Legislature(1993 - 1994)

02/18/1993 09:00 AM Senate CRA

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
          SENATE COMMUNITY & REGIONAL AFFAIRS COMMITTEE                        
                        February 18, 1993                                      
                            9:00 a.m.                                          
  MEMBERS PRESENT                                                              
  Senator Randy Phillips, Chairman                                             
  Senator Robin Taylor, Vice Chairman                                          
  Senator Rick Halford                                                         
  MEMBERS ABSENT                                                               
  Senator Al Adams                                                             
  Senator Fred Zharoff                                                         
  COMMITTEE CALENDAR                                                           
  SENATE BILL NO. 62                                                           
  "An Act relating  to the  public school foundation  program;                 
  and providing for an effective date."                                        
  SENATE BILL NO. 102                                                          
  "An Act relating  to municipal  property tax exemptions  for                 
  certain residences and to property tax equivalency  payments                 
  for certain residents; and providing for an effective date."                 
  SENATE BILL NO. 88                                                           
  "An  Act  relating  to   grants  to  municipalities,   named                 
  recipients,  and  unincorporated  communities;  establishing                 
  capital project matching  grant programs for  municipalities                 
  and unincorporated  communities; establishing a  local share                 
  requirement  for capital  project grants  to municipalities,                 
  named  recipients,  and   unincorporated  communities;   and                 
  providing for an effective date."                                            
  SENATE BILL NO. 89                                                           
  "An Act  making appropriations for capital  project matching                 
  grant programs; and providing for an effective date."                        
  PREVIOUS SENATE COMMITTEE ACTION                                             
  SB  62 - No previous action to record.                                       
  SB 102 - No previous action to record.                                       
  SB 88 - See Community & Regional Affairs minutes                             
          dated 2/16/93.                                                       
  SB 89 - See Community & Regional Affairs minutes                             
          dated 2/16/93.                                                       
  WITNESS REGISTER                                                             
  Senator Jay Kerttula                                                         
  State Capitol                                                                
  Juneau, AK 99801-1182                                                        
  POSITION STATEMENT:  Opposed to SB 102                                       
  Bruce Geraghty, Deputy Commissioner                                          
  Department of Community & Regional Affairs                                   
  P.O. Box 112100                                                              
  Juneau, AK 99811-21-00                                                       
  POSITION STATEMENT:  Offered information on SB 102                           
  Kent Swisher                                                                 
  Alaska Municipal League                                                      
  217 Second St., Suite 22                                                     
  Juneau, AK 99801                                                             
  POSITION STATEMENT:  Testified in support of SB 102                          
  Connie Sipe, Executive Director                                              
  Older Alaskans Commission                                                    
  P.O. Box 110209                                                              
  Juneau, AK 99811-0209                                                        
  POSITION STATEMENT:  Testified on  SB 102                                    
  Duane Guiley, Director of School Finance                                     
  Department of Education                                                      
  801 W. 10th St., Suite 200                                                   
  Juneau, AK 99801                                                             
  POSITION STATEMENT:  Offered information on SB 62                            
  Carl Rose, Executive Director                                                
  Association of Alaska School Boards                                          
  Juneau, AK 99801                                                             
  POSITION STATEMENT:  Supports SB 62                                          
  Sharon Macklin                                                               
  DeBarr Road                                                                  
  Anchorage, AK 99504                                                          
  POSITION STATEMENT:  Stated concerns with SB 62                              
  Willie Anderson                                                              
  105 Municipal Way                                                            
  Juneau, AK 99801                                                             
  POSITION STATEMENT:  Stated concerns with SB 62                              
  ACTION NARRATIVE                                                             
  TAPE 93-7, SIDE A                                                            
  Number 001                                                                   
  The Senate Community & Regional Affairs Committee was called                 
  to order by Chairman Randy Phillips at 9:00 a.m.                             
  CHAIRMAN  RANDY  PHILLIPS   introduced  SB  102   (MUNICIPAL                 
  PROPERTY TAX EXEMPTIONS) as the first order of business.                     
