Legislature(2019 - 2020)BARNES 124

02/25/2020 08:00 AM COMMUNITY & REGIONAL AFFAIRS

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Audio Topic
08:02:50 AM Start
08:04:10 AM Presentation: the Community Services Fund; a Concept
09:53:42 AM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ Presentation: "The Community Services Fund; A TELECONFERENCED
Concept" by Nils Andraessen, Exec. Dir., Alaska
Municipal League
                    ALASKA STATE LEGISLATURE                                                                                  
    HOUSE COMMUNITY AND REGIONAL AFFAIRS STANDING COMMITTEE                                                                   
                       February 25, 2020                                                                                        
                           8:02 a.m.                                                                                            
                                                                                                                                
                             DRAFT                                                                                            
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative Harriet Drummond, Co-Chair                                                                                       
Representative Sara Hannan, Co-Chair                                                                                            
Representative Matt Claman                                                                                                      
Representative Jonathan Kreiss-Tomkins                                                                                          
Representative Steve Thompson                                                                                                   
Representative Sharon Jackson                                                                                                   
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
Representative DeLena Johnson                                                                                                   
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
PRESENTATION:  THE COMMUNITY SERVICES FUND; A CONCEPT                                                                           
                                                                                                                                
     - HEARD                                                                                                                    
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
No previous action to record                                                                                                    
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
NILS ANDREASSEN, Executive Director                                                                                             
Alaska Municipal League                                                                                                         
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Offered a presentation, entitled "The                                                                    
Community Services Fund; A Concept."                                                                                            
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
8:02:50 AM                                                                                                                    
                                                                                                                                
CO-CHAIR  SARA HANNAN  called the  House  Community and  Regional                                                             
Affairs  Standing  Committee  meeting   to  order  at  8:02  a.m.                                                               
Representatives  Claman,  Kreiss-Tomkins,  Thompson,  and  Hannan                                                               
were present at  the call to order.   Representatives Jackson and                                                               
Drummond arrived as the meeting was in progress.                                                                                
                                                                                                                                
^Presentation:  The Community Services Fund; A Concept                                                                          
     Presentation:  The Community Services Fund; A Concept                                                                  
                                                                                                                              
                                                                                                                                
8:04:10 AM                                                                                                                    
                                                                                                                                
NILS  ANDREASSEN, Executive  Director,  Alaska Municipal  League,                                                               
indicated  that the  concept of  a community  services fund  is a                                                               
work in  progress.  He explained  that he would not  say that AML                                                               
members have come  to agreement regarding the  information in the                                                               
presentation.   Notwithstanding  that,  he said  there are  "next                                                               
steps in terms  of potential legislation" that would  give AML "a                                                               
better  sense of  the considerations  that the  legislators might                                                               
have with respect to this concept."                                                                                             
                                                                                                                                
MR. ANDREASSEN began a  PowerPoint presentation, entitled "Alaska                                                               
Community Services  Fund."  As shown  on slide 1, he  stated that                                                               
the  ultimate  goal is  to  maximize  local, self-government  and                                                               
leverage local government  resources in the public  interest.  As                                                               
shown on  slide 2,  he listed that  local governments:   maintain                                                               
5,500, have  a combined spend  on law enforcement of  $75 million                                                               
more than  the budget of  the Department of Public  Safety (DPS);                                                               
collect more in  taxes than the State of Alaska;  fund 50 percent                                                               
of the  state's constitutional  public education  obligation; own                                                               
and  maintain 75  percent of  the state's  schools; maintain  the                                                               
majority of  libraries, parks, pools,  and museums in  the state;                                                               
own  and  maintain a  majority  of  ports  and harbors;  and  are                                                               
responsible for zoning and platting half the state.                                                                             
                                                                                                                                
MR.  ANDREASSEN turned  to  slide 3,  which  lists the  following                                                               
challenges   facing  Alaska's   communities:     $3  billion   in                                                               
construction and  maintenance needs,  based on 40  lists provided                                                               
to AML by  boroughs and first-class cities; $2  billion in school                                                               
construction and  maintenance needs,  derived from  Department of                                                               
Education &  Early Development  (DEED) numbers;  $2 in  water and                                                               
wastewater needs, based on numbers  provided by the Department of                                                               
Environmental Conservation (DEC); lack  of local law enforcement,                                                               
plus  recruitment  and  retention issues;  continued  erosion  of                                                               
state  support  over  three decades,  which  is  contributing  to                                                               
"stressed communities"  that are  struggling to "keep  the lights                                                               
on"  while  complying  with state  regulation  and  statute;  and                                                               
restricted and varied  tax base.  He said  municipalities are not                                                               
created equal,  and many of  them struggle to leverage  their tax                                                               
base to meet both the needs of residents and the state.                                                                         
                                                                                                                                
8:08:33 AM                                                                                                                    
                                                                                                                                
MR. ANDREASSEN turned to slide  4, which addresses the "Intent of                                                               
Concept."   The goals of a  community services fund would  be to:                                                               
reduce  the  state's  role as  intermediary  and  increase  local                                                               
control; connect  state funding to services  provided, similar to                                                               
the  original revenue  sharing program;  negotiate an  increasing                                                               
number  of  responsibilities to  move  from  the state  to  local                                                               
governments;   incentivize  the   adoption  of   powers,  borough                                                               
formation, and  class upgrades.   Regarding  the state's  role as                                                               
intermediary, he  offered his understanding that  the pushback he                                                               
has  experienced from  lawmakers comes  from an  unsureness about                                                               
what the state  would get from community assistance.   He said he                                                               
thinks there  is an opportunity  to better define that  return on                                                               
state investment  and to "connect state  funding to, essentially,                                                               
state responsibilities  provided at the local  level."  Regarding                                                               
the negotiation  of responsibilities, he  said it is  the concept                                                               
of  subsidiarity  that "the  level  of  government that  is  most                                                               
capable to  deliver a service should  be the one to  deliver that                                                               
service."                                                                                                                       
                                                                                                                                
MR.  ANDREASSEN highlighted  that  the concept  is  not meant  to                                                               
displace programs  that currently  collect and share  state taxes                                                               
on local economic  activity, such as shared fisheries  taxes.  He                                                               
said he thinks  there still should be a reduction  in the cost of                                                               
compliance.                                                                                                                     
                                                                                                                                
8:11:40 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE THOMPSON, regarding costs  of compliance, noted he                                                               
has a  list from schools  regarding unfunded mandates,  which has                                                               
about  30 items  on it.    He said  that  is a  burden on  school                                                               
districts.   He  speculated  that unfunded  mandates affect  more                                                               
than just schools.  He asked whether  AML has come up with a list                                                               
of unfunded mandates.                                                                                                           
                                                                                                                                
MR.  ANDREASSEN said  he  would like  to see  the  list to  which                                                               
Representative Thompson had referred.   He said AML is working on                                                               
a similar  list.  He  promoted the idea  of making it  easier for                                                               
local governments and  political subdivisions of the  state to be                                                               
partners.                                                                                                                       
                                                                                                                                
REPRESENTATIVE  THOMPSON  said  he  would get  the  list  to  Mr.                                                               
Andreassen.                                                                                                                     
                                                                                                                                
