  accountable  to  local                                                                 
     residents.  In  most  matters,  local government  governs                                                                  
     Finally,  let me note that the  proposed legislation  does                                                                 
     remove  one  major  disincentive  to borough  government.                                                                  
     Section  1  (a)  excludes  locally  untaxed  oil  and  gas                                                                 
     property   from   calculation   of  the   required   local                                                                 
     contribution  to  education.  Otherwise,  SB 48  does  not                                                                 
     address other  significant disincentives that  have proven                                                                 
     difficult  to  reform.  The proposed  legislation  simply                                                                  
     accepts  those  disincentives  as a  matter of  fact,  and                                                                 
     leaves them to be addressed elsewhere.                                                                                     
     In closing,  the commission has done its best  to meet its                                                                 
     goal of an  approach that is uniformly fair, accountable,                                                                  
     and within  the framework of existing law. We  believe the                                                                 
     proposed approach:                                                                                                         
          uniformly implements the standards for borough                                                                        
          incorporation in existing law, but respects the                                                                       
          diverse circumstances in different rural regions;                                                                     
          provides checks and balances; and                                                                                     
          is modeled on existing law and minimally changes                                                                      
MR. WARING  said that  concluded his  remarks and  that he would  be                                                            
happy to answer any questions.                                                                                                  
SENATOR LINCOLN noted that  in the fiscal note there were provisions                                                            
for a financial  consultant for each petition. She  wondered whether                                                            
there would  be increased  commission activity  if the bill  were to                                                            
pass in current form.                                                                                                           
MR.  WARING did  not  presume that  there  would be  and  additional                                                            
workload  for  the commission  members  but  that was  difficult  to                                                            
predict  since they  have no control  over the  number of  petitions                                                            
submitted  each year.  Additionally,  if there  are  expenses it  is                                                            
because they are doing work they are supposed to be doing.                                                                      
SENATOR LINCOLN  asked that figures for reduction  of capital match,                                                            
50 percent  reduction of fisheries  tax and PILT monies be  provided                                                            
for the next meeting.                                                                                                           
MR. WARING said they could be provided.                                                                                         
CHAIRMAN  TORGERSON  asked  if there  were  any questions  or  other                                                            
ALLEN  TESCHE, Local  Boundary Commission  member,  came forward  to                                                            
address several  fundamental policy  issues that had been  raised in                                                            
the current legislation.                                                                                                        
The  first   fundamental   policy  issue   concerns  the  right   of                                                            
individuals to vote on  organization. When the Mandatory Borough Act                                                            
was adopted in  the mid 1960's, it was in response  to the fact that                                                            
the pace of forming local  governments was slow. The legislature had                                                            
to step  in and force the  organization and  incorporation  of local                                                            
governments.  Many times this  was against  the will of the  people.                                                            
Although  the right of  people to  vote is important  and should  be                                                            
guarded,  it  is important  to  have a  system  to bring  about  the                                                            
creation of new local governments  when people are unable to look at                                                            
the situation with a long  range time frame. What may be distasteful                                                            
today may be an accepted and desirable fact in 50 years.                                                                        
The second question  asks whether local government  should be forced                                                            
on people when it would  effect economic strain. He wanted committee                                                            
members to  refer to page  32 of the annual  report provided  by LBC                                                            
staff  to committee  members. This  outlines the  list of  standards                                                            
that are gone through to  determine whether or not a particular area                                                            
meets  the test for  incorporation.  Among the  standards, the  most                                                            
important  is  the  ability  of the  local  community,  through  its                                                            
economy,   its  people,   and  its  resources,   to  support   local                                                            
government.  It is not the desire  of the commission to bring  about                                                            
the  formation  of local  government,  which  ultimately  fails.  He                                                            
referred  to the Adak  petition discussed  earlier  and said  that a                                                            
primary  question  was  "Was there  enough  of  a local  economy  to                                                            
support  people who,  in  turn, would  support  local government?".                                                             
Ultimately, the decision  was yes, but not until much study had been                                                            
MR. TESCHE thanked the  committee for the opportunity to address the                                                            
questions raised by the committee.                                                                                              
CHAIRMAN  TORGERSON said that  the issue would  be brought  up again                                                            
and that there  would be a Saturday meeting providing  the public an                                                            
opportunity to testify.                                                                                                         
There being no further business before the committee, meeting was                                                               
adjourned at 3:35 p.m.                                                                                                          

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