  Number 015                                                                   
  SENATOR JAY KERTTULA  said the state has  sufficient income,                 
  and as long  as the  state does have  sufficient income,  we                 
  shouldn't be taking from the senior programs.  If it becomes                 
  necessary to  do so,  then it  should  be done  in the  same                 
  manner and not  exceeding the percentage of  other programs,                 
  including the operating of general government.                               
  Senator Kerttula  voiced his  concern  with statements  that                 
  have been made by the Alaska Municipal League on SB 102.  He                 
  said  the  seniors  don't draw  on  municipal  services; the                 
  primary costs to the municipalities is the schools.                          
  Senator Kerttula believes it  is fair to consider giving   a                 
  senior citizen property  tax reduction, both at  the borough                 
  and at  the state level.   He said  seniors do not  have the                 
  costs to  the  boroughs that  the ordinary  family or  does.                 
  However, seniors do  put a lot of money into  the state just                 
  through normal living expenditures.                                          
  Senator Kerttula stated he believes that overall it is a big                 
  mistake to change this program.  He said the state gives the                 
  municipalities revenue sharing, municipal services and other                 
  funds from this  state to help  offset whatever they may  do                 
  for  the  seniors and  their  property contributions  at the                 
  local level.                                                                 
  Number 088                                                                   
  CHAIRMAN PHILLIPS said state statute says the program has to                 
  be funded  at $9 million,  yet the  legislature, year  after                 
  year only  funds one-third  of it.   He said  he has  a real                 
  problem:    either the  commitment  is  there  or  its  not.                 
  SENATOR  KERTTULA  said  local  governments  don't  consider                 
  seniors  particularly important  and  they aren't  going  to                 
  provide the benefits at the local  level unless they have to                 
  and it is mandated.  He  said it would be fairer perhaps  if                 
  it were funded totally, but if we don't fund it fully, it is                 
  not so unfair that they pay the difference for the reason he                 
  stated.  Seniors don't draw on  the programs that cost local                 
  government, i.e., schools.                                                   
  Number 155                                                                   
  BRUCE GERAGHTY, Deputy Commissioner, Department of Community                 
  and Regional Affairs, directed  attention to the  Governor's                 
  transmittal  letter,  which  states  that  due to  declining                 
  revenues, it has become apparent over the past several years                 
  that the  state can no  longer afford to  fully pay for  the                 
  municipal  reimbursement program  for  the mandatory  senior                 
  citizens or disabled  veterans property tax exemption.  As a                 
  result, municipalities have not been  reimbursed in full for                 
  the tax  revenues lost  through the  mandatory property  tax                 
  exemptions.    SB 102  will  allow municipalities  to decide                 
  whether they wish to  exempt such property from taxation  in                 
  whole or  in part.  If  they choose to exempt  the property,                 
  they will lose tax revenue, but that decision  will be up to                 
  the individual municipality and will not be mandated  by the                 
  Mr. Geraghty pointed  out that  the total reimbursements  to                 
  municipalities for calendar year 1992  would have been $13.6                 
  million.    The  legislature  funded  the  program  at  $2.8                 
  million,  which amounts  to about  20 percent  of the  total                 
  funding.  He  added that the  legislature funds the  renters                 
  rebate program at about  85 percent, which is a  little over                 
  Number 195                                                                   
  CHAIRMAN PHILLIPS asked for an explanation of the January 1,                 
  1993  effective  date.   BRUCE  GERAGHTY answered  there was                 
  discussion on whether they make this effective on January 1,                 
  1994, and they determined  there wasn't a lot  of difference                 
  between  making it  retroactive  to this  year.   They  have                 
  received   applications  for  this  year,  and,  unless  the                 
  legislature so determines  to put money  into the fund  this                 
  year, the program will go unfunded in FY 94.                                 
