Legislature(2015 - 2016)HOUSE FINANCE 519
04/14/2016 08:30 AM House FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| SB196 | |
| SB210 | |
| HB81 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 81 | TELECONFERENCED | |
| + | SB 196 | TELECONFERENCED | |
| + | SB 210 | TELECONFERENCED | |
| += | HB 194 | TELECONFERENCED | |
| + | TELECONFERENCED |
HOUSE FINANCE COMMITTEE
April 14, 2016
9:09 a.m.
9:09:32 AM
CALL TO ORDER
Co-Chair Thompson called the House Finance Committee
meeting to order at 9:09 a.m.
MEMBERS PRESENT
Representative Mark Neuman, Co-Chair
Representative Steve Thompson, Co-Chair
Representative Dan Saddler, Vice-Chair
Representative Bryce Edgmon
Representative Les Gara
Representative Lynn Gattis
Representative David Guttenberg
Representative Scott Kawasaki
Representative Cathy Munoz
Representative Lance Pruitt
Representative Tammie Wilson
MEMBERS ABSENT
None
ALSO PRESENT
Senator Lyman Hoffman, Sponsor; Shirley Marquardt, Mayor,
Unalaska; Kathie Wasserman, Alaska Municipal League;
Senator Anna MacKinnon, Sponsor; Alexi Painter, Analyst,
Legislative Finance Division, Alaska State Legislature;
Laura Cramer, Staff, Senator Anna MacKinnon; Jane Pierson,
Staff, Representative Steve Thompson; Representative Cathy
Tilton, Sponsor; Christopher Clark, Staff, Representative
Cathy Tilton.
PRESENT VIA TELECONFERENCE
Rick Koch, City Manager, City of Kenai; Dr. Jon Erickson,
Manager, City and Borough of Yakutat; Richard Carr, Owner,
Bema Construction; Andre Spinelli, President, Alaska Home
Builders Association; Patrick Dalton, Contractor, Delta
Junction; James Squyres, Self, Rural Deltana; Terry
Dusynski, Member, Alaska State Homebuilder's Association;
Al Nagel, Department of Labor and Workforce Development.
SUMMARY
HB 81 EXEMPTION: LICENSING OF CONTRACTORS
CSHB 81(FIN) was REPORTED out of committee with a
"do pass" recommendation and with one new zero
fiscal note from the House Finance Committee for
the Department of Commerce, Community and
Economic Development and one new zero fiscal note
from the Department of Labor and Workforce
Development.
HB 194 AK SECURITIES ACT; PENALTIES; CRT. RULES
HB 194 was SCHEDULED but not HEARD.
CSSB 196(FIN)
POWER COST EQ FUND: RESERVE ACCT;DIVIDEND
CSSB 196(FIN) was HEARD and HELD in committee for
further consideration.
CSSB 210(FIN) am
COMM. REV. SHARING;PROP. TAX EXEMPTIONS
CSSB 210(FIN) am was HEARD and HELD in committee
for further consideration.
9:10:06 AM
AT EASE
9:12:45 AM
RECONVENED
CS FOR SENATE BILL NO. 196(FIN)
"An Act relating to the amount appropriated for power
cost equalization; relating to the use of certain
unexpended earnings from the power cost equalization
endowment fund; and providing for an effective date."
9:13:26 AM
SENATOR LYMAN HOFFMAN, SPONSOR, thanked the committee for
hearing the bill. He relayed that he had introduced the
bill due to ongoing dialogue about how to utilize the
excess earnings in the Power Cost Equalization (PCE) fund.
The legislation was designed to strengthen and save the PCE
fund. He recounted that the program existed for over 30
years and initially relied on general funds but evolved
into a true endowment that currently did not rely on
appropriations. Several years ago the legislature changed
the way the fund was invested due to the high rate of
return of 7 percent. He indicated that SB 196 addressed two
issues; how much could be taken from the earnings of the
fund and how excess earnings were dealt with. The
withdrawable amount was changed from 7 to 5 percent. He
elaborated that the legislation identified two ways the
excess earnings were made available; 50% not to exceed 30
million of the excess earnings were distributed to the
Community Assistance Program and 20% not to exceed 25
million were distributed to the Renewable Energy Fund, the
Bulk Fuel Revolving Loan Fund, and the Rural Power System
Upgrades. He pointed out that in the last 12 or so years
the earnings would have met the needs for PCE and the
provisions for excess earnings. He recounted that the
program funded up to the first 500 kilowatts of energy. He
spoke to the high power costs in rural areas. The program
only addressed the first 500 kilowatts and many residents
in urban Alaska utilized much more than that. He believed
it was good legislation that ensured the solvency of the
fund by changing the payout from 7 percent to 5 percent. In
addition, the bill reduced the dependency on General Fund
(GF) appropriations for the revenue sharing and rural
energy programs.
