Legislature(1999 - 2000)
04/12/1999 01:50 PM House FIN
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE FINANCE COMMITTEE
April 12, 1999
1:50 P.M.
TAPE HFC 99 - 76, Side 1.
TAPE HFC 99 - 76, Side 2.
TAPE HFC 99 - 77, Side 1.
CALL TO ORDER
Co-Chair Therriault called the House Finance Committee
meeting to order at 1:50 P.M.
PRESENT
Co-Chair Therriault Representative Foster
Co-Chair Mulder Representative Grussendorf
Vice Chair Bunde Representative Kohring
Representative Austerman Representative Moses
Representative J. Davies Representative Williams
Representative G. Davis
ALSO PRESENT
Representative Norman Rokeberg; Patti Swenson, Staff,
Representative Bunde.
TESTIFIED VIA TELECONFERENCE
Chris Birch, Anchorage; Brooks Chandler, Girdwood; Jim
Norcross, Mat-Su; Hank Hove, Mayor, Fairbanks.
SUMMARY
HB 96 An Act relating to deposits to the Alaska
permanent fund.
HB 96 was HELD in Committee for further
consideration.
HB 133 An Act relating to municipal service areas and
providing for voter approval of the formation,
alteration, or abolishment of certain service
areas; and providing for an effective date.
CS HB 133 (FIN) was reported out of Committee with
a "do pass" recommendation and with a zero fiscal
note by the Department of Community and Regional
Affairs dated 3/31/99.
HB 161 An Act relating to reduction in payments to
individuals under certain benefit programs; and
providing for an effective date.
CS HB 161 (FIN) was reported out of Committee with
"no recommendation" and with a zero fiscal note by
the Office of the Governor.
HOUSE BILL NO. 96
"An Act relating to deposits to the Alaska permanent
fund."
REPRESENTATIVE NORMAN ROKEBERG testified that HB 96 would
return the percentage of all-mineral lease royalties and
bonuses deposited into the Permanent Fund to the
constitutionally mandated 25 percent.
He continued, the legislation would propose changes to a
statute, not the Alaska Constitution. The Constitution
states that "at least twenty-five percent of all mineral
lease rentals, royalties, royalty sale proceeds, federal
mineral revenue sharing payments and bonuses received by the
State shall be placed in a permanent fund". In 1980, the
Legislature realized excess revenues existed and wisely
decided to raise the amount of royalties and bonuses
deposited into the Permanent Fund to 50 percent.
Representative Rokeberg stated that it is time for the State
of Alaska to redirect those deposits to the general fund.
He believed that passage of the proposed legislation would
generate an extra $9.5 million dollars in FY00. He urged
passage of the legislation.
Representative Rokeberg referenced the printed handout
provided by the Department of Revenue, Deborah Vogt, dated
3/26/99. [Copy on File]. The memo was drafted in response
to the request for information on the royalties and other
mineral payments that would be affected by the proposed
legislation. The memo indicates that the bill would reduce
to 25% the contribution to the Permanent Fund of those
mineral payments that are currently being made at a 50%
rate.
Additionally, Representative Rokeberg referenced the
memorandum from the Alaska Permanent Fund Corporation
(APFC), Jim Kelly, Director of Communications. [Copy on
File]. The intent of the memo was to make a distinction
between the impact of the bill on per capita dividends over
the next five years, both compared to the status quo and
assuming passage of a one-time $4 billion dollar transfer
from the Fund's earning reserve account to the Capital
Budget Reserve Fund (CBRF) per the Governor's proposal.
Based on a financial analysis, the impact would be less than
a $10 difference over five years.
Representative Rokeberg pointed out that the funds would not
include any mineral resources or bonus money. Last year,
$53 million dollars in bonus bids was received, which added
up to an additional $12.5 million dollars for the FY2000
budget and does not include federal receipts.
Representative Grussendorf clarified that the legislation
would increase the revenue stream from oil to the general
fund and would reduce it by $12.5 million dollars. He noted
that the original 50% legislation was passed so that amount
would be placed into the corpus for investment purposes. He
reminded Committee members that any long-range fiscal plan
will need to take the Earnings Reserve Account into
consideration. He recommended that it remain consolidated
for investments within the corpus.
Co-Chair Therriault pointed out that the Alaska State
Constitution indicates that 25% should be placed into that
account and that with passage of the legislation that would
continue to occur. Representative Grussendorf understood
that the legislation would repeal the statutory 25%
recommendation.
Representative Rokeberg stated that the State Constitution
clearly illustrates that the earnings of the corpus can be
spent by the general fund. Representative Grussendorf
emphasized that a long-range fiscal plan should be based on
the Earnings Reserve Account, not an additional stream into
the general fund. Representative Rokeberg commented that it
is appropriate for the Legislature to appropriate money for
the budget. He interjected that it is now time to redirect
the 50% statutory language so it can be used as needed. The
bill does not speak to what should be done with that money.