  Mr. Geraghty said since the original bill was introduced, in                 
  discussions with the  Department of  Law, it was  determined                 
  that Section 1 is not necessary  and they are proposing that                 
  it be deleted in a committee substitute.                                     
  Number 218                                                                   
  CHAIRMAN PHILLIPS asked if disabled  veterans were taken out                 
  of the bill, how  much money and people would  that involve.                 
  BRUCE  GERAGHTY  responded  that he  didn't  have  the exact                 
  figures,   but  his  understanding  was  that  the  disabled                 
  veterans  are a  small  portion of  the  program.   CHAIRMAN                 
  PHILLIPS requested that he be provided that breakdown.                       
  Number 235                                                                   
  KENT SWISHER,  Alaska Municipal League, stated  the League's                 
  support for SB  102, but  added that they  are requesting  a                 
  couple of minor changes in the bill.                                         
  Mr. Swisher noted that when the program started out it was a                 
  very small program.  However, now it is a great  big program                 
  and it is an  expensive program, both in terms  of the state                 
  and its obligation, largely unfunded, and the municipalities                 
  and  their  contributions   to  this  program.     There  is                 
  approximately  $10  million  a  year  in  terms  of  funding                 
  shortfall.   He said  that's a large  enough number to  be a                 
  significant problem, especially when it  is coupled with the                 
  decline over  the last few years of municipal assistance and                 
  revenue sharing.                                                             
  Mr. Swisher outlined three suggested changes to SB 102:  (1)                 
  require  that  any  local property  tax  relief  program for                 
  senior citizens  and disabled  veterans be  approved by  the                 
  voters; (2)  allow locally established  property tax  relief                 
  programs  to grant deferments  on property taxes  as well as                 
  exemptions; and (3)  exempt the value of property optionally                 
  exempted  under a  local program  to provide tax  relief for                 
  senior citizens and disabled veterans from the full and true                 
  value determination prepared by the Department  of Community                 
  & Regional  Affairs, which is  a determining  factor in  the                 
  level  of  funding under  the  education foundation  and the                 
  state revenue sharing programs.                                              
  Mr.  Swisher  said the  municipalities  strongly  feel these                 
  exemptions are decisions that should be made locally.   They                 
  are not  insensitive to the concerns of senior citizens, but                 
  it is  necessary to balance  whether this exemption  is most                 
  helpful to seniors who  may be struggling or perhaps  to the                 
  younger family  who may also  be struggling.   He  suggested                 
  that  perhaps, as public policy, the question of need should                 
  at least be considered.                                                      
  Number 290                                                                   
  Addressing  the amendments  proposed  by the  League,  BRUCE                 
  GERAGHTY said they think the municipalities can already deal                 
  with  the  requirement  for  an   election  to  approve  the                 
  ordinance.   He said he  wasn't quite sure that  access to a                 
  deferral system isn't  already available.  There  is nothing                 
  that says municipalities can't institute a  deferral system.                 
  The department prefers that the  municipalities have as much                 
  flexibility as possible.                                                     
  Speaking to the  third amendment to  remove it from the  tax                 
  rolls, Mr. Geraghty said the  state tax assessor has brought                 
  that up, and he  thinks that it is  a matter of it being  in                 
  the  proper location  to  exempt so  it  doesn't affect  the                 
  education  formula.    He  added  that  he  would  get  more                 
  information on the issue.                                                    
  SENATOR TAYLOR commented that it was his understanding local                 
  communities are  not allowed  to exempt  property from  that                 
  calculation.   He  believes that  a program should  be based                 
  upon what a tax mill generates in a  community, not what the                 
  department   calculates   a  community   being   capable  of                 
  generating.   He said it raises a policy issue that needs to                 
  be resolved  because there  are many  communities where  the                 
  department  doesn't have a tax  base.  Furthermore, he would                 
  be  very  hesitant  to provide  an  additional  exemption as                 
  suggested by Mr. Swisher, because  that exemption might very                 
  well be abused.                                                              
  Number 350                                                                   
  CONNIE SIPE, Executive  Director, Older Alaskans Commission,                 
  explained that the  Commission has not yet taken an official                 
  position on  SB 102, although  they have been  discussing it                 
  and have some concerns with it.                                              
  Ms. Sipe said she  always thought that under the  old system                 
  there was  some exemption  from ad  valorem value  at either                 
  revenue  sharing  or  school  taxation  for  these  exempted                 
  properties so that the municipalities  did have some benefit                 
  despite the fact  that they weren't fully reimbursed  by the                 
  Ms.  Sipe  noted  that  seniors have  also  raised  the same                 
  concern   as addressed by Senator Taylor  about the fairness                 
  between the communities.                                                     
  Concluding,   Ms.  Sipe   said   seniors  would   like  some                 
  consideration of something  like the deferral system,  or if                 
  it  is going to go to local  option, perhaps the state could                 
  preserve  a mandatory hardship level  and have it defined so                 
  that  it would be  fair between cities.   She  added that 30                 
  percent  of  seniors  have incomes  below  $15,000  and that                 
  includes their longevity bonus and permanent fund dividend.                  