9:18:39 AM
Representative Gara spoke to lowering the payout and asked
whether the amount was taken from the corpus of the fund.
Senator Hoffman replied in the affirmative. Representative
Gara asked for the current total of the fund. Senator
Hoffman replied that the amount was approximately $1
billion. Representative Gara stated that 5 percent amounted
to $50 million. Senator Hoffman replied in the affirmative
and stated that currently PCE cost approximately $43
million. Representative Gara deduced that $7 million would
be available for excess funding. Senator Hoffman replied in
the affirmative.
9:21:21 AM
Representative Edgmon asked the sponsor to address how the
PCE program would remain the underlying purpose of the
endowment. He wondered about how bundling the items
together were mutually beneficial for all programs. Senator
Hoffman answered that the legislation authorized that the
first use of the funds were for PCE. He explained that if
the earnings were less than $43 million the earnings would
be depleted and the remainder would be taken out of the
corpus of the fund. He provided a scenario that in the
second year, if the fund earned 100 million then $43
million would pay PCE, the excess earnings would be
appropriated and the remainder would be deposited into the
corpus of the fund to protect it in case of lower than
expected earnings again in the future. The bill ensured
that the primary purpose was to protect the fund itself.
Senator Hoffman elaborated that bundling the items were
mutually beneficial by assisting the revenue sharing
program that would fund up to the 30 percent for rural and
urban Alaska and reduced the need for GF as well as assist
with other energy programs. He summarized that the bill
ensured a solid endowment for PCE and in good years offered
assistance to GF in the areas of energy and revenue
sharing.
9:24:20 AM
Co-Chair Neuman recounted that the PCE paid for the first
500 kilowatts of power. He asked what the average usage in
rural Alaska was. Senator Hoffman answered that average use
was between 500 and 600 kilowatts; many residents kept
usage at 500 kilowatts due to the high expense.
Representative Pruitt addressed the community assistance
portion. He asked whether the intent was that the bill
would help supplement the normal level of revenue sharing
funding or replace some of the GF appropriation. Senator
Hoffman answered that the intent was to relieve the
pressure on the general fund from the community revenue
sharing by replacing some GF. Representative Pruitt favored
the legislation and endorsed the renewable energy portion
of the bill.
9:26:18 AM
Representative Munoz asked about the 500 kilowatt
threshold. She asked whether the legislation raised the
threshold. Senator Hoffman replied in the negative. He
believed it was more important to protect the endowment.
Representative Kawasaki asked what the current PCE payout
was. Senator Hoffman replied the amount was $43 million.
Representative Kawasaki pointed to page 2 of FN 2 (CED) and
read the following analysis:
1) 50% or $30,000,000, whichever is less, to a
community revenue sharing or community assistance
fund;
2) 30% or $25,000,000, whichever is less, to the
renewable energy grant fund (AS 42.45.045), to the
bulk fuel revolving loan fund (AS 42.45.250), or for
rural power system upgrades; and …
Co-Chair Thompson noted that David Teal, Director,
Legislative Finance Division would be available to answer
fiscal note questions.
Representative Kawasaki did not think that much excess
funds would be available on a "6 percent draw." Senator
Hoffman answered that in past years the fund had earned 13
percent but also experienced losses. He noted that there
were years in the past that the earnings had been in the
double digits. Representative Kawasaki observed that Mr.
Teal had provided the actual PCE earnings rates (Power Cost
Equalization Endowment Fund - Impacts of SB 196 - (copy on
file). He was bewildered about the fund earning 24 percent
one year and negative 13 percent within two years. He asked
whether money had been added to increase the earnings rate.
Senator Hoffman answered that it did not matter if money
was added in relation to the earnings rate. He delineated
that in 2007 when the Four Dam Pool was sold $182.7
thousand was added to the fund. The last infusion had been
$400 million in 2012 in order to make it a true endowment.
A few years ago the fund had become a true endowment.
Representative Kawasaki was confused by the linkage between
SB 196 and SB 210 (Community Revenue Sharing/Assistance).
Senator Hoffman responded that there had been discussion
about combining the two bills, but due to the single topic
rule they had been introduced as two bills.
Representative Wilson stated that the two bill's linkage
made the current discussion difficult to follow. She
reiterated the provisions in SB 196 to confirm she
understood how the legislation worked. She surmised that
the committee needed to pay attention when SB 210 was
addressed due to the fact that the specific payouts or
whether any excess PCE funds were available in a given year
was based on a "good" or "bad year" in the stock market.