8:13:16 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  KREISS-TOMKINS  said he  would  like  to see  the                                                               
list.                                                                                                                           
                                                                                                                                
8:13:24 AM                                                                                                                    
                                                                                                                                
CO-CHAIR  HANNAN  remarked  that  many laws  get  passed  without                                                               
"clearing out  the statutes"; therefore,  she suspects  there are                                                               
many things the  state requires of local governments  that may no                                                               
longer be  pertinent.   She then  inquired how  much conversation                                                               
has  taken  place  between  the  legislature  and  AML  regarding                                                               
borough  formation.   She indicated  that  the state's  "furthest                                                               
south  first-class government"  in Southeast  Alaska has  "pushed                                                               
repeatedly  for  mandatory  borough  formation."   She  said  the                                                               
legislature,  by  law, acts  as  the  government for  unorganized                                                               
boroughs but  tends "not  to exercise that  very narrowly."   She                                                               
asked whether AML  has pursued the cost of  borough formation and                                                               
"what  kinds  of new  and  competing  interests might  be  formed                                                               
amongst  local   governments  if  we  pushed   mandatory  borough                                                               
formation."                                                                                                                     
                                                                                                                                
8:14:46 AM                                                                                                                    
                                                                                                                                
MR. ANDREASSEN  answered that AML would  oppose mandatory borough                                                               
formation  on  the grounds  that  it  must  be a  locally  driven                                                               
process.  That said, he noted  that there was a resolution passed                                                               
in November  [2019] requesting  that the  legislature act  as the                                                               
assembly  of  the  unorganized  borough.    He  named  the  three                                                               
responsibilities of a borough as  planning, platting, and zoning.                                                               
He  said   there  are  education  powers,   which  currently  are                                                               
delegated   through  the   Department   of   Education  &   Early                                                               
Development (DEED).  He said there is also taxation.                                                                            
                                                                                                                                
8:15:55 AM                                                                                                                    
                                                                                                                                
CO-CHAIR DRUMMOND, regarding the  incentivization of the adoption                                                               
of powers, borough formation, and  class upgrades, expressed that                                                               
that  involves cost-shifting  and  burdens  that local  taxpayers                                                               
cannot, and  in some cases  won't, take  on.  She  indicated that                                                               
she  supports  the  "moving"  of   the  burden.    She  said  the                                                               
Municipality of  Anchorage has been doing  a lot of work  in that                                                               
respect, and  she offered an  example of trooper vehicles  on the                                                               
Seward Highway.   The Anchorage Police Department had  come to an                                                               
agreement with  smaller communities on  the way to  Girdwood that                                                               
they would  be added to  the police service  area.  She  said she                                                               
would be  interested to  see what  the visible  heightened public                                                               
safety has  done in  terms of  accident rates.   She  also talked                                                               
about snow plowing of sidewalks adjacent to state roads.                                                                        
                                                                                                                                
8:18:46 AM                                                                                                                    
                                                                                                                                
MR.   ANDREASSEN  emphasized   the   importance   of  the   words                                                               
"negotiate"  and "incentivize"  when  figuring out  how to  shift                                                               
responsibilities to  the local level while  mitigating the impact                                                               
of that shift.   He said he  thinks there will always  be a basic                                                               
level  of   technical  and   funding  assistance   necessary  for                                                               
communities.    He said  the  Division  of Community  &  Regional                                                               
Affairs  "or  something   like  it"  is  called   for  under  the                                                               
Constitution [of  the State of Alaska].   He said there  was a $1                                                               
million  unallocated  budget  cut  to that  division  last  year,                                                               
resulting in six fewer local  government specialists.  He said he                                                               
has received feedback from communities  that the current state of                                                               
DCRA and  the lack  of capacity  of local  government specialists                                                               
are harming their ability to  operate.  When community assistance                                                               
went away  in the  early 2000s,  communities closed  their doors.                                                               
He said  he would cover  this issue in  more detail later  in the                                                               
presentation.                                                                                                                   
                                                                                                                                
8:20:32 AM                                                                                                                    
                                                                                                                                
MR.  ANDREASSEN   directed  attention  to  slide   5,  "Community                                                               
Services Fund."   He  named the  four funds  shown on  the slide:                                                               
Standing Funds  - currently  expenses of  the state,  for example                                                               
Alaska  Online   With  Libraries  (OWL)  and   transit  matching;                                                               
Capacity Building  Funds -  strengthening local  governments, for                                                               
example  community  assistance;  Transferred  Funds  -  currently                                                               
managed by the  state for transfer, for example  for secure rural                                                               
schools  (SRS), timber  receipts, and  payment in  lieu of  taxes                                                               
(PILT);  and Devolved  Funds  - compensation  for  taking on  new                                                               
responsibilities, for example  law enforcement.  He  said part of                                                               
the  proposal would  be to  move all  of these  into a  community                                                               
services  fund   through  fund  transfers  and   then  through  a                                                               
municipal or community services dividend.                                                                                       
                                                                                                                                
8:22:37 AM                                                                                                                    
                                                                                                                                
MR.  ANDREASSEN turned  to slide  6, "Fund  Transfers -  State as                                                               
Intermediary."   As shown on the  slide, he said $140  million is                                                               
held by the state on behalf  of local governments; it is retained                                                               
by the  state for three  to six months;  generally it is  held in                                                               
the state's general fund account,  called "GeFONSI," with minimal                                                               
interest/investment  earnings;  potentially  those  earnings  are                                                               
$102  million; generally  those  earnings do  not  accrue to  the                                                               
intended recipients  - the state  holds on to a  federal transfer                                                               
as long  as possible and  the earnings  stay with the  state; the                                                               
distributions  are generally  managed  by DCRA.   Mr.  Andreassen                                                               
questioned  whether  this is  the  best  use of  state  resources                                                               
during a  time of  fiscal constraint  or whether  there may  be a                                                               
better way to approach this  system.  Further, he questioned, "Is                                                               
this consistent with the intent of  those funds?  If the intended                                                               
recipient  is  a local  government,  then  is  it in  the  public                                                               
interest for the state to hold  $140 million for between three to                                                               
six months?"                                                                                                                    
                                                                                                                                
8:24:17 AM                                                                                                                    
                                                                                                                                
MR. ANDREASSEN,  in response to  Co-Chair Hannan, said  he thinks                                                               
there are  a number  of reasons  that the state  holds on  to the                                                               
funds for  so long.   He remarked  that Alaska is  different from                                                               
other  states.   One reason  is because  there is  an unorganized                                                               
borough;  because  the state  acts  as  the intermediary  of  the                                                               
assembly  of the  unorganized  borough, "it  comes  first to  the                                                               
state  for distribution  to those  communities."   He added  that                                                               
there  is  no reason  that  the  appropriation levels  for  those                                                               
communities are  not already indicated.   He said  essentially it                                                               
is state  policy that the  state accept those funds  and redirect                                                               
them; it  could just as  easily be set up  for those funds  to go                                                               
directly to intended recipients.                                                                                                
                                                                                                                                
8:26:01 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE JACKSON noted that  potentially there could be $1-                                                               
2  million  sent  to  local  communities.   She  asked  how  many                                                               
communities that would be and  whether Mr. Andreassen would "want                                                               
that evenly distributed."                                                                                                       
                                                                                                                                
