Legislature(2005 - 2006)BELTZ 211

03/09/2005 01:30 PM COMMUNITY & REGIONAL AFFAIRS


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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ HB 42 JOE WILLIAMS, SR., COASTAL TRAIL TELECONFERENCED
Heard & Held
*+ SB 112 TAX ON REAA RESIDENTS TELECONFERENCED
Heard & Held
*+ SB 114 SERVICE AREAS IN SECOND CLASS BOROUGHS TELECONFERENCED
Heard & Held
                    ALASKA STATE LEGISLATURE                                                                                  
    SENATE COMMUNITY AND REGIONAL AFFAIRS STANDING COMMITTEE                                                                  
                         March 9, 2005                                                                                          
                           1:35 p.m.                                                                                            
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Senator Gary Stevens, Chair                                                                                                     
Senator Johnny Ellis                                                                                                            
Senator Albert Kookesh                                                                                                          
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
Senator Bert Stedman                                                                                                            
Senator Thomas Wagoner                                                                                                          
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
HOUSE BILL NO. 42                                                                                                               
"An Act naming the Joe Williams, Sr., Coastal Trail."                                                                           
                                                                                                                                
     HEARD AND HELD                                                                                                             
                                                                                                                                
SENATE BILL NO. 114                                                                                                             
"An Act relating to consolidating or abolishing certain service                                                                 
areas in second class boroughs."                                                                                                
                                                                                                                                
     HEARD AND HELD                                                                                                             
                                                                                                                                
SENATE BILL NO. 112                                                                                                             
"An Act imposing a tax on residents of regional educational                                                                     
attendance areas; and providing for an effective date."                                                                         
                                                                                                                                
     HEARD AND HELD                                                                                                             
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
BILL: HB 42                                                                                                                   
SHORT TITLE: JOE WILLIAMS, SR., COASTAL TRAIL                                                                                   
SPONSOR(s): REPRESENTATIVE(s) ELKINS                                                                                            
                                                                                                                                
01/10/05       (H)       PREFILE RELEASED 12/30/04                                                                              
01/10/05       (H)       READ THE FIRST TIME - REFERRALS                                                                        
01/10/05       (H)       CRA, TRA                                                                                               
01/20/05       (H)       CRA AT 8:00 AM CAPITOL 124                                                                             
01/20/05       (H)       Moved Out of Committee                                                                                 
01/20/05       (H)       MINUTE(CRA)                                                                                            
01/21/05       (H)       CRA RPT 5DP                                                                                            
01/21/05       (H)       DP: SALMON, LEDOUX, NEUMAN, OLSON,                                                                     
                         THOMAS                                                                                                 
01/21/05       (H)       FIN REFERRAL ADDED AFTER TRA                                                                           
02/08/05       (H)       TRA AT 1:30 PM CAPITOL 17                                                                              
02/08/05       (H)       Moved Out of Committee                                                                                 
02/08/05       (H)       MINUTE(TRA)                                                                                            
02/09/05       (H)       TRA RPT 5DP                                                                                            
02/09/05       (H)       DP: SALMON, NEUMAN, THOMAS, GATTO,                                                                     
                         ELKINS                                                                                                 
02/14/05       (H)       FIN AT 1:30 PM HOUSE FINANCE 519                                                                       
02/14/05       (H)       Moved Out of Committee                                                                                 
02/14/05       (H)       MINUTE(FIN)                                                                                            
02/16/05       (H)       FIN RPT 9DP                                                                                            
02/16/05       (H)       DP: HAWKER, WEYHRAUCH, CROFT, HOLM,                                                                    
                         KELLY, STOLTZE, FOSTER, MEYER, CHENAULT                                                                
02/16/05       (H)       ALL MEMBERS COSPONSORS                                                                                 
02/16/05       (H)       TRANSMITTED TO (S)                                                                                     
02/16/05       (H)       VERSION: HB  42                                                                                        
02/18/05       (S)       READ THE FIRST TIME - REFERRALS                                                                        
02/18/05       (S)       TRA, CRA                                                                                               
03/01/05       (S)       TRA AT 1:30 PM BUTROVICH 205                                                                           
03/01/05       (S)       Scheduled But Not Heard                                                                                
03/03/05       (S)       TRA AT 1:30 PM BUTROVICH 205                                                                           
03/03/05       (S)       Moved  HB  42 Out of Committee                                                                         
03/03/05       (S)       MINUTE(TRA)                                                                                            
03/04/05       (S)       TRA RPT  4DP                                                                                           
03/04/05       (S)       DP: HUGGINS, FRENCH, KOOKESH, COWDERY                                                                  
03/09/05       (S)       CRA AT 1:30 PM BELTZ 211                                                                               
                                                                                                                                