She noted that in a bad year no additional funds were
available for community sharing as all of the fund's
earnings were needed for PCE. She stated that the fund's
corpus was available to access for the PCE payout in a low
earnings year but not the other programs. Senator Hoffman
answered in the affirmative. He mentioned that in good
years 30 percent of the earnings would be added back to
replenish the corpus due to the fact that funds from the
corpus could be spent in bad years. Representative Wilson
clarified that in low earnings years the other programs
would not receive funding from the PCE endowment. Senator
Hoffman answered in the affirmative.
9:34:06 AM
Representative Gara spoke to a book by Willy Hensley
stating that electricity in rural Alaska brought "one of
the biggest transformations" to the bush. He believed that
the PCE "was an extension of that" and the provision to
spend excess funding on other state needs was historic. He
asked why the bill proposed depositing 30 percent of the
excess funds back into the corpus. Senator Hoffman restated
that the deposits were needed to replenish the fund when
money were withdrawn in low earning's years in order to
"protect" the corpus of the fund.
Senator Hoffman provided closing comments on the bill. He
felt that PCE made life better for residents in rural
Alaska. He thanked the committee for hearing the
legislation.
Co-Chair Thompson OPENED public testimony.
9:37:08 AM
SHIRLEY MARQUARDT, MAYOR, UNALASKA, spoke in support of the
bill. She thanked Senator Hoffman for his work on the bill.
She stated that PCE and revenue sharing were very important
to her region. She appreciated that the bill created a new
funding vehicle for revenue sharing, realizing the funding
would ebb and flow depending on the earnings in a given
year. She asked the legislature to help relieve some of the
financial strain on municipalities by finding more
alternative funding avenues for communities.
KATHIE WASSERMAN, ALASKA MUNICIPAL LEAGUE, testified in
support of the bill. She relayed her confidence and trust
in Senator Hoffman's custodial role over PCE and community
revenue sharing. She believed the legislation stabilized
the funds as best as possible under the state's current
fiscal crisis.
Co-Chair Thompson CLOSED public testimony.
CSSB 196(FIN) was HEARD and HELD in committee for further
consideration.
CS FOR SENATE BILL NO. 210(FIN) am
"An Act relating to the community revenue sharing
program; and changing the name of the community
revenue sharing program to the community assistance
program."
9:40:23 AM
SENATOR ANNA MACKINNON, SPONSOR, spoke to the bill. She
related that the legislation changed the program's name
from Community Revenue Sharing Program to the Community
Assistance Program due to the fact that the state currently
"did not have anything to share." She discussed that SB 210
was a step to continue providing assistance to rural
communities. She shared that some members of urban
communities were pointing to rural communities reproving
them of not contributing their fair share in the form of
taxes. In response, she engaged in a dialogue with Senator
Hoffman regarding finding a way PCE could help support
community revenue sharing. She related that the result was
SB 196 proposing the mechanism to provide the support. She
recounted that 50 percent of the extra earning on the PCE
endowment would support community assistance. She
reiterated that the bill changed the name of the program
from revenue sharing to community assistance. She pointed
to page 5, line 3 and explained that the bill changed the
amount from $220 thousand based on the population formula
to $300 thousand in order to create an equitable spread to
account for years of high or low investment and ensure that
the larger communities would still receive assistance in
the same "proportionate way as the smaller communities."
She added that if the revenue sharing program remained
unchanged, she believed her hometown would receive up to 40
percent of revenue sharing and was not attempting to "harm"
her constituents, but felt that the bill struck a "balance"
between rural and urban areas. She stated that SB 196
provided a revenue stream dependent on earnings and
safeguarded that rural communities were contributing to
help with community assistance; the bill reduced the
state's obligation by $30 million. She detailed that the
bills took a $180 million program stepped it down to $90
million within three years, provided $30 million in
assistance and shared the assistance equitably throughout
the state.
Representative Wilson spoke to a handout titled "SB 210:
Community Assistance Payments FY 16-18 with $300,000 Base"
(copy on file) and remarked that the payments were not
based on population. She asked how the percentages were
formulated. Senator MacKinnon answered that the payouts
were based on a mathematical equation on page 5, line 3 of
SB 210. She delineated that the sponsors evaluated the
current distribution under the $220 thousand multiplier for
population and developed a formula that was included in the
original version of the bill. The Senate did not believe
the proportional spread was fair because the new formula
significantly reduced the payment to larger communities and
actually increased assistance to rural communities. The
sponsors chose a formula that spread the proportional
distribution of the reduction more fairly. Under a $20
million, $30 million and $50 million program, the amount of
$300 thousand was the "ideal" number where the decreases
were spread most proportionately.
