Legislature(2007 - 2008)SENATE FINANCE 532
05/03/2007 01:30 PM Senate FINANCE
| Audio | Topic |
|---|---|
| Start | |
| SB104 | |
| HB121 | |
| SB72 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | SB 104 | TELECONFERENCED | |
| + | SB 72 | TELECONFERENCED | |
| + | HB 121 | TELECONFERENCED | |
| + | TELECONFERENCED |
2:09:42 PM CS FOR SENATE BILL NO. 72(CRA) "An Act relating to the community revenue sharing program; and providing for an effective date." This was the first hearing for this bill in the Senate Finance Committee. Co-Chair Stedman announced intention to not report this bill from Committee at this time. 2:10:12 PM Co-Chair Hoffman offered a motion to adopt CS SB 72, 25- LS0506\M, as a working document. Without objection, CS SB 72, Version "M" was ADOPTED as a working document. 2:10:33 PM Co-Chair Stedman indicated spreadsheets were distributed that indicated the impact of this legislation to each incorporated and unincorporated municipal government in the state. 2:10:46 PM Co-Chair Hoffman commented that the passage of SB 185 relating to the establishment of a "cost share" system to address the unfunded liability of the Public Employees Retirement System (PERS) and the Teachers Retirement System (TRS), "made tremendous progress" in reducing the potential bankruptcy of many local governments. At a cost to the State of approximately $66 million, contribution rates for certain governments would be significantly reduced, while the rates of others would increase somewhat. He collaborated with Senator Olson in an attempt to achieve parity through the State revenue sharing program for those communities that had previously experienced a lesser or no unfunded liability. 2:12:05 PM Senator Olson, sponsor of the bill, testified he introduced this legislation on behalf of the Alaska Municipal League. The original version "presented the League's views on how the municipalities throughout the state, from the largest to the smallest, would share in the revenues from our mineral wealth". He appreciated Co-Chair Hoffman's decision to retain much of the intent of the original version of the bill and commended the effort to "provide equity for the state's help with municipalities, especially related to the PERS and TRS costs." This committee substitute was "a gigantic step forward in bringing financial stability to our struggling cities and communities." 2:13:00 PM TIM GRUSSENDORF, Staff to Co-Chair Hoffman, detailed the committee substitute. Section 1 of the committee substitute would amend AS 29.60 by adding a new Article 11. Community Revenue Sharing Program., and accompanying new sections. Mr. Grussendorf informed that Section 29.60.850. Community revenue sharing fund., on page 1 line 6, would establish the community revenue sharing fund by a transfer each fiscal year of the lesser of $50 million or "an amount equal to three percent of the money received by the State during the immediately preceding fiscal year from all mineral lease rentals, royalties, royalty sale proceeds, federal mineral revenue sharing payments, and bonuses." The funding source would not include revenue from petroleum taxes. Mr. Grussendorf stressed that the community revenue sharing fund would not be a dedicated fund and that appropriation from the fund for community revenue sharing payments by the Legislature was optional. 2:14:43 PM Mr. Grussendorf explained Section 29.60.855. Community revenue sharing payments for communities., on page 2 line 4. Five percent of the "available balance" of the community revenue sharing fund would be allocated directly to unincorporated communities. Each unincorporated community would receive a minimum of $25,000 unless sufficient funding was not available, in which case the amount would be equally divided between all communities. In the event that excess funds were available, the funds would be distributed per capita amongst the communities in amounts not to exceed $50,000. The maximum amount an unincorporated community could receive from this program would be $75,000. The limit was intended to ensure that payments to an unincorporated community did not exceed the amount of payments made to any incorporated municipality. Mr. Grussendorf referenced an untitled spreadsheet that listed all unincorporated communities and the calculation of the distribution of the funding to each [copy on file]. 2:16:03 PM Mr. Grussendorf next outlined the provisions of Section 29.60.860. Community revenue sharing payments for municipalities and reserves., on line 20, utilizing an untitled spreadsheet that listed all boroughs and municipalities and calculations of distribution of the funding to each [copy on file]. He stated that 95 percent of the amount appropriated for community revenue sharing payments would be allocated for incorporated municipalities. Each organized borough would receive $250,000 and each municipality would receive $75,000 as a "base payment value". This information was contained in the third column, labeled Municipal basic Local Government Support, of the spreadsheet. Mr. Grussendorf noted that subsection (b)(1) on line 29 would stipulate that the basic payment values be reduced on a pro rata basis in instances in which insufficient funds were available to allocate the full base rate. 2:17:12 PM Mr. Grussendorf furthered that subsection (b)(2) on page 3, line 1 contained a provision to increase the base payment values on a per capita basis in the event excess funds were available. The amounts for each municipality and borough were shown in the fourth column labeled "Per Capita Distribution @ $43.27" of the spreadsheet. The second column, "2005 Population", listed the census population for each community. 