Legislature(2007 - 2008)BUTROVICH 205
02/01/2007 08:00 AM House COMMUNITY & REGIONAL AFFAIRS
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| Department of Commerce, Community, & Economic Development | |
| Adjourn |
* first hearing in first committee of referral
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ALASKA STATE LEGISLATURE
JOINT MEETING
HOUSE COMMUNITY AND REGIONAL AFFAIRS STANDING COMMITTEE
SENATE COMMUNITY AND REGIONAL AFFAIRS STANDING COMMITTEE
February 1, 2007
8:03 a.m.
MEMBERS PRESENT
HOUSE COMMUNITY AND REGIONAL AFFAIRS
Representative Anna Fairclough, Co-Chair
Representative Gabrielle LeDoux, Co-Chair
Representative Nancy Dahlstrom
Representative Mark Neuman
Representative Kurt Olson
Representative Sharon Cissna
Representative Woodie Salmon
SENATE COMMUNITY AND REGIONAL AFFAIRS
Senator Donny Olson, Chair
Senator Joe Thomas
Senator Albert Kookesh
Senator Gary Stevens
MEMBERS ABSENT
HOUSE COMMUNITY AND REGIONAL AFFAIRS
All members present
SENATE COMMUNITY AND REGIONAL AFFAIRS
Senator Thomas Wagoner
COMMITTEE CALENDAR
OVERVIEW: DEPARTMENT OF COMMERCE, COMMUNITY, & ECONOMIC
DEVELOPMENT
- HEARD
PREVIOUS COMMITTEE ACTION
No previous action to record
WITNESS REGISTER
EMIL NOTTI, Commissioner
Department of Commerce, Community, & Economic Development
Juneau, Alaska
POSITION STATEMENT: Presented an overview of the department.
MIKE BLACK, Director
Division of Community Advocacy
Department of Commerce, Community, & Economic Development
Anchorage, Alaska
POSITION STATEMENT: Answered questions.
ACTION NARRATIVE
CHAIR DONNY OLSON called the joint meeting of the House and
Senate Community and Regional Affairs Standing Committees to
order at 8:03:30 AM. Representatives LeDoux, Fairclough,
Dahlstrom, Neuman, Olson, and Cissna and Senators Olson, Thomas,
Kookesh, and Stevens were present at the call to order.
Representative Salmon arrived as the meeting was in progress.
^Department of Commerce, Community, & Economic Development
8:04:25 AM
CHAIR OLSON announced that the only order of business would be
the presentation from the Department of Commerce, Community, &
Economic Development.
8:05:47 AM
EMIL NOTTI, Commissioner, Department of Commerce, Community, &
Economic Development (DCCED), related his background as an
Alaskan Native who saw the buildup that occurred during World
War II and saw the construction of most of Alaska's highways as
well as the transformation due to statehood. He noted that he
is a veteran of the U.S. Navy. He informed the committee that
he is an electrical engineer, and even worked on the guidance
system for the Minuteman Missile. He then reviewed his service
to the state under various administrations, including the Egan
and Sheffield Administrations. Commissioner Notti reminded the
committee that DCCED is the result of the merger of two
departments. The department has two major divisions, one of
which addresses economic development while the other addresses
community development. There are six divisions within DCCED and
six agencies outside of DCCED. Furthermore, the commissioner is
assigned to 23 boards and commissions.
8:09:28 AM
REPRESENTATIVE NEUMAN recalled a meeting last year during which
there was discussion of community leaders who were dissatisfied
with the consolidation. He asked if there are any plans to
separate the department back into two entities.