9:46:27 AM
Representative Wilson pointed out that the city of
Fairbanks received a 66 percent reduction while the North
Star Borough received a 64 percent reduction, and the city
of North Pole was reduced by 44 percent and the North Slope
Borough received a 32 percent reduction. She indicated that
the North Slope Borough was capable of generating more
money than the North Pole. She was having trouble making
sense of the distribution. Senator MacKinnon answered that
the sponsors did not "mess" with the underlying existing
formula that prorated the distribution of a revenue sharing
plan. She stated that the $300 thousand figure created "the
appropriate fairness spread in the reduction" of the
program while creating "the least impact" on small
communities because they possessed "the least ability to
respond" to the reduction in the program. She stated that
the Legislative Finance Division (LFD) was available for
questions.
ALEXI PAINTER, ANALYST, LEGISLATIVE FINANCE DIVISION,
ALASKA STATE LEGISLATURE, explained that the community
assistance program provided two payments; a per capita
payment and a basic amount. The basic amount was
distributed to all communities regardless of population,
the $300 thousand was the base amount, cities and
unincorporated municipalities received differing fractions
of that amount. Additionally, there was a per capita
distribution. The bill reduced the base amount from $384
thousand to $300,000 and changed the manner of the
proration. In the current formula, the base began at $384
thousand but if the distribution was below $60 million the
base was reduced pro rata to a floor of $220,000. He
recounted that the bill changed the base to $300 thousand,
the exact middle amount, and did not prorate as long as a
sufficient amount of funding was available to pay the basic
amount.
Representative Wilson did not have a problem with the bill
due to the fact that she did not think excess funds would
be available except in years experiencing exceptional
returns. She asked that based on the numbers on the chart
provided, what was the assumption regarding the amount that
was distributed into the program "first."
9:50:29 AM
Senator Mackinnon replied that in FY 2016 the state
distributed $57.3 million. In SB 210, the distribution was
proposed at $38.2 million. She explained that the $300
thousand figure was a new multiplier. She pointed to page
5, line 1 of the bill that designated deletion of the $384
thousand number. She reiterated that two formulas were
employed. The "larger communities may feel like" the
distribution was "unfair." The state did not have enough
revenue to share and based on a comparison exclusively of
the changes of the percentages it would be difficult to
find a rational reason for the distribution. She delineated
that two formulas applied between the borough and the
population and a different spreadsheet was necessary to
show how it worked. "Larger communities were impacted to a
greater degree." The Senate believed that "larger
communities' had a way to react" to reduction in revenues.
The Senate wanted to ensure smaller communities could
retain firefighters or police officers and therefore,
offered additional assistance while transitioning into the
reality of state budget shortfalls.
Mr. Painter elaborated that most of the distribution larger
communities received were through the per capita payment.
Altering the formula reduced the amount of the per capita
payment and proportionately increased the payment through
the base amount. A larger community that mostly received
its distribution from the per capita payout received a
larger reduction than a smaller community that mostly
received payments from the base amount.
Representative Wilson noted that North Pole only had 2,100
people. She pointed to the North Slope Borough with a
population of 2870 and "a lot of infrastructure, business,
oil, and gas" and compared it to the North Pole that lost a
big industry but received a higher reduction. She did not
believe the numbers "seemed fair." Senator MacKinnon
replied that the numbers for the unorganized boroughs were
"very different." She relayed that the Senate Finance
Committee discussed that boroughs received more money. She
warned that the population numbers were not actual and were
not included in the borough population. She stated that a
percentage of borough money was also distributed to the
North Pole based on the formula for boroughs. Another
formula used for boroughs shared revenues with its cities
in another portion of the revenue sharing program.
Mr. Painter delineated that the population count in the
formula did not double count citizens. The population
within the North Pole city limits was counted in its
population but not in the borough. The North Slope Borough
received its distribution from the full base figure. The
city of North Pole received one quarter of the base set in
statute but also received funding from the borough formula.
9:56:03 AM
Representative Wilson announced that most of the cities had
charters that limited the amount of property tax it could
raise and some already charged a sales tax. She wondered
why the reduction discrepancy between the City of Fairbanks
and the North Star Borough of 2 percent existed in the new
formula.
Co-Chair Thompson noted that the bill would be heard before
the committee again.
Mr. Painter answered that a borough received a distribution
from the full base of 300 thousand and the city received
one quarter of the base. The different treatment was due to
the split between the per capita amount and the base
amount.
Senator MacKinnon elaborated that the program was at a
"stair step down stage." She recounted that the legislature
did not recharge the fund with the yearly $60 million
appropriation and the fund dropped to a $57.3 million
program. She expounded that currently, the program was in
the second stair step down headed towards elimination and
eventually the cities will not receive anything. The stair
step had dropped from $57.3 million to $38.2 million for
the current fiscal year's budget. The largest factor
affecting the proration was the reduction in the
distribution in FY 16 of $57.3 million down to $38.2
million currently. The proration was not the significant
portion of the change to municipalities it was the stair
stepping reduction to the program.