Representative Bunde spoke in support of the proposed
legislation. He suggested that the public has dictated how
they would like the Legislature to spend money by who they
have elected to office.
Representative J. Davies argued that point. He added that
it is important to look at a long-range fiscal plan for the
State. He voiced his preference to continue depositing
money into the corpus of the fund. At this time, the fund
is not large enough to "spin off" enough money to address
the State's financial condition.
Co-Chair Therriault asked how the State should manage the
$1.2 billion dollar deficit which it is facing.
Representative J. Davies stated that the State could
"absolutely" manage that deficit. He pointed out that
Alaska has $2.4 billion dollars in the Earnings Reserve
Account, and that the State expects a similar amount to be
deposited into that account over the next fiscal year.
Representative Grussendorf recommended that the needed funds
could always be taken from the Earning Reserve Account or
from the general fund. If those funds are not desperately
required, the money should stay in the corpus generating an
annual income. He recommended that the present statute stay
in tact until a long-term plan had been devised.
Representative Grussendorf concluded that the $12 million
dollars is a small amount and that the structure should not
be changed in order to access it.
Representative Rokeberg pointed out that any money taken
from this fund would create a situation which would cause no
further public tax implementation. He proposed that a prior
legislature's law is now binding the current legislature as
to how additional deposits should be made to the corpus. He
urged passage of the bill.
Representative Williams asked how the legislation would
affect the State's ability to generate more earnings. Co-
Chair Mulder explained that if the State can utilize this
money now, it could delay a statewide tax for a period of
time. He added, the financial management of that account
would drive the overall health of the Permanent Fund. The
future of the Permanent Fund will be dependent upon a
structure being established to retain the financial health
of that fund. He believed that the revenues lost from
passage of the bill would be inconsequential to the relative
current health of the general fund.
Co-Chair Therriault noted that the Legislature has many
opportunities to make contributions to the Permanent Fund.
Representative Grussendorf referenced the original premise
of the Permanent Fund in which the Constitution is explicate
that the interest earned off of it should be used as
designated by statute. Over $3 million general fund dollars
has been placed into the corpus of that fund. Outside of
that concern, Representative Grussendorf emphasized that the
title of the proposed legislation was too broad and that in
the future, the earnings reserve could possibly be attached
into the corpus. Co-Chair Therriault acknowledged that the
title would need to be tightened.
In response to Representative Austerman, Co-Chair Therriault
explained that 25% was deposited and did not come through
the general fund. The additional 25% was a yearly
appropriation of general fund dollars into the corpus.
Representative J. Davies pointed out that this money would
be a statutory dedication. The money funds need to
technically be placed into the general fund and then
deposited. Any legislature has the authority to pass a bill
as the one proposed. He clarified that there has been no
binding of one legislature by another. He remarked that a
small stream of money continues to build the fund. Co-Chair
Therriault asked if Representative J. Davies' comfort level
was higher because a small amount of money was requested.
Representative J. Davies commented on current funds versus
state taxes. He recommended that the State would be better
off if State taxes were paid "sooner" rather than "later".
He recommended the reinstitution of an appropriate income
tax.
Co-Chair Therriault suggested that the title should be
changed in order to tighten it up and then the legislation
could be brought before the Committee for final
consideration.
HB 96 was HELD in Committee for further discussion.
(Tape Change HFC 99 - 76, Side 2).
HOUSE BILL NO. 133
"An Act relating to municipal service areas and
providing for voter approval of the formation,
alteration, or abolishment of certain service areas;
and providing for an effective date."
VICE CHAIR CON BUNDE explained that HB 133 would amend AS
29.35.450 to support local control by clearly identifying
who should vote on the abolishment and alternation of a
service area under three scenarios:
* Abolishment of a service area.
Subject to approval by the majority of the voters
residing in that service area.
* Abolishment and replacement of a service area.
Must be approved separately by a majority of
voters inside an existing service area and by a
majority of voters residing in the proposed
service area but outside the existing service
area.
* Alteration of a service area or combining it with
another service area.
Must be approved, separately by a majority of
voters who vote on the question and who reside in
each of the service areas or in a proposed service
area affected by the proposal.
Representative Bunde concluded that the legislation would
settle a long time debate about who is entitled to vote
during the creation, alteration or abolishment of a service
area. He urged the Committee's favorable support.
Representative Grussendorf asked, if there was an area
where people did not want the service to be provided, would
the State then be placed in an "obligated" situation. Co-
Chair Therriault noted that in Fairbanks, a school bus will
not travel on a road which is not being maintained.
