Legislature(1995 - 1996)
02/22/1995 01:40 PM Senate CRA
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* first hearing in first committee of referral
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+ teleconferenced
= bill was previously heard/scheduled
SENATE COMMUNITY & REGIONAL AFFAIRS COMMITTEE
February 22, 1995
1:40 p.m.
MEMBERS PRESENT
Senator John Torgerson, Chairman
Senator Randy Phillips, Vice Chairman
Senator Tim Kelly
Senator Fred Zharoff
Senator Lyman Hoffman
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
SPONSOR SUBSTITUTE FOR SENATE BILL NO. 20
"An Act establishing the Alaska municipal basic services program,
relating to certain programs of state aid to municipalities and
recipients in the unorganized borough; and providing for an
effective date."
PREVIOUS SENATE COMMITTEE ACTION
SB 20 - No previous action to record.
WITNESS REGISTER
Mayor Don Long, President of the Alaska
Municipal League
P.O. Box 629
Barrow, AK 99723
POSITION STATEMENT: Testified in support of SSSB 20
Doug Griffin
Box 307
Valdez, AK 99686
POSITION STATEMENT: Supports SSSB 20
Leo Rasmussen
Box 2
Nome, AK 99762
POSITION STATEMENT: Supports SSSB 20
Mayor Barbara Lacher
Matanuska-Susitna Borough
775 E. Parks Highway
Wasilla, AK 99645
POSITION STATEMENT: Testified in support of SSSB 20
Don Moore, Manager
Matanuska-Susitna Borough
350 E. Dahlia
Palmer, AK 99645
POSITION STATEMENT: Supports SSSB 20
Tom Smith, City Manager
City of Palmer
231 W. Evergreen Ave.
Palmer, AK 99645
POSITION STATEMENT: Testified in support of SSSB 20
Tom Quick, Vice Mayor
City of Ouzinkie
P.O. Box 109
Ouzinkie, AK 99644
POSITION STATEMENT: Supports SSSB 20
Gene Dusek, Budget Director
Municipality of Anchorage
P.O. Box 196650
Anchorage, AK 99519
POSITION STATEMENT: Testified in support of SSSB 20
Betty Glick
Kenai Peninsula Borough Assembly
P.O. Box 528
Kenai, AK 99611
POSITION STATEMENT: Testified in support of SSSB 20
Tom Boedeker, Attorney for Kenai Peninsula Borough
144 N. Binkley
Soldotna, AK 99669
POSITION STATEMENT: Supports SSSB 20
Fred Armstrong
Box 4
Kotzebue, AK 99752
POSITION STATEMENT: Supports SSSB 20
Lois Irvin
167 W. Bayview
Homer, AK 99603
POSITION STATEMENT: Supports SSSB 20
Mayor Albert Dick
City of Hoonah
P.O. Box 360
Hoonah, AK 99829
POSITION STATEMENT: Supports SSSB 20
Mayor Alaire Stanton
City of Ketchikan
334 Front St.
Ketchikan, AK 99901
POSITION STATEMENT: Testified in support of SSSB 20
Mayor Thomas Greene
City of Nondalton
P.O. Box 089
Nondalton, AK 99640
POSITION STATEMENT: Testified in support of SSSB 20
Michael Cushing, Research Analyst
Department of Community & Regional Affairs
P.O. Box 112100
Juneau, AK 99811-2100
POSITION STATEMENT: Offered information on SSSB 20
ACTION NARRATIVE
TAPE 95-5, SIDE A
Number 001
SCRA - 2/22/95
SSSB 20 ALASKA MUNICIPAL BASIC SERVICES PROGRAM
CHAIRMAN TORGERSON called the Senate Community & Regional Affairs
Committee meeting to order at 1:40 p.m., and noted Representative
Ivan Ivan was in attendance.
CHAIRMAN TORGERSON introduced SSSB 20 as the only order of
business, and stated it was not his intent to pass the bill out of
committee this date but to take only public testimony for the
record.
