Legislature(2007 - 2008)
05/12/2007 03:25 PM House FIN
| Audio | Topic |
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| Start | |
| SB72 | |
| SB53 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE FINANCE COMMITTEE
May 12, 2007
3:25 P.M.
CALL TO ORDER
Co-Chair Meyer called the House Finance Committee meeting to
order at 3:25:35 PM.
MEMBERS PRESENT
Representative Mike Chenault, Co-Chair
Representative Kevin Meyer, Co-Chair
Representative Bill Stoltze, Vice-Chair
Representative Harry Crawford
Representative Richard Foster
Representative Les Gara
Representative Mike Hawker
Representative Reggie Joule
Representative Mike Kelly
Representative Mary Nelson
Representative Bill Thomas Jr.
MEMBERS ABSENT
None
ALSO PRESENT
Representative Gabrielle LeDoux; Representative Paul Seaton;
Representative Bryce Edgmon; Representative Nancy Dahlstrom;
Tim Grussendorf, Staff, Senator Lyman Hoffman; Fred Fisher,
Staff, Senator Bert Steadman; Shawna Crondahl, Alaska
Municipal League (AML), Juneau; Denise Michels, Mayor, City
of Nome; Bill Rolfzen, Local Government Specialist,
Department of Commerce, Community and Economic Development
PRESENT VIA TELECONFERENCE
Dick Wyland, Mayor, City of Seldovia; Jerome Selby, Mayor,
Kodiak Island Borough; Dan Coffey, Assembly, Municipality of
Anchorage
SUMMARY
CS SB 53(FIN)
An Act making and amending appropriations,
including capital appropriations, supplemental
appropriations, and appropriations to capitalize
funds; ratifying certain expenditures; and
providing for an effective date.
CS SB 53 (FIN) was HEARD & HELD in Committee for
further consideration.
CS SB 72(FIN)
An Act relating to the community revenue sharing
program; and providing for an effective date.
CS SB 72 (FIN) was HEARD & HELD in Committee for
further consideration.
3:26:13 PM
CS FOR SENATE BILL NO. 72(FIN)
An Act relating to the community revenue sharing
program; and providing for an effective date.
TIM GRUSSENDORF, STAFF, SENATOR LYMAN HOFFMAN, explained
that SB 72 would establish a sustainable revenue sharing
program based on the owner-state concept. The resources of
the State belong to all Alaskans. Cities and boroughs were
formed by the State as political subdivisions to provide
services to the people. Without revenue sharing, the entire
cost of basic services is borne by local taxpayers.
Mr. Grussendorf continued, skyrocketing fuel and retirement
system costs and inflation, in conjunction with severe cuts
in revenue sharing over the past several years have local
governments trying to continue to provide even basic
services such as snow removal, road maintenance, public
safety and education.
SB 72 provides a means for sustainable revenue sharing in
order to allow communities to continue providing basic
services. SB 72 allows the Legislature to allocate 3% of
certain natural resource revenues or up to $50 million
dollars for community revenue sharing each year. Basing
revenue sharing on the State's annual income allows for the
flexibility needed to continue the program during lean years
when State revenues are down. Without a consistent &
dependable revenue sharing, provisions of basic services
will continue to decline. Some small communities have
already closed their doors. SB 72 provides the tool to
solve the problem of helping local governments fund basic
services.
3:29:53 PM
Representative Hawker asked if the bill before the Committee
was for the $50 thousand dollars. Mr. Grussendorf explained
that it initially was intended to be $75 thousand dollars
and he requested the Committee to amend that language.
3:31:10 PM
Mr. Grussendorf overviewed handout 1, Senate Finance
Committee (SFC) numbers. (Copy on File). All numbers from
communities within a borough were backed out in order that
there be no "double dipping". He pointed out the base
support per capita column, giving Anchorage $3.5 million
dollars with the percent column tying it to SB 125 [cost
share]. Of the $66 million dollars spent by the State to
get communities to the 22% mark, Anchorage receives $26
million, which represents 39.76% of the total.
3:33:26 PM
Mr. Grussendorf noted that SB 72 attempts to proportionately
apply that number to the revenue sharing bill, a lesser
amount. If an area does not participate in the Public
Employees Retirement System (PERS) and/or is under the 22%
amount, a zero will be indicated.
