03/20/2001 08:07 AM House CRA

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* first hearing in first committee of referral
+ teleconferenced
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ALASKA STATE LEGISLATURE HOUSE COMMUNITY AND REGIONAL AFFAIRS STANDING COMMITTEE March 20, 2001 8:07 a.m. MEMBERS PRESENT Representative Kevin Meyer, Co-Chair Representative Carl Morgan, Co-Chair Representative Drew Scalzi Representative Lisa Murkowski Representative Gretchen Guess Representative Beth Kerttula MEMBERS ABSENT Representative Andrew Halcro COMMITTEE CALENDAR HOUSE BILL NO. 135 "An Act relating to municipal fees for certain police protection services." - MOVED CSHB 135(CRA) OUT OF COMMITTEE HOUSE BILL NO. 145 "An Act making a civil remedy available to the state or a municipality against persons who make false claims for, or certain misrepresentations regarding, state or municipal money or other property; and providing for an effective date." - MOVED HB 145 OUT OF COMMITTEE HOUSE BILL NO. 20 "An Act relating to state aid to municipalities and certain other recipients, and for the village public safety officer program; relating to municipal dividends; relating to the public safety foundation program; and providing for an effective date." - MOVED CSHB 20(CRA) OUT OF COMMITTEE PREVIOUS ACTION BILL: HB 135 SHORT TITLE:MUNICIPAL FEES: POLICE & FIRE SERVICES SPONSOR(S): REPRESENTATIVE(S)GUESS Jrn-Date Jrn-Page Action 02/21/01 0386 (H) READ THE FIRST TIME - REFERRALS 02/21/01 0386 (H) CRA 02/21/01 0387 (H) REFERRED TO COMMUNITY & REGIONAL AFFAIR 03/15/01 (H) CRA AT 8:00 AM CAPITOL 124 03/15/01 (H) Heard & Held 03/15/01 (H) MINUTE(CRA) 03/20/01 (H) CRA AT 8:00 AM CAPITOL 124 BILL: HB 145 SHORT TITLE:FALSE CLAIMS AGAINST STATE OR SPONSOR(S): RLS BY REQUEST OF THE GOVERNOR Jrn-Date Jrn-Page Action 02/23/01 0416 (H) READ THE FIRST TIME - REFERRALS 02/23/01 0416 (H) CRA, JUD 02/23/01 0416 (H) FN1: ZERO(LAW) 02/23/01 0416 (H) GOVERNOR'S TRANSMITTAL LETTER 03/15/01 (H) CRA AT 8:00 AM CAPITOL 124 03/15/01 (H) Scheduled But Not Heard 03/20/01 (H) CRA AT 8:00 AM CAPITOL 124 BILL: HB 20 SHORT TITLE:AID TO MUNICIPALITIES AND OTHERS SPONSOR(S): REPRESENTATIVE(S)MOSES Jrn-Date Jrn-Page Action 01/08/01 0029 (H) PREFILE RELEASED 12/29/00

01/08/01 0029 (H) READ THE FIRST TIME - REFERRALS

01/08/01 0029 (H) CRA, STA, FIN

01/08/01 0029 (H) WITNESS REGISTER JIM BALDWIN, Assistant Attorney General Civil Division (Juneau) Department of Law PO Box 110300 Juneau, Alaska 99811-0300 POSITION STATEMENT: Requested that the committee favorably forward HB REPRESENTATIVE CARL MOSES Alaska State Legislature Capitol Building, Room 500 Juneau, Alaska 99801 POSITION STATEMENT: Testified as the sponsor of HB Number 0076 CO-CHAIR MEYER announced that the first order of business would be HOUSE BILL NO. 135, "An Act relating to municipal fees for certain police protection services." [Before the committee was CSHB REPRESENTATIVE GUESS, testifying as sponsor of HB CO-CHAIR MORGAN announced that the next order of business would be HOUSE BILL NO. 145, "An Act making a civil remedy available to the state or a municipality against persons who make false claims for, or certain misrepresentations regarding, state or municipal money or other property; and providing for an effective date." JIM BALDWIN, Assistant Attorney General, Civil Division (Juneau), Department of Law, informed the committee that this bill was before the committee in the Twenty-First Legislature as HB 425. process too late. He explained that 145 relating to the cooperation between state and municipal governments when there may claims that have both state and municipal involvement. He informed the committee that cooperation between the state and the municipalities in the Bank of America case has been extremely good, although a rather involved process was followed in regard to how "we were going to conduct ourselves and finance our activities." This 145, Number 0723 MR. BALDWIN emphasized that, from the Department of Law's perspective, the bill provides a fairly potent remedy from a civil context in that it would potentially impose treble damages against a wrongdoer. Furthermore, the bill would establish easy methods of proof [by] following a criminal prosecution for fraud or misrepresentation. Our statute lacks those modern improvements. As far as Mr. Baldwin knew, there have been no questions raised by the municipalities about provisions that touch upon their powers or activities. Mr. Baldwin requested that the committee favorably forward HB 425 what [the committees] did with it last year. She expressed the need for the House Judiciary Standing Committee to review what constitutes a "reasonable time" after the discovery of a false claim as well as some other specific technical issues. CO-CHAIR MEYER asked if Representative Murkowski recalled any concerns that arose with AS taxation code, would be exempt. Also exempt are public assistance, AS 47.25; (ATAP), AS 47.27; worker's compensation, AS 23.30, and the Employment Security Act, AS 23.20. punish people who make false claims and thus there was no desire to change