Legislature(2015 - 2016)SENATE FINANCE 532

04/11/2016 09:00 AM FINANCE

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+= SB 101 STATE PARKS FEES & SALES OF MERCHANDISE TELECONFERENCED
Moved CSSB 101(FIN) Out of Committee
+= SB 200 MANDATORY PHYSICAL ACTIVITY IN SCHOOLS TELECONFERENCED
Scheduled but Not Heard
+= SB 201 PHARMA BD & EMPLOYEES;DRUG DIST/MANUFAC TELECONFERENCED
Moved SB 201 Out of Committee
+= SJR 12 CONST. AM: ELECTED ATTORNEY GENERAL TELECONFERENCED
Moved SJR 12 Out of Committee
+= SB 196 POWER COST EQ FUND: RESERVE ACCT;DIVIDEND TELECONFERENCED
Moved CSSB 196(FIN) Out of Committee
+= SB 210 COMM. REV. SHARING;PROP. TAX EXEMPTIONS TELECONFERENCED
Heard & Held
+ Bills Previously Heard/Scheduled TELECONFERENCED
SENATE BILL NO. 210                                                                                                           
                                                                                                                                
     "An  Act  relating  to the  community  revenue  sharing                                                                    
     program;  changing the  name of  the community  revenue                                                                    
     sharing  program to  the community  assistance program;                                                                    
     and relating  to the  municipal property  tax exemption                                                                    
     on the residence  of a senior, a  disabled veteran, and                                                                    
     a widow or widower of a senior or disabled veteran."                                                                       
                                                                                                                                
10:21:43 AM                                                                                                                   
                                                                                                                                
Co-Chair MacKinnon  discussed the CS  for SB 210,  which had                                                                    
been adopted on  April 6, 2016. Public  testimony had opened                                                                    
on  closed  on  the  same   date.  She  clarified  that  the                                                                    
committee was considering bill version H.                                                                                       
                                                                                                                                
10:22:11 AM                                                                                                                   
AT EASE                                                                                                                         
                                                                                                                                
10:23:06 AM                                                                                                                   
RECONVENED                                                                                                                      
                                                                                                                                
Vice-Chair Micciche  discussed the  fiscal note,  from DCCED                                                                    
(OMB component  2879); with appropriation and  allocation to                                                                    
Community  and Regional  Affairs.  He shared  that the  note                                                                    
showed  $6.1 thousand  of fiscal  impact  in FY  17 with  no                                                                    
additional  costs, positions,  or capital.  He relayed  that                                                                    
the committee believed that the  department could handle the                                                                    
minor  amount  of  work  resultant from  the  bill,  and  it                                                                    
intended to zero out the fiscal note.                                                                                           
                                                                                                                                
Co-Chair MacKinnon  asked for the  support of  the committee                                                                    
to zero out the fiscal note.  The fiscal note was amended to                                                                    
zero.  She informed  that the  committee  would request  the                                                                    
Legislative Finance Division (LFD)  to provide a forthcoming                                                                    
zero fiscal note.                                                                                                               
                                                                                                                                
Vice-Chair Micciche relayed a  concern from his district and                                                                    
mentioned  a   spreadsheet  that   showed  an   increase  in                                                                    
community revenue sharing in some  communities, and a larger                                                                    
proportion  of  decrease  of community  revenue  sharing  in                                                                    
other  communities. He  asked  if  Co-Chair MacKinnon  could                                                                    
explicate  and  confirm that  no  communities  in the  state                                                                    
would receive an increase.                                                                                                      
                                                                                                                                
Co-Chair MacKinnon asked LFD staff  to explain the breakdown                                                                    
of how the state would assist communities under the bill.                                                                       
                                                                                                                                