  Number 395                                                                   
  CHAIRMAN RANDY PHILLIPS  requested that  the Older  Alaskans                 
  Commission  provide  the   committee  with  any  recommended                 
  changes.    He  stated  SB  102  would be  back  before  the                 
  committee the following Thursday.                                            
  Number 430                                                                   
  CHAIRMAN  RANDY  PHILLIPS introduced  SB  62  (PUBLIC SCHOOL                 
  FOUNDATION PROGRAM) as the next order of business.                           
  DUANE  GUILEY, Director  of  School  Finance, Department  of                 
  Education, said one major criticism  of the existing formula                 
  for distributing state  aid is  the area cost  differential.                 
  In  response  to  this  concern,  the  Alaska  2000  Finance                 
  Committee recommended formulation of the Alaska School Price                 
  Index Committee.  He highlighted six primary areas of change                 
  that were recommended  by that  committee and are  contained                 
  within SB 62.                                                                
  First, it would  change the Alaska School Price  Index which                 
  would  serve  as a  replacement  for the  current  area cost                 
  differential.   The ASPI  is a  weighted price  differential                 
  based on expenditures as reported by districts  during FY 89                 
  and FY 92.  The districts in  the base were the eight school                 
  districts that currently  have an  area differential of  1.0                 
  under the area cost differential.                                            
  SENATOR TAYLOR commented that prior to the last major change                 
  in the foundation  formula, Southeast Alaska did not  have a                 
  school in it  that was at 1.0.   Anchorage was the  only one                 
  that was 1.0.  When the foundation formula passed, Southeast                 
  Alaska got lumped in with Anchorage and has been stuck there                 
  ever since, and that's  where a major portion of  the single                 
  site problem came from.                                                      
  DUANE GUILEY said there two very  positive things about this                 
  approach as  compared to other  studies to try  to determine                 
  differences in cost.   One is  that this approach was  based                 
  upon  total expenditures  incurred  by  the district,  which                 
  includes local  contributions.   So  those communities  that                 
  have contributed heavily  to the  education of the  students                 
  are awarded  through this system because those contributions                 
  are reflected in salaries  passed to staff, prices paid  for                 
  good  and services  and  choices made  at  the local  level.                 
  Those  communities  that did  not contribute  at the  max or                 
  anywhere close are not rewarded in this system  because they                 
  did  not  have the  dollars  which  to  flow the  negotiated                 
  agreements, to the  data points that were measured for staff                 
  salaries and for the benefits afforded to those staff.                       
  Secondly, other  studies in  the past  have concentrated  as                 
  Anchorage as the  base.   By expanding the  base out  beyond                 
  Anchorage, it allows  the opportunity for even  Anchorage to                 
  come up above  1.0.  Mr. Guiley  said every district in  the                 
  state was afforded the opportunity to be placed at something                 
  greater than 1.0.                                                            
  TAPE 93-7, SIDE B                                                            
  Number 001                                                                   
  There  was  brief  discussion on  teacher  salaries  and the                 
  number  of  unemployed  teachers  looking  for work  in  the                 
  various communities.                                                         
  Number 040                                                                   
  DUANE  GUILEY continued  his overview  on changes in  SB 62.                 
