Legislature(2001 - 2002)

03/28/2001 06:06 PM FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
     CS FOR SENATE BILL NO. 48(CRA)                                                                                             
     "An Act  relating to the determination  of full and  true value                                                            
     of  taxable  municipal  property for  purposes  of calculating                                                             
     funding   for  education   and  certain   other  programs,   to                                                            
     incorporation  of  third class  boroughs,  to incorporation  of                                                            
     certain boroughs  in the unorganized borough  and annexation of                                                            
     portions  of the unorganized  borough  to boroughs and  unified                                                            
     municipalities,  and to the formation  of separate unorganized                                                             
     boroughs; and providing for an effective date."                                                                            
This was  the second  hearing for  this bill in  the Senate  Finance                                                            
Senator Wilken  updated the Committee  on events since the  previous                                                            
hearing related to a subcommittee  formed to review this legislation                                                            
and  chaired by  Senator  Leman.  Senator  Wilken noted  a  proposed                                                            
committee substitute, Version "R" would be offered.                                                                             
Senator  Leman listed  membership  on  the subcommittee  as  Senator                                                            
Wilken,  Senator  Hoffman  and  himself  who  heard  testimony  from                                                            
"interested  parties" across  the state. He  noted that while  there                                                            
was testimony in favor  of the legislation from the City of Cordova,                                                            
there  was  a  far  greater  amount  of  testimony   in opposition,                                                             
primarily  from  rural communities.  He  summarized  responses  from                                                            
rural communities  as "We  don't want no  government." and  "We want                                                            
services  but we  don't  want to  pay  for it."  He stated  that  no                                                            
specific amendments were offered.                                                                                               
Senator Hoffman  corrected that there were recommendations  offered,                                                            
for example  if there were boroughs  organized, they should  be done                                                            
so  by a  vote of  the  residents. He  emphasized  that  of all  the                                                            
testimony heard,  there was one speaker  in support of the  bill and                                                            
the remaining  20 speakers reflected  and "overwhelming opposition"                                                             
to the legislation.  He stressed that  there was a speaker  for each                                                            
of the recommended  model boroughs who opposed the  bill. He singled                                                            
out  the  Valdez  borough  as an  example,  noting  that  while  the                                                            
community  of  Cordova was  in  support of  the  mandatory  borough,                                                            
residents of Valdez opposed it.                                                                                                 
Senator  Wilken asserted  that he had received  unsolicited  support                                                            
for  the legislation,  given  the "difficult  positions"  placed  on                                                            
those voicing support.  He noted the Eagle River Chamber of Commerce                                                            
as a supporter.  He stressed that  the facts and intent of  the bill                                                            
speaks "to the effort and the reasons why it should pass."                                                                      
Senator Wilken  moved for adoption of CS SB 48 22-LS0025\R,  3/28/01                                                            
as a working draft.                                                                                                             
Senator Hoffman objected for explanation.                                                                                       
Senator Wilken  detailed the changes in the committee  substitute as                                                            
     Page 4 lines 16-18:  new language, "In addition, the commission                                                            
     shall hold  at least one public hearing in each  community with                                                            
     at least  400 residents  and in each  home rule or first  class                                                            
     city located in the area."                                                                                                 
Senator Wilken  commented this had been discussed  during a previous                                                            
hearing and noted there  would be no fiscal impact on the department                                                            
given  the  Local Boundary  Commission's  (LBC)  experience  in  the                                                            
     Page  4,  line  23 -  26:  changes  "each  annexation"  to  "an                                                            
     annexation" and inserts  "however the commission may submit not                                                            
     more  than   two  petitions  to  the  legislature   under  this                                                            
     subsection each year."                                                                                                     
Senator Wilken  reminded that  the legislature  has noted that  this                                                            
legislation  "sells patience"  as much  as it  "sells fairness."  He                                                            
expressed  he  has  waited  ten years  to  receive  studies  on  the                                                            
identified  areas. He predicted that  the two petitions per  year is                                                            
an ambitious  schedule.  He also thought  that once  this system  is                                                            
validated and  in place and residents in unorganized  Alaska realize                                                            
that they  "can help pay  for education and  can support  government                                                            
like others in  Alaska" these residents would find  it in their best                                                            
interest to form  a borough under existing law. He  stated that this                                                            