COMMISSIONER NOTTI recalled a meeting in which the Alaska
Federation of Natives (AFN) and the Alaska Municipal League
(AML) backed a proposal to separate the department back into two
entities. However, he opined that it would be difficult because
some portions of the former Department of Community & Regional
Affairs (DCRA) were placed in the Department of Labor &
Workforce Development. Furthermore, the portions of the former
DCRA that remain in DCCED constitute a smaller entity than what
it once was. Although separating DCCED back into two entities
won't cost a great deal, it would create much disruption and
probably wouldn't return everything to its former state. He
stated that at this time, there are no plans to separate the
department back into two entities. However, he acknowledged
that [those in rural Alaska] don't believe they have a seat at
the gubernatorial cabinet level. He related that DCCED is
currently organized with two deputy commissioners and he said he
is considering organizing them such that one deputy commissioner
would address economic development and the other would address
mostly rural issues. He opined that such an organization would
address the [concerns of those in rural Alaska].
REPRESENTATIVE NEUMAN surmised then that the department is going
to address the matter in-house.
COMMISSIONER NOTTI replied yes.
8:12:04 AM
REPRESENTATIVE CISSNA recalled the increasing number of
communities in distress and the increasing numbers of rural
residents moving to urban centers. She asked if the department
would attempt to ameliorate the aforementioned and find ways in
which to help communities survive.
COMMISSIONER NOTTI said the best tact is to offer people the
ability to choose their own lifestyle and choose to live in
rural or urban areas. A large part of that choice is work
because unemployment causes many problems, socially and
economically. To have employable people, it will require state
funding for education/training. Commissioner Notti then
highlighted the high price of fuel in rural areas and the many
sources of energy that could be developed, but at an expensive
cost. Therefore, employed residents would help address the
economic problem [in rural Alaska] as well as relieve the state
from having to provide welfare.
8:17:04 AM
COMMISSIONER NOTTI continued his presentation by highlighting
that the span of the department touches all Alaskans. He
related excitement with regard to development projects that are
poised for the future. The six agencies with independent boards
under DCCED include the Alaska Seafood Marketing Institute
(ASMI), the Alaska Aerospace Development Corporation, the Alaska
Railroad Corporation - which is the only board to which the
commissioner can't assign a representative to attend meetings -
the Alaska Industrial Development & Export Authority (AIDEA) and
the Alaska Energy Authority (AEA), the Regulatory Commission of
Alaska (RCA), and the Alaska Community Services Commission. He
further informed the committee that DCCED has 500 employees of
which approximately 100 work on the local government side. The
department has offices in Anchorage, Bethel, Dillingham,
Fairbanks, Juneau, Kotzebue, and Nome as well as Seattle,
Washington and Tok Junction. The department has a total budget
of $208 million of which $60 million is general fund money. He
related the various programs his department is charged with
administering, including revenue sharing, community assistance,
Local Boundary Commission staff, borough formation, energy
assistance, alternative energy, the senior property tax
exemption, power cost equalization (PCE), the fisheries business
tax, grants to communities, and research information.
8:21:06 AM
SENATOR STEVENS pointed out that the constitution calls for the
eventual organization of the entire state. He inquired as to
the department's plans to move forward with organization.
COMMISSIONER NOTTI related that the department has staff who can
provide training and skills necessary to run a government, but
beyond that it's a community's choice. The legislature provides
an incentive, he pointed out, through the differential between
the payments it makes to unincorporated versus incorporated
communities. Still, there is resistance to organization.
SENATOR STEVENS clarified that he is referring to communities
such as Skagway and Dutch Harbor, which are communities that
aren't located in boroughs but are financially stable.
COMMISSIONER NOTTI recalled that the Local Boundary Commission
(LBC) recently voted that Skagway should form a borough, which
has caused some concern among legislators as well as other
community leaders around the state. He related that there will
be reconsideration of the aforementioned vote on February 12th.
8:23:37 AM
CHAIR OLSON inquired as to the incentives provided for those
areas that do organize.
COMMISSIONER NOTTI specified that the largest incentive is
economics: $25,000 for unincorporated communities, $75,000 for
incorporated communities, and $250,000 for boroughs. However,
AML is requesting 6 percent of resource money to go to local
governments and anything beyond "the numbers quoted" would be
distributed on a per capita basis.