ALEXEI   PAINTER,  FISCAL   ANALYST,  LEGISLATIVE   FINANCE,                                                                    
discussed the  spreadsheet "FY 17 Community  Revenue Sharing                                                                    
Estimates,"  (copy on  file). He  explained  that under  the                                                                    
status quo  distribution of $60 million  versus the proposed                                                                    
distribution  of SB  210 (under  any  amount), no  community                                                                    
would  receive  more  funding  under   the  formula  in  the                                                                    
Community  Revenue Sharing  Program. The  bill would  change                                                                    
the way that pro-rating worked, so  if one were to compare a                                                                    
pro-rated  base in  the status  quo program  to a  pro-rated                                                                    
base in the  new program, it was true  that some communities                                                                    
would  be  better or  worse  off.  He reiterated  that  when                                                                    
compared to  the original $60 million  program, no community                                                                    
would receive more funding under SB 210.                                                                                        
                                                                                                                                
Vice-Chair  Micciche  thought  that  when  some  people  had                                                                    
initially  looked  at the  calculations;  it  had showed  an                                                                    
actual  increase for  Aleutians East,  False Pass,  and some                                                                    
other  areas. He  asked  if Mr.  Painter  could explain  the                                                                    
logic of the bill and its relationship to the PCE program.                                                                      
                                                                                                                                
Co-Chair MacKinnon stated that  there was a policy decision,                                                                    
and  referred to  the SB  196,  which had  just passed  from                                                                    
committee. She explained  that SB 196 had  proposed a change                                                                    
to the  PCE Fund structure,  in which excess  earnings would                                                                    
be  diverted   to  the  revenue  sharing   program.  It  was                                                                    
estimated to be in the amount  of $17 million for FY 17. She                                                                    
considered the two bills to be interrelated.                                                                                    
                                                                                                                                
10:27:36 AM                                                                                                                   
                                                                                                                                
Vice-Chair Micciche  stated that  the bill  being considered                                                                    
(SB  210)  would  change  the   name  of  the  program  from                                                                    
Community  Revenue  Sharing   to  Community  Assistance.  He                                                                    
continued  that the  program funding  had been  reduced from                                                                    
$60 million to $38.2 million,  half of which was expected to                                                                    
come from PCE Endowment Fund earnings.                                                                                          
                                                                                                                                
Co-Chair MacKinnon  stated that for  FY 17, if the  fund was                                                                    
not re-charged,  there would be $38,200,000  available under                                                                    
the current  stepdown in statute.  She continued  that under                                                                    
SB 210, the  pro-rated share would be changed.  If there was                                                                    
expected  earnings  on the  PCE  Fund,  there would  be  $17                                                                    
million to go to the Community Revenue Sharing Program.                                                                         
                                                                                                                                
Senator Hoffman  stated that the governor's  proposal was to                                                                    
spend  $50 million  on the  revenue sharing  program in  the                                                                    
current  year, and  increase the  amount to  $60 million  in                                                                    
subsequent years.  The committee  was evaluating  whether or                                                                    
not  the state  could continue  to fund  the program  at the                                                                    
same  high level.  Since  the state  no  longer had  surplus                                                                    
revenue  to  share,  he  thought the  title  change  to  the                                                                    
Community  Assistance  Program   was  more  appropriate.  He                                                                    
thought by  changing it to  a $30 million program,  it would                                                                    
not  necessitate funding  an additional  $35 million  in the                                                                    
current year. He  noted that the fund had  $115 million, and                                                                    
in order to get a three-year  average the fund would have to                                                                    
contain  $150   million.  Subsequently,  the   governor  had                                                                    
requested  the additional  $35 million.  If the  legislature                                                                    
moved forward and  reduced the program, the  state would not                                                                    
have to come up with $35  million, and there would be enough                                                                    
funding already to  cover a $30 million program.  He did not                                                                    
believe the state  could continue on the path it  was on. He                                                                    
thought it  was more likely  that the program  could survive                                                                    
at the lower  funding level. He noted  that each legislature                                                                    
would  have  to consider  the  financial  conditions of  the                                                                    
state at the time.                                                                                                              
                                                                                                                                
10:31:00 AM                                                                                                                   
                                                                                                                                
Vice-Chair  Micciche thought  it was  unjustified to  simply                                                                    
end the  program, and  thought the  bill was  an appropriate                                                                    
action.   He  referred   to   other   bills  that   impacted                                                                    
municipalities, and thought  that SB 210 had  a much smaller                                                                    
impact. He thought that the bill was a healthy compromise.                                                                      
                                                                                                                                