language addresses  concerns that  this bill is "a mass wholesaling                                                             
of unorganized Alaska into boroughs."                                                                                           
     Page  5, line  12 through  "voter",  and line  15: inserts  new                                                            
     language stipulating that if a borough is incorporated and if                                                              
     there is to be use taxes or sales taxes, those taxes must have                                                             
     voter approval from the residents of the new borough.                                                                      
Senator Wilken  suggested that for  some boroughs, it could  be more                                                            
appropriate to fund their  government in other ways besides property                                                            
     Page 5, line 21: inserts "on the date of the annexation"                                                                   
Senator  Wilken noted  this  change was  the recommendation  of  the                                                            
Department  of Natural Resources and  addresses the concern  related                                                            
to annexed land to a borough  as deemed appropriate by the LBC under                                                            
this legislation,  and the borough's  entitlement to ten-percent  of                                                            
the state-owned portion of the annexed land.                                                                                    
Senator Green  asked if the committee  substitute also includes  the                                                            
same legislative  purpose as contained  in the Senate Community  and                                                            
Regional Affairs committee substitute.                                                                                          
Senator Wilken affirmed it was.                                                                                                 
AT EASE 6:42 PM / 6:43 PM                                                                                                       
Senator Hoffman  removed his objection and the committee  substitute                                                            
was ADOPTED as a working draft.                                                                                                 
Senator  Austerman shared  that he  had been  considering a  delayed                                                            
effective date for this  legislation. He spoke to concerns that once                                                            
the bill  became law, those  communities that  already have  a sales                                                            
tax with a portion dedicated  to local education, would be precluded                                                            
from making decisions regarding  what forms of taxation to adopt. He                                                            
surmised  that the  two petitions  per year  stipulation would  give                                                            
communities ample opportunity to make these decisions.                                                                          
Senator Wilken spoke to  the search for funds for K-12 education and                                                            
responded   that  while  some  argued   that  this  legislation   is                                                            
premature, he also faced pressure that this is not soon enough.                                                                 
Senator  Olson remarked  that this  bill would  continue to  receive                                                            
scrutiny.  He  opined that  one  of the  appeals  of Alaska  is  its                                                            
opportunity   for  independent   thinking.   He   referred  to   the                                                            
stipulation in  the committee substitute that provides  LBC petition                                                            
approval  without voter  ratification.  He compared  this to  taxing                                                            
citizens but allowing them no influence in these decisions.                                                                     
Co-Chair  Kelly countered  that some communities  receive money  but                                                            
pay nothing to  the state. He suggested that those  communities that                                                            
do  not  want  government   should  not  receive  the   benefits  of                                                            
government. He  understood that there are some communities  that are                                                            
unable to contribute.                                                                                                           
Senator Wilken commented  that 83 percent of Alaskans had government                                                            
"crammed down  their throats" in the  early 1960s, which  turned out                                                            
to  be beneficial.  He  noted that  Alaska is  the  only state  with                                                            
unorganized governmental  districts. He surmised that  when citizens                                                            
actually assist  in paying for local education, they  take a greater                                                            
interest in how  the funds are spent, which improves  the quality of                                                            
education. He  asserted that those areas that can  contribute should                                                            
begin to do so  and that those areas unable to contribute  should be                                                            
assisted in developing  an economy so that they could  contribute in                                                            
the future.  He suggested  that this legislation  helps focus  state                                                            
resources on those areas in need of assistance.                                                                                 
Senator  Hoffman   agreed  that  some  areas  would   be  unable  to                                                            
contribute.  He  stressed  many  of  the  unorganized  boroughs  are                                                            
comprised  mostly  of  federal  land and  that  the  state  receives                                                            
federal funding, i.e. Impact  Aid Program, in lieu of taxes. He gave                                                            
as examples,  the Lower  Kuskokwim School  District, which  receives                                                            
$8.3 million in impact  aide, and the Bering Strait School District,                                                            
which  receives  $5.6  million.  He  calculated  the  Average  Daily                                                            
Membership  (ADM) for  these  districts and  the  amount of  funding                                                            
received   per  student   and  compared  these   figures  to   local                                                            
contributions   for  school  districts  in  Anchorage,   Juneau  and                                                            