8:25:00 AM
MIKE BLACK, Director, Division of Community Advocacy, Department
of Commerce, Community, & Economic Development, explained that
the current financial incentives for communities that form a
borough totals $600,000 and is parsed out over a three-year
period in which $250,000 is provided in the first two years to
cover startup and administrative costs. The remaining $100,000
would be received in the third year. He highlighted that the
aforementioned financial incentive hasn't changed since the mid
1980s and thus hasn't kept pace with inflation and costs. The
division provides information, technical assistance regarding
the formation of a borough, he said. The aforementioned is
important because those in unorganized areas have little
understanding as to what it really means to live in a borough.
He noted that he was recently in Aniak discussing what it would
mean to become a borough, which is under a great deal of
consideration due to the Donlin Creek development. There has
also been some discussion and a petition for the formation of a
borough in the Delta area.
8:27:23 AM
CHAIR OLSON inquired as to other incentives besides financial
incentives that would encourage borough formation because it
takes a fair amount of intellectual expertise.
MR. BLACK clarified that the financial incentives only occur
after organization. Those communities considering borough
formation have to find the aforementioned expertise, beyond what
the department provides, from their own resources. For example,
in the Delta area the mining interests provided money prior to
borough formation in order to help the community. Another
incentive is land transfers from state unallocated or unreserved
land within an area to be proposed as a borough. If a borough
forms, the borough has the opportunity to select 10 percent of
the unreserved state land. The aforementioned can be a large or
small incentive depending upon how much land is in state
ownership within the borough.
8:29:12 AM
REPRESENTATIVE NEUMAN related his understanding that the
financial incentives are only for newly organized areas. He
then recalled the university land grant legislation that passed
last year, which provided the university a matching 250,000
acres from the federal government. Representative Neuman said
that he viewed the aforementioned as a tremendous opportunity
for Southeast communities, in particular, because there is a lot
of federal land in Southeast Alaska. Perhaps, the university
could transfer lands in order to help areas create boroughs.
MR. BLACK, addressing the university land selection, related his
understanding that there is tension between university land
selection and potential borough selection. He pointed out that
in Southeast Alaska one of the questions is how much land is
commercially viable and would represent an economic base for a
future borough. The university and any future borough will have
to cooperate, he opined, because if one entity selects all the
best land, then the other entity is left with less to achieve
economic independence. Communities in Southeast have discussed
the aforementioned with the division because there is concern.
Mr. Black said he wasn't sure that there would be cooperation in
the selection and ultimate use of the land without something to
make it happen.
MR. BLACK then turned to the $250,000 mentioned by the
commissioner as part of the revenue sharing program that AML
would like to see implemented. The $250,000 would be an annual
payment to all boroughs, not just to new boroughs. The
aforementioned is separate from the earlier mentioned
organizational grants that total $600,000 over the course of
three years.
REPRESENTATIVE NEUMAN offered to work with the university on the
[land selection matter].
8:33:12 AM
CO-CHAIR LEDOUX inquired as to what benefits residents receive
from their community organizing into a borough. She pointed out
that in an unorganized area residents don't pay property tax but
will in a borough. Therefore, she questioned why a resident
would vote for his/her community to form a borough.
MR. BLACK pointed out that in an organized area, one would have
an elected body from within the immediate area to address issues
and control some major development projects rather than leaving
it to the legislature. Furthermore, a borough would take
responsibility and authority over, within limits, the
educational system for the region. The organized area would
also have the ability to raise revenue from whatever taxing
authority available to local governments.
CO-CHAIR LEDOUX interjected that residents may view the
aforementioned to mean that a borough resident would be taxed.
MR. BLACK acknowledged that such could be the case. However,
there are usually some central development activities that would
allow for an increased property tax base or, as is the case in
the Northwest Arctic Borough, a Payment in Lieu of Taxes (PILT).
Nonetheless, organization does allow for taxing on various
projects. If the choice is to not organize, then the area would
rely entirely on the state legislature and/or federal government
for services. He acknowledged that some are quite happy with
the aforementioned situation and don't want to change. However,
the presence of large tax base developments in rural Alaska have
presented an opportunity for some regions to benefit more from
forming a borough than would have been the case as an
unorganized borough. He cited the Northwest Arctic Borough, the
North Slope Borough, the Lake and Peninsula Borough, and the
Aleutians East Borough as examples of the aforementioned.