3:34:23 PM
Mr. Grussendorf referenced the redistribution of the PERS
capita column, which is the total equaling $6.1 million
dollars and redistributed to the communities either fewer
than 22% or those that did not participate in the PERS.
That action was incorporated to keep it accurate & in
proportion to SB 125. State assistance pays to get to the
22% column and places Anchorage at $26 million dollars for a
total PERS assistance and revenue sharing of $34.3 million
dollars, equaling 30% of the two programs combined. A
population determination was made with the FY06 numbers and
has not been confirmed yet.
3:36:48 PM
Representative Thomas inquired if there would be a review of
changes made during the hearing in the House Community and
Regional Affairs (HCRA) Committee. Mr. Grussendorf
explained in that Committee, the unincorporated communities
that reside within boroughs addressed. He understood that
there are 30 communities meeting qualifications for
essential services. The Senate Finance Committee (SFC)
decided that should be a policy call and that those areas
have not been included since revenue sharing was started.
They do not receive a base amount & are usually covered
within the borough allocation. He discussed, those changes
add another $1 million dollars to the program.
3:38:41 PM
Representative Thomas asked if the PERS/TRS contributions
made within a borough had been "backed out". Mr.
Grussendorf noted such calculations had not been made in the
previous committees. If the populations were backed-out and
put in with the unincorporated communities, the PERS number
would decline, contributing at a different amount, changing
the formula.
3:40:06 PM
Representative Gara questioned how that compared to last
year. Mr. Grussendorf replied it was the same.
Representative Gara inquired if the amount adds more
unincorporated communities this year. Mr. Grussendorf said
that the unincorporated communities had not been included
last year. Representative Gara voiced concerns that some
communities will receive less than last year; he recommended
inflation proofing and capping.
3:41:43 PM
Co-Chair Meyer interjected that last year, it was called
Energy Assistance and was in the amount of $65 million
dollars. He understood that the version passing out of the
HCRA Committee included more communities than the SFC
version.
3:42:37 PM
Representative Nelson noted the fiscal note had increased by
$1 million dollars, however, the amount of money for the
unincorporated communities had been diluted by adding the
30. She questioned if the additional funding had been
allocated to the incorporated communities.
Co-Chair Meyer requested that someone from the HCRA
Committee explain the fiscal impact. Vice Chair Stoltze
pointed out that the SFC did not have many legislators from
Anchorage; he recommended that the House Finance Committee
(HFC) scrutinize it more closely.
3:45:51 PM
Representative Hawker discussed taking the absolute amount
that the communities received as a percentage of the entire
benefit. The absolute number is being reduced by a per
capita formula. He argued that within the PERS solution,
there is concern with the equity of the conclusion. He was
worried with the distribution formula and did not think it
was fair. Mr. Grussendorf explained it had been done
proportionately to pay assistance in order to get the rate
reduced to 22%. He hoped it was fair & that all communities
would be included.
Representative Hawker commented that the formula was meant
to "punish" communities that provide for themselves. He
pointed out that the PERS school districts had been factored
in at 22%. Mr. Grussendorf maintained that the legislation
was not punishing but rather including. Having a statewide
revenue sharing program including all the communities is
fair. It is important to include them all through the per
capita shared in the State resource revenue. Representative
Hawker pointed out that Fairbanks was a good example of a
case in dispute. Mr. Grussendorf emphasized that the bill
is all inclusive.
3:53:37 PM
Representative Hawker recommended discussing the fund source
change.
Representative Nelson addressed the issues of revenue
sharing versus PERS/TRS. Revenue sharing and municipal
assistance had been removed during the operating budget
discussions. She voiced concern that communities that do
not participate in PERS, will be receiving nothing, which is
unfair. With a PERS/TRS fix to communities that have a 33%
rate, adjusting it, others will be paying more than they
should and would be placed on a "hero's list". She believed
that communities on the list should not be punished because
of their foresight & planning.
Representative Kelly pointed out that even though Fairbanks
has a high number of public employees, they have never
missed a payment; they were placed on the "hero's list".
Mr. Grussendorf pointed out that Fairbanks had been included
in statewide revenue sharing.
Representative Gara questioned the amount of revenue sharing
last year. Co-Chair Meyer remembered that the total amount
last year was $65 million dollars including the PERS
increased amount and some energy assistance. Representative
Hawker concurred.
