03/20/2001 08:07 AM House CRA
| Audio | Topic |
|---|
+ teleconferenced
= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
HOUSE COMMUNITY AND REGIONAL AFFAIRS
STANDING COMMITTEE
March 20, 2001
8:07 a.m.
MEMBERS PRESENT
Representative Kevin Meyer, Co-Chair
Representative Carl Morgan, Co-Chair
Representative Drew Scalzi
Representative Lisa Murkowski
Representative Gretchen Guess
Representative Beth Kerttula
MEMBERS ABSENT
Representative Andrew Halcro
COMMITTEE CALENDAR
HOUSE BILL NO. 135
"An Act relating to municipal fees for certain police protection
services."
- MOVED CSHB 135(CRA) OUT OF COMMITTEE
HOUSE BILL NO. 145
"An Act making a civil remedy available to the state or a
municipality against persons who make false claims for, or
certain misrepresentations regarding, state or municipal money
or other property; and providing for an effective date."
- MOVED HB 145 OUT OF COMMITTEE
HOUSE BILL NO. 20
"An Act relating to state aid to municipalities and certain
other recipients, and for the village public safety officer
program; relating to municipal dividends; relating to the public
safety foundation program; and providing for an effective date."
- MOVED CSHB 20(CRA) OUT OF COMMITTEE
PREVIOUS ACTION
BILL: HB 135
SHORT TITLE:MUNICIPAL FEES: POLICE & FIRE SERVICES
SPONSOR(S): REPRESENTATIVE(S)GUESS
Jrn-Date Jrn-Page Action
02/21/01 0386 (H) READ THE FIRST TIME -
REFERRALS
02/21/01 0386 (H) CRA
02/21/01 0387 (H) REFERRED TO COMMUNITY &
REGIONAL AFFAIR
03/15/01 (H) CRA AT 8:00 AM CAPITOL 124
03/15/01 (H) Heard & Held
03/15/01 (H) MINUTE(CRA)
03/20/01 (H) CRA AT 8:00 AM CAPITOL 124
BILL: HB 145
SHORT TITLE:FALSE CLAIMS AGAINST STATE OR
SPONSOR(S): RLS BY REQUEST OF THE GOVERNOR
Jrn-Date Jrn-Page Action
02/23/01 0416 (H) READ THE FIRST TIME -
REFERRALS
02/23/01 0416 (H) CRA, JUD
02/23/01 0416 (H) FN1: ZERO(LAW)
02/23/01 0416 (H) GOVERNOR'S TRANSMITTAL LETTER
03/15/01 (H) CRA AT 8:00 AM CAPITOL 124
03/15/01 (H) Scheduled But Not Heard
03/20/01 (H) CRA AT 8:00 AM CAPITOL 124
BILL: HB 20
SHORT TITLE:AID TO MUNICIPALITIES AND OTHERS
SPONSOR(S): REPRESENTATIVE(S)MOSES
Jrn-Date Jrn-Page Action
01/08/01 0029 (H) PREFILE RELEASED 12/29/00
01/08/01 0029 (H) READ THE FIRST TIME -
REFERRALS
01/08/01 0029 (H) CRA, STA, FIN
01/08/01 0029 (H) REFERRED TO CRA
03/20/01 (H) CRA AT 8:00 AM CAPITOL 124
WITNESS REGISTER
JIM BALDWIN, Assistant Attorney General
Civil Division (Juneau)
Department of Law
PO Box 110300
Juneau, Alaska 99811-0300
POSITION STATEMENT: Requested that the committee favorably
forward HB 145 to its next committee of referral.
REPRESENTATIVE CARL MOSES
Alaska State Legislature
Capitol Building, Room 500
Juneau, Alaska 99801
POSITION STATEMENT: Testified as the sponsor of HB 20.
TIM BENINTENDI, Staff
to Representative Moses
Alaska State Legislature
Capitol Building, Room 500
Juneau, Alaska 99801
POSITION STATEMENT: Provided additional information on HB 20.
GREGG HANSON, Member
Unalaska City Council
PO Box 920381
Dutch Harbor, Alaska
POSITION STATEMENT: Testified in support of HB 20.
KEVIN RITCHIE, Executive Director
Alaska Municipal League
217 Second Street
Juneau, Alaska 999801
POSITION STATEMENT: Testified in support of HB 20.
JIM KELLY, Director
Communications
Alaska Permanent Fund Corporation
Department of Revenue
PO Box 25500
Juneau, Alaska 99802-5500
POSITION STATEMENT: Testified on HB 20.
ACTION NARRATIVE
TAPE 01-14, SIDE A
Number 0001
CO-CHAIR KEVIN MEYER called the House Community and Regional
Affairs Standing Committee meeting to order at 8:07 a.m.
Representatives Morgan, Meyer, Scalzi, Murkowski, Guess, and
Kerttula were present at the call to order.