MR.  ANDREASSEN  answered  by showing  slide  7,  entitled  "Fund                                                               
Transfers - State  as Intermediary."  [The slide  shows the types                                                               
of funds  transfers, the approximate  annual amount  in millions,                                                               
and the  average time  held.]  He  said just a  few of  the funds                                                               
listed  are federal;  most of  them  are state  activity that  is                                                               
accepting  state taxes  or fees,  and statute  dictates that  the                                                               
state  should direct  the money  back to  local governments.   He                                                               
continued:                                                                                                                      
                                                                                                                                
     Between  all   of  these,  this  impacts   every  local                                                                    
     government,  and there's  formulas in  statute for  how                                                                    
     they  are allocated  to intended  recipients.   So,  it                                                                    
     would impact 155  cities and boroughs.   It wouldn't be                                                                    
     spread  out evenly;  ...  it is  spread  out right  now                                                                    
     according to  those formulas.   It could  be calculated                                                                    
     and given  directly to those  local governments  or ...                                                                    
       through this community services fund, which would                                                                        
     reduce the lag time.                                                                                                       
                                                                                                                                
REPRESENTATIVE  JACKSON indicated  that money  that comes  to the                                                               
state from  the federal government  is in a  lump sum, and  it is                                                               
the responsibility  of the state  "to divvy  it out."   She asked                                                               
Mr. Andreassen whether  he thinks the money  could be distributed                                                               
fairly without the  state's involvement in "that  was supposed to                                                               
be mine."                                                                                                                       
                                                                                                                                
MR. ANDREASSEN  proffered that  at the heart  of the  question is                                                               
the consideration that the money  currently goes to the state and                                                               
that there  is a lag  time [in  its distribution] because  of the                                                               
state's  power  of  appropriation.    He  said  the  formula  for                                                               
distribution  is already  in statute;  early on  in the  year the                                                               
Department of  Revenue can  see what is  available.   Further, he                                                               
said there  is statute  dictating where  the money  will go.   He                                                               
stated, "You hold  onto it so that in the  budget process you can                                                               
say, 'We recognize  this revenue on the one hand,  and we will do                                                               
what the statute says on the other.'"                                                                                           
                                                                                                                                
8:29:00 AM                                                                                                                    
                                                                                                                                
MR. ANDREASSEN  moved on to  slide 8, "Capacity  Building Funds."                                                               
One of  those funds  is community assistance,  in which  there is                                                               
currently $60  million and  can be  as much as  $90 million.   He                                                               
said the  original community revenue  sharing was a  precursor to                                                               
community  assistance  and  relates  to  reimbursement  for  road                                                               
miles, police,  and additional  services.   He said  that program                                                               
has been  reduced from  $180 million  in 1985  to $30  million in                                                               
2015.    It  provides  base amounts  for  boroughs,  cities,  and                                                               
community  associations.     He  noted  that  the   veto  of  the                                                               
recapitalization of that fund this  year caused the drop from $90                                                               
million to $60  million; the payment in fiscal year  2021 (FY 21)                                                               
will be  reduced by a third,  which means $20 million  instead of                                                               
$30 million that  goes out.  He said, "Everybody  will go down to                                                               
their base level."                                                                                                              
                                                                                                                                
MR. ANDREASSEN said another capacity  building fund is power cost                                                               
equalization  (PCE),  in  which  there  is  $1.13  billion.    He                                                               
indicated that  the state holds  that fund  in order to  "pay out                                                               
according to  statute."  The  fund reduces transaction  costs and                                                               
the cost  of energy and "levels  the playing field" for  over 100                                                               
communities.                                                                                                                    
                                                                                                                                
MR.  ANDREASSEN  named  another capacity  building  fund  as  the                                                               
reimbursement for  senior citizen  and disabled  veteran property                                                               
tax exemption,  which has been in  place for 20-25 years  and has                                                               
not  been reimbursed  since  1997.   He  said  the  value of  the                                                               
required mandate by  the state is $90 million, and  it impacts 40                                                               
municipalities.  He explained, "That  means $90 million less that                                                               
they have  available to provide  services required by  the state.                                                               
It also means  that that amount is made up  by other taxpayers in                                                               
those jurisdictions."   He said  statute clearly states  that the                                                               
legislature  shall  appropriate  that  funding,  though  it  does                                                               
provide  for  some  "wrinkle  room"  to  allow  for  "pro  grata"                                                               
distribution.                                                                                                                   
                                                                                                                                
8:32:01 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE CLAMAN  asked whether  this is another  example of                                                               
statute directing  the state to  spend a certain amount  of money                                                               
unless it does not have sufficient funds to do so.                                                                              
                                                                                                                                
MR. ANDREASSEN answered, "Yes, kind  of."  He clarified that most                                                               
[statutes]  use the  word "may"  and are  based on  appropriation                                                               
while "this says  pretty clearly, 'shall'."  That  said, if there                                                               
is no funding available, then  the funds would be distributed pro                                                               
rata.   He added, "So, this  is one of ...  higher-level unfunded                                                               
mandate type aspects."                                                                                                          
                                                                                                                                
REPRESENTATIVE CLAMAN  asked what  efficiency would be  gained by                                                               
having a third party involved rather than the state doing it.                                                                   
                                                                                                                                
MR. ANDREASSEN said he would like  to build an argument for that,                                                               
and he indicated it would be included in the upcoming slides.                                                                   
                                                                                                                                
8:33:45 AM                                                                                                                    
                                                                                                                                
CO-CHAIR  HANNAN  said  statistics  show  that  seniors  are  the                                                               
largest growing demographic  in the state.  She  remarked that in                                                               
1997 the state  still had a lot  of money, but it  still chose to                                                               
do away  with the reimbursement  for senior citizens.   She asked                                                               
whether there  has been dialogue  at the  state level and  a push                                                               
from   municipalities  to   reinstate  the   reimbursement,  thus                                                               
fulfilling the statutory mandate.                                                                                               
                                                                                                                                
8:34:44 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  KREISS-TOMKINS proffered  that the  only time  he                                                               
has heard about it has been  through testimony from AML.  He said                                                               
in terms  of the  permanent fund  dividend (PFD)  formulas, there                                                               
are "half a  dozen statutes that are highly  substantive that the                                                               
state  has  ignored  for  a  decade or  multiple  decades."    He                                                               
expressed that he thinks Alaska should  follow the laws it has in                                                               
place;  however,  he  said  he   thinks  there  is  "a  selective                                                               
indignance" when  it comes  to the  PFD.   He indicated  a choice                                                               
would be  to repeal  [statute] and  allow municipalities  to make                                                               
the decision.                                                                                                                   
                                                                                                                                
8:35:33 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  JACKSON  asked  for clarification  that  Co-Chair                                                               
Hannan was talking about the tax exemption for seniors.                                                                         
                                                                                                                                
CO-CHAIR  HANNAN answered  yes.   In  response to  Representative                                                               
Jackson, she clarified that she was talking about property tax.                                                                 
                                                                                                                                