Representative Gara asked if those funds were distributed
along the revenue sharing formula. Co-Chair Meyer discussed
adding more dollars for PERS/TRS this year; he thought
Anchorage was being reduced from 40% to 22% PERS.
4:00:37 PM
Representative Hawker spoke to equity. He referenced the
spreadsheets and the State assistance amount of $65.9
million dollars, approximately $100 dollars per head. He
thought the amounts were being disproportionately reduced.
Mr. Grussendorf acknowledged that, however, pointed out that
Anchorage makes the mean at $94 dollars per capita.
Representative Nelson recommended that in order to make the
discussion "fair", the Committee should apply the Institute
of Social and Economic Research (ISER) study on area cost
differentials, stressing that the cost of living is greater
the further "out" one goes in the State.
Representative Gara pointed out that the proposed amount of
revenue sharing is less than when the State was in a "budget
deficit mode"; it has not been adjusted for inflation, which
is inadequate.
4:05:33 PM
Co-Chair Meyer asked about discussion heard in the HCRA
Committee.
REPRESENTATIVE GABRIELLE LEDOUX distributed the spread
sheets from HCRA and addressed policy concerns. (Copies on
File). She commented on disincentives for organizing into a
borough, stating that the 30 communities were being punished
and not providing fire protection, emergency medical, water
& sewer, and/or the four other criteria. The HCRA
Committee version included those communities.
4:08:29 PM
REPRESENTATIVE PAUL SEATON added that the HCRA version did
address concerns voiced by Representative Hawker,
incorporating a cap of $50 thousand dollars. He referenced
the spreadsheets from the Department of Community & Economic
Development.
Representative Seaton stated that the unincorporated
communities only count if they supply three criteria and not
those supplied outside the boroughs. Everyone will gain by
adopting that version. The municipalities went from a per
capita amount to a per capita distribution of 47.60%. The
unincorporated per capita is equalized among both inside and
outside the boroughs.
Representative Seaton indicated that there would be no
double-dipping. Also, the difference between the
unincorporated is that there would be no PERS distribution
and no revenue sharing in the PERS formula for any of those
communities.
4:12:49 PM
Representative Thomas inquired if the unincorporated
communities would have to provide for the education fund.
Representative Seaton said yes but do not provide for the
actual school, which is provided by a school district or by
a borough.
Representative Thomas hoped that the bill would provide
funding for those not receiving the PERS/TRS.
Representative Seaton noted that the PERS adjustment goes
toward school district borough assistance and that revenue
sharing is different from the TRS, offsetting the cost
increase. Revenue sharing provides support to provide basic
local services.
4:15:29 PM
In response to Co-Chair Chenault, Representative LeDoux
outlined the seven criteria:
· Fire protection
· Emergency medical service
· Water & sewer
· Solid waste management
· Public road maintenance
· Public health
· Search and rescue
Co-Chair Chenault asked if his area qualified, noting that
they had not been included in the list. Representative
Seaton asked if they were classified as a second class city
and recommended a reassessment.
4:18:07 PM
Vice Chair Stoltze mentioned concerns with his district &
the criteria. Representative Seaton said if they were
provided for independently, the bill as written does not
remove from a municipality; it can be adjusted for cities.
Representative LeDoux added it does not address road service
areas, communities, which are managed through grants or
paying into a central community entity to provide benefits.
Co-Chair Chenault commented his area has elected to tax in
order to provide services. Representative LeDoux did not
understand why that district had not been included.
Vice Chair Stoltze spoke to the reality of local government
frustration. Representative LeDoux reiterated that most of
the areas are remote with few road system accessibility.
4:22:01 PM
Representative Gara pointed out that $48.1 million dollars
was equal to the amount paid last year in energy assistance.
Vice Chair Stoltze stated that past per head capita revenue
sharing had been generous.
Representative Gara referenced the language on Line 10, Page
1, version \L, that the amount could not be greater than $50
million dollars. Unless statute is changed, the amount can
never increase beyond $50 million dollars. Representative
LeDoux concurred. Representative Gara questioned placing
the language in statute because it prevents inflation
proofing.