Co-Chair MacKinnon stated that the  bill was from the Senate                                                                    
Finance Committee, and  asked that any input  be directed to                                                                    
her  office.  She  referred   to  discussion  regarding  the                                                                    
definition of  "community" and how large  a community should                                                                    
be.  She recounted  the same  discussion  pertaining to  the                                                                    
size   of  schools.   She  had   heard  conversation   about                                                                    
considering  50  residents  to constitute  a  community,  or                                                                    
whether  11  members  in a  geographic  area  qualified  for                                                                    
community  assistance of  $96,000.  She  clarified that  the                                                                    
bill did not  propose a change to  definitions of community,                                                                    
but noted  that there was  an anomaly in the  Aleutians East                                                                    
Borough  that had  a  population of  39  and received  state                                                                    
assistance in the amount of $385,000.                                                                                           
                                                                                                                                
Mr. Painter clarified that the  population of Aleutians East                                                                    
Borough  was actually  higher, and  the 39  individuals were                                                                    
those that did not live in an incorporated borough.                                                                             
                                                                                                                                
Co-Chair  MacKinnon   asked  Mr.  Painter  to   discuss  why                                                                    
Aleutians East  would get extra compensation  if communities                                                                    
were already receiving funds from other sources.                                                                                
                                                                                                                                
Mr.   Painter  stated   that   there   were  boroughs   with                                                                    
incorporated communities that received  the borough share of                                                                    
the program.                                                                                                                    
                                                                                                                                
Co-Chair   MacKinnon  clarified   that  the   boroughs  were                                                                    
overlaid  upon the  city or  village designations,  and both                                                                    
were getting assistance.                                                                                                        
                                                                                                                                
Mr. Painter answered in the affirmative.                                                                                        
                                                                                                                                
Co-Chair   MacKinnon  asked   Mr.   Painter   to  create   a                                                                    
spreadsheet  to  illustrate  the cities  with  the  boroughs                                                                    
overlaid   atop,  with   associated   revenues,  to   better                                                                    
understand how the program gave  assistance to the boroughs.                                                                    
She thought  the information  would also  be helpful  in the                                                                    
next committee  of referral  if the  bill was  successful on                                                                    
the Senate floor.                                                                                                               
                                                                                                                                
10:35:04 AM                                                                                                                   
AT EASE                                                                                                                         
                                                                                                                                
10:39:14 AM                                                                                                                   
RECONVENED                                                                                                                      
                                                                                                                                
Senator Dunleavy thought that  he would benefit greatly from                                                                    
additional consideration  of the bill. He  wanted to discuss                                                                    
some questions about the bill with staff from LFD.                                                                              
                                                                                                                                
Senator  Olson  referred  to  an  earlier  discussion  about                                                                    
communities  that   did  not   have  city   governments.  He                                                                    
commented that  he would  like a  list of  such communities,                                                                    
the  population,  and  how much  money  each  community  was                                                                    
receiving from the revenue sharing program.                                                                                     
                                                                                                                                
Co-Chair MacKinnon  stated she  would be  happy to  hold the                                                                    
bill until the afternoon meeting.                                                                                               
                                                                                                                                
Vice-Chair  Micciche  opined  that   there  were  a  lot  of                                                                    
legislators  that   thought  that  it  was   time  that  the                                                                    
communities with  tax authority  and/or a fund  balance move                                                                    
beyond community revenue sharing. He  thought the bill was a                                                                    
healthy  compromise. He  acknowledged that  the program  was                                                                    
slightly  advantaged to  smaller communities  that (in  some                                                                    
cases) had  the revenue  sharing program  as its  only state                                                                    
support. He thought there were  communities that objected to                                                                    
the proportional  differences. He  thought it was  a healthy                                                                    
shift for larger  communities that had a  greater ability to                                                                    
provide for themselves.                                                                                                         
                                                                                                                                