Representative Bunde added, subdivision roads are not
thoroughfares and there would be no obligation for the
State to maintain these services.
Representative J. Davies recalled that there is a provision
in the Alaska State Constitution, Title 29 which addresses
the formation of service areas. He recommended that the
Committee revisit the logic of that constitutional
provision. He questioned if the proposed legislation would
be inconsistent with that provision because it provides for
people living in an existing service area to prohibit the
annexation of another area by voting "no". In the past,
the State has allowed city assemblies to decide if and when
annexation should go forward.
Co-Chair Mulder read to the Committee, Article 10, Section
5 of the Alaska State Constitution:
"A new service area shall not be established if
consistent with the purposes of this article, the new
service area could be provided by an existing service
area by incorporation as a city or annexation of a
city".
PATTI SWENSON, STAFF, REPRESENTATIVE CON BUNDE, emphasized
that the bill is about "abolishment and alteration" and not
new services. She added that there are over 200 service
areas in Alaska and that 120 of them are in the Fairbanks
area. The legislation would allow people to vote to
abolish, replace or alter a service area, giving themselves
differential tax rates.
Representative J. Davies agreed that the issue of
differential maintenance has been a problem, however, the
language of the bill would allow the formation of new
service areas. Currently, the assemblies do have the power
to make that decision and the people do have the ability to
comment on it through their assembly members.
CHRIS BIRCH, (TESTIFIED VIA TELECONFERENCE), ANCHORAGE,
spoke in support of HB 133. He noted that service areas
involve a lot of time and energy but they are government
working at a "grass roots" level. He urged support of the
bill.
BROOKS CHANDLER, (TESTIFIED VIA TELECONFERENCE), GIRDWOOD,
testified in support of the legislation. He noted that his
service area encompassed road, parks, recreation and fire
protection areas. He viewed the proposed legislation as
implementing an unenforceable compact made at the time of
unification to provide a level of service and control from
property tax dollars. Mr. Chandler commented that Girdwood
would appreciate the bill be adopted in order to provide
for the protection of services.
JIM NORCROSS, (TESTIFIED VIA TELECONFERENCE), MAT-SU,
voiced his support of the legislation. He commented that
the individual road service area residents are better
capable to determine what is needed to maintain their
roads. He feared that if a local borough decided that
there was an emergency, they could spend road service funds
without approval. Mr. Norcross urged the Committee's
support of the legislation.
In response to Representative Austerman's query,
Representative Bunde replied that in previous committee
hearings, only one person had testified against the
proposed legislation.
HANK HOVE, (TESTIFIED VIA TELECONFERENCE), MAYOR,
FAIRBANKS, testified in support of the legislation. He
stated that if passed, the bill would allow the City of
Fairbanks to consolidate some of their road service areas.
It has become inefficient and difficult to manage road
service areas and costs are higher than they might be under
the service proposed in the legislation. He pointed out
that the legislation would offer an opportunity to
consolidate service areas, which has not occurred in the
past because the conditions of roads in the various service
areas were not comparable.
Mayor Hove noted that under the terms of the proposed
legislation, a taxation scheme would be established for the
purpose of supporting roads. He agreed that the bill was
sufficient, as it is at this time, however, legal counsel
has advised that an additional change to AS 29.60.080 would
be advantageous adding "or a service area". He urged
passage of the bill.
Representative J. Davies agreed with the inclusion of
Section 4, although, asked if the addition of Section 3
would impede consolidation if a service area voted no
approval. Mayor Hove replied that the "hope" was that
language could create a circumstance in which approval
would be more readily granted. Representative J. Davies
acknowledged the "hope", but argued if that could act as a
possible impediment. Mayor Hove agreed that was a
possibility.
Representative J. Davies questioned if adopting Section 4
and excluding Section 3 would accomplish the concerns.
Mayor Hove commented that Section 3 was part of the
original SB 208 presented last session.
Representative J. Davies MOVED to AMEND the bill
conceptually by removing Section 3. Representative Bunde
OBJECTED.
Representative J. Davies asserted that most concerns were
addressed in Section 4 of the bill. Section 3 speaks to a
situation that has only occurred a couple of times in the
State. Representative J. Davies additionally suggested that
Section 3 was unconstitutional within the existing statute.
Representative Bunde understood why Representative J.
Davies would want to retain the section which addresses the
needs in Fairbanks, however, Representative Bunde believed
that would be inconsistent with passage of the bill. He
noted that it would be "good government" to not allow a
larger area to dominate a smaller area.
A roll call vote was taken on the motion to amend.