the statutory scheme. Number 1470 REPRESENTATIVE MURKOWSKI moved to report HB CO-CHAIR MORGAN announced that the next order of business would be HOUSE BILL NO. 20, "An Act relating to state aid to municipalities and certain other recipients, and for the village public safety officer program; relating to municipal dividends; relating to the public safety foundation program; and providing for an effective date." Number 1526 REPRESENTATIVE CARL MOSES, Alaska State Legislature, testified as the sponsor of HB that HB He informed the committee that he introduced this legislation several years ago in order to help replace the municipal revenue sharing funds that have been cut. This municipal dividend program will have little impact on the size of an individual's dividend, but will "go a long way to eliminate the scrutiny by the IRS to tax the fund." Representative Moses informed the committee that there should be a couple of minor amendments that his staff will address. He said that the effect of eliminating municipal revenue sharing has been to basically impose taxes on the local governments. Therefore, Representative Moses emphasized the need to replace revenue sharing through the proposal in HB amount of the surplus earnings, he felt the amount should be doubled per dividend recipient and it should not be tied to any particular service. Furthermore, how the money should be spent should be determined at the local level. REPRESENTATIVE MURKOWSKI related her understanding that refers to calculating the [municipal dividend program] based on $150 per dividend. However, the committee has received information indicating a proposal that is based on $250 per dividend. Therefore, she asked if Representative Moses was running two proposals at once. REPRESENTATIVE MOSES said that the Alaska Municipal League (AML) will probably speak to the $250 proposal. Number 1721 REPRESENTATIVE MURKOWSKI related her understanding of how the public safety foundation program would work. She understood that there is a set amount for road maintenance, for example, although within each component there is a provision stating that the municipality can use an amount not exceeding 55 percent of the entitlement for education purposes. She inquired as to why education was treated that way. TIM BENINTENDI, Staff to Representative Moses, Alaska State Legislature, remarked that 20 does include dividend money] to be used as a community match for capital projects under the Municipal Capital Matching Grant Program and the Unincorporated Community Matching Grant Program. REPRESENTATIVE SCALZI related his understanding that "this is the only provision in here that has any type of municipal payment, otherwise everything is set up on ... population -- a hundred and fifty dollars per person, it doesn't matter what your taxing structure is .... I guess that's where we deviate from the current system we have, right?" MR. BENINTENDI agreed. Number 2227 REPRESENTATIVE GUESS inquired as to where cities would fall under this. She said that the health care section had generated this question because there are hospital facilities that aren't in municipalities, such as Bethel. MR. BENINTENDI referred to page 5, Section 7, which delineates eligibility for municipalities. REPRESENTATIVE KERTTULA requested that Mr. Benintendi lead the committee through a scenario in which a community such as Bethel, which has a hospital, would obtain its money from this [municipal dividend program]. MR. BENINTENDI referred the committee to page 9 where three different circumstances are provided. He specified, "First of all, whether it's a community-owned facility or whether it's a nonprofit and then ... there's a size differentiation whether its ten beds or more or ten beds or less. There's a per bed ... entitlement, a per hospital entitlement, or just a flat [$]9,000 on line 11 for hospitals with less than ten beds." MR. BENINTENDI pointed out that on page 9, lines 23-23, the bill provides for health clinics. Page 9, line 24, delineates a $360 a bed charge for a health facility, an institution that is not set up as a hospital. REPRESENTATIVE KERTTULA asked if there are hospitals that wouldn't be covered by this or are all hospitals in the state located in municipalities or are they all nonprofits. MR. BENINTENDI answered that he didn't know. Number 2400 GREGG HANSON, Member, Unalaska City Council, testified in support of HB testifying as a city council member with seven-and-a-half years experience. Over that period of time, he has followed the changes in municipal funding. Although the City of Unalaska feels that developing a long-term fiscal plan is imperative, Mr. Hanson said that he would limit his comments to the area of health and public safety. MR. HANSON informed the committee that he has over 13 years experience with the Unalaska Volunteer Fire and Emergency Medical Service (EMS) Departments. Over the years Unalaska has been fortunate with its own tax revenues and has not had to cut its [health and public safety] services. However, he acknowledged that this is not the case with many outlying communities that