8:36:57 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE   CLAMAN  echoed   Representative  Kreiss-Tomkins'                                                               
remark that the  entities that lobby on the issue  seem to be AML                                                               
and municipalities.   Based  on his  former experience  as acting                                                               
mayor  of   the  Municipality   of  Anchorage,  he   offered  his                                                               
understanding of  tax exemptions and  how they affect value.   He                                                               
explained that the  way the Anchorage mil rate  is calculated, it                                                               
doesn't result in  the loss of property tax revenue  to the city,                                                               
because  if  seniors  receive a  tax  reduction,  "the  effective                                                               
result of the reduction is that  people who are not seniors pay a                                                               
somewhat effectively  higher rate and,  in effect, pay  the taxes                                                               
[such] that ...  the city actually doesn't lose  money."  Because                                                               
of  this, Representative  Claman shared,  in tight  times it  was                                                               
difficult to advocate  to the state that it should  pay the money                                                               
that would  "make up the  difference," because the  city couldn't                                                               
say that it was really losing the money.                                                                                        
                                                                                                                                
CO-CHAIR HANNAN said  she understands that it is not  a true loss                                                               
but rather a  shift in who, in the municipality,  is carrying the                                                               
burden.   She  pointed out  that  in Haines,  Alaska, within  her                                                               
district,  many  homes  are  valued  at  $150,000,  and  with  an                                                               
anticipated  exponential  growth  in  the  percentage  of  senior                                                               
citizens,  half the  community's tax  base could  be tax  exempt.                                                               
She  remarked that  the legislature  historically deals  with the                                                               
crises it faces rather than offering long-term solutions.                                                                       
                                                                                                                                
8:40:54 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  THOMPSON  expressed   concern  that  seniors  who                                                               
cannot afford property taxes may opt to leave Alaska.                                                                           
                                                                                                                                
8:41:33 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE JACKSON said  that is an important  question.  She                                                               
spoke about the outcry of seniors regarding loss of exemptions.                                                                 
                                                                                                                                
8:42:11 AM                                                                                                                    
                                                                                                                                
MR. ANDREASSEN  offered his understanding that  AML's position is                                                               
that "the reimbursement should be  reimbursed."  He said there is                                                               
not consensus of 40 mayors  and jurisdictions about "the approach                                                               
the state should  take in terms of removing that  exemption."  He                                                               
indicated that  nationally the best  practice is  means-based not                                                               
age-based.  He  said that is the position he  has "seen from AARP                                                               
and others."   He suggested that may be a  longer term discussion                                                               
to hold.                                                                                                                        
                                                                                                                                
8:43:06 AM                                                                                                                    
                                                                                                                                
MR. ANDREASSEN returned  to the PowerPoint, to  slide 9, entitled                                                               
"Community Services Fund Stewardship."   He said the two types of                                                               
funds that  AML might  propose moving  into a  community services                                                               
fund are  transfer funds that  have to be transferred  anyway and                                                               
those  funds that  provide  base levels  of  support.   Regarding                                                               
Representative Claman's  question about the efficiency  of moving                                                               
funds from  the state  to local  control, he  said it  depends on                                                               
"what it  looks like."  He  said AML's argument would  be that it                                                               
could manage  the funds for  less cost  than the state;  it could                                                               
get  them into  the hands  of local  governments quicker;  and it                                                               
could find efficiencies  that the state is not  currently able to                                                               
find because  of the way  the system  is structured in  the state                                                               
within departments.   He  said federal  and state  funds intended                                                               
for  local  government  could  be  transferred  directly  into  a                                                               
municipally  managed holding  account; any  interest or  earnings                                                               
accrued within the  funds could be directed to  the recipients of                                                               
the  funds; and  the  funds  are managed  according  to state  or                                                               
federal  statute  or regulation.    He  said  he thinks  AML  can                                                               
streamline grant administration.   He said investment or interest                                                               
earnings   distributed  according   to   statute  or   regulation                                                               
essentially  pay  for administration;  "there  is  no cost  to  a                                                               
community services fund necessarily."                                                                                           
                                                                                                                                
MR.  ANDREASSEN mentioned  the AML  investment  pool (AMLIP)  and                                                               
investment  criteria  in  statute.    He  said  it  allows  local                                                               
governments to  pool resources for short-term  investment with an                                                               
active money market  account.  He said it is  possible to develop                                                               
ability within AMLIP for medium-  and long-term investments, "and                                                               
basically  replicate   the  structure   of  the   PCE  investment                                                               
guidelines,  which are  pretty simple  and straightforward."   He                                                               
stated that  there are  already formulas  established in  law and                                                               
applied to  distribution, and there could  be separate accounting                                                               
for all  funds consistent with state  law.  Finally, he  said the                                                               
community services fund stewardship  would eliminate the state as                                                               
intermediary, increase distribution  speed, and ultimately reduce                                                               
the  footprint of  state government,  which is  when efficiencies                                                               
are  reached.   He  said  there  is a  form  to  fill out  and  a                                                               
reporting mechanism  for all the  funds, and a third  party could                                                               
provide efficiency in those steps.                                                                                              
                                                                                                                                
8:47:06 AM                                                                                                                    
                                                                                                                                
MR.  ANDREASSEN directed  attention to  slide 10,  which contains                                                               
further  information   regarding  the  community   services  fund                                                               
stewardship.   He  said it  preserves  and maximizes  legislative                                                               
law-making authority,  even though  it reduces  a direct  role in                                                               
appropriation.   He added, "I  don't know that  that's completely                                                               
straightforward or  true, but I  think there's a  strong argument                                                               
that, at the very least, you  retain those powers even as we move                                                               
things  to  externally managed  funds."  He  said he  thinks  the                                                               
stewardship helps  to maximize local control  and self-government                                                               
so  that  the intended  recipients  of  the  funds are  the  ones                                                               
managing them,  not only  to the state's  guidelines but  also to                                                               
the local governments'  interests.  The state  retains the strong                                                               
oversite role.                                                                                                                  
                                                                                                                                
8:48:09 AM                                                                                                                    
                                                                                                                                
MR.  ANDREASSEN turned  to  slide  11, "Step  Two  - A  Community                                                               
Services  Dividend."   He said  the concept  has been  around for                                                               
awhile  and recognizes  the role  of  the state  as the  resource                                                               
owner;  the state  preempts local  governments from  taxing those                                                               
resources;  and there  is  a distributive  ability  at the  state                                                               
level  that  does not  exist  at  the local  level.    He said  a                                                               
community  services dividend  builds on  the idea  of partnership                                                               
between  local governments  in the  state such  that they  have a                                                               
role  in taking  on  responsibility of  the  state in  delivering                                                               
services  to Alaskans.   Finally,  he  talked about  the idea  of                                                               
individual  dividends being  maximized when  community needs  are                                                               
addressed, reducing  the need for  overly burdensome  local taxes                                                               
while  infrastructure is  in place  to reduce  transaction costs,                                                               
thereby improving the cost of living and doing business.                                                                        
                                                                                                                                