SENATOR TOGERSON opened the hearing to testimony over the
Legislative Teleconference Network.
Number 030
DON LONG, Mayor of Barrow and President of the Alaska Municipal
League, testifying from Barrow, read the following prepared
statement into the record:
"The Alaska Municipal League strongly supports the concept embodied
in this bill. It has not yet taken a position on the new changes
in the sponsor substitute.
The goal of the Alaska Municipal Basic Service is to educate the
administration and the Legislature on the critical importance of
state revenue sharing with municipalities.
Each of the fifty states provide some form of revenue sharing with
municipalities because political subdivisions carry out a large
number of state mandates which would otherwise be totally unfunded
state mandates.
In Alaska, revenue sharing with municipalities is even more
important because, in addition to many state mandates on
municipalities, the current wealth of the state is primarily
concentrated in a small area to the north. Without a redistribution
of these resources to other areas of the state, current state
services would virtually be impossible to sustain at any reasonable
level. Likewise, without a reasonable level of revenue sharing
with municipalities, the quality of life and essential services in
many municipalities simply cannot be sustained.
The January 25, 1995 Local Boundary Commission report to the
Legislature notes that five municipalities are being recommended
for dissolution. However, many more municipalities and areas of
boroughs are seriously considering dissolution or detachment.
Page 50 of the LBC report, which discusses the detachment of part
of the Mat-Su Borough, states that the borough has been financially
'..penalized because of incorporation. Anticipated continued
reductions in state aid to local governments will only exacerbate
the problem.'
The financial cost to the state to provide services to additional
unincorporated areas will be far greater than the cost of
stabilization of revenue sharing at an adequate level.
In the past nine years, the state has cut revenue sharing over 55
percent while the state operating budget has experienced moderate
growth on the whole. It has been easy for the state to cut revenue
sharing because the state is insulated from the decisions
necessitated by the cuts. In fact, the cuts to revenue sharing
have gone far beyond forcing political subdivisions to operate at
maximum efficiency.
The primary purpose for the creation of the concept of the Alaska
Municipal Basic Services program is to gain your good faith support
for the stabilization of state revenue sharing with municipalities
this year and in the future."
Number 090
DOUG GRIFFIN, City Manager, Valdez, presented a brief history on
the concept of putting the legislation together. At the annual
conference of the Alaska Municipal League in 1993, there was
discussion about what members of the League and the municipalities
could do to try to address dramatic cuts that have been made in
revenue sharing. A resolution was passed and a committee was
formed that looked at problems with the existing programs, and it
was agreed that there was a need to come up with a better approach
that they thought they could sell to the legislators: a category
of basic services that legislators could relate to in terms of
funds instead of a block grant approach. He said the bottom line
is that they want to try to make is easier for the Legislature to
understand the need for the dollars, the need for the services, and
they see themselves as a partner with the state in providing
critical services to Alaskans.
Number 155
LEO RASMUSSEN, testifying from Nome, said in combining municipal
assistance and state-shared revenue, they are hoping to maintain a
program of funding from the state to all municipal governments with
a reasonable level of funding. The level field they are trying to
recreate was not created recently, but was created under a business
tax program in 1978 and it has not been adjusted since. He said it
doesn't matter what is done, there's going to be winners and
losers. There is nothing fair about consolidation of basic
services, but if something isn't done today, it is going to be even
less fair when they take another 56 percent cut. He cautioned that
if something isn't done early in the session with the legislation,
that it will end up a political football, either failing to pass or
completely rewritten.
Number 195
BARBARA LACHER, Mayor, Matanuska-Susitna Borough, stated the
borough supports the legislation in its present form. However, she
observed that there will probably be a lot of changes between now
and its passage, and she requested that members cautiously observe
it through its process.
Number 202
DON MOORE, Manager, Matanuska-Susitna Borough, voiced support for
some kind of stabilization in the municipal assistance and revenue
sharing funds. He suggested that as the committee works on the
legislation to take a close look at the allocation formulas and the
rationale that goes into them. He questioned why police are given
a 17 percent allocation while fire and emergency medical services
are given only 11 percent. He also suggested examining the
philosophical change from rather than looking at local revenue
generation, this seems to be based on local expenditures.