8:37:34 AM
CHAIR OLSON inquired as to what happens after a resource, or any
economic base is gone but the borough remains.
MR. BLACK answered that if the economic base disappears, the
borough must live within its means. He related that such a
scenario hasn't manifested in any large scale and in fact often
when one resource declines the taxing of other developments
related to the original resource provide funds to maintain
borough services.
8:39:19 AM
REPRESENTATIVE CISSNA recalled the commissioner touching on the
problems of rural Alaska, including the lack of employment.
However, she opined that what's also happening is that the
benefits small government is able to give to its communities is
disappearing as those governmental entities lose the capacity to
keep government going due to the revenue sharing decreases and
Public Employees' Retirement System (PERS) and Teachers'
Retirement System (TRS) costs. She expressed frustration with
regard to suicide, alcoholism, and violence all of which are old
problems. Therefore, she questioned what the legislature could
do to change the situation. She indicated the need to have
studies with regard to the aforementioned problems as well as
the problems related to rural residents moving to urban areas.
She also inquired as to what the department is doing in terms of
measurements, promising practices, and building solutions into
programs.
COMMISSIONER NOTTI said that at the bottom of much of this is
alcohol. Furthermore, poverty and unemployment have been an
issue for some time. Although there is no easy solution, he
maintained that education is still the solution on many fronts.
The state has the choice of appropriating funds to education for
a long-term solution because he said he doesn't see any way the
villages will change without economic development, which must
result from a large resource to overcome costs of rural areas.
He highlighted that much money is appropriated for alcoholism
programs that aren't effective, and thus employment seems to be
the best answer.
8:45:17 AM
REPRESENTATIVE CISSNA agreed that education is important, but
questioned whether there have been studies to review these
serious problems and options. She said that natural resource
development goes well when there are other sources of
development as well. She opined that resource development isn't
sustainable in many communities. However, there are options for
alternative sustainable energy projects that create jobs,
sustainable energy, and can sustain a community. Still, those
haven't been long-term efforts with such projects.
Representative Cissna characterized alcoholism as the largest
thing that robs the state and individuals and yet funds toward
alcohol treatment programs are declining.
COMMISSIONER NOTTI pointed out that usually these alternative
energy programs require funds from the state and federal
government. Although such programs are worthwhile, they are
costly and long-term. He mentioned that there will probably be
different solutions for different areas of Alaska. He said he
didn't know of any recent studies.
MR. BLACK said he didn't know of any recent studies with regard
approaches to address alcoholism, alternative energy, and
sustainable economies. However, a survey illustrating that
Western Alaska is suffering tremendously by recent spikes in
fuel prices has just been completed. He explained that any time
there is an increase in the cost of living of a small village
where there is no income, many people are likely to choose to
live elsewhere. He then related his anecdotal knowledge that in
the Donlin Creek area the level of alcoholism, suicide, and
violence has decreased with training and employment from the
mine. Perhaps statistics should be obtained on that situation
from the Department of Labor & Workforce Development, he
remarked.
8:51:25 AM
SENATOR THOMAS noted his agreement that employment is important
in improving the quality of life in an area. Further, he agreed
that areas should be able to discuss taxes in the area and
boroughs provide a structure. Senator Thomas inquired as to
what should be done to encourage formation of boroughs and
encourage existing boroughs to implement a structure after
formation.
COMMISSIONER NOTTI answered that to encourage organization, the
department must do something that it hasn't yet done. He
reiterated his earlier comments regarding the need to train
individuals to run a borough, which will require travel and the
funds to do so. However, the department is down to bare bones,
he pointed out.
