Legislature(2019 - 2020)BARNES 124
02/25/2020 08:00 AM House COMMUNITY & REGIONAL AFFAIRS
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| Presentation: the Community Services Fund; a Concept | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
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| + | TELECONFERENCED | ||
ALASKA STATE LEGISLATURE
HOUSE COMMUNITY AND REGIONAL AFFAIRS STANDING COMMITTEE
February 25, 2020
8:02 a.m.
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
8:03:39 AM
CO-CHAIR HANNAN announced that the only order of business would
be a presentation on the Alaska Municipal League's concept for a
community services fund.
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 road miles, 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 billion 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 accepts 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 "wriggle 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 estimate. 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 ceased
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 [educational attendance] 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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