Number 240
TOM SMITH, City Manager, Palmer, stated the city's support for SSSB
20 in its current form. The basic concept of the legislation is
very good. He suggested the Legislature should keep dissolutions
in mind because the state pays for them. He pointed out that last
year petitions for dissolution of five cities were approved, and it
is projected that 14 other cities may consider dissolution this
year.
Number 260
TOM QUICK, Vice Mayor of Ouzinkie, spoke on behalf of Mayor
Chichenoff. He said they have been experiencing difficulty with
managing their budget and coming up with enough money to provide
essential services. The small communities don't have a taxation
base; the majority of housing is provided by HUD and, as such, they
are not permitted to tax that housing. He noted at the Alaska
Conference of Mayors meeting in Homer, it was concluded that in a
small community approximately $50,000 was about the minimum amount
needed to provide the essential services, but under SSSB 20, the
entitlement for his community is down to about $40,000. He stated
he favors the bill overall, but he hopes that it can be kept down
to as simple a concept as possible.
Number 343
GENE DUSEK, Budget Director, Municipality of Anchorage, voiced the
municipality's support for the concept of the municipal basic
services program and their belief that the program makes a lot more
sense than the current municipal assistance and revenue sharing
programs. He expressed the hope that the Legislature will more
adequately fund something that makes more sense. They see no real
problem with the minimum entitlement provision, but they feel that
the minimum entitlement should be subject to proration if funding
is cut. He reiterated that the municipality is very supportive of
the concept of the program, but they are concerned with the way the
sponsor substitute is currently written and its impact on
Anchorage.
Number 390
BETTY GLICK, speaking on behalf of the Kenai Peninsula Borough
Assembly, said they have been working with other municipalities to
come up with a program that would be mutually acceptable to the
Legislature and the local governments that does show some
stability, predictability, and fiscal accountability. She said the
Kenai Peninsula Borough supports the concept of SSSB 20 at this
time, and they encourage the Legislature to continue working with
the municipalities towards the development of a mutually acceptable
program, keeping in mind that the municipalities are in partnership
with the state.
Number 420
TOM BOEDEKER, an attorney for the Kenai Peninsula Borough, said he
has also served as chairman of thef Alaska Municipal League
Legislative Committee, so he has been involved in this process.
One of the issues that they addressed in the legislation, and they
think is important for the Legislature to look at, is that the
current program does not seem to garner a great deal of support
when it comes time for funding. In fashioning a new program, they
tried to determine what the essential services were, where the
money was being spent, and identify those services and tie the
funding to them so that it would have more support to show that the
municipalities are providing these services. He pointed out that
a certain portion of the state funding does go to provide services
to the citizens, and that municipalities are often the best
mechanism for delivering those services.
Number 440
FRED ARMSTRONG, testifying from Kotzebue, stated support for the
AMBS program. He spoke to the impact that the reductions in
municipal assistance and revenue sharing have on small communities
in his region. Significant reductions are seen as economic losses
because local governments provide the majority of employment in
their small communities. Any cuts not only affect the services but
jobs as well. Since 1990, the City of Kotzebue has seen a 50
percent reduction in municipal assistance and 58 percent reduction
in revenue sharing. He urged that legislators make a bipartisan
effort to pass the legislation to ensure that municipalities can
operate effectively.
Number 460
LOIS IRVIN, testifying from Homer, expressed her appreciation for
the legislation and her interest in seeing it passed by the
Legislature.
Number 490
MAYOR ALBERT DICK, testifying from Hoonah, voiced the City of
Hoonah's support for the concept of SSSB 20. Like all the other
communities, Hoonah has experienced major funding cuts in municipal
assistance and revenue sharing. He said if the cuts continue, they
may be losing their police department.
Number 498
There being no other witnesses wishing to testify over the
teleconference network, SENATOR TORGERSON closed that portion of
the meeting and stated testimony would be taken in Juneau.