  Vocational education  instructions units will  be calculated                 
  by  multiplying  enrollment  in  grades  9-12 by  a  revenue                 
  weighing factor.   Gifted and  talented instructional  units                 
  will be calculated  by multiplying the enrollment  in grades                 
  K-12 by 4 1/2 percent, and  then multiplying that product by                 
  a revenue weighing  factor.   This is an  attempt to  remove                 
  gifted and talented from special education and treat it as a                 
  separate unit.                                                               
  The  bill  also  establishes a  hold  harmless  provision to                 
  ensure that no district would receive  less as the change is                 
  made to the new funding formula.  The provision would remain                 
  in effect for three years.                                                   
  The due date  of the student enrollment  projection is being                 
  changed to a  later date in  order to provide more  accurate                 
  information to the legislature and  to the Governor's office                 
  in establishing a budget for the following year.                             
  Mr.  Guiley  said they  have established  a type  of forward                 
  funding by  asking that  a district  be allowed  to use  the                 
  greater of  the current  year enrollment or  the prior  year                 
  enrollment,  whichever would  generate  more  money for  the                 
  school district.  This would provide an opportunity that the                 
  school district  would know  their minimum  level of  budget                 
  dollars at  the time they are making  staffing decisions and                 
  budget plans.                                                                
  SENATOR TAYLOR asked if there was a change made in the  caps                 
  in the  tax equivalents.   DUANE GUILEY  answered that  they                 
  were not recommending  any changes  in the tax  equivalents.                 
  As  the basic  need calculation  is raised,  the  basic need                 
  drives the cap,  and as the basic need goes up, the cap goes                 
  up.  It will  change the calculation in the  following years                 
  for the  three districts  that are  at the  35 percent  cap.                 
  However, they did  not adjust  the 35 percent  base at  all.                 
  SENATOR TAYLOR requested that Mr.  Guiley draft an amendment                 
  adjusting that 35 percent  base so that he can insert  it in                 
  the  bill.   He said people  in his  community pay 10  or 11                 
  mills  and  maybe  have  a  third  or  fourth  of  it  go to                 
  education, whereas in the North Slope Borough they pay a lot                 
  less in taxes  and yet  they receive five  to six times  the                 
  amount of money they need to run their schools.                              
  Number 110                                                                   
  CARL ROSE,  Executive Director, Association of Alaska School                 
  Boards, stated their support for SB 62.                                      
  Mr.  Rose  was a  member of  the  Alaska School  Price Index                 
  Committee.  He  said the methodology  that was used and  the                 
  points that were  considered in reviewing the  Alaska School                 
  Price  Index  were valid  considering  the disparity  in the                 
  state.  The attempt was to  try to provide equity.  He  said                 
  there were  some problems in  trying to provide  a statewide                 
  perspective, but it  was felt  that the attempt  was a  good                 
  one.  The Department  of Education is working on  some minor                 
  adjustments to address some of the  needs of the single site                 
  Mr.  Rose  said the  Association  is concerned  that current                 
  enrollment figures be used in the state budget planning.                     
  Speaking to the hold harmless provision, Mr. Rose asked that                 
  the department consider  being more clear  on the review  in                 
  three years.   He said the  three-year review leads some  to                 
  believe  that this issue  would be reviewed  in three years,                 
  but he thinks,  more accurately, we're trying  to transition                 
  from where  we are now  to where we  think we have  to be in                 
  three years.                                                                 
  Number 220                                                                   
  SHARON MACKLIN, representing the  Anchorage School District,                 
  said the school district has taken  a position that if there                 
  is a rewrite to the foundation formula this year, they would                 
  like it to  be equitable to  the Anchorage School  District.                 