MR. ANDREASSEN brought  attention to slide 12  and discussed that                                                               
on which  a community services dividend  builds.  He said  in the                                                               
1980s Governor  Walter Hickel talked about  a community dividend;                                                               
his suggestion had  been that it be instead of  or in addition to                                                               
the individual PFD.  Governor  Hickel had suggested that earnings                                                               
from   the  permanent   fund  would   be  distributed   to  local                                                               
governments   and  set   aside   for  community   infrastructure.                                                               
Beginning 2001, former Representative  Carl Moses had legislation                                                               
drafted  proposing a  community dividend.   His  proposal was  to                                                               
establish  a municipal  dividend fund  to grant  monies so  local                                                               
governments could  address key, important issues,  such as public                                                               
safety.  The  proposed dividend would be "equal to  lesser of the                                                               
amount calculated  by multiplying $100  by the number of  PFDs or                                                               
the balance  of earnings  reserve."   As shown  on slide  13, Mr.                                                               
Andreassen  noted that  former Governor  Jay Hammond  also had  a                                                               
community dividend plan in "Diapering  the Devil."  He said there                                                               
were  three pieces  to  the  plan:   a  percent  of market  value                                                               
(POMV),  which  is currently  in  place;  an  income tax,  and  a                                                               
community  dividend.     Governor  Jay  Hammond   had  told  then                                                               
Anchorage Mayor Mark Begich that  this plan would bring immediate                                                               
relief to property tax.   Mr. Andreassen indicated that AML would                                                               
argue  that it  would give  the ability  to local  governments to                                                               
"bring down local taxes and take on new services."                                                                              
                                                                                                                                
8:53:01 AM                                                                                                                    
                                                                                                                                
MR.  ANDREASSEN  showed  slide  14,  "Alaska  Community  Services                                                               
Dividend."   He  said there  could be  discussion of  a community                                                               
dividend  in  relation  to  the  current  POMV  draw;  some  have                                                               
suggested that  50 percent should  go to state government  and 50                                                               
percent to the  individual PFD.  He said  Legislative Finance has                                                               
said  that would  still "break"  the state;  a 75:25  split might                                                               
make more sense.                                                                                                                
                                                                                                                                
8:54:02 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE JACKSON  proffered that in  a 70:30 split,  of the                                                               
70 percent, 35  would go to local governments and  35 would go to                                                               
the state, and the money to  local communities would be well used                                                               
in ways that make life better  for their residents.  She said she                                                               
has not heard any discussion about the topic.                                                                                   
                                                                                                                                
MR. ANDREASSEN  responded that he  thinks this is  something that                                                               
should be part of the conversation.   He said the percentages can                                                               
be  chosen  based  on  how   the  state  wants  to  allocate  the                                                               
resources.   He remarked  that to  a large  extent, the  state is                                                               
already  allocating  those  resources to  local  government,  and                                                               
"this is just  carving out some intentionality around  that."  He                                                               
said this  is definitely  a political conversation  to have.   He                                                               
indicated another option could be 30  percent of tax revenue or a                                                               
percentage of oil revenue.                                                                                                      
                                                                                                                                
8:56:27 AM                                                                                                                    
                                                                                                                                
MR. ANDREASSEN,  returning to the PowerPoint,  directed attention                                                               
to slide 15,  "Justification."  He said one  justification is the                                                               
reduction   in   state   government  allocation.      He   listed                                                               
justifications as:   the identification and  direction of funding                                                               
for state  priorities; the enhancement of  local decision-making;                                                               
the response  to the governor's  stance that local  issues should                                                               
be  dealt  with  locally;  and the  provision  of  a  sustainable                                                               
funding mechanism  and control.   Further  justification includes                                                               
the consideration  that [a community services  fund] would result                                                               
in a  reduction in individual  PFD allocation; however,  it would                                                               
allow local  governments to maintain delivery  of local essential                                                               
services; avoid tax  increases at the local level  - and possibly                                                               
decrease   local  taxes;   enhance   local  decision-making   and                                                               
governance; and increase the role of Alaskans in state spending.                                                                
                                                                                                                                
MR.  ANDREASSEN  pointed to  slide  16  to  show "what  could  be                                                               
included."   The  list shows  an FY  20 budget  of $586  million,                                                               
broken down as:   school bond debt match, $100  million; port and                                                               
harbor capital  improvements, $40 million;  community assistance,                                                               
$40 million;  road and rural  airport maintenance,  $100 million;                                                               
law  enforcement  and  community  jails,  $80  million;  deferred                                                               
building  and  K-12  Maintenance,  $75  million;  senior  citizen                                                               
property tax exemption reimbursement,  $90 million; and water and                                                               
wastewater  upgrades, $30  million.   He said  these are  numbers                                                               
that would need  to be negotiated and formulas were  used to come                                                               
up with the distributions.                                                                                                      
                                                                                                                                
8:59:52 AM                                                                                                                    
                                                                                                                                
MR. ANDREASSEN  turned attention to  slide 17, "School  Bond Debt                                                               
Match,"  and he  said  currently  there is  no  school bond  debt                                                               
reimbursement  program,  but  it  is one  funding  mechanism  for                                                               
construction  and major  maintenance in  schools.   He said  last                                                               
year  there was  an obligation  of $100  million reduced  to just                                                               
under  $43  million in  less  than  five  years.   Instead  of  a                                                               
reimbursement  program,  he  said,  there is  an  opportunity  to                                                               
develop a way  to have some of the state's  obligation for school                                                               
construction  and major  maintenance grant-funded,  but also  for                                                               
the  state "to  bond for  its portion  of those  projects and  to                                                               
reform  that entire  program for  how to  deliver on  the state's                                                               
constitutional  obligation."   He  said the  total  need is  $1.3                                                               
billion,  which is  a  conservative  amount.   In  response to  a                                                               
question  from  Co-Chair  Hannan,  he  explained  how  "need"  is                                                               
determined.    He  said  the  Department  of  Education  &  Early                                                               
Development (DEED) "does an amazing  job keeping track what needs                                                               
look  like" by  maintaining  a  list of  the  1,006 schools  that                                                               
currently exist, 75 percent of  which are owned and maintained by                                                               
the  state.   He explained  that each  school district  submits a                                                               
priority  list  to the  department,  which  maintains a  six-year                                                               
plan.   He said  the $1.3  billion need  relates to  the six-year                                                               
plan; however,   he said  the amount  is probably closer  to $2.3                                                               
billion  when  taking  into   consideration  the  average  amount                                                               
requested for school construction and maintenance.                                                                              
                                                                                                                                
9:02:44 AM                                                                                                                    
                                                                                                                                
CO-CHAIR DRUMMOND  offered her understanding  that the  number of                                                               
schools in Alaska is "more like  515," not 1,006.  She questioned                                                               
where  Mr. Andreassen  got  the  latter number.    She cited  the                                                               
information on  slide 17,  third bullet  point, which  notes that                                                               
two  communities "drop  off" in  the next  two years,  while five                                                               
will drop off in  the next six to seven years.   She asked for an                                                               
explanation.                                                                                                                    
                                                                                                                                
MR.  ANDREASSEN responded  that the  1,006 figure  he gave  might                                                               
"extend to facilities."   In regard to the dropping  off rate, he                                                               
said that pertains to schools that  will no longer be part of the                                                               
school bond debt  reimbursement program.  He said  the 19 schools                                                               
that have bonded have done so at various intervals.                                                                             
                                                                                                                                