are operating, due to budget cuts, with old or insufficient equipment and with a lack of training. Mr. Hanson also informed the committee that he was a recent patient in the Unalaska system because he suffered a heart attack in Unalaska clinic and EMS people, I probably would not be here today enjoying the privilege of testifying to you. I want every resident of this great state to have that level of care available to them. And this bill will help us work towards that goal." Number 2505 KEVIN RITCHIE, Executive Director, Alaska Municipal League (AML), testified in support of Anchorage Daily News on March 7, 2001. Former Governor Hammond's editorial noted his support of a municipal dividend concept as part of the solution to Alaska's financial problems. He also informed the committee that the committee packet should also contain a letter of support [for HB 20 permanent fund dividend, a municipal dividend, which would go directly to communities and bypass the IRS. Under the current situation, local taxes will increase, individuals will receive a PFD, which - if you're paying taxes - will be taxed and sent to Washington, D.C. Taxes would still increase and the individual would pay more local taxes on the [PFD]. On the other hand, the municipal dividend would take money and place it in the services that people want to see. Therefore, the IRS would be bypassed and millions of dollars that would otherwise go to Washington, D.C., would be kept in the state. Furthermore, the municipal dividend increases the public purpose of the PFD. MR. RITCHIE turned to the vote on the tax cap initiative, the results of which were that the vast majority of Alaskans didn't want to cap or cut their property taxes. Mr. Ritchie surmised that the result of the vote on the initiative was due to the public's support of the purposes the taxes are used for in their communities. He further related his belief that the tax cap initiative was defeated because people want good schools and health services. This legislation would provide a more effective means to support those services in each community. He informed the committee that Representative James did a constituent survey in North Pole and Salcha. This survey said that the [legislature] would like to use part of the earnings of the PFD "in this way to support these particular services." The overwhelming majority of those in North Pole and Salcha thought that was a good idea. Mr. Ritchie felt that people supported this [municipal dividend program] because the legislation specifies how the money will be used. Number 2741 MR. RITCHIE addressed the earlier question regarding the 55 percent entitlement for schools. He pointed out that the entitlement was generated by second class boroughs, specifically the Fairbanks North Star Borough. He explained that a borough with lots of service areas would have the money go into roads and fire, which is mainly provided through service areas, but there wouldn't be a good way to provide general tax relief or general money for services in the community. In places such as Fairbanks and Kenai, most of the money going to revenue sharing goes to the schools. Therefore, the 55 percent was used in order to approximate the amount of money that currently goes to schools from revenue sharing and thus it would not cause an increase in taxes locally. Mr. Ritchie pointed out that if a larger community dividend was generated [under the $250 option], a separate category could be established for schools. Essentially, a $26 or $27 million contribution for schools could be created. Therefore, it wouldn't be necessary "to have a percentage of the other funds that would be allocated to the other services, but it could be more generally service provision and tax relief and extremely straightforward as to how the money is allocated," he said. He also pointed out that the word "entitlement" could be easily changed. Number 2844 MR. RITCHIE said that he could provide the committee with a history of revenue sharing. He explained that the revenue sharing program began in 1972; it began much like the program proposed in HB fire protection, police, planning, and roads. In the 1980s when there was oil money, the system was thought to be complex and it was suggested that municipalities be given chunks of money. That approach worked the first couple of years. However, one didn't know where the money in this large pot went and that meant it couldn't be defended well [in the face of cuts] because there wasn't much information regarding its use. Therefore, it was easier to justify a reduction [to that money]. The federal government used a similar revenue sharing program, which faced the same fate of being reduced year after year. Mr. Ritchie informed the committee that on the state level, municipal revenue sharing as a block grant has been reduced by about 80 percent over the past 15 years. Mr. Ritchie said, "Even though it took our members a number of years to come to grips with this issue that revenue sharing as a block grant probably wasn't going to be something that would be a permanent fixture, they have, I believe, come