BILL: SB 114                                                                                                                  
SHORT TITLE: SERVICE AREAS IN SECOND CLASS BOROUGHS                                                                             
SPONSOR(s): COMMUNITY & REGIONAL AFFAIRS                                                                                        
                                                                                                                                
02/23/05       (S)       READ THE FIRST TIME - REFERRALS                                                                        
02/23/05       (S)       CRA                                                                                                    
03/09/05       (S)       CRA AT 1:30 PM BELTZ 211                                                                               
                                                                                                                                
BILL: SB 112                                                                                                                  
SHORT TITLE: TAX ON REAA RESIDENTS                                                                                              
SPONSOR(s): SENATOR(s) BUNDE                                                                                                    
                                                                                                                                
02/23/05       (S)       READ THE FIRST TIME - REFERRALS                                                                        
02/23/05       (S)       CRA, FIN                                                                                               
03/09/05       (S)       CRA AT 1:30 PM BELTZ 211                                                                               
                                                                                                                                
WITNESS REGISTER                                                                                                              
Jim Van Horn                                                                                                                    
Staff to Representative Jim Elkins                                                                                              
Alaska State Capitol                                                                                                            
Juneau, AK  99801-1182                                                                                                          
POSITION STATEMENT:  Introduced HB 42                                                                                         
                                                                                                                                
Melanie Lesh                                                                                                                    
Staff to Senator Gary Stevens                                                                                                   
Alaska State Capitol                                                                                                            
Juneau, AK  99801-1182                                                                                                          
POSITION STATEMENT:  Introduced SB 114                                                                                        
                                                                                                                                
Renee Broker, Attorney                                                                                                          
Fairbanks North Star Borough                                                                                                    
PO Box 71267                                                                                                                    
Fairbanks, Alaska  99707                                                                                                        
POSITION STATEMENT:  Testified on SB 114                                                                                      
                                                                                                                                
Rynnieva Moss                                                                                                                   
Legislative Aide for Representative John Coghill                                                                                
Alaska State Capitol                                                                                                            
Juneau, AK  99801-1182                                                                                                          
POSITION STATEMENT:  Testified on SB 114                                                                                      
                                                                                                                                
Kevin Ritchie                                                                                                                   
Alaska Municipal League                                                                                                         
217 Second Street                                                                                                               
Juneau, Alaska 99801                                                                                                            
POSITION STATEMENT:  Strongly supported SB 114 and testified in                                                               
support of the concept of SB 112                                                                                                
                                                                                                                                
Senator Con Bunde                                                                                                               
Alaska State Capitol                                                                                                            
Juneau, AK  99801-1182                                                                                                          
POSITION STATEMENT:  Sponsor of SB 112                                                                                        
                                                                                                                                
John Borg                                                                                                                       
Eagle, AK                                                                                                                       
POSITION STATEMENT:  Raised questions about SB 112                                                                            
                                                                                                                                
Joe Banghart, Superintendent                                                                                                    
McGrath area school district                                                                                                    
POSITION STATEMENT:  Suggested the committee consider other                                                                   
options than that proposed in SB 112                                                                                            
                                                                                                                                