9:03:51 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE KREISS-TOMKINS, given that  there is no new school                                                               
bond  debt being  accepted, and  given the  population growth  in                                                               
Matanuska-Susitna  ("Mat-Su"), asked  whether  the Mat-Su  School                                                               
District is  paying 100 percent  of the  cost for the  new school                                                               
being built.                                                                                                                    
                                                                                                                                
MR.  ANDREASSEN  offered his  understanding  that  Mat-Su is  not                                                               
currently  building new  schools.   Further,  he  said he  thinks                                                               
there is "a lot of hope  that ... the moratorium will expire" and                                                               
there would  then be  the opportunity to  apply for  the program.                                                               
Notwithstanding that,  he remarked  that there is  "not a  lot of                                                               
faith in  that program."   He said there are  some municipalities                                                               
that have  bonded for maintenance,  perhaps schools  in Anchorage                                                               
and Fairbanks; however, "most don't have that capacity."                                                                        
                                                                                                                                
9:05:36 AM                                                                                                                    
                                                                                                                                
MR. ANDREASSEN returned to slide  17 and talked about the state's                                                               
liability.  He said the  state will still have responsibility for                                                               
funding schools,  and the question  is what  the state can  do to                                                               
offset  the  75   percent  of  facilities  that   are  owned  and                                                               
maintained by municipalities.                                                                                                   
                                                                                                                                
9:06:02 AM                                                                                                                    
                                                                                                                                
MR.  ANDREASSEN turned  to  slide 18,  "Port  and Harbor  Capital                                                               
Improvements  $40  million."   He  said  the  need here  is  $600                                                               
million,  which was  defined  in a  2010 study  by  the Corps  of                                                               
Engineers.   He  indicated  that AML  would  update that  survey,                                                               
because,  for example,  the current  study does  not include  the                                                               
Port of Alaska.   He said new needs will be  created.  He related                                                               
that there is a port and  harbor matching grant program, which is                                                               
utilized by  municipalities.   He mentioned  old debt  related to                                                               
House  Bill 528  [passed  during the  Twenty-Second Alaska  State                                                               
Legislature].  He said the legislature  could set up a new way to                                                               
invest  in port  and harbor  for capital  improvements.   He said                                                               
that  might  look  like a  Statewide  Transportation  Improvement                                                               
Program (STIP) dedicated to ports and  harbors.  He said in terms                                                               
of vetting  needs, there is no  similar structure in place  as is                                                               
used by DEED.                                                                                                                   
                                                                                                                                
9:08:27 AM                                                                                                                    
                                                                                                                                
MR. ANDREASSEN moved on to  slide 19, "Community Assistance."  He                                                               
said the  need in  this area is  $304 million.   He said  that is                                                               
significant  for local  governments.   He said  local governments                                                               
are being  asked to continue doing  all the things the  state has                                                               
asked of them but with less reimbursement from the state.                                                                       
                                                                                                                                
9:09:03 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  KREISS-TOMKINS  noted  that  Mr.  Andreassen  had                                                               
mentioned   the  "shuttering   or   bankruptcy  of   incorporated                                                               
municipalities."     He  asked  when  that   happened,  to  which                                                               
communities, and how many communities.                                                                                          
                                                                                                                                
MR.  ANDREASSEN indicated  that  Legislative  Legal and  Research                                                               
Services had reported  on the issue in the early  2000s.  He said                                                               
he does  not know  the name  of the  communities but  offered his                                                               
understanding  that   there  were  eight  of   them  that  seized                                                               
operations and fourteen  that reduced operations.   He said there                                                               
is no way  for some municipalities to operate on  their tax base.                                                               
He  predicted the  state would  see  more of  those decreases  if                                                               
community assistance is not "further funded  for FY 21."  He said                                                               
the $10 million reduction will  not impact smaller communities as                                                               
much  but will  affect  the medium-size  communities, which  will                                                               
have to eliminate programs to make up for the loss of funding.                                                                  
                                                                                                                                
REPRESENTATIVE  KREISS-TOMKINS observed  there  are  a number  of                                                               
small communities with a limited tax  base; there are a subset of                                                               
those communities  that have made  no effort to  collect revenues                                                               
"and do  have the  means."  He  said this has  "struck" him.   He                                                               
asked Mr. Andreassen  whether he knows of any  incentive that has                                                               
existed  wherein  assistance is  "married  with  an incentive  or                                                               
requirement for local revenue."                                                                                                 
                                                                                                                                
9:12:51 AM                                                                                                                    
                                                                                                                                
MR. ANDREASSEN said he does not  know whether there has been that                                                               
conversation, and he remarked that  it would be a challenging one                                                               
to have.  He said there  is a difference between communities that                                                               
choose not to  collect more and communities that do  not have the                                                               
capacity to tax  because of the size of  their local governments.                                                               
He  said there  are  more of  the  latter than  the  former.   He                                                               
indicated that  it would be  interesting to looking at  local tax                                                               
bases, but  AML would  not want to  mandate local  governments to                                                               
tax  more  to  gain  additional  benefit  from  the  state.    He                                                               
concluded,  "If  you incentivize  or,  you  know, increase  their                                                               
opportunity  to take  on powers  in support  of what  the state's                                                               
currently providing, I think that's  a different piece, and maybe                                                               
... that's a future conversation."                                                                                              
                                                                                                                                
9:14:59 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  JACKSON suggested  AML could  see what  the large                                                               
and  small businesses  in each  community could  do, which  would                                                               
empower    the    community    through    increased    employment                                                               
opportunities.   She indicated  this increased  involvement would                                                               
mean "everyone has skin in the game."                                                                                           
                                                                                                                                
MR. ANDREASSEN agreed  that finding a way  to increase engagement                                                               
throughout communities is  important.  He pointed  out that since                                                               
the legislature  acts as the  assembly for  unorganized boroughs,                                                               
it could "take up that question."                                                                                               
                                                                                                                                
9:16:19 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE   KREISS-TOMKINS   asked   in  what   manner   Mr.                                                               
Andreassen  saw  the legislature  failing  to  execute or  under-                                                               
executing "those responsibilities."                                                                                             
                                                                                                                                
MR. ANDREASSEN  named three responsibilities  of the  assembly of                                                               
the unorganized borough:  education,  currently delegated to DEED                                                               
for  regional  education  attainment areas  (REAAs);  platting  -                                                               
planning  and zoning,  which perhaps  the  Department of  Natural                                                               
Resources does some of; and taxation.                                                                                           
                                                                                                                                
9:17:25 AM                                                                                                                    
                                                                                                                                
MR.  ANDREASSEN returned  to slide  19, and  he said  base levels                                                               
need to be maintained; an  increase to $100,000 would benefit 100                                                               
out of 155  cities and boroughs.  He said,  "A small increase for                                                               
the base level  for cities is actually a huge  increase for those                                                               
communities."   He  then  referred to  information  on slide  20,                                                               
"Road  and  Rural Airport  Maintenance."    He  said there  is  a                                                               
difference between  DOT&PF reducing service for  an airport where                                                               
the city  has never agreed  to the  plan and the  situation here,                                                               
where state  and local government  agree to the  local government                                                               
taking on more  responsibilities.  He said  there are duplicative                                                               
systems that could be streamlined.   He said taking on more is an                                                               
expensive endeavor for  local governments, so the  amount of $100                                                               
million shown on the slide may not be sufficient.                                                                               
                                                                                                                                