HB 135-MUNICIPAL FEES: POLICE & FIRE SERVICES
Number 0076
CO-CHAIR MEYER announced that the first order of business would
be HOUSE BILL NO. 135, "An Act relating to municipal fees for
certain police protection services." [Before the committee was
CSHB 135, version LS0421\F, Cook, 3/9/01, as amended.]
REPRESENTATIVE GUESS, testifying as sponsor of HB 135, reminded
the committee that at the last meeting a conceptual amendment
was adopted that would insert language ensuring actual notice
and consideration for appropriate corrective action in the
ordinance. She pointed out that the committee packet should
include an amendment that is based on the previously adopted
conceptual amendment, this amendment was developed with the help
of her office, Anchorage Assemblyman Tesche, and Tam Cook,
Director, Legal and Research Services, Legislative Affairs
Agency. The amendment is as follows:
Page 1, line 13, following "AS 18.66.990.":
Insert "An ordinance enacted under this section
shall require actual notice to the property owner of
police contacts and a warning that failure to take
appropriate corrective action may result in the
imposition of a fee. The ordinance shall also define
"appropriate corrective action" and provide that the
property owner is not liable for the fee if that
action is promptly taken.
[Original punctuation provided.]
Number 0199
REPRESENTATIVE MURKOWSKI referred to the "warning" included in
the amendment. She noted her appreciation of not being too
specific so that the municipality can have enough flexibility to
structure it for their needs. She related her understanding of
the amendment as follows: "All we're saying is you've got to
have actual notice, we don't care how it's delivered ..., and a
warning and then we're leaving it up to the municipalities to
define what appropriate corrective action can be."
REPRESENTATIVE GUESS agreed with Representative Murkowski's
understanding. She also agreed with Representative Murkowski
that "promptly" is being left for the municipality to define.
Number 0290
REPRESENTATIVE MURKOWSKI asked if this language addresses
Representative Kerttula's concern regarding evictions.
REPRESENTATIVE KERTTULA remarked, "It probably goes further than
that because it would probably allow even things less than
actual eviction." She indicated that the language seems to
address her concerns.
Number 0381
REPRESENTATIVE MURKOWSKI moved to report CSHB 135, version
LS0421\F, Cook, 3/9/01, out of committee with individual
recommendations and the accompanying zero fiscal note. There
being no objection, CSHB 135(CRA) was reported from the House
Community and Regional Affairs Standing Committee.
The committee took a brief at-ease at 8:12 a.m. to 8:13 a.m. in
order to pass the gavel to Co-Chair Morgan.
HB 145-FALSE CLAIMS AGAINST STATE OR MUNICIPALIT
CO-CHAIR MORGAN announced that the next order of business would
be HOUSE BILL NO. 145, "An Act making a civil remedy available
to the state or a municipality against persons who make false
claims for, or certain misrepresentations regarding, state or
municipal money or other property; and providing for an
effective date."
JIM BALDWIN, Assistant Attorney General, Civil Division
(Juneau), Department of Law, informed the committee that this
bill was before the committee in the Twenty-First Legislature as
HB 425. House Bill 425 didn't pass simply because it was in the
process too late. He explained that HB 145 is the result of
[the department's] efforts to prosecute a claim against a major
financial institution jointly with several municipalities in the
state. Mr. Baldwin said, "While this bill may not aid that
litigation, it came to light that we need something like this to
update our laws, to give us better tools in enforcing the civil
rights and remedies of municipal and state government when there
has been a misrepresentation or a false or fraudulent claim
presented against the state."
MR. BALDWIN informed the committee that the current law, AS
37.10.090, is skeletal and dates back to territorial days.
Basically, this statute provides a right of action by the state
or a municipality if money has been falsely paid or illegally
diverted. The statute also includes provisions regarding the
state taking over the prosecution on behalf of municipalities.
This has been utilized infrequently, if at all. Therefore, the
department believes there is the need to update the statutes
with a more detailed false claim statute. California [statute]
was used as the model. Mr. Baldwin related his belief that HB
145 was referred to this committee because of the provisions
relating to the cooperation between state and municipal
governments when there may claims that have both state and
municipal involvement. He informed the committee that
cooperation between the state and the municipalities in the Bank
of America case has been extremely good, although a rather
involved process was followed in regard to how "we were going to
conduct ourselves and finance our activities." This bill, HB
145, would resolve some of those issues, such as who goes first.
Number 0723
MR. BALDWIN emphasized that, from the Department of Law's
perspective, the bill provides a fairly potent remedy from a
civil context in that it would potentially impose treble damages
against a wrongdoer. Furthermore, the bill would establish easy
methods of proof [by] following a criminal prosecution for fraud
or misrepresentation. Our statute lacks those modern
improvements. As far as Mr. Baldwin knew, there have been no
questions raised by the municipalities about provisions that
touch upon their powers or activities. Mr. Baldwin requested
that the committee favorably forward HB 145 to its next
committee of referral.