2:17:25 PM Mr. Grussendorf reviewed the provision of subsection (c) on line 4, which reduced the amount allocated as the base payment value for certain boroughs and municipalities by specified percentages. The reductions correlated with the appropriations made through the provisions of SB 185 relating to assistance for communities with PERS unfunded liabilities. Payments on the liabilities were established for each PERS contributor as a percentage of the contributor's employee salaries. Statutory changes made by SB 185 would establish the percentage, or contribution rate, for each PERS contributor at 22 percent. The discrepancy resulting from those communities that had a higher contribution rate would be funded by the State and by those contributors that previously had a contribution rate of less than 22 percent. Mr. Grussendorf pointed out that each community that enjoyed a decrease in the contribution rate was subject to the reduction to the community revenue sharing payment and was listed in the subsection along with the corresponding percentage of the reduction. This information was also reflected on the spreadsheet in the fifth column labeled "State Assistance pay to get to 22%" listing the percentage, and in the sixth column "% state PERS Contrib * Per Capita Distribution" listing the dollar amount. Mr. Grussendorf utilized the Municipality of Anchorage as an example to demonstrate the calculations. The base payment value was $250,000 and the per capita distribution for the community of 278,241 residents was $12,039,488.07. The combined amounts equaled $12,289,488.07. The previous PERS contribution rate was 61.76 percent, which was reduced to 22 percent for the Municipality with "State assistance" providing funding for the remaining 39.76 percent. The amount of the base payment value plus the per capita distribution provided for in this legislation, multiplied by 39.76 percent, equaled $4,886,517.59, which was then deducted from the base payment value plus per capita distribution amount to establish the total revenue sharing payment of $7,402,970.48 for the Municipality. This amount was listed in the eighth column labeled, "total revenue with PERS adjustment". Mr. Grussendorf qualified that the total deductions taken in the revenue sharing program of $5.6 million differed from the actual amount of $66 million that the State provided to offset the contribution rate reductions to these communities. He assured that the calculation of the amount for each community subjected to the reduction "across the board, it's the same type of deduction; for the same percentage". 2:19:08 PM Mr. Grussendorf then described the redistribution of the funding reductions to those communities that either did not participate in the PERS system or did participate but had contribution rates lower than 22 percent before implementation of SB 185. The $5.6 million total reductions were distributed amongst the eligible communities on a per capita basis and were listed in the ninth column, labeled "Redistribution of PERS adjustment per-capita (88.18)" of the spreadsheet. 2:19:47 PM Mr. Grussendorf noted the tenth column, "Total Rev. Sharing Payment", totaled the basic payment value and the per capita distribution plus the per capita redistribution for those communities eligible for the redistribution. This column also carried forward the amounts of the eighth column for the communities that received a reduction. 2:20:17 PM Mr. Grussendorf redirected attention to the State funding provided on behalf of the PERS unfunded liability of those communities that would have experienced contribution rates higher than 22 percent. The actual amount provided for each community was listed in the eleventh column labeled "State Assistance pay to get to 22%". This figure was added to the community's adjusted revenue sharing payment to achieve the "Total State PERS Assistance & Revenue Sharing" shown in the twelfth column. The funding provided to reduce Municipality of Anchorage's contribution rate by 39.76 percent was $26,218,049, which, added to the adjusted total revenue sharing payment, totaled $33,621,019.48. Mr. Grussendorf stated that the thirteenth and final column of the spreadsheet was labeled "Percent share of Total State Assistance and Revenue Sharing" and listed the percentage of the total revenue sharing appropriation each community received. The Municipality of Anchorage received 30.20 percent. 2:20:51 PM Mr. Grussendorf continued explaining the committee substitute, addressing Section 29.60.865. Eligibility., on page 4 line 27. This language was the same as that utilized in other statutes to establish the definition of unincorporated community. The State must verify that an infrastructure existed that would be able to receive and expend the funding. The community of Metlakatla qualified as a "reserve". 2:21:24 PM Mr. Grussendorf informed that the method to determine the population of a community would be the same as previous methods and was provided for in Section 29.60.870. Determination of population., on page 5 line 12. 