9:20:31 AM                                                                                                                    
                                                                                                                                
MR.  ANDREASSEN  moved  on  to slide  21,  "Law  Enforcement  and                                                               
Community  Jails."   He  indicated that  community  jails run  by                                                               
local governments are a state  responsibility, and the $7 million                                                               
status quo  amount received  is less  than the  2002 levels.   He                                                               
said AML is  working with communities that report  that the state                                                               
is putting in about half of  what the communities are spending on                                                               
jails.  He noted that local  governments are not in charge of the                                                               
court system  or the laws  the legislature puts in  place related                                                               
to public safety.   He said the repeal of  Senate Bill 91 [passed                                                               
during  the Twenty-Ninth  Alaska State  Legislature] was  "a good                                                               
step forward in  a lot of ways," but it  means there are probably                                                               
more people in  these jails without the state's  support for that                                                               
additional amount.   He said  a lot  of discussion has  been held                                                               
concerning  Village Public  Safety  Officers (VPSOs).   He  said,                                                               
"There's  nothing  the state  puts  in  right  now to  local  law                                                               
enforcement."   He said he  thinks there  is a good  argument for                                                               
having the state strengthening support  to local law enforcement,                                                               
which could  mean as little  as $30,000 per officer,  which would                                                               
cover liability insurance, bullet-proof  vests, and training.  He                                                               
said  the  need  [$400  million]  is  estimated.    Studies  done                                                               
regarding  boroughs that  have looked  at adopting  police powers                                                               
have pointed to a required  $30-$50 million investment, a $30-$50                                                               
million  tax  increase for  residents.    There  needs to  be  an                                                               
ability to  offset those costs  if local governments are  to take                                                               
up those responsibilities.   He said there are  some other things                                                               
the state  funds, such as  local emergency response,  which could                                                               
be "included in this."                                                                                                          
                                                                                                                                
9:24:53 AM                                                                                                                    
                                                                                                                                
MR. ANDREASSEN, in  response to a question  from Co-Chair Hannan,                                                               
confirmed  that  any  incorporated  city and  borough  can  adopt                                                               
police powers.                                                                                                                  
                                                                                                                                
9:25:30 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE CLAMAN  remarked that this  slide seems to  get to                                                               
the  core of  Mr. Andreassen's  proposal  in terms  of trying  to                                                               
convince the state  to provide a more  sustainable funding stream                                                               
in times of limited funding to help communities make a plan.                                                                    
                                                                                                                                
MR. ANDREASSEN  said he  thinks police and  snow plowing  are the                                                               
two most visible  elements for residents, in terms  of "the heart                                                               
of  the proposal."   He  said there  are municipalities  that are                                                               
trying to  come to grips with  lack of state support  while being                                                               
asked  "to  take  up  more."    He  mentioned  school  bond  debt                                                               
reimbursement and that it shifts over  time.  He said part of the                                                               
conversation that  needs to be  held is how  [municipalities] can                                                               
overcome the  lack of  confidence in the  state "for  keeping its                                                               
piece of the  agreement."  He stated, "There's  plenty of concern                                                               
at the  local side about what  this would look like  if the state                                                               
chose to ... move a different way."                                                                                             
                                                                                                                                
9:29:57 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  JACKSON mentioned  Eagle River  wanting to  break                                                               
away from the  Municipality of Anchorage.  She  asked whether AML                                                               
supports municipalities that want to become more independent.                                                                   
                                                                                                                                
MR.  ANDREASSEN said  he would  not  comment on  the Eagle  River                                                               
experience  directly;   however,  he  said  there   are  lots  of                                                               
communities that are unincorporated.   He indicated that there is                                                               
a resolution that addresses the  idea of increasing local control                                                               
either by  incorporating or  taking on  new powers.   He  said he                                                               
could forward the resolution to the committee.                                                                                  
                                                                                                                                
9:31:59 AM                                                                                                                    
                                                                                                                                
MR.  ANDREASSEN   returned  to  the  PowerPoint,   to  slide  22,                                                               
"Deferred Building and K-12 Maintenance."   He said the need here                                                               
is  $5  billion,  which  is   a  combination  of  $3  billion  in                                                               
identified  need  for  capital improvement  plan  (CIP)  projects                                                               
submitted  to  AML  by  cities and  boroughs,  plus  DEED's  $2.3                                                               
billion  need  for  schools,  with "a  little  bit  of  overlap."                                                               
Currently  there   is  nothing  on  the   state's  approach  that                                                               
recognizes $3  billion in  need for  public buildings  and public                                                               
infrastructure provided  by local government.   He suggested that                                                               
the  state should  recognize this  need for  deferred maintenance                                                               
and construction  essential to  residents of  Alaska.   He talked                                                               
about a  K-12 deferred  maintenance schedule  on a  six-year plan                                                               
organized  by DEED,  but  75  of those  facilities  are owned  by                                                               
municipalities;  therefore,  a  new  approach  is  necessary,  he                                                               
reiterated.    He   mentioned  REAAs  and  said   those  are  the                                                               
responsibility of DEED, but "maybe  there's a new approach to how                                                               
that's done."                                                                                                                   
                                                                                                                                
9:34:35 AM                                                                                                                    
                                                                                                                                
MR.  ANDREASSEN  moved  on  to slide  23,  "Senior  Property  Tax                                                               
Exemption Reimbursement."   He said the need is $90  million.  He                                                               
stated, "Including this as part  of the dividend means that local                                                               
governments have  greater decision  making, can  take on  more if                                                               
they want  to, and also reduce  taxes or ... make  decisions that                                                               
are  entirely in  the interest  of their  local government."   He                                                               
noted that the  tax base was increased in the  City of Fairbanks,                                                               
but because  of the [property  tax] exemption [for  seniors], the                                                               
city actually gets less revenue.                                                                                                
                                                                                                                                
MR.  ANDREASSEN  turned  to  slide   24,  "Water  and  Wastewater                                                               
Upgrades $30 million."  He said the  need here is $3 billion.  He                                                               
indicated  that   a  list  that   Indian  Health   Service  (IHS)                                                               
maintains, submitted  by DEC, shows  a need of $1.6  billion just                                                               
for rural  Alaska.   He said currently  there are  65 communities                                                               
that do  not have  to meet  the requirements  of the  Clean Water                                                               
Act; if  those communities were required  by the state to  do so,                                                               
then  there would  need to  be more  investment.   The investment                                                               
currently made  by the state  is only through the  revolving loan                                                               
fund, which  he said  is successful, and  the Village  Safe Water                                                               
Program.                                                                                                                        
                                                                                                                                