10:41:30 AM                                                                                                                   
                                                                                                                                
Co-Chair MacKinnon  stated that the conversation  around the                                                                    
creation and  reduction of the  revenue sharing  program had                                                                    
to  do with  Senator Hoffman's  comments regarding  the fact                                                                    
that the  state could no  longer afford to share  funding it                                                                    
did  not  have.  She  pointed  out  that  the  governor  was                                                                    
proposing multiple  ways to provide revenues  through taxing                                                                    
different  industry  groups  and  individual  Alaskans.  She                                                                    
suggested that larger communities  had the ability (provided                                                                    
by the  legislature) to  tax themselves,  and thereby  had a                                                                    
greater ability  for self-determination. She noted  that the                                                                    
smaller communities,  which had  not already done  so, still                                                                    
had the opportunity to tax themselves.                                                                                          
                                                                                                                                
Co-Chair MacKinnon  relayed that  some of  her constituents,                                                                    
as well as other residents, had  asked that all of Alaska be                                                                    
incorporated  as  boroughs  so   as  to  tax  residents  and                                                                    
contribute to  education and other activities  funded by the                                                                    
state. She  thought the  bill was  a compromise.  Instead of                                                                    
eliminating  all  revenue  assistance  to  communities  with                                                                    
taxing  authority, the  compromise was  to reduce  to a  $30                                                                    
million program and utilize earnings  from the PCE Fund. She                                                                    
referred to  the suite of  interlocked bills,  including one                                                                    
that  concerned  the  Public  Employees'  Retirement  System                                                                    
(PERS)  and  the  Teachers'  Retirement  System  (TRS).  The                                                                    
committee  had heard  from a  variety  of people,  including                                                                    
those   that  were   highly  vocal   and  critical   of  the                                                                    
legislature and  cost-shifting. She  discussed PERS  and TRS                                                                    
liability.  She  thought  it  was  fair  to  say  that  more                                                                    
conversation  was  needed  on the  topic.  She  agreed  that                                                                    
proportionally,  smaller  communities  were protected  in  a                                                                    
better  way;  and  noted  that if  the  previous  bill  went                                                                    
forward, part of the PCE fund would help lower GF spend.                                                                        
                                                                                                                                
10:45:08 AM                                                                                                                   
                                                                                                                                
Vice-Chair  Micciche  thought Co-Chair  MacKinnon's  remarks                                                                    
were well  stated. He related  that he  tried to be  able to                                                                    
put himself in  other people's shoes. He referred  to his 5-                                                                    
year tenure as mayor of  an Alaskan community. He thought as                                                                    
mayor  he  would  have taken  issue  with  the  proportional                                                                    
change proposed in the bill.  He acknowledged the difference                                                                    
of his current role, as  well as the changed fiscal climate.                                                                    
He reiterated  that the bill was  an appropriate compromise,                                                                    
especially considering a PCE Fund shift.                                                                                        
                                                                                                                                
SB  210  was  HEARD  and   HELD  in  committee  for  further                                                                    
consideration.                                                                                                                  
                                                                                                                                
Co-Chair  MacKinnon  discussed  the afternoon  schedule,  at                                                                    
which time  the committee  would do  a full  walk-through of                                                                    
the capital  budget. She noted  that she would work  to move                                                                    
out SB  210 and SB  196 together  so that they  could travel                                                                    
together. She reiterated  that the two bills  were a portion                                                                    
of the same suite of bills.                                                                                                     
                                                                                                                                
10:46:37 AM                                                                                                                   
AT EASE                                                                                                                         
                                                                                                                                
10:47:02 AM                                                                                                                   
RECONVENED                                                                                                                      
                                                                                                                                
Co-Chair MacKinnon discussed the afternoon schedule.                                                                            
                                                                                                                                

Document Name Date/Time Subjects
SB 200 Public Testimony Nees.pdf SFIN 4/11/2016 9:00:00 AM
SB 200
SB 200 NEA Alaska Letter.pdf SFIN 4/11/2016 9:00:00 AM
SB 200
SB 210 Community Revenue Sharing Estimates.pdf SFIN 4/11/2016 9:00:00 AM
SB 210
SB 201 Responses to questions during SB 201 hearing SFIN 4.pdf SFIN 4/11/2016 9:00:00 AM
SB 201
SB 210 with $38.2 million vs Status Quo with $60 million.pdf SFIN 4/11/2016 9:00:00 AM
SB 210