Co-Chair Thompson interjected that "otherwise" revenue
sharing was being eliminated.
Senator MacKinnon agreed and restated that SB 196 was an
effort to support the program outside of general fund
appropriations.
Co-Chair Neuman asked how equitably the current version
distributed revenue sharing dollars to communities. Senator
MacKinnon answered that the new program gained more equity
through lowering the base amount to $300 thousand. She
indicated that the formula would still work if additional
appropriations were made to the community assistance
program. She restated that the bills were "a way to
stabilize a program in recognition" that there was no
revenue to share.
Co-Chair Neuman asked why the provisions did not allocate
100 percent of excess PCE funds into revenue sharing, since
PCE was funded via general fund dollars, and further
preserve the draw on GF. He voiced that his goal was to
reduce GF draws.
10:01:18 AM
Senator MacKinnon responded she shared the same goal but
employed a different method to attain it. She detailed that
LFD determined that $17 million was the amount of excess
earnings of the PCE fund from FY 2018 through FY 2022.
Through discussions with Senator Hoffman and the entire
Senate in an effort to stimulate support for some of the
programs rural Alaska received, 50 percent up to the
maximum of $30 million would support community assistance.
She emphasized that $30 million would fund the assistance
program at 100 percent and larger communities would be
receiving a profit from the PCE receipts. She believed the
provisions were "a good compromise." She explained that
historically the PCE fund was founded because a significant
amount of money was invested in large hydro projects that
exclusively benefitted urban areas and rural communities
did not see relief from energy costs. She mentioned that
her goal was to reduce general fund spending with the
bills. She noted that the state was spending GF on Alaska
Energy Authority (AEA) programs. She remarked that the bill
was a compromise and that the initial bill did assign all
of the excess to the GF but rural Alaska's needs were
different than urban Alaska's needs and the current version
attempted to strike a balance.
Co-Chair Neuman understood the rationale. He spoke to the
population in the Mat-Su region growing at "an
extraordinary rate." He cited a figure of 100 thousand from
"state economists." He noted that the Mat-Su school
district experienced an increase of 708 students but its
revenue sharing was going down "disproportionately compared
to how other communities were affected." He had issues with
the bill. His goal was to get the excess funds to go back
into communities with lowered GF. He stated that the bill
did not contain a mechanism that adjusted for communities
with a high growth rate. He felt that the amount of people
affected by the reduction in revenue sharing was "very
disproportionate compared to the needs" in a rapidly
growing community.
10:05:15 AM
Representative Pruitt favored the program's name change to
community assistance. He wanted to better understand the
impact to his community. He asked about how the change
affected the individual tax payer. Senator MacKinnon
replied that she was uncertain. She offered that the other
choice eliminated the program completely. The result would
be a cost to everyone's community and her community would
lose $7.8 million directly. She said there was simply no
revenue and the legislation's intention was not to shift
costs. In FY 18, only $8 million was left to share and
urban areas would take 40 percent to 50 percent of the
funds. The sponsors were not attempting to impact local
communities but wanted to sustain the program in
"perpetuity." She commented that $8.5 million out of the
projected $17 million of excess PCE funds would "standup"
the community assistance program. She acknowledged that the
issue was contentious. She reiterated that she and Senator
Hoffmann had been searching for a way that some of the
receipts from the $1 billion PCE fund would be utilized
fairly while protecting the $1 billion balance in the fund.
She stated that once the PCE fund was spent it would be
impossible to replenish the fund.
10:09:10 AM
Representative Kawasaki asked about additional changes to
the revenue sharing program listed on page 5 of the bill.
He noted that the provision that changed the base to $300
thousand rounded the amount off to the nearest dollar
instead of nearest thousand. He wondered whether the
provision was the only change besides the total amount.
Senator MacKinnon replied that was the only change in
addition to the name change of the program.
LAURA CRAMER, STAFF, SENATOR ANNA MACKINNON, affirmed that
they were the only changes. She confirmed that the rounding
was changed to the nearest $1.00 so the fund would not go
negative. Representative Kawasaki agreed that the
distribution formula between rural and urban communities
was disproportionate. He spoke to the revenue sharing
change to community assistance. He did not favor the name
change and thought it sounded like public assistance.
Representative Edgmon stated that he supported the bill
even though it was not a "perfect." He viewed the
legislation as a measure that incorporated urban and rural
members of the Senate working together to find a solution
in times of downsizing the budget. He pointed to page 6 of
the spreadsheet handout and noted that after the first six
listed communities the rest of the 59 communities had a
population under 10 thousand. He thought the program saved
the state money. He maintained that without revenue
sharing, costs would shift form the operating budget to the
capital budget. He voiced that in all of the other revenue
measures there were disparate numbers as well.