Number 500
MAYOR ALAIRE STANTON of the City of Ketchikan related that she is
also president of the Conference of Mayors. At their last meeting
the conference passed a resolution in support of the concepts
contained in SB 20. Even though the communities that she
represents, Ketchikan, Saxman and the Ketchikan Gateway Borough do
not either gain a lot or lose a lot under the current scenario,
they feel that the concept contained in the revisions of the
program are the ones they want to support. They believe it is
appropriate that the state share in those basic services that are
provided by the municipalities, because if the municipalities were
not providing those services, the state would have to pick up on
them.
Number 510
MAYOR THOMAS GREENE of the City of Nondalton, speaking on behalf of
the City of Nondalton and the Lake and Peninsula Borough, said it
is quite obvious that the old programs are unfavorable in most
areas of the state because of the conflicts of each program. The
AMBS program puts this together and reflects a realistic look of
what municipal basic services is. However, their are two concerns
that both the city has and the borough has. One is the minimum
entitlement and the other is the discretion of unincorporated
communities within organized boroughs versus unincorporated
communities outside of boroughs. There is thought that if both are
sitting right on that boundary line providing the same services,
one is going to do better just because it is outside of a borough.
SENATOR TORGERSON said he had omitted a transition period in the
original version of SB 20, mainly because of his concern that it
would be leading this program to change the formulas by the
transition instead of the merits of the bill. That transition
period is in the sponsor substitute and it has raised a lot of
questions. He asked Michael Cushing of the Department of Community
& Regional Affairs to explain how the transition provisions would
take effect, particularly if there was a cut to existing funding
levels.
MICHAEL CUSHING, Research Analyst, Department of Community &
Regional Affairs, said as the transition provision is laid out in
the bill, the provision provides for a maximum loss to
municipalities of 2 percent in the first year compared to their FY
95 funding; in the next year it would 2 be percent compared to
their FY 96 funding; and for the next year and out years it would
be no more than a 5 percent loss in preceding years.
He said the scenario is simple if we were to stay at the FY 95
funding level for the next 10 years. First they would run the
basic formula that's presented in the bill. They would then put
all of those numbers into the computer which would result in a new
allocation. He agreed that when changing from one formula approach
to another, there are going to winners and there are going to be
losers. No matter what the formula, there is going to be someone
changing up or down. Finally, the transition provision is applied.
In this case, if there is a stable level of funding, essentially,
you take money from the winners and move that down to the losers to
bring that collective group of losers up to a maximum loss of 2
percent, so any given community would not lose more than 2 percent
from the preceding year.
However, if there was a fairly major cut in overall program
funding, they would run the formula and see who are winners and
losers in the formula. They would then attempt to do the second
step of the process, which would be to take money from those who
are still winners and move it down to those losers in attempt to
bring them up to no more than a 2 percent loss. He added there is
some point where there would not be enough winners to make up the
money to bring the losers up to a 2 percent loss.
TAPE 95-5, SIDE B
Number 015
SENATOR TORGERSON asked if the 1978 business license tax base has
ever received a cut since it has been in place. MICHAEL CUSHING
responded that it hasn't. On the municipal assistance side, there
is a $11.6 million base amount under municipal assistance, so if
there are cuts to the municipal assistance program, they are taken
out of the per capita sharing side of it. That base amount that is
protected is about $11 million. SENATOR TORGERSON said he made
that point because there may be people who are not aware that since
this program has been existence, there are portions of it that
aren't subject to a cut, and, with the AMBS program, all portions
of the program are equal, except for unincorporated communities and
volunteer fire departments. MICHAEL CUSHING said that exception
would also include the $40,000 minimum entitlement communities once
that is taken out.
Number 035
There being no further witnesses wishing to testify on SSSB 20,
SENATOR TORGERSON said it was his intent to continue working with
the Alaska Municipal League and the Conference of Mayors on the
formula and the transition provision. He then adjourned the
meeting at 2:30 p.m.
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