Darroll Hargraves, Chair                                                                                                        
Local Boundary Commission                                                                                                       
Department of Community & Economic Development                                                                                  
550 West Seventh Avenue, Suite                                                                                                  
Anchorage, Alaska 99501-3510                                                                                                    
POSITION STATEMENT:  Spoke in support of the concept of SB 112                                                                
but the LBC took no position on the bill                                                                                        
                                                                                                                                
Richard Schultz                                                                                                                 
Tok, AK                                                                                                                         
POSITION STATEMENT:  Testified in support of SB 112                                                                           
                                                                                                                                
William Miller                                                                                                                  
Dot Lake Village Council                                                                                                        
Alaska Gateway School Board                                                                                                     
P.O. Box 226                                                                                                                    
Tok, AK 99737                                                                                                                   
POSITION STATEMENT:  Suggested changes to SB 112                                                                              
                                                                                                                                
Issac Juneby, Chief                                                                                                             
Eagle Village, AK                                                                                                               
POSITION STATEMENT:  Opposed SB 112.                                                                                          
                                                                                                                                
Jim Nygaard, Superintendent                                                                                                     
Southeast Island School District                                                                                                
P.O. Box 195691218A                                                                                                             
Shoreline Drive                                                                                                                 
Thorne Bay, AK 99919                                                                                                            
POSITION STATEMENT:  Expressed concern with SB 112.                                                                           
                                                                                                                                
Patrick Dalton                                                                                                                  
Delta Junction, AK                                                                                                              
POSITION STATEMENT:  Supports SB 112                                                                                          
                                                                                                                                
Irene Meade                                                                                                                     
Delta Junction, AK                                                                                                              
POSITION STATEMENT:  Supports SB 112                                                                                          
                                                                                                                                
Denny K. Weathers                                                                                                               
Cordova, AK                                                                                                                     
POSITION STATEMENT:  Opposes SB 112                                                                                           
                                                                                                                                
P.R. Miller                                                                                                                     
Delta Junction, AK                                                                                                              
POSITION STATEMENT:  Testified on SB 112                                                                                      
                                                                                                                                
John Kunik                                                                                                                      
Glennallen, AK                                                                                                                  
POSITION STATEMENT:   Questioned where the money  would come from                                                             
for SB 112                                                                                                                      
                                                                                                                                
Mike Murphy                                                                                                                     
Delta Junction, AK                                                                                                              
POSITION STATEMENT:  Testified on SB 112                                                                                      
                                                                                                                                
Audrey Murphy                                                                                                                   
Delta Junction, AK                                                                                                              
POSITION STATEMENT:  Testified on SB 112                                                                                      
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
CHAIR  GARY STEVENS  convened the  Senate Community  and Regional                                                             
Affairs Standing  Committee meeting at 1:35:57  PM. Senator Ellis                                                             
and Chair Gary  Stevens were present and  Senator Kookesh arrived                                                               
during the course of the meeting.  He announced that a quorum was                                                               
not present and no action would be taken on bills that day.                                                                     
                                                                                                                                
1:36:43 PM                                                                                                                    
                                                                                                                                
            HB  42-JOE WILLIAMS, SR., COASTAL TRAIL                                                                         
                                                                                                                              
CHAIR GARY STEVENS announced HB 42 to be up for consideration.                                                                  
                                                                                                                                
JIM VAN  HORN, staff to  Representative Jim Elkins,  explained HB                                                               
42  names three  miles  of coastal  trail  between Ketchikan  and                                                               
Saxman the  Joe Williams Sr.  Coastal Trail. Mr.  Williams served                                                               
as mayor  of Saxman for  38 years,  was active in  public affairs                                                               
and was a highly respected citizen.                                                                                             
                                                                                                                                
The bill honors  the memory of a respected Native  leader and his                                                               
family as well.                                                                                                                 
                                                                                                                                
1:38:54 PM                                                                                                                    
                                                                                                                                
CHAIR  GARY  STEVENS  noted  that most  House  members  were  co-                                                               
sponsors then asked whether the  sponsor objected to the proposed                                                               
committee substitute, which  would change the name  to the Joseph                                                               
C. Williams Coastal Trail.                                                                                                      
                                                                                                                                