Number 0807
REPRESENTATIVE MURKOWSKI referred to page 5, subsection (c) that
addresses the sharing of the costs. She inquired as to how
readily such could be determined. If there is some compensation
being returned to the municipality or city, could there be a
fight regarding who receives what.
MR. BALDWIN replied that such a situation could potentially be
the [case]. He explained that the Bank of America case involved
bonds that were issued by various governments. A formula based
on the amount of debt service that each entity was responsible
for paying on the bonds involved was established. Therefore,
costs are shared on a percentage of the debt service as compared
to the whole. He said, "That's ... what we're getting at here
with this kind of provision. If there's some logical way to
arrive at that share, then this would be the avenue to getting
there." Mr. Baldwin agreed with Representative Murkowski that
in the beginning it is difficult to determine the total amount
involved. However, there could be adjustments at the conclusion
[of the process].
REPRESENTATIVE MURKOWSKI related her understanding that unless
there is an agreement otherwise, the share would be based on the
proportion. However, determining that proportion can be
problematic.
MR. BALDWIN agreed. He said, "What that does is it forces you
to try to agree otherwise so that ... going in you remove the
dispute." He agreed with Representative Murkowski's
understanding that an agreement regarding the cost would be
entered into at the time it is determined who would go first.
He noted that if there is enough at stake, there is usually a
way to find an agreement.
Number 1039
REPRESENTATIVE MURKOWSKI recalled hearing this legislation twice
last year, once in the House Community and Regional Affairs
Standing Committee and once in the House Judiciary Standing
Committee. She said she believes that HB 145 is probably the
same as HB 425 from last year, although she couldn't remember
what [the committees] did with it last year. She expressed the
need for the House Judiciary Standing Committee to review what
constitutes a "reasonable time" after the discovery of a false
claim as well as some other specific technical issues.
CO-CHAIR MEYER asked if Representative Murkowski recalled any
concerns that arose with HB 425.
REPRESENTATIVE MURKOWSKI referred to page 2, paragraph (8), and
recalled that there was a question surrounding what would
constitute a reasonable amount of time. She recalled that on
page 3, subsection (3)(c), there was a question regarding what
would happen to an individual that did all the things listed but
knew that there was probably going to be an investigation. She
felt that the House Judiciary Standing Committee could find the
points of discussion.
Number 1276
REPRESENTATIVE SCALZI asked if this would apply to any type of
contract with a municipality.
MR. BALDWIN answered that certain things are exempt from the
act. If there is a single claim, worth under $500, that can't
be aggregated with other claims, it would not be subject to this
act. Therefore, this addresses the larger claims. There is
also an exemption for provisions that have a statutory means for
prosecuting false claims. Those provisions that are exempt
would include the permanent fund dividend, employment claims,
and under Title 43, the revenue and taxation code.
CO-CHAIR MEYER said that he too had thought HB 145 would apply
to people who falsified their permanent fund application or
their taxes, or even the senior citizen property exemption.
However, he understood Mr. Baldwin to mean that those would be
exempt from this law.
MR. BALDWIN reiterated that the permanent fund dividend is
specifically exempted. He clarified, "If it's not specifically
exempted, it could be prosecuted under this law." He specified
that any civil penalty prosecuted under AS 43, the revenue and
taxation code, would be exempt. Also exempt are public
assistance, AS 47.25; the Alaska Temporary Assistance Program
(ATAP), AS 47.27; worker's compensation, AS 23.30, and the
Employment Security Act, AS 23.20. Those all have statutes that
punish people who make false claims and thus there was no desire
to change the statutory scheme.
Number 1470
REPRESENTATIVE MURKOWSKI moved to report HB 145 out of committee
with individual recommendations and the accompanying zero fiscal
note. There being no objection, HB 145 was reported from the
House Community and Regional Affairs Standing Committee.
The committee took a brief at-ease from 8:28 a.m. to 8:30 a.m.
HB 20-AID TO MUNICIPALITIES AND OTHERS
CO-CHAIR MORGAN announced that the next order of business would
be HOUSE BILL NO. 20, "An Act relating to state aid to
municipalities and certain other recipients, and for the village
public safety officer program; relating to municipal dividends;
relating to the public safety foundation program; and providing
for an effective date."
Number 1526
REPRESENTATIVE CARL MOSES, Alaska State Legislature, testified
as the sponsor of HB 20. Representative Moses began by saying
that HB 20 would go far in solving the long-range fiscal plan.
He informed the committee that he introduced this legislation
several years ago in order to help replace the municipal revenue
sharing funds that have been cut. This municipal dividend
program will have little impact on the size of an individual's
dividend, but will "go a long way to eliminate the scrutiny by
the IRS to tax the fund." Representative Moses informed the
committee that there should be a couple of minor amendments that
his staff will address. He said that the effect of eliminating
municipal revenue sharing has been to basically impose taxes on
the local governments. Therefore, Representative Moses
emphasized the need to replace revenue sharing through the
proposal in HB 20. Although the proposal is limited to the
amount of the surplus earnings, he felt the amount should be
doubled per dividend recipient and it should not be tied to any
particular service. Furthermore, how the money should be spent
should be determined at the local level.
