Legislature(1995 - 1996)
03/26/1996 08:10 AM Senate FIN
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
SPONSOR SUBSTITUTE FOR SENATE BILL NO. 20
An Act establishing the Alaska municipal basic
services program, relating to certain programs of
state aid to municipalities and recipients in the
unorganized borough; and providing for an
effective date.
Co-chairman Halford directed that SSSB 20 be brought on for
discussion. KEVIN RITCHIE came before committee on behalf
of the Alaska Municipal League and the Alaska Conference of
Mayors. He voiced support for the bill and described
efforts that led to development of the legislation over the
past two years.
END: SFC-96, #51, Side 2
BEGIN: SFC-96, #52, Side 1
SENATOR TORGERSON, sponsor of the legislation, next came
before committee. He explained that the bill renames the
"municipal assistance" portion to "revenue sharing for safe
communities." Provisions require moneys received from safe
communities to be spent on certain public purposes, require
municipalities to list notice to taxpayers of the amount of
money received from safe communities, and allow the base
amount to be prorated. Since establishment in 1978, the
base amount was held harmless from cuts. This funding is
the former business license tax. The legislation "takes
money from all the communities and raises the minimum
entitlement to smaller communities to $40.0." Funding
required for the transition totals $238.9. That amount is
prorated from each community. The bill also changes the
date of the payment to coincide with the earlier payment so
that both sections are paid on July 31. That results in one
payment for both revenue sharing and safe communities. The
remainder of the bill involves housekeeping measures.
The sponsor further described past efforts to rewrite
municipal assistance and revenue sharing programs. He said
he had been involved in attempts to change the formula so
that "We wouldn't have many winners and losers when we tweak
the formula." The approach proposed within CSSSSB 20 (CRA)
is overwhelmingly supported by the Conference of Mayors, the
Alaska Municipal League, and communities that are not
members of either of the foregoing organizations.
Senator Torgerson attested to past controversy over the
fiscal note. The fiscal note from the Dept. of Revenue
derives from moving the $29.4 million payment from February
to July 31. Senator Torgerson said he did not agree with
the resulting ($874.0) fiscal note. He advised that part of
the reason for advancing the payment date is the fact that
July is one of the only months in which the state has a
surplus. The proposed bill would entail expenditure of part
of the surplus and would not involve the constitutional
budget reserve.
In response to a question from Co-chairman Halford, Senator
Torgerson directed attention to a tabulation (copy on file)
listing funding to be received under the existing municipal
assistance program versus that in the proposed bill. He
then spoke to impact on specific communities.
Responding to a question from Co-chairman Halford, Senator
Torgerson explained that the idea behind the $40.0 minimum
entitlement is to transform every community below that level
up to that mark. That would take care of this fiscal year.
In future years, if there is a reduction in the program,
each community will take the same amount of reduction. The
$40.0 is not held harmless forever. Co-chairman Halford
asked if the one-third, two-third split between safe
communities and state revenue sharing, respectively, would
remain in place. Senator Torgerson responded affirmatively.
He added that state revenue sharing is distributed on a per
capita basis while the one-third split is distributed "into
the safe communities portion." Co-chairman Halford voiced
his understanding that the appropriation goes through that
separation and is prorated for each community. He then
asked if separation and proration apply to both total and
minimum entitlements. Senator Torgerson said that the
minimum entitlement is not subject to "the safe communities
portion." Minimum entitlement "comes out up front."
BILL ROLFZEN, State Revenue Sharing, Division of Municipal
and Regional Assistance, Dept. of Community and Regional
Affairs, came before committee. Speaking to the one-
third/two-third split, he explained that the intent was to
allow the base amount to be subject to cuts in the future.
For the FY 96 appropriation to the municipal assistance
program, one-third went to the base amount and two-thirds
went to the per capita account. If the overall
appropriation is reduced, each account would be subject to
the same amount of cuts.
In response to a question from Co-chairman Halford asking
how the minimum entitlement would be impacted, Mr. Rolfzen
responded,
Okay, we go through the revenue sharing program.
We go through the municipal assistance (now called
the safe communities formula). If after we go
through the entire formula, there are some
municipalities that don't have a total of $40.0,
going to that municipality, we go to the per
capita account under the safe communities fund and
grab enough money to bring everybody up to $40.0.