4:25:12 PM
SHAWN CRONDAHL, ALASKA MUNCIPAL LEAGUE (AML), JUNEAU,
testified that AML supports SB 72 - revenue sharing. She
pointed out that revenue sharing began in 1969 with the
intent to assist local governments financially so that they
could provide adequate levels of services. The lack of
revenue sharing for the past several years along with
increases to the PERS contributions have destabilized local
property sales tax rates and threatened the provisions of
basic public safety and other critical services.
Ms. Crondahl advised that SB 72 & SB 125 are an acceptable
compromise to the municipalities. She stated that the $50
million dollar cap is less than the Legislature provided in
previous years. She read from prepared statements.
4:28:58 PM
Ms. Crondahl pointed out that SB 72 only asks 3% of certain
natural recourse revenues and a small share of royalties.
She maintained that stable local governments provide the
best atmosphere to live, work and do business.
Vice Chair Stoltze noted that previously, revenue sharing
had been funded through the Permanent Fund & asked AML's
position on that. Ms. Crondahl responded that the Permanent
Fund could be politically sensitive.
4:32:42 PM
Representative Gara spoke to the future year's funding cap.
Ms. Crondahl pointed out that the original bill offered a
flat 6% certain of all natural resource revenues and in
FY08, the amount was estimated to be $120 million dollars.
4:33:46 PM
DENISE MCHELS, MAYOR, CITY OF NOME, spoke on behalf of the
legislation, pointing out that it would be a "good
beginning" for revenue sharing. The City of Nome has dipped
into reserves for the past several years. Rural villages
are hurting and cannot sustain basic services.
4:35:20 PM
DICK WYLAND, (TESTIFIED VIA TELECONFERENCE), MAJOR, CITY OF
SELDOVIA, stressed the importance of revenue sharing. He
noted services provided by the City had been reduced. The
legislation will provide a great asset, acknowledging that
Seldovia could "survive" with the $48 million dollar
addition to the PERS/TRS funding.
4:37:52 PM
Representative Gara pointed out that there is a cap
preventing future revenues from exceeding the $50 million
dollars. Mayor Wyland hoped the level would increase next
year. He acknowledged the importance of capital projects,
hoping that revenue sharing could provide planning for
extended projects. He noted that his area has one of the
highest sales taxes in the State. The community is moving
toward becoming a retirement community and is struggling as
are most other coastal communities.
In response to a question regarding property tax by Vice
Chair Stoltze, Mayor Wyland said they are paid year-round;
however, some properties are not residential and not taxed.
4:41:35 PM
JEROME SELBY, (TESTIFIED VIA TELECONFERENCE), MAYOR, KODIAK
ISLAND BOROUGH, testified in support of the legislation,
including the unincorporated communities. The legislation
accomplishes a number of important items. The money
received from the State is based on natural resource income,
which is a critical factor in that it is the "people's
money". He felt it was appropriate to return some of those
revenues to help on the local level. He acknowledged that
the help of the PERS/TRS would shift more than 3% to rural
communities. It takes $100 to $125 thousand a year to have
a functioning government community and shifting the PERS
adjustment, small communities could be in the range of $85 -
$125 thousand. The legislation accomplishes the objective
of getting money to all communities, particularly the
smaller ones. He addressed unincorporated borough
distribution of money.
4:46:25 PM
DAN COFFEY, (TESTIFIED VIA TELECONFERENCE), CHAIRMAN,
ANCHORAGE ASSEMBLY, spoke in support of SB 72. Anything
received from the State in Anchorage goes "dollar for
dollar" toward property tax relief. He maintained that new
programs would not be started through additional funding.
He mentioned that this year's tax assessment has been held
in order that it can be adjusted in accordance of
legislative action. He pled for a revenue sharing bill that
could be counted on.
In response to a question by Co-Chair Meyer, Mr. Coffey
advised that relief from PERS/TRS would also go toward
property taxes.
4:49:42 PM
Responding to Vice Chair Stoltze, Mr. Coffey noted that
Anchorage bares a large burden for social services from
people moving in from small towns & villages. He did not
know enough to debate the value of the legislation for
Anchorage. The Anchorage Assembly is looking for a level of
certainty and hopes the Legislature is able to find a fair
dynamic. He preferred "any relief to no relief". Vice
Chair Stoltze mentioned the difficulty in making statutory
changes. Mr. Coffey acknowledged the risk of "going down a
road that the direction cannot be changed", reiterating the
importance of tax relief.