9:36:54 AM                                                                                                                    
                                                                                                                                
MR.  ANDREASSEN, to  Representative  Claman's previous  question,                                                               
showed slide  25, "Variation in  Decision Making."   He indicated                                                               
the decisions  relate to  mitigating risk  for both  parties, for                                                               
local  governments that  take on  responsibilities, and  managing                                                               
risk  at  the  state  level  to the  extent  that  the  state  is                                                               
devolving  some of  those responsibilities.   He  talked about  a                                                               
possible increase in  funding and the likelihood  the state would                                                               
want  to  manage some  of  those  funds.    He talked  about  the                                                               
prospect of  a decrease in  the POMV  such that $586  million was                                                               
not available  and what that  would look  like.  He  talked about                                                               
putting  in  place formulas  as  needed.    He mentioned  a  hold                                                               
harmless provision such  that any power or program  that has been                                                               
taken on cannot be left unfunded,  and perhaps the floor could be                                                               
$200  million.   If the  municipality give  up a  power, then  it                                                               
would be the  responsibility of the state to take  on that power.                                                               
He  illustrated that  a  community that  shuts  down is  probably                                                               
offering  Division of  Election services  or animal  control, for                                                               
example.  He  highlighted that any service not  being provided at                                                               
the  local level  that is  the responsibility  of the  state then                                                               
reverts to the state for coverage.                                                                                              
                                                                                                                                
9:39:38 AM                                                                                                                    
                                                                                                                                
CO-CHAIR  HANNAN  asked whether  AML  has  engaged in  any  other                                                               
revenue streams  in terms of  the Alaska Community  Services Fund                                                               
or whether  the discussion  has focused  solely on  "the dividend                                                               
and  POMV  structure  for  a  place  to  come  up  with  a  local                                                               
government apportionment."                                                                                                      
                                                                                                                                
MR. ANDREASSEN responded that there  are certainly other ways "to                                                               
get  to  this."    He  said currently,  other  than  the  federal                                                               
government, the state is the only  level of government able to do                                                               
a  net  income tax;  therefore,  it  would  have  to be  a  state                                                               
decision to  do that.   If  there were an  income tax,  then that                                                               
would meet funding needs, he said.                                                                                              
                                                                                                                                
CO-CHAIR HANNAN  said when she  thinks of income tax,  she thinks                                                               
of  all  the  income  earned  by  nonresident  workers  in  rural                                                               
communities and how that income  goes back into those communities                                                               
that may  otherwise have  a property tax  to generate  revenue to                                                               
local powers.   She reiterated  her remark about  wondering where                                                               
AML's discussion has focused in terms of revenue streams.                                                                       
                                                                                                                                
9:42:44 AM                                                                                                                    
                                                                                                                                
MR. ANDREASSEN  returned to the  PowerPoint, to slide  26, "State                                                               
Fiscal Note."   He said that "the intent behind  this" is to save                                                               
the state money.  He added,  "If there's not savings to the state                                                               
then  probably a  lot of  this doesn't  make sense.   ...  It's a                                                               
harder  argument  if  I'm  just   here  saying,  'Increase  local                                                               
control.'"                                                                                                                      
                                                                                                                                
9:43:16 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  KREISS-TOMKINS  regarding  "state  direct  budget                                                               
reduction  of  $50-$100  million,"  asked  whether  that  is  net                                                               
savings to the state.                                                                                                           
                                                                                                                                
MR. ANDREASSEN  answered that he  thinks a number like  that must                                                               
be reached in order to  make it justifiable to [the legislature].                                                               
He  said  the   total  outlay  from  the  states,   in  terms  of                                                               
reallocating what  is currently being provided  for some programs                                                               
would be "much  more than this," but "in terms  of the savings to                                                               
state  operating  costs,  I  think,  yes,  you  want  to  get  to                                                               
something  like  this  in  reducing  state  administrative  costs                                                               
across  departments,  ...  and  that  gets  picked  up  by  local                                                               
governments  in a  lot  of  ways."   Mr.  Andreassen  said it  is                                                               
difficult for him to know what  this means in terms of downsizing                                                               
departments, but he thinks "those  should be conversations ... as                                                               
part of  this."  He  concluded, "And if  part of the  goal during                                                               
this  time of  fiscal  crisis  is to  reduce  the  size of  state                                                               
spending to  the extent  you can, and  the state  footprint, this                                                               
maybe helps to meet that need."                                                                                                 
                                                                                                                                
9:44:52 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  CLAMAN speculated  that getting  to a  savings of                                                               
$50 to $100 million would require  the state to put a substantial                                                               
amount into  the fund so  that income  earned off the  fund would                                                               
actually pay out that much money.                                                                                               
                                                                                                                                
MR. ANDREASSEN  answered that without  further analysis  he could                                                               
not offer confirmation.                                                                                                         
                                                                                                                                
REPRESENTATIVE  CLAMAN  said  if  the savings  are  all  achieved                                                               
through efficiencies in departments -  considering the low end of                                                               
$50 million and  figuring an average cost of  $100,000 per worker                                                               
-  hundreds  of people  would  be  losing  jobs.   He  questioned                                                               
whether department staffing  is so bloated that it  could work to                                                               
achieve the desired gain through efficiencies alone.                                                                            
                                                                                                                                
MR. ANDREASSEN  said the idea  is one  in progress and  AML would                                                               
like to work  with the legislature to figure out  the details and                                                               
come to a mutual agreement.                                                                                                     
                                                                                                                                
9:48:48 AM                                                                                                                    
                                                                                                                                
CO-CHAIR HANNAN said  last year the state did  not save residents                                                               
any  money,  "it's  just  they're  now paying  them  at  a  local                                                               
government level instead of the state  level."  She said it was a                                                               
cost shift.   She indicated  that the goal of  AML is "to  seek a                                                               
more efficient  operation of local  delivery of  [local services,                                                               
such as] snowplowing."                                                                                                          
                                                                                                                                
MR. ANDREASSEN commented that  transferring government from state                                                               
to  local  still  results  overall   in  "about  that  same  size                                                               
government."   He said, "Hopefully  you can find  efficiencies in                                                               
that transfer."   He said political views vary on  the issue.  He                                                               
spoke  of setting  intention  regarding  the state's  partnership                                                               
with local  government.   He said this  definitely fits  into the                                                               
legislature's  current conversation  about  how  to allocate  the                                                               
POMV draw.                                                                                                                      
                                                                                                                                
MR.   ANDREASSEN   recapped   his  previous   points   from   the                                                               
presentation as  shown on  slide 27, "Conclusion."   He  said AML                                                               
can "stand  things up pretty  quickly," as evidenced  by programs                                                               
like the AML  Joint Sheriff's Association and  the AML Investment                                                               
Pool,  both  of  which  are statute  driven,  and  AML's  current                                                               
efforts  in  setting  up  an   Alaska  Remote  Seller  Sales  Tax                                                               
Commission  for online  sales in  the state.   He  concluded, "We                                                               
know  how to  do  this  in bringing  together  ... an  interlocal                                                               
administration,  and right  now  those are  really effective  and                                                               
affordable ways to deliver services  for local governments and on                                                               
behalf of local Alaska residents."                                                                                              
                                                                                                                                
9:52:49 AM                                                                                                                    
                                                                                                                                
CO-CHAIR HANNAN thanked Mr. Andreassen for his presentation.                                                                    
                                                                                                                                
9:53:42 AM                                                                                                                    
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
There being no  further business before the  committee, the House                                                               
Standing Committee  on Regional Affairs meeting  was adjourned at                                                               
9:54 a.m.                                                                                                                       

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