Representative Munoz stated that Fairbanks, Ketchikan, and
Kodiak were listed twice on the spreadsheet, as
municipalities and as parts of boroughs. Juneau and
Wrangell were also municipalities that were part of
boroughs and were only listed once. She wondered why Juneau
and Wrangell were only listed once. Co-Chair Thompson
clarified that boroughs contain cities inside it such as
the Mat-Su borough that contained Palmer and Wasilla. He
added that cities did not exist inside municipalities.
Representative Munoz ascertained that Juneau was
incorporated as one municipality with one city government
and therefore, was only listed once. Co-Chair Thompson
replied in the affirmative.
Senator MacKinnon referenced Representative Kawasaki's
concern that some of the rural payments were very high
relative to the low population numbers. She reminded the
committee that some of the rural communities were listed
separately and were also part of a borough where some of
its population existed within a borough. She reiterated
that the formula did not double count population and
cautioned against using population numbers to compare
proportionality. She offered to send an analyst from LFD to
member's offices to explain the breakdown in each member's
district.
Co-Chair Thompson noted that the Fairbanks North Star
Borough listed population along with the listed populations
of Fairbanks and North Pole on the spreadsheet equaled the
actual population of the Fairbanks North Star Borough.
10:16:37 AM
Representative Gara stated that the revenue sharing program
had changed many times over the years. He asked why the
current formula was eventually stepped down to zero by FY
2019. Senator MacKinnon answered that most likely the
reason was due to the legislature's decision to not
recharge the fund. She recounted that the fund was
originally set up at the full allocation of $180 million;
$60 million was drawn and paid according to the pro rata
formula.
Mr. Painter expounded that annually one-third of the
balance was distributed which amounted to $60 million. The
previous year the legislature appropriated $52 million into
the fund; not the full $60 million and distributed $57.3
million. Without another appropriation, one third of the
funds balance of approximately $115 million was $38 million
and eventually decreased to $25 million. Current statute
prohibited any distribution if the fund's balance was below
$20 million. Representative Gara asked for further
clarification. Mr. Painter replied that the legislature did
recharge the fund during the last fiscal year in the amount
of $52 million. He added that the formula using
progressivity was no longer in effect. Representative Gara
asked what amount was necessary to recharge the current
fund. Mr. Painter answered that the balance was currently
$115 million and an appropriation of $75 million was
necessary.
Co-Chair Thompson OPENED public testimony.
SHIRLEY MARQUARDT, MAYOR, UNALASKA, believed the name
change was very significant and agreed that the state did
not have the revenue to share anymore. She opined that the
revenue sharing program had always been assistance to
communities to "keep the lights on." She referenced the
community of Atka that literally had a difficult time
keeping the lights on and the money they received under the
continuation of the program assisted them with power
generation. She noted the difficulty in providing services
in rural communities. She supported the bill.
KATHIE WASSERMAN, ALASKA MUNICIPAL LEAGUE, relayed that the
league examined the formula regularly and the inequities
shifted between all areas. The previous version contained
larger decreases to the Fairbanks North Star Borough.
Manipulating the formula was very difficult and she opined
that at some point it had to become acceptable with
existing inequities. Her only concern was the absence of an
effective date and the league "was not certain that the SB
210 formula can operate" under the $38.2 million provision
that was effective in July 2016. She recommended using the
old formula to distribute the $38.2 million in FY 18.
10:24:22 AM
RICK KOCH, CITY MANAGER, CITY OF KENAI (via
teleconference), voiced that currently a variable base was
built into the formula and the legislation did not contain
a variable base. He believed eliminating the variability
created the problem with the calculation. He deduced that
at $30 million the base of $300 thousand worked but noted
that as the distribution dropped the formula "went
completely out of whack." He cited that at an allocation of
$30 million with the base of $300 thousand the distribution
for Fairbanks was roughly $877 thousand but at a $20
million distribution it would drop to $78 thousand which
was a 91 percent drop. He added that Anchorage would
experience a 95 percent drop from a distribution of $7.8
million to $406 thousand under the same allocations. A
small community of 322 would receive $83 thousand or $75
thousand and only experience slightly less than a 10
percent reduction under the same distribution factors. He
believed the disparity was too wide and a variable
distribution provision would resolve the issue. He offered
to provide a proposed plan to the committee members.
10:27:11 AM
DR. JON ERICKSON, MANAGER, CITY AND BOROUGH OF YAKUTAT (via
teleconference), spoke in support of SB 210. He stated that
revenue sharing made up 16 percent of the borough's budget.
He reported that Yakutat collected $350 thousand in
property tax and in order to make up the difference he
needed to increase property tax two and one half times. In
addition, Yakutat was funding the school at the full
contribution rate at $503 thousand. Yakutat had been using
revenue sharing to make up the differences in its various
budgets. He indicated that if revenue sharing was
eliminated he would be forced to reduce the administrative
staff from 6 to 3 employees. He understood that "everyone
had to pitch in and make it work somehow."