2:21:38 PM Mr. Grussendorf alluded to the definitions specified in Section 29.60.879. Definitions., on line 21. 2:21:48 PM Senator Olson asked how the eligibility requirements would be applied for a community that had a lien filed against it, particularly those filed by the federal Internal Revenue Service (IRS). 2:22:05 PM Mr. Grussendorf did not have an answer to the question. 2:22:15 PM Senator Huggins, noting that the per capita calculations would be based on data from the 2005 census, asked if this census contained the most updated information available. 2:22:33 PM Mr. Grussendorf answered it was the most reliable source of population estimates. "Problems" with the 2006 census data had arisen rendering it unreliable. 2:22:47 PM Senator Huggins pointed out that the population of some communities had significantly increased or decreased since the 2005 census was taken. 2:23:02 PM MIKE BLACK, Director, Division of Community Advocacy, Department of Commerce, Community and Economic Development, testified via teleconference from an offnet location that the agency had been responsible for distribution of funding through the previous revenue sharing plan. He supported revenue sharing and this legislation was an improvement to other plans. He also supported the inclusion of assistance to unincorporated communities. He pointed out that the population of unincorporated communities located within a borough would be included in the population count of that borough. He supported the fairness relative to the assistance provided for the PERS and TRS unfunded liability. Mr. Black identified the relevance of liens filed against funds allocated to certain local governments, particularly those with "debt issues". An attachment filed by the federal Internal Revenue Service (IRS) would result in the IRS securing the revenue sharing funds. Primacy over debt owed to other parties was less clear. 2:25:21 PM ROBERT PRUNELLA, Manager, City of Wrangell, testified via teleconference from Wrangell that he had not received the spreadsheets. He would provide written comments after reviewing the information. Co-Chair Stedman assured he would speak with the witness at a later time. 2:26:11 PM TAMMIE WILSON, resident of the Fairbanks North Star Borough, testified in Juneau in appreciation of this legislation. The Borough as well as the City of Fairbanks needed this funding, given property tax issues. She favored it's consideration of the PERS and TRS cost sharing plan over other proposals because it was "easier to understand" than multiple bills would be. She preferred that the funding would be provided every year, although she understood that revenue sharing payments would be lower or would not be made in years the State received less revenue. 2:27:02 PM KATHY WASSERMAN, Alaska Municipal League, testified in Juneau that she had understood that public testimony would not be heard until the following day. She requested additional time to distribute the committee substitute and accompanying information to members and permission for members to comment at a future hearing. 2:27:50 PM Co-Chair Stedman reiterated that the bill would not be reported from Committee at this hearing. 2:27:58 PM MIKE FORD, Alaska Native Health Board, testified in Juneau in support of the bill, opining that the committee substitute reflected "a good step forward". He explained the relevance of this bill to the Board. Lack of revenue for municipalities and unincorporated communities affected health care. 2:29:19 PM Senator Thomas clarified unincorporated communities would receive a base rate of $25,000 plus additional funding if available and that the maximum per capita adjustment would be $50,000. 2:29:58 PM Senator Olson appreciated the efforts made in developing this legislation. The communities which he represented could utilize the funding as "they feel like they're out their withering on the vine". 2:30:18 PM Senator Elton understood the minimum and maximum payments an unincorporated community could receive. He predicted that if less than $50 million was available in a given year for this program, the $75,000 maximum payment would not be reached. The proposed appropriation made in this bill was $48 million. 2:30:51 PM Mr. Grussendorf identified two communities, Deltana and Tok, in which the per capita adjustment calculations would be more than $50,000 if the limit was not established and the program was funded to the maximum amount of $50 million. These communities would have received higher payments than some municipalities. 2:31:32 PM Co-Chair Hoffman remarked that the maximum payment amount was intended as incentive for those larger communities to incorporate. 2:31:53 PM Senator Dyson requested an overview of the fiscal notes, specifically identification of those relevant to the committee substitute. 2:32:18 PM Mr. Grussendorf reported that all the fiscal notes before the Committee were not applicable and that updated fiscal notes would be prepared. The cost for Fiscal Year 2008 (FY 08) would be $48.1 million and future appropriations would be a maximum of $50 million annually. The appropriations would be deposited into a "pool" with the Legislature determining the amount of annual allocations in a manner "they see fit for that fiscal year". 2:32:58 PM Co-Chair Stedman ordered the bill HELD in Committee.
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