REPRESENTATIVE MURKOWSKI related her understanding that HB 20
refers to calculating the [municipal dividend program] based on
$150 per dividend. However, the committee has received
information indicating a proposal that is based on $250 per
dividend. Therefore, she asked if Representative Moses was
running two proposals at once.
REPRESENTATIVE MOSES said that the Alaska Municipal League (AML)
will probably speak to the $250 proposal.
Number 1721
REPRESENTATIVE MURKOWSKI related her understanding of how the
public safety foundation program would work. She understood
that there is a set amount for road maintenance, for example,
although within each component there is a provision stating that
the municipality can use an amount not exceeding 55 percent of
the entitlement for education purposes. She inquired as to why
education was treated that way.
TIM BENINTENDI, Staff to Representative Moses, Alaska State
Legislature, remarked that HB 20 is the result of an
evolutionary process that occurred in the Twenty-First
Legislature. In that process, some communities expressed the
desire to have an allocation for education purposes, which the
community would determine. Therefore, the [55 percent of the
entitlement] was the mechanism used to accommodate that. In
further response to Representative Murkowski, Mr. Benintendi
didn't know the reasoning behind the 55 percent because that
provision surfaced in the Senate.
REPRESENTATIVE GUESS mentioned that the percentage could be
related to the impact aid and the equity issue that would
require staying "within that range for federal dollars." She
offered to look into that.
REPRESENTATIVE MOSES, in response to Co-Chair Meyer, said that
it has never been determined whether the [earnings] is taxable
or not. He related his belief that [the earnings] could
eventually be taxed if they aren't used for some public purpose.
Representative Moses agreed with Co-Chair Meyer that HB 20 would
be beneficial because [the municipal dividend program] is a
public purpose.
Number 1894
REPRESENTATIVE MURKOWSKI referred to the use of the words
"entitlement program." She asked if this language is used in
statute; does that language put [the state] "in a bad way at any
point."
MR. BENINTENDI pointed out that the language actually came from
the public safety foundation, which was a popular and successful
program in the 1980s. He indicated that the "entitlement"
language could probably be changed without affecting the
program. In further response to Representative Murkowski, Mr.
Benintendi recalled that the public safety foundation was in
existence for maybe ten years. In regard to the specifics of
that program, he deferred to AML.
Number 1979
REPRESENTATIVE MURKOWSKI inquired as to how the money should be
paid to unincorporated communities because the language [in AS
29.60.690] is somewhat confusing. She pointed out that the
language says, "The department may not pay money under an
entitlement to a Native village council unless the council
waives immunity from suit ...." She asked how these small
unincorporated communities would be handled if there is a
disagreement surrounding who should receive the money.
MR. BENINTENDI pointed out that the bill provides for the
Department of Law and the Department of Community & Economic
Development to determine the receiving entity. He specified
that there would only be one receiving entity per community and
that entity could be a tribal council. He acknowledged that
"they" would have to waive immunity. He didn't envision there
being many since there is a history of these programs going to
nonmunicipal entities.
Number 2092
REPRESENTATIVE SCALZI stated that the municipal assistance and
revenue sharing formula was partially based on what the
communities tax themselves. However, page 12 of HB 20 includes,
for capital projects, a 30 percent match for grants over $5,000
and a 15 percent match for grants under $5,000. He inquired as
to why there wasn't a flat [match] regardless of the amount of
the grant. He questioned whether this would encourage requests
for more small grants.
MR. BENINTENDI clarified that the language refers to population
figures not the dollars worth of the grant.
REPRESENTATIVE SCALZI acknowledged that and surmised that the
reason a formula is used is because the smaller villages don't
have the tax base.
MR. BENINTENDI replied yes. Mr. Benintendi pointed out that HB
20 does include a provision that allows some of this [municipal
dividend money] to be used as a community match for capital
projects under the Municipal Capital Matching Grant Program and
the Unincorporated Community Matching Grant Program.
REPRESENTATIVE SCALZI related his understanding that "this is
the only provision in here that has any type of municipal
payment, otherwise everything is set up on ... population -- a
hundred and fifty dollars per person, it doesn't matter what
your taxing structure is .... I guess that's where we deviate
from the current system we have, right?"
MR. BENINTENDI agreed.
Number 2227
REPRESENTATIVE GUESS inquired as to where cities would fall
under this. She said that the health care section had generated
this question because there are hospital facilities that aren't
in municipalities, such as Bethel.
MR. BENINTENDI referred to page 5, Section 7, which delineates
eligibility for municipalities.
REPRESENTATIVE KERTTULA requested that Mr. Benintendi lead the
committee through a scenario in which a community such as
Bethel, which has a hospital, would obtain its money from this
[municipal dividend program].