Co-Chair Thompson CLOSED public testimony.
CSSB 210(FIN) am was HEARD and HELD in committee for
further consideration.
HOUSE BILL NO. 81
"An Act relating to an exemption from the regulation
of construction contractors."
10:30:21 AM
Co-Chair Neuman MOVED to ADOPT the proposed committee
substitute for HB 81, Work Draft 29-LS0346\P (Bruce,
4/12/16). There being NO OBJECTION, it was so ordered.
JANE PIERSON, STAFF, REPRESENTATIVE STEVE THOMPSON,
explained the changes in the Committee Substitute and read
from a prepared statement:
HB 81 Version P differs from CSHB 81 (L&C), HB 81 Version
H, in three ways:
1. Deletes "in order" from the legislative intent
language from page 1, line 6, of HB 81 Version H
because the words are not needed, as many grammarians
often say.
2. Adds a new section 2 (page 1, lines 8 through 14) that
adds a new subsection to AS 08.18.116 to require the
Alaska Department of Commerce, Community, and Economic
Development or the Alaska Department of Labor and
Workforce Development to investigate and take
appropriate action if an owner-builder tries to sell a
structure while not licensed as a contractor during
the time of constructing the building or two years
after construction begins. See "begins" on line 11.
3. Replaces language in section 3 (page 3, lines 2
through 6) to require an owner-builder to notify the
Alaska Department of Commerce, Community, and Economic
Development on a form provided by the agency when
advertising or selling a home built if an owner-
builder tries to sell it while not licensed as a
contractor during the time of constructing the
building or two years after construction begins. See
"begins" on line 4.
The previous versions of the bill would have required the
owner-builder to get permission from the department to
sell a building. HB 81 Version N changes this to require
disclosure.
Representative Wilson asked for clarification regarding the
two year provision. Ms. Pierson answered that the two year
provision was consistent with current law. Representative
Wilson asked when the two year period began. Ms. Pierson
deferred the question to the sponsor.
REPRESENTATIVE CATHY TILTON, SPONSOR, replied that the
question had been asked the prior session and was something
the sponsors struggled with over the interim and
extensively researched. The two year period began at the
start of construction because the start was the point that
defined the permitting process. She discussed the
legislation. She relayed that HB 81 provided stronger
protection to homebuyers that required an unlicensed
builder to disclose the fact that the building was
constructed by an unlicensed builder. The intent was to
allow individuals to continue to construct their own homes.
Unfortunately, there were people who built with the intent
to sell and avoided attaining the required licensures. She
stated that contractor law had been on the books in Alaska
since 1968. She detailed that the current homeowner/builder
exemption was enacted in 1982 and modified in 2006. The
current law provided an exemption allowing a person to
build their own home or commercial building every two years
without a license. A growing number of individuals were
exploiting the provision to build and operate construction
businesses without attaining required licensure. Homeowners
who purchase a home from the unlicensed builder had no
recourse in the law if the home had issues and was not
built properly. She declared that the bill provided for
transparency and disclosure.
Co-Chair Thompson OPENED public testimony.
RICHARD CARR, OWNER, BEMA CONSTRUCTION (via
teleconference), spoke in support of the bill. He relayed
that he specialized in restoration and remodeling. He had
received many "frantic calls from insurance agents and
homeowners" with serious issue due to faulty work. He
shared personal experience with customers who had no
financial recourse because the builder did not have a
"performance bond." The bill would protect the consumers of
Alaska from "unscrupulous builders" that "hide behind the
two year allowance."
ANDRE SPINELLI, PRESIDENT, ALASKA HOME BUILDERS ASSOCIATION
(via teleconference), stated his strong support of the
bill. He shared that the association worked on the issue
for many years.
PATRICK DALTON, CONTRACTOR, DELTA JUNCTION (via
teleconference), testified against Section 11 of the
current version of the bill. He felt that the provision was
extreme and "interfered with the right of private
property." He agreed with the regulations for organized
boroughs. He proposed an exemption for unorganized
boroughs. He believed the provision protected a
professional group at the expense of rural homebuilders.
10:42:27 AM
JAMES SQUYRES, SELF, RURAL DELTANA (via teleconference),
testified against the bill. He believed the bill had
unintended consequences for rural residents. He stressed
that "the contractor lobby was tenacious and was
terrorizing" regular Alaskans. He opposed the provision
that required the owner/builder to fill out a form and
provide proof to the Department of Labor and Workforce
Development (DOL) and Department of Commerce, Community and
Economic Development (DCCED) in order to sell their owner-
built home. He opined that the provision increased the
agencies bureaucratic functions and impinged on individual
freedoms.