4:53:07 PM
Representative Nelson referenced the social service burden
existing in Anchorage, stressing that if the Legislature
does not recognize the economic crisis of rural Alaska, the
migration to Anchorage is going to create an even greater
social service burden. She noted that Anchorage has a high
level of municipal services. She stated she would support
paying sales tax while visiting Anchorage. Co-Chair Meyer
interjected that Anchorage currently pays high property
taxes.
4:56:03 PM
Representative Gara observed that North Slope oil has
resulted in many benefits for Anchorage. Mr. Coffey
maintained that the reliance on property tax outstrips the
ability of property to ultimately meet the burden.
Co-Chair Chenault asked the property tax rate in Anchorage.
Mr. Coffey replied 13 to 16 mills, depending on the service
area. Co-Chair Chenault noted that Kenai pays 12.5 to 13
mills with a 2.5 percent sales tax in order to provide equal
services. Mr. Coffey observed the reluctance of Anchorage
residents to accept a sales tax; each election has over a
70% "no" vote when on the ballot. Co-Chair Chenault noted
that taxes can help provide property tax relief. He pointed
out that Kenai provides $14 million toward schools, not paid
through property taxation.
4:59:24 PM
Co-Chair Chenault asked the percentage of property owners
versus population. Mr. Coffey thought about 66% of
Anchorage citizens own their own homes, with a declining
availability of land. He stressed that Anchorage would need
other specialty taxes or cut services.
5:00:46 PM
Representative Gara asked for more information regarding the
cap.
BILL ROLFZEN, LOCAL GOVERNMENT SPECIALIST, DEPARTMENT OF
COMMERCE, COMMUNITY AND ECONOMIC DEVELOPMENT, explained that
6% is roughly $126 million dollars.
Representative Nelson asked how the HCRA version would
affect small unincorporated communities. Mr. Rolfzen noted
that there are an estimated 30 communities that would be
funded, the first time in the history of revenue sharing
that unincorporated communities within boroughs are funded.
Those communities have not been part of the formula since
they were in an organized borough and were then calculated
within the borough's determination. Borough assemblies have
been responsible for that funding. Co-Chair Meyer noted
that boroughs do not always distribute their funding
equitably.
5:05:32 PM
CSSB 72 (FIN) was HEARD and HELD in Committee for further
consideration.
CS FOR SENATE BILL NO. 53(FIN)
An Act making and amending appropriations, including
capital appropriations, supplemental appropriations,
and appropriations to capitalize funds; ratifying
certain expenditures; and providing for an effective
date.
Co-Chair Meyer stated that the Senate version of the capital
budget had been received in Committee. He advised that the
House Finance Committee version preparation would be
prepared by late evening.
FRED FISHER, STAFF, SENATOR BURT STEADMAN, spoke to the CS
SB 53(FIN)\N version outline.
· Sections 1-6 are capital projects and grants
· Section 7 is the FY08 operating line for the
monetary terms of the collective bargaining
agreements
· Sections 10-24 indicates FY07 supplemental
appropriations
· Sections 25-31 provides the language sections
pertaining to the FY08 capital appropriations
· Sections 32-45(a) indicates reappropriation items
· Section 45(b) provides an FY08 operating item
· Section 46 indicates a reappropriation item
· Section 47 is a supplemental appropriation item
· Sections 48 & 49 are reappropriations
· Section 51 is a reappropriation item
· Sections 52 & 53 are appropriations to the remaining
FY07 surplus to the Constitutional Budget Reserve
(CBR) & the Alaska Housing Finance Corporation
(AHFC) components
5:12:52 PM
Mr. Fisher noted the total capital budget grants from
General Fund sources are $458.6 million dollars, of which
$240.6 million were Governor request items; $218 million SFC
additions including Railbelt Energy and National Petroleum
Reserve-Alaska (NPR-A) impact grants, totaling an additional
$85 million dollars.
5:14:32 PM
CS SB (FIN) was HELD in Committee for further consideration.
5:15:26 PM
Representative Gara inquired about the outstanding bills
remaining in Committee.
ADJOURNMENT
The meeting was adjourned at 5:15 P.M.
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