MR. BENINTENDI referred the committee to page 9 where three
different circumstances are provided. He specified, "First of
all, whether it's a community-owned facility or whether it's a
nonprofit and then ... there's a size differentiation whether
its ten beds or more or ten beds or less. There's a per bed ...
entitlement, a per hospital entitlement, or just a flat [$]9,000
on line 11 for hospitals with less than ten beds."
MR. BENINTENDI pointed out that on page 9, lines 23-23, the bill
provides for health clinics. Page 9, line 24, delineates a $360
a bed charge for a health facility, an institution that is not
set up as a hospital.
REPRESENTATIVE KERTTULA asked if there are hospitals that
wouldn't be covered by this or are all hospitals in the state
located in municipalities or are they all nonprofits.
MR. BENINTENDI answered that he didn't know.
Number 2400
GREGG HANSON, Member, Unalaska City Council, testified in
support of HB 20. He informed the committee that he is
testifying as a city council member with seven-and-a-half years
experience. Over that period of time, he has followed the
changes in municipal funding. Although the City of Unalaska
feels that developing a long-term fiscal plan is imperative, Mr.
Hanson said that he would limit his comments to the area of
health and public safety.
MR. HANSON informed the committee that he has over 13 years
experience with the Unalaska Volunteer Fire and Emergency
Medical Service (EMS) Departments. Over the years Unalaska has
been fortunate with its own tax revenues and has not had to cut
its [health and public safety] services. However, he
acknowledged that this is not the case with many outlying
communities that are operating, due to budget cuts, with old or
insufficient equipment and with a lack of training. Mr. Hanson
also informed the committee that he was a recent patient in the
Unalaska system because he suffered a heart attack in Unalaska
14 months ago. He said, "Had it not been for our highly skilled
clinic and EMS people, I probably would not be here today
enjoying the privilege of testifying to you. I want every
resident of this great state to have that level of care
available to them. And this bill will help us work towards that
goal."
Number 2505
KEVIN RITCHIE, Executive Director, Alaska Municipal League
(AML), testified in support of HB 20. He informed the committee
that the bill packet should contain a handout entitled, "Invest
in Communities." Mr. Ritchie thanked Representative Moses and
Representative James in their efforts to bring HB 20 forward.
He acknowledged that former Governor Walter Hickel developed the
concept of a community dividend program. Mr. Ritchie mentioned
an editorial former Governor Jay Hammond, which was printed in
the Anchorage Daily News on March 7, 2001. Former Governor
Hammond's editorial noted his support of a municipal dividend
concept as part of the solution to Alaska's financial problems.
He also informed the committee that the committee packet should
also contain a letter of support [for HB 20] from the Anchorage
Economic Council.
MR. RITCHIE identified the following reasons that Alaskans could
view HB 20 as acceptable. This legislation creates another
permanent fund dividend, a municipal dividend, which would go
directly to communities and bypass the IRS. Under the current
situation, local taxes will increase, individuals will receive a
PFD, which - if you're paying taxes - will be taxed and sent to
Washington, D.C. Taxes would still increase and the individual
would pay more local taxes on the [PFD]. On the other hand, the
municipal dividend would take money and place it in the services
that people want to see. Therefore, the IRS would be bypassed
and millions of dollars that would otherwise go to Washington,
D.C., would be kept in the state. Furthermore, the municipal
dividend increases the public purpose of the PFD.
MR. RITCHIE turned to the vote on the tax cap initiative, the
results of which were that the vast majority of Alaskans didn't
want to cap or cut their property taxes. Mr. Ritchie surmised
that the result of the vote on the initiative was due to the
public's support of the purposes the taxes are used for in their
communities. He further related his belief that the tax cap
initiative was defeated because people want good schools and
health services. This legislation would provide a more
effective means to support those services in each community. He
informed the committee that Representative James did a
constituent survey in North Pole and Salcha. This survey said
that the [legislature] would like to use part of the earnings of
the PFD "in this way to support these particular services." The
overwhelming majority of those in North Pole and Salcha thought
that was a good idea. Mr. Ritchie felt that people supported
this [municipal dividend program] because the legislation
specifies how the money will be used.
Number 2741
MR. RITCHIE addressed the earlier question regarding the 55
percent entitlement for schools. He pointed out that the
entitlement was generated by second class boroughs, specifically
the Fairbanks North Star Borough. He explained that a borough
with lots of service areas would have the money go into roads
and fire, which is mainly provided through service areas, but
there wouldn't be a good way to provide general tax relief or
general money for services in the community. In places such as
Fairbanks and Kenai, most of the money going to revenue sharing
goes to the schools. Therefore, the 55 percent was used in
order to approximate the amount of money that currently goes to
schools from revenue sharing and thus it would not cause an
increase in taxes locally. Mr. Ritchie pointed out that if a
larger community dividend was generated [under the $250 option],
a separate category could be established for schools.