  The school district feels that the  proposal on the table is                 
  not equitable.   Although there  are some parts of the  bill                 
  that they support,  they feel that  overall they are  coming                 
  out on the short end of the stick.                                           
  Ms. Macklin directed  attention to a  graph provided to  the                 
  committee by the  district outlining the areas  they believe                 
  are not  equitable.   She said  they go  from three  funding                 
  communities to one  which results in  a large loss, as  does                 
  the change in the formula for gifted children.                               
  Number 276                                                                   
  DUANE GUILEY clarified  that the board felt  that vocational                 
  education is significantly short-funded across the state and                 
  they  wanted  to increase  the  funding level  to vocational                 
  education to all school districts, so the amount per student                 
  was  increased  by  approximately  50  percent  from  what's                 
  currently provided.  The board felt the  gifted and talented                 
  program was  over-funded and  they wanted  to decrease  that                 
  level of funding.   He added  that special education is  the                 
  fastest growing program  in Alaska with basically  no limits                 
  on it,  and this is an attempt to  establish a limit on that                 
  program and to provide a flat rate of funding.                               
  Mr.  Guiley  also  clarified that  by  existing  regulation,                 
  Anchorage  is a unified city  borough and by regulation they                 
  are one  funding community.   He  said the  Anchorage School                 
  District  has been granted  exceptions in the  past, and, as                 
  they  move  to  the new  funding  formula,  the Commissioner                 
  wanted to dissolve all exceptions  that have been previously                 
  awarded  and  go by  the  regulatory definition  of "funding                 
  Number 305                                                                   
  CHAIRMAN RANDY PHILLIPS told Ms.  Macklin that he shared her                 
  concerns.  As he understand the new  formula, Anchorage will                 
  get 30.1  percent, and under the existing  formula, they get                 
  30.7 percent.   This  is an  overall state  increase of  $12                 
  million of which Anchorage only  gets $476,000, and yet they                 
  have 38 percent of the school  enrollment, but they are only                 
  getting about 29 percent of the funding.                                     
  Number 335                                                                   
  WILLIE  ANDERSON, representing  NEA-Alaska, stated  they are                 
  supportive of  parts of the bill, but  have serious concerns                 
  about other parts of the bill.                                               
  Mr. Anderson said the school price index issue is one of the                 
  areas where they are generally supportive of the  attempt to                 
  equalize the funding process.  They  don't agree with all of                 
  the conclusions made, but they think it can be worked out so                 
  that  it becomes  a  better area  of  differentials than  it                 
  currently is.                                                                
  NEA-Alaska is  supportive of the  centralized correspondence                 
  secondary funding.                                                           
  NEA-Alaska has serious concerns about the area of gifted and                 
  talented  funding.   It  is  their  belief  that the  gifted                 
  program  is  a program  that  is  population  driven.    The                 
  students who are in the  special education program are there                 
  because they are  certified and qualified for  that program,                 
  and that's the way to get  to the cost issue he said.   They                 
  believe  the  gifted program  should  be covered  and should                 
  continue under the  same level of funding that it  is at now                 
  as opposed to a flat rate  of funding.                                       
  NEA-Alaska  supports  the  transition  period  in  the  hold                 
  harmless provision.                                                          
  Mr. Anderson said it is  NEA-Alaska's belief that the  issue                 
  of single and small site districts should be addressed  once                 
  and for all on a long term basis.                                            
  There being no  further witnesses present  to testify on  SB
  62, CHAIRMAN RANDY  PHILLIPS closed  the public hearing  and                 
  stated it would be back before the  committee in the next of                 
  couple of weeks.                                                             
  Because the committee  had lost  its quorum, CHAIRMAN  RANDY                 
  PHILLIPS held  over  action on  SB 88  and SB  89 until  the                 
  following Tuesday.                                                           
  There  being  no   further  business  to  come   before  the                 
  committee, the meeting was adjourned at 10:38 a.m.                           

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