MR. VAN HORN responded the sponsor had no objection.                                                                            
                                                                                                                                
CHAIR GARY STEVENS held HB 42 in committee.                                                                                     
                                                                                                                                
                                                                                                                                
         SB 114-SERVICE AREAS IN SECOND CLASS BOROUGHS                                                                      
                                                                                                                              
1:39:34 PM                                                                                                                    
                                                                                                                              
CHAIR GARY STEVENS announced SB 114 to be up for consideration.                                                                 
                                                                                                                              
MELANIE LESH,  staff to Senator  Gary Stevens, explained  that SB                                                               
114 relates  to consolidation or  dissolution of  certain service                                                               
areas in  second-class boroughs. It  is the companion bill  to HB                                                               
121 that is awaiting final House action.                                                                                        
                                                                                                                                
MS.  LESH  explained  that  Senator Gary  Stevens  was  asked  to                                                               
introduce SB 114 to help  resolve unintended consequences related                                                               
to  the  creation then  cessation  of  funding for  road  service                                                               
districts.                                                                                                                      
                                                                                                                                
Initially  state   revenue  sharing   was  sufficient   to  allow                                                               
subdivisions outside  city limits  to maintain local  area roads.                                                               
Local  service  area road  commissions  were  created to  collect                                                               
revenue  sharing based  on the  miles of  road in  the particular                                                               
service area.                                                                                                                   
                                                                                                                                
When the revenue sharing program  terminated, a number of service                                                               
areas  had  insufficient  funding to  perform  road  maintenance.                                                               
Those  service areas  became non-functional  and  roads in  those                                                               
service areas are deteriorating.                                                                                                
                                                                                                                                
Second Class  Boroughs have  no road powers  and no  authority to                                                               
dissolve  a service  area without  a vote  of the  residents, but                                                               
even  so  they  are  concerned  about  their  liability  for  the                                                               
deteriorating roads. The proposed  statute change would allow for                                                               
the dissolution or consolidation of non-functioning districts.                                                                  
                                                                                                                                
MS. LESH  stated that SB 114  serves to resolve a  problem in the                                                               
Fairbanks  North  Star Borough  and  the  borough attorney  would                                                               
provide further explanation.                                                                                                    
                                                                                                                                
1:41:29 PM                                                                                                                    
                                                                                                                                
RENEE  BROKER, attorney  for the  Fairbanks  North Star  Borough,                                                               
reported  that  the borough  has  107  road-service areas.  Since                                                               
state revenue sharing terminated,  some service areas have become                                                               
unable  or unwilling  to tax  themselves sufficiently  to provide                                                               
some  or any  road maintenance.  Some service  areas aren't  even                                                               
able  to  attract commissioners  to  serve  on the  service  area                                                               
boards, which  means they are  headed for legal  dysfunction. The                                                               
Fairbanks North Star Borough supports  SB 114 to regain a measure                                                               
of  control since  it has  the  responsibility for  dysfunctional                                                               
service areas and  the liability for poorly  maintained roads. It                                                               
wants to step in and  exercise responsible action with respect to                                                               
those  service  areas  specifically,   but  has  no  interest  in                                                               
extending  its authority  to service  areas that  are functioning                                                               
legally and as intended.                                                                                                        
                                                                                                                                
CHAIR GARY STEVENS asked Ms. Moss to come forward.                                                                              
                                                                                                                                
1:44:00 PM                                                                                                                    
                                                                                                                                
RYNNIEVA MOSS, legislative aide  for Representative John Coghill,                                                               
reported she  was testifying in support  of SB 114 as  chair of a                                                               
road service district in North Pole.                                                                                            
                                                                                                                                
Initially she had concerns  about protecting properly functioning                                                               
service districts but she is  comfortable that the language in SB                                                               
114  does  provide  protection to  service  areas  that  function                                                               
properly and allows them to continue to conduct their business.                                                                 
                                                                                                                                
1:44:52 PM                                                                                                                    
                                                                                                                                
CHAIR GARY  STEVENS asked Ms. Moss  if she sees the  advantage in                                                               
removing road service areas that are non-functioning.                                                                           
                                                                                                                                