to a realization that both in terms of public accountability, accountability to the legislature, that there needs to be some accountability that goes along with the distribution of money." MR. RITCHIE turned to Representative Murkowski's earlier question regarding how this money is allocated to unincorporated communities. He said that this bill attempts to be balanced since the amount of money going into unincorporated communities remains in the bill. Additionally, a fire department in an unincorporated community would still be eligible for... TAPE 01-14, SIDE B MR. RITCHIE continued, "...uses the methodology of the municipal capital matching grants, which was a program approved under the Hickel Administration to allocate capital matching money for capital projects to communities around the state." He pointed out that the municipal matching grants program has an allocation for unincorporated communities and small communities. This bill wouldn't change that program. With regard to specific questions regarding unincorporated communities, Mr. Ritchie deferred to Bill Rolfzen, State Revenue Sharing, Municipal Assistance, National Forest Receipts, Fish Tax; Division of Community and Business Development; Department of Community & Economic Development (DCED). In regard to whether this covers hospitals, Mr. Ritchie related his belief that this would cover all eligible hospitals in the state whether the hospital is in a municipality or not. Number 2917 MR. RITCHIE referred to a packet of information that he had provided the committee. That information is aimed at a larger dividend. The page containing the analysis of HB garner the necessary long-term support. REPRESENTATIVE SCALZI asked if AML felt that HB community would only receive the $20 per person for fire service if the community provided fire service. Although $20 per person for fire service will not cover that service, it provides an incentive to provide that service. REPRESENTATIVE SCALZI asked if a fire service district would be eligible for these funds or would the funds have to go to the municipality. MR. RITCHIE answered that the funds would go to the organization if it [the organization] wasn't part of an organized municipality. He turned to Kenai as an example. Kenai has several EMS organizations that are not part of the city. In that case, he presumed that the money would go to the borough that would allocate the money to those organizations. Number 2404 REPRESENTATIVE MURKOWSKI asked if AML would prefer the $250 per individual amount. MR. RITCHIE said, "We would agree with the sponsor that a higher amount has, still, a very small impact on the dividend, but has more benefit to the people of the state." He mentioned that AML is meeting next week with the Legislative Conference and this will be put before the members. In discussions with AML's Board and the Revenue and Finance Subcommittee, support of the higher amount has been noted at this point. He emphasized the need to continue to educate AML members because it is important for every community to think this is a good idea. Number 2315 JIM KELLY, Director, Communications, Alaska Permanent Fund Corporation, Department of Revenue, informed the committee that the long-standing position of the [Permanent Fund Corporation] board is that it neither supports nor opposes any proposals relating to the use of fund earnings. However, he did mention the proposal encompassed in 15] is paid out. Therefore, the inflation-proofing money no longer has to be moved from the earnings reserve account to the principal, where it cannot be spent. [The inflation-proofing money] amounts to about $700 million this year. In a situation in which there are two to three consecutive years of negative earnings, the earnings reserve account would eventually be depleted and there would be no money for anything. Therefore, it's important to bulk up the earnings reserve account. For example, there was about $6.5 billion in the earnings reserve account on June 30, 2000. Nine months later, after paying out $1 billion and suffering about a 6.5 percent negative return, the earnings reserve is down to about $4 billion. A couple more years such as that could deplete the earnings reserve account, which would result in a serious problem. REPRESENTATIVE MURKOWSKI inquired as to where "the give" would occur if there is a municipal dividend program in statute and the cap on the PFD in the constitution. She related her assumption that the PFD to the people would end at some point. MR. KELLY pointed out that 20 REPRESENTATIVE MURKOWSKI commended Representative Moses for his proposal. She remarked that [the municipal dividend program] is a good idea. She acknowledged, "Perhaps, there hasn't been the political will to go into the earnings reserve arena, probably understandably so." However, she expressed her hope are approaching the point at which something such as ADJOURNMENT There being no further business before the committee, the House Community and Regional Affairs Standing Committee meeting was adjourned at 9:35 a.m.

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