Essentially, a $26 or $27 million contribution for schools could
be created. Therefore, it wouldn't be necessary "to have a
percentage of the other funds that would be allocated to the
other services, but it could be more generally service provision
and tax relief and extremely straightforward as to how the money
is allocated," he said. He also pointed out that the word
"entitlement" could be easily changed.
Number 2844
MR. RITCHIE said that he could provide the committee with a
history of revenue sharing. He explained that the revenue
sharing program began in 1972; it began much like the program
proposed in HB 20. Revenue sharing provided specific money for
fire protection, police, planning, and roads. In the 1980s when
there was oil money, the system was thought to be complex and it
was suggested that municipalities be given chunks of money.
That approach worked the first couple of years. However, one
didn't know where the money in this large pot went and that
meant it couldn't be defended well [in the face of cuts] because
there wasn't much information regarding its use. Therefore, it
was easier to justify a reduction [to that money]. The federal
government used a similar revenue sharing program, which faced
the same fate of being reduced year after year. Mr. Ritchie
informed the committee that on the state level, municipal
revenue sharing as a block grant has been reduced by about 80
percent over the past 15 years. Mr. Ritchie said, "Even though
it took our members a number of years to come to grips with this
issue that revenue sharing as a block grant probably wasn't
going to be something that would be a permanent fixture, they
have, I believe, come to a realization that both in terms of
public accountability, accountability to the legislature, that
there needs to be some accountability that goes along with the
distribution of money."
MR. RITCHIE turned to Representative Murkowski's earlier
question regarding how this money is allocated to unincorporated
communities. He said that this bill attempts to be balanced
since the amount of money going into unincorporated communities
remains in the bill. Additionally, a fire department in an
unincorporated community would still be eligible for...
TAPE 01-14, SIDE B
MR. RITCHIE continued, "...uses the methodology of the municipal
capital matching grants, which was a program approved under the
Hickel Administration to allocate capital matching money for
capital projects to communities around the state." He pointed
out that the municipal matching grants program has an allocation
for unincorporated communities and small communities. This bill
wouldn't change that program. With regard to specific questions
regarding unincorporated communities, Mr. Ritchie deferred to
Bill Rolfzen, State Revenue Sharing, Municipal Assistance,
National Forest Receipts, Fish Tax; Division of Community and
Business Development; Department of Community & Economic
Development (DCED). In regard to whether this covers hospitals,
Mr. Ritchie related his belief that this would cover all
eligible hospitals in the state whether the hospital is in a
municipality or not.
Number 2917
MR. RITCHIE referred to a packet of information that he had
provided the committee. That information is aimed at a larger
dividend. The page containing the analysis of HB 20 from the
Alaska Permanent Fund Corporation illustrates that there will be
no impact, under any of the scenarios, to the individual PFD in
the first two years. In the third year there will be a $10
impact, under any of the scenarios. For example, Alaskans could
receive $250 each year in tax relief for three years for a
projected $10 decrease in the PFD in the third year. Therefore,
an Alaskan would receive $750 of tax relief and services for a
projected $10 decrease in the PFD over three years. Mr. Ritchie
didn't believe that any Alaskans would pass up that deal. Over
the period of 11 years, the impact remains small. Mr. Ritchie
referred to a spreadsheet that was developed with the assistance
of DCED. The first columns are Representative Moses' bill.
That spreadsheet provides an idea of the types of allocations
that would go to communities under this program. He noted that
this is all based on estimates.
Number 2815
REPRESENTATIVE MURKOWSKI referred to the spreadsheet and asked,
"You're just tacking on $200 per student and then, if it's in an
REAA [Rural Education Attendance Area], what [do] you do?"
MR. RITCHIE specified that this is just conjecture in regard to
one way that money could be allocated to schools, which would
amount to about $27 million for schools. He explained that this
amount was derived by multiplying the number of students in the
state by $200. That amount would then be allocated to cities
and boroughs that have school districts. At the bottom of the
spreadsheet the amount for REAA's is noted, $3,161,800, which is
the number of students in REAAs multiplied by the $200. He
guessed that money would go back to the state since there is no
municipal government running the school district in REAAs.
CO-CHAIR MEYER remarked that he is "still smarting" from the PFD
vote. He asked if Mr. Ritchie could offer any advice regarding
how to sell this concept.
MR. RITCHIE related his belief that there were weaknesses to the
September 14th vote. One of the significant weaknesses was
accountability in that the public didn't really know where the
money would go beyond that it just would go to "the government."
That is a fairly scary concept. Furthermore, there needs to be
some significant education on this issue. Mr. Ritchie mentioned
that Alaskans United Against the Cap is attempting to reorganize
as Alaskans United in order to work on educating the public.
CO-CHAIR MEYER agreed that more education would help. He also
agreed that this legislation lists specifics in regard to where
the money will go, which wasn't the case during the vote.
Furthermore, Co-Chair Meyer noted that enlisting Governor
Hammond's help in selling this program would be helpful.
Number 2556
REPRESENTATIVE SCALZI asked if AML is in general support of this
concept versus the current revenue sharing and municipal
assistance.