MR. BLACK related that the Division of Community Advocacy has 54
staff, 3 LBC staff, and 12-15 in the Local Government Assistance
Group. He noted that there have been some educational efforts,
although there isn't a program for educating unorganized areas
as to what formation of a borough would mean. He related that
Aniak has requested that the Northwest Arctic Borough speak to
it about what it means to organize, which he viewed as
important. The aforementioned should be replicated.
8:57:03 AM
REPRESENTATIVE NEUMAN highlighted the governor's proposal to
reduce the cost of state government by $150 million while fully
funding other programs such as PCE. He inquired as to how the
aforementioned will be accomplished.
The committee took an at-ease from 8:58 a.m. to 9:03 a.m.
9:03:37 AM
REPRESENTATIVE SALMON commented that the department has a
difficult job. He then related the perspective of the villages,
which believe there is enough government. He pointed to Fort
Yukon as an example as it has village corporations, regional
corporations, Native village, city council, Council of
Athabascan Tribal Governments (CATG), the state government, the
federal government, and the school district. If the desire is
to streamline government, he questioned why one would want to
create another government.
9:06:02 AM
COMMISSIONER NOTTI, in response to Representative Neuman's
earlier question, answered that the department only receives $60
million in general funds and thus is mostly run on program
receipts and licensing fees. He related that the department is
reviewing positions that don't have a clear mission. In fact,
in a number of cases people don't have supervisors or support
staff. Therefore, those positions will either be offered up and
may be taken up by other departments or eliminated. The
department will also have to review the following programs:
ASME, ATSI [Ahtna Technical Services, Inc.], and AEA as those
are the receivers of a large amount of funds. The department
will have to review the aforementioned because it doesn't
receive much in the way of general funds.
REPRESENTATIVE NEUMAN surmised then that DCCED will review a
reduction in staff in response to budget cuts. He then
questioned whether an increase in receipt funds could counter
the losses.
COMMISSIONER NOTTI said that the department hasn't discussed
increasing incoming funds. He further said that obtaining funds
for education is beyond the department's ability.
9:09:20 AM
CO-CHAIR LEDOUX returned to AML's revenue sharing proposal and
related her belief that it's a disincentive to organize a
borough. She explained that the current proposal provides a
certain amount of funds to unorganized communities in the
unorganized borough while it doesn't provide any funds to
unorganized communities within an organized borough. Therefore,
she opined that unorganized communities within an organized
borough would receive more funds if they were in an unorganized
borough.
MR. BLACK related his understanding that AML's proposal would
provide $25,000 for unincorporated communities, $75,000 for
cities, and $250,000 for boroughs. He opined that AML would
probably argue that the boroughs can pass on funds through
services or through revenue sharing of its own. The AML
proposal utilizes the old system of revenue sharing as a model,
he noted.
9:12:34 AM
CO-CHAIR FAIRCLOUGH highlighted the partnerships and successes
of DCCED, such as the Denali Commission. She asked if the
commissioner has specifics with regard to employment
opportunities that would generate jobs in rural and urban
Alaska.
COMMISSIONER NOTTI reviewed the last 30 years of development in
Alaska during which about 300,000 people have moved into the
state, many of which are commuting out of state for jobs.
Therefore, he opined that Alaska isn't benefiting from that
development. He further opined that it's in the interest of the
state for local people to get these development jobs.
Therefore, it's necessary to educate Alaskans to do these jobs.
As Alaska develops, the state must insist on local hire, which
would require funds for training, he stated.
9:15:19 AM
CO-CHAIR FAIRCLOUGH asked if the existing language within the
Alaska hire law is strong enough to pass constitutional muster
to implement Alaska hire. If not, she asked if the commissioner
had any suggestions for language that could be incorporated in
statute.
COMMISSIONER NOTTI clarified that he isn't aware of the
constitutional provisos. However, he did suggest that perhaps
there could be tax incentives to hire locally.
CO-CHAIR FAIRCLOUGH commented that the aforementioned is an idea
that deserves exploration.
9:16:57 AM
ADJOURNMENT
There being no further business before the committees, the joint
meeting of the House and Senate Community and Regional Affairs
Standing Committees was adjourned at 9:17:05 AM.
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