Mr. Rolfzen further added, "But, no one gets an absolute
$40.0. The intent was that all municipalities share in
bringing up the smaller communities to $40.0." If there is
a cut, they are also to share in that cut. He then directed
attention to the distributed tabulation and noted that for
the first year some municipalities at the $40.0 level would
actually be receiving $39.9.
In response to a question from Co-chairman Halford, Mr.
Rolfzen acknowledged that under existing revenue sharing the
minimum is $25.0 times the cost-of-living differential.
There is no minimum entitlement under municipal assistance.
The proposed bill would set a minimum of $40.0 and bring
approximately 41 of the "very small communities" up to
$40.0. It would cost approximately $238.0 statewide.
Smaller communities would also share in bringing communities
to the $40.0 threshold.
PAT POLAND, Director, Division of Municipal and Regional
Assistance, Dept. of Community and Regional Affairs, next
spoke via teleconference from Anchorage. He expressed
support for the bill and advised that it contains
improvements to municipal assistance and revenue sharing
programs. It effects changes in a fair and "generally
balanced manner." It is important that the state protect
its investment in public infrastructure made through
municipal governments. Establishment of a minimum funding
level is an important step in that direction. Removal of
the holdharmless provision will provide for better program
equity. Moving the date for the safe communities payment
forward will enable larger municipalities to minimize
impacts from cuts. In his concluding remarks, Mr. Poland
acknowledged a difference between departments over the
fiscal impact of the date change. He then voiced support
for a date that "basically gives us the fiscal impact at the
lower end of the fiscal note submitted by the Dept. of
Revenue."
Senator Rieger referenced a proposed amendment and explained
that when the legislature passed legislation relating to the
ranking of school projects, the listing of a priority list
in statutes produced an awkward result in which the first
item on the list was required to be exhausted, in its
entirety, before proceeding to the next item. That was not
the intent. To clarify the situation, the proposed
amendment contains the following language:
Subsection (c) of this section may not be
construed to require a municipality to fund all
requests it receives for services in a category
with a higher ranking of priority before funding
services in a category with a lower ranking of
priority.
The Senator then MOVED for adoption of the amendment.
Senator Torgerson acknowledged that the amendment clears up
problems within the bill. No objection having been raised,
Senator Rieger's amendment was ADOPTED.
To an inquiry from Co-chairman Frank concerning the repeal
within Sec. 13, Senator Rieger explained that the clause
required a municipality to reduce taxes in response to
revenue sharing and municipal assistance increases.
Co-chairman Frank asked if the bill deals with both revenue
sharing and municipal assistance. Senator Torgerson
responded, "basically just municipal assistance." The Co-
chairman then voiced his understanding that the primary
thrust is to increase the minimum entitlement to $40.0.
Senator Torgerson added that it also removes holdharmless
provisions. Discussion followed regarding the current
workings of holdharmless language. Additional discussion
followed regarding minimum entitlements under the proposed
bill. Co-chairman Frank asked if the legislation would
cover unincorporated areas. Senator Torgerson responded
negatively.
In response to inquiries from Co-chairman Frank concerning
municipal support, Senator Torgerson said that both the
mayor of the Fairbanks Borough and the mayor of the City of
Fairbanks worked with the mayor of Anchorage in putting the
proposed plan together.
VERN VOSS, Cash Manager, Treasury Division, Dept. of
Revenue, came before committee in response to questions
regarding cash flow and the department fiscal note. He
explained that if funds are paid to municipalities in
February versus July, the state must borrow money from the
constitutional budget reserve or another source. In the
alternative, if excess funds are available, early payment
would effect a reduction in interest income.
JOHN STEIN next testified via teleconference from Wasilla.
He voiced support for the legislation, saying that the
Alaska Municipal League and the legislature have developed
"something that sort of makes sense out of municipal
funding." He voiced further support for the public
relations campaign to explain to voters that "This is really
a sloughing . . . a pushing down of costs to the municipal
governments." That should be understood. Mr. Stein urged
support for the bill and local governments.
Co-chairman Frank MOVED for passage of CSSSSB 20 (Fin) with
individual recommendations and accompanying fiscal notes.
CSSSSB 20 (Fin) was REPORTED OUT of committee with a zero
fiscal note from the Dept. of Community and Regional Affairs
and a note from the Dept. of Revenue projecting a revenue
reductions of $(874.0). Co-chairmen Frank and Halford and
Senators Sharp and Zharoff signed the committee report with
a "do pass" recommendation. Senators Donley, Phillips, and
Rieger signed "no recommendation."
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