MR. RITCHIE pointed out that the AML's policy statement says
that it would be acceptable for the legislature to provide
municipalities with $50 million in tax relief with no strings.
However, AML will also support this concept [proposed in HB 20].
Mr. Ritchie specified that both approaches are acceptable,
although HB 20 is the only one that has accountability and would
garner the necessary long-term support.
REPRESENTATIVE SCALZI asked if AML felt that HB 20 addresses the
fairness issue regarding the municipalities that tax themselves
versus those that don't.
MR. RITCHIE said that if that could be factored in that would be
appropriate, but "we couldn't figure out a way to do that." He
reiterated that HB 20 provides accountability in that a
community would only receive the $20 per person for fire service
if the community provided fire service. Although $20 per person
for fire service will not cover that service, it provides an
incentive to provide that service.
REPRESENTATIVE SCALZI asked if a fire service district would be
eligible for these funds or would the funds have to go to the
municipality.
MR. RITCHIE answered that the funds would go to the organization
if it [the organization] wasn't part of an organized
municipality. He turned to Kenai as an example. Kenai has
several EMS organizations that are not part of the city. In
that case, he presumed that the money would go to the borough
that would allocate the money to those organizations.
Number 2404
REPRESENTATIVE MURKOWSKI asked if AML would prefer the $250 per
individual amount.
MR. RITCHIE said, "We would agree with the sponsor that a higher
amount has, still, a very small impact on the dividend, but has
more benefit to the people of the state." He mentioned that AML
is meeting next week with the Legislative Conference and this
will be put before the members. In discussions with AML's Board
and the Revenue and Finance Subcommittee, support of the higher
amount has been noted at this point. He emphasized the need to
continue to educate AML members because it is important for
every community to think this is a good idea.
Number 2315
JIM KELLY, Director, Communications, Alaska Permanent Fund
Corporation, Department of Revenue, informed the committee that
the long-standing position of the [Permanent Fund Corporation]
board is that it neither supports nor opposes any proposals
relating to the use of fund earnings. However, he did mention
the proposal encompassed in HJR 15. Mr. Kelly pointed out that
with the $250 municipal dividend, the effect over 10 years would
be an $80 [reduction]. He also pointed out that the market
itself will probably cause the dividend to be reduced by about
$80 this year. Therefore, he advised the committee, when
reviewing these projections, to realize that the projections are
based on median expectations. He said, "There could be a lot
more money for dividends or a lot less money for dividends than
you show on these sheets or for payout for any purpose. The
market is going to have a much larger impact than something like
this proposal here, for example."
REPRESENTATIVE MURKOWSKI turned to the Permanent Fund Board's
current proposal that would cap the payout. She inquired as to
how that proposal would impact a program like the municipal
dividend program.
Number 2198
MR. KELLY said that the Permanent Fund Board's current proposal
is designed to accomplish what the legislature has been
accomplishing for the last 25 years. He specified that the
basic concepts behind the Permanent Fund Board's current
proposal are the following: to protect the purchasing power of
the fund in order that there will be a permanent fund; to
establish a system such that it will maximize the amount of
income that the fund can produce year after year; and to provide
the maximum amount of stability in the annual payout. Mr. Kelly
said that the plan [encompassed in HB 20] would have no negative
impact on [the Permanent Fund Board's current proposal]. He
estimated that the permanent fund dividend plus the municipal
dividend would amount to about 4.5 percent of the average market
value of the fund. Having analyzed HJR 15, Mr. Kelly said he
was confident that anywhere between $175-$300 million more than
the current payout could be paid out and there would still be a
permanent fund that is protected forever. Therefore, the $300
per person municipal dividend mentioned by Representative Moses
would be in that range and would be below the 5 percent payout
in combination with the permanent fund dividend.
REPRESENTATIVE MURKOWSKI asked if anything would be left over.
MR. KELLY explained that the permanent fund dividend currently
takes about 4 percent of the market value of the fund and thus 1
percent of the fund would be left. If there was a $30 billion
fund, 5 percent of that amounts to $1.5 billion. He informed
the committee that this year about $1.1 billion will be paid out
this year for the per capita dividends. "The $300 per person
municipal dividend would take something like a couple of hundred
dollars, depending on the year," he said.
Number 2034
REPRESENTATIVE MURKOWSKI inquired as to what would happen if the
market fell and the 5 percent payout cap was in place as well as
the municipal dividend and the permanent fund dividend is paid
out.
MR. KELLY explained that the advantage of the proposal [in HJR
15] is that there is a constitutional limit on how much can be
paid out. Therefore, the inflation-proofing money no longer has
to be moved from the earnings reserve account to the principal,
where it cannot be spent. [The inflation-proofing money]
amounts to about $700 million this year. In a situation in
which there are two to three consecutive years of negative
earnings, the earnings reserve account would eventually be
depleted and there would be no money for anything. Therefore,
it's important to bulk up the earnings reserve account. For
example, there was about $6.5 billion in the earnings reserve
account on June 30, 2000. Nine months later, after paying out
$1 billion and suffering about a 6.5 percent negative return,
the earnings reserve is down to about $4 billion. A couple more
years such as that could deplete the earnings reserve account,
which would result in a serious problem.