Fairbanks,  noting  that the  larger communities  have  a lower  per                                                            
student  allocation. He surmised  that when  considering the  impact                                                            
aid as  contribution to local  education in  lieu of taxes,  the two                                                            
districts have a greater per student allocation.                                                                                
Co-Chair Kelly  appreciated the math,  and asked if this  takes into                                                            
consideration that Anchorage,  Fairbanks and Juneau also contributes                                                            
additional taxes to local education.                                                                                            
Senator Hoffman stressed  that this legislation addresses equity and                                                            
fairness  in education  funding. Therefore,  he  expressed that  the                                                            
Lower  Kuskokwim and  Bering Straits  school  districts are  already                                                            
contributing fairly to their local education.                                                                                   
SFC 01 # 56, Side B 06:55 PM                                                                                                    
Senator  Hoffman   responded  to   a  question  by  Co-Chair   Kelly                                                            
suggesting that  the Impact Aid Program and ADM relationship  should                                                            
be calculated  for all school  districts. He  noted that one  reason                                                            
many areas  of the  state remain  unincorporated  is because  of the                                                            
large make-up of federal lands.                                                                                                 
Senator  Wilken disagreed  that  the federal  impact  aid should  be                                                            
considered  as  a  local  contribution,   stating  that  it  is  not                                                            
considered  as such  in the Fairbanks  school district.  He cited  a                                                            
March  29,  2000 letter  from  the  US Department  of  Education  as                                                            
     Financial  need  of such  agencies for  the  provision of  free                                                            
     public  education  for  children  served  by  such  agency  [US                                                            
     Department  of Education], except that a State  may consider as                                                            
     local  resources funds received  under this title…only  [Impact                                                            
     Aid  Program]  in  proportion  to  the  share  that  local  tax                                                            
     revenues  covered  under a State  equalization  program are  of                                                            
     total local tax revenues.                                                                                                  
Senator Wilken  concluded that if  no local taxes are collected  for                                                            
education,  the Impact  Aid Program  funds could  not be claimed  as                                                            
local contribution.                                                                                                             
Senator Hoffman pointed  out that this bill provides taxing property                                                            
to raise  the local  effort. He  stressed that  when a community  is                                                            
limited  in  the number  of  acres  available  for taxation  due  to                                                            
federal ownership,  the ability to  collect those taxes is  limited.                                                            
He surmised  that the Impact Aid Program  funds should therefore  be                                                            
considered  local effort. He stressed  that many communities  in his                                                            
district are themselves located on federally owned property.                                                                    
Co-Chair Kelly responded  that a community with 95 percent federally                                                            
owned  land would  not be  a top priority  for  organization by  the                                                            
boundary commission.                                                                                                            
Senator Wilken agreed.                                                                                                          
Co-Chair  Kelly accepted  Senator  Hoffman's position  that an  area                                                            
consisting  primarily of federal land  the ability to collect  taxes                                                            
is decreased.                                                                                                                   
Senator Hoffman  remarked that 67  percent of the land in  Alaska is                                                            
exempt from  taxation because  it is federally  owned. He  estimated                                                            
that the existing  organized boroughs contain a lower  percentage of                                                            
federally   owned  land,   leaving  a  higher   percentage   in  the                                                            
unorganized boroughs.                                                                                                           
AT EASE 7:01 PM / 7:01 PM                                                                                                       
Senator Wilken  offered a  motion to report  CS SB 48, 22-LS0025\R,                                                             
from  Committee  with  accompanying   Department  of  Community  and                                                            
Economic Development fiscal note for $130,000.                                                                                  
Senator Hoffman objected.                                                                                                       
A roll call was taken on the motion.                                                                                            
IN FAVOR: Senator Wilken, Senator Austerman, Senator Green, Senator                                                             
Leman, Co-Chair Donley and Co-Chair Kelly                                                                                       
OPPOSED: Senator Hoffman and Senator Olson                                                                                      
ABSENT: Senator Ward                                                                                                            
The motion PASSED (6-2-1)                                                                                                       
The bill MOVED from Committee.                                                                                                  

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