TERRY DUSYNSKI, MEMBER, ALASKA STATE HOMEBUILDER'S
ASSOCIATION (via teleconference), testified in support of
the bill. He shared that he was a home inspector since 1978
and had seen many owner-built homes. He voiced that the
exemption in the bill allowed people to build their own
homes. He explained that the bill merely required a person
building a house and selling it before the two year period
to notify the department and explain why the individual was
selling the house. He emphasized that the bill did not
prohibit constructing an owner built home.
Co-Chair Thompson CLOSED public testimony.
Representative Wilson asked who would enforce the issue -
DOL or DCCED.
CHRISTOPHER CLARK, STAFF, REPRESENTATIVE CATHY TILTON,
replied that the provision in Section 2 of the bill was
enforced by both DCCED and DOL. He added that the provision
in Section 3 was enforced by DCCED. Representative Wilson
wanted to know how the bill would be enforced.
10:48:12 AM
AL NAGEL, DEPARTMENT OF LABOR AND WORKFORCE DEVELOPMENT
(via teleconference), answered that the details had not yet
been worked out between the departments; the regulations
would be written after the bill was adopted. He delineated
that both departments had investigators that were dedicated
to license enforcement.
Representative Wilson wondered whether the bill was
necessary. She asked how the bill changed what was supposed
to currently be done. Mr. Nagel replied that he was not
sure what the department was not doing now. He stated that
the bill offered more structure about when a two-year
exemption period started. He emphasized that the department
was seriously enforcing the existing statute.
Representative Wilson asked what paper work would be
required to prove the starting date of the two year
construction period. Mr. Nagel answered that the statute
would require notice that the homeowner was divesting
herself of a property; not for a business reason. The
department would investigate and determine whether the
activity was unlicensed. Representative Wilson asked
whether updated fiscal notes were forthcoming.
Co-Chair Neuman spoke to the fiscal notes. He noted that
the Division of Corporations, Businesses, and Professional
Licensing (DCBPL) submitted a zero note (FN 1 CED). He
detailed that the division noted that the licensing costs
covered the regulatory costs. He noted the Department of
Labor and Workforce Development zero fiscal note (FN 2
DOL).
10:52:25 AM
Representative Wilson spoke to the fiscal notes. She
believed the bill carried fiscal impacts to the agencies.
Co-Chair Neuman stated that according to the fiscal notes
the department determined that its fees and staff were
sufficient to enforce the legislation.
Co-Chair Thompson reminded the committee that
investigations were presently happening on a regular basis.
Co-Chair Neuman MOVED to report CSHB 81(FIN) out of
committee with individual recommendations and the
accompanying fiscal notes.
Representative Wilson OBJECTED. She was concerned over how
the regulations would be written and believed that the bill
impacted personal property rights. She WITHDREW her
OBJECTION.
CSHB 81(FIN) was REPORTED out of committee with a "do pass"
recommendation and with one new zero fiscal note from the
House Finance Committee for the Department of Commerce,
Community and Economic Development and one new zero fiscal
note from the Department of Labor and Workforce
Development.
ADJOURNMENT
10:54:55 AM
The meeting was adjourned at 3:58 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB 194 CS WORKDRAFT FIN GH1060-S.pdf |
HFIN 4/14/2016 8:30:00 AM |
HB 194 |
| HB 81 CS WORKDRAFT vP.pdf |
HFIN 4/14/2016 8:30:00 AM |
HB 81 |
| House Members - SB 196ce.pdf |
HFIN 4/14/2016 8:30:00 AM |
SB 196 |
| SB 196 Fin updated sectional.pdf |
HFIN 4/14/2016 8:30:00 AM |
SB 196 |
| sb 196 Leg finance spread sheets.pdf |
HFIN 4/14/2016 8:30:00 AM |
SB 196 |
| CSSB 210(FIN) AM - Sectional Analysis.pdf |
HFIN 4/14/2016 8:30:00 AM |
SB 210 |
| CSSB 210(FIN) AM E.A.PDF |
HFIN 4/14/2016 8:30:00 AM |
SB 210 |
| CSSB 210(FIN) AM Sponsor Statement.pdf |
HFIN 4/14/2016 8:30:00 AM |
SB 210 |
| CSSB210(FIN) AM - Community Assistance Distribution.pdf |
HFIN 4/14/2016 8:30:00 AM |
SB 210 |
| HB 81 Summary of Changes Pversion 8 March 2016.pdf |
HFIN 4/14/2016 8:30:00 AM |
HB 81 |
| 196 new sponsor statement.pdf |
HFIN 4/14/2016 8:30:00 AM |
SB 196 |
| 4 14 16 SB 210 by Borough.pdf |
HFIN 4/14/2016 8:30:00 AM |
SB 210 |