IN FAVOR: Grussendorf, J. Davies, Mulder
OPPOSED: G. Davis, Foster, Kohring, Williams,
Austerman, Bunde, Therriault
Representative Moses was not present for the vote.
The MOTION FAILED (3-7).
Representative Foster MOVED to report CS HB 133 (FIN) out of
Committee with individual recommendations and with the
accompanying fiscal note. There being NO OBJECTION, it was
so ordered.
CS HB 133 (FIN) was reported out of Committee with a "do
pass" recommendation and with a zero fiscal note by the
Department of Community and Regional Affairs dated 3/31/99.
HOUSE BILL NO. 161
"An Act relating to reduction in payments to
individuals under certain benefit programs; and
providing for an effective date."
Co-Chair Therriault restated that HB 161 would allow program
administrators to reduce payments in benefit programs to
match the appropriate level of funding. It would allow the
Legislature and Administration to deal with reductions in
revenue and increases to recipients in a simple and
practical manner.
He explained that current circumstances require that
payments be made at a prescribed level without reference to
appropriation. If the enrollment exceeds affordable levels,
managers would be allowed to manage within the appropriated
resources. Currently, the only option is to request a
supplemental appropriation or shut a program down in the
later months of the fiscal year.
HB 161 would provide a reasonable budgetary tool to the
Administration and Legislature. Co-Chair Therriault
believed that the legislation would help deal with the
State's fiscal realities.
(Tape Change HFC 99 - 77, Side 1).
Representative Grussendorf pointed out that in some
programs, the departments must make a projection. He asked
how supplemental requests would be addressed in these
situations. Co-Chair Therriault replied those
determinations would be made individually in each following
year by the full Legislature.
Representative Grussendorf questioned how Power Cost
Equalization (PCE) would be affected by the bill. Co-Chair
Therriault replied that because it currently has statutory
pro rata language, this bill would not impact it.
Co-Chair Mulder reiterated that the decision to seek a
supplemental was driven by the adoption terms of each
department's budget. He stated for the record that it was
not the Committee's intention to short-fund budgets for the
coming year. Representative Grussendorf voiced concern for
those departments that have to make cost projections. Co-
Chair Therriault agreed that in many programs, that would be
a guess. He pointed out that in the Department of Health
and Social Services budget, he would follow it throughout
the year making sure when federal help is available, they
apply. He emphasized that dialogue should be continued with
the departments throughout the interim.
Representative J. Davies inquired which programs would be
scrutinized with passage of the legislation. Co-Chair
Therriault explained that the legislation would be used as a
"tool" for the current fiscal year. He acknowledged the he
personally did not intent for it to apply to any specific
program.
Representative Foster MOVED to report CS HB 161 (FIN) out of
Committee with individual recommendations and the
accompanying fiscal note. Representative J. Davies
OBJECTED.
Representative J. Davies commented that in most of the cases
where these issues exist, they are addressed on an on-going
basis. He foresaw possible "mis-use" with the legislation.
Representative J. Davies noted that if it was the
Committee's intent to "under-fund" a department, that should
be indicated in the appropriation, rather than leaving out a
fiscal note and expect that department to "get" the message.
He reiterated that underfunding should be done up front so
that it is fair. He reiterated that the bill's language
provides for misunderstanding and punishment.
Co-Chair Mulder disagreed, suggesting that if this tool is
utilized, information would be stipulated up front.
Whereas, the only alternative now with these programs is to
cut off assistance. He suggested that the bill would allow
short funding evenly throughout the calendar year. The
departments will need to receive clear guidance regarding
the intent.
Representative J. Davies requested that a conceptual
amendment be submitted which would address that concern.
The language could state that the Legislature, in cases
where there is intent to reduce an appropriation on a pro
rata basis, it should be submitted in writing.
Co-Chair Therriault pointed out that there was a MOTION
before the Committee to move the bill. Representative J.
Davies stated that his MOTION would AMEND that MOTION.
Representative Foster WITHDREW the MOTION to MOVE the bill.
Representative J. Davies MOVED that a conceptual amendment
be written which would provide for the Legislature to
clearly indicate intent to reduce the appropriation on a pro
rata basis. Co-Chair Therriault OBJECTED to the amendment
at this time, remarking that he might be persuaded
differently once the language of the amendment was drafted.
Representative J. Davies WITHDREW his MOTION to adopt the
conceptual amendment.
Representative Foster MOVED to report CS HB 161 (FIN) out of
Committee with individual recommendations and the
accompanying fiscal note. There being NO further OBJECTION,
it was so ordered.
CS HB 161 (FIN) was reported out of Committee with "no
recommendation" and with a zero fiscal note by the Office of
the Governor.
ADJOURNMENT
The meeting adjourned at 3:55 P.M.
H.F.C. 11 4/12/99
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