REPRESENTATIVE MURKOWSKI inquired as to where "the give" would
occur if there is a municipal dividend program in statute and
the cap on the PFD in the constitution. She related her
assumption that the PFD to the people would end at some point.
MR. KELLY pointed out that HB 20 pays the municipal dividend
after the per capita dividend and inflation-proofing.
Therefore, he agreed with Representative Murkowski that the
municipal dividend program would come after the per capita
dividend. He clarified:
Putting a limit in place which allows you to hold on
to that inflation-proofing money in the earnings
reserve account, where it is available for spending,
is probably going to turn out to be one of the key
decisions facing the legislature ... in the future.
That's going to make a big difference in the
availability of money in the future because you cannot
spend principal, by the constitution.
Number 1851
REPRESENTATIVE MOSES noted his confidence that the municipal
dividend program will be a major step in solving Alaska's fiscal
problems. He also noted the need to amend the effective date.
MR. BENINTENDI informed the committee that in order for the
program to be effective for fiscal year 2002, the transfer would
need to occur June 30, 2001. Therefore, the department would
have from July 1st on to make the distribution under this
program. Mr. Benintendi, in response to Representative
Murkowski's earlier question, directed the committee to page 14,
line 10, which specifies that after inflation-proofing and
payment of the PFD, the municipal dividend would equal the
lesser of the following amounts: $150 times the number of PFD
recipients from the prior year or the balance in the account.
Therefore, [the municipal dividend] program could shrink.
Number 1704
REPRESENTATIVE KERTTULA moved that the committee adopt an
effective date of June 30, 2001.
REPRESENTATIVE MURKOWSKI asked if the program can be implemented
that quickly.
MR. BENINTENDI related his belief that the department would be
ready.
REPRESENTATIVE SCALZI remarked that HB 20 is being reviewed as
possibly part of a long-term fiscal plan. Therefore,
Representative Scalzi expressed his preference of giving this
[municipal dividend program] public review and doing it next
year. He asked if Representative Moses felt that this is a
stand-alone measure that should go forward this year.
REPRESENTATIVE MOSES answered that he believes this [municipal
dividend program] to be a stand-alone measure. Furthermore, he
felt that the permanent fund dividend should have been capped in
prior years. He reiterated the fact that municipal revenue
sharing has been cut to bare bones, which actually results in a
property tax on "our constituents."
CO-CHAIR MORGAN asked if there was any objection to the
amendment to change the effective date of HB 20 to June 30,
2001. There being no objection, the amendment was adopted.
Number 1466
CO-CHAIR MEYER acknowledged that this municipal dividend program
has been around for awhile. Therefore, he inquired as to the
past opposition or resistance to this bill.
REPRESENTATIVE MOSES said that he didn't know because he isn't
privy to some of the decisions made by the Majority.
MR. BENINTENDI informed the committee that this is the third
legislature that this bill has been introduced in some fashion.
Mr. Benintendi pointed out that there is "considerable stress in
accessing the earnings reserve, for the first time, for a major
program." However, the components of the program are very
popular. Mr. Benintendi also informed the committee that last
year both versions of this legislation were in the House and
Senate Finance Committees. However, the bill couldn't get a
hearing in either committee last year. He reiterated that there
was never any negative comments regarding the program's
components.
CO-CHAIR MEYER noted his agreement with Representative Scalzi's
suggestion that perhaps this should be part of a larger long-
term fiscal plan. However, he also noted agreement that HB 20
is a start.
REPRESENTATIVE MOSES interjected that the legislature should do
a long-term fiscal plan this year. He noted that HB 10 and HB
20 will go far in achieving a long-term fiscal plan.
REPRESENTATIVE MURKOWSKI commended Representative Moses for his
proposal. She remarked that [the municipal dividend program] is
a good idea. She acknowledged, "Perhaps, there hasn't been the
political will to go into the earnings reserve arena, probably
understandably so." However, she expressed her hope that "we"
are approaching the point at which something such as HB 20 can
move through the legislature. She noted that she liked HB 20
because of its accountability. Representative Murkowski also
expressed her hope that HB 20 would go further this year and
move us towards a long-term fiscal plan.
Number 1097
REPRESENTATIVE MURKOWSKI moved to report HB 20 as amended out of
committee with individual recommendations and the accompanying
zero fiscal notes. There being no objection, CSHB 20(CRA) was
reported from the House Community and Regional Affairs Standing
Committee.
ADJOURNMENT
There being no further business before the committee, the House
Community and Regional Affairs Standing Committee meeting was
adjourned at 9:35 a.m.
| Document Name | Date/Time | Subjects |
|---|