Legislature(2001 - 2002)
03/28/2001 06:06 PM FIN
* first hearing in first committee of referral
= bill was previously heard/scheduled
= 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 Committee. 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 follows. 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 matter. 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 taxes. 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 follows. 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.