MS. MOSS  replied yes  and recapped the  issue that  Second Class                                                               
Boroughs  become  liable  for roads  that  aren't  maintained  in                                                               
accordance with the state statutes  that set up the service area.                                                               
SB  114  removes that  liability.  She  contended that  it's  the                                                               
people  that  live in  the  service  areas  that will  be  liable                                                               
because ambulances, fire trucks  and school buses will eventually                                                               
stop using roads that aren't maintained.                                                                                        
                                                                                                                                
CHAIR GARY STEVENS said the  borough might become the deep pocket                                                               
in the event of a lawsuit.                                                                                                      
                                                                                                                                
KEVIN RITCHIE, Alaska Municipal  League (AML), reported that both                                                               
the AML legislative committee and  the AML board strongly support                                                               
SB 114.                                                                                                                         
                                                                                                                                
There was no further testimony.                                                                                                 
                                                                                                                                
1:46:57 PM                                                                                                                    
                                                                                                                                
CHAIR GARY  STEVENS announced he  would hold SB 114  in committee                                                               
and take action at the next meeting.                                                                                            
                                                                                                                                
At ease 1:47:15 PM - 1:50:46 PM                                                                                             
                                                                                                                                
CHAIR  GARY STEVENS  noted that  Senator Kookesh  had joined  the                                                             
meeting and a quorum was present.                                                                                               
                                                                                                                                
                  SB 112-TAX ON REAA RESIDENTS                                                                              
                                                                                                                                
CHAIR GARY  STEVENS announced SB  112 to be up  for consideration                                                               
and asked Senator Bunde to come forward.                                                                                        
                                                                                                                                
1:50:52 PM                                                                                                                    
                                                                                                                                
SENATOR CON  BUNDE, sponsor of  SB 112, opened his  comments with                                                               
the observation  that all school  districts could use  more money                                                               
and  that only  4 of  34  districts statewide  contribute to  the                                                               
maximum for schools.                                                                                                            
                                                                                                                                
SB 112  simply says let's have  some equity and compare  what the                                                               
average  per  capita payment  for  schools  is in  organized  and                                                               
unorganized areas. It provides the  opportunity for adults in the                                                               
unorganized areas  to approach the  average payment of  adults in                                                               
the organized  areas. He  estimates that this  would amount  to a                                                               
tax  of approximately  $400 per  person and  by FY  08 and  would                                                               
generate to nearly $13 million for schools.                                                                                     
                                                                                                                                
This  doesn't supplant  existing  support for  school; the  money                                                               
would be  in addition to  current funding. Although  funds cannot                                                               
be dedicated, he contended that this would be a true school tax.                                                                
                                                                                                                                
1:55:56 PM                                                                                                                    
                                                                                                                                
CHAIR  GARY STEVENS  remarked his  community receives  payment in                                                               
lieu of taxes  (PILT) money for the military base  and REAAs also                                                               
receive some  type of  federal support. He  asked the  sponsor to                                                               
explain what that  money does and does not do  for the recipients                                                               
and how it fits into payment for education.                                                                                     
                                                                                                                                
1:56:20 PM                                                                                                                    
                                                                                                                                
SENATOR BUNDE  asserted that PILT  funds are pass  through monies                                                               
from  the federal  government and,  in  his view,  they aren't  a                                                               
local contribution.                                                                                                             
                                                                                                                                
SENATOR KOOKESH pointed out that the  funds don't have to be pass                                                               
through money because a number  of other states funnel that money                                                               
directly to school districts.                                                                                                   
                                                                                                                                
SENATOR BUNDE replied the funds are pass through in Alaska.                                                                     
                                                                                                                                
SENATOR KOOKESH said  his point is that other  states have proven                                                               
that  the money  doesn't  have to  be pass  through  so the  idea                                                               
shouldn't be brushed aside lightly.                                                                                             
                                                                                                                                
SENATOR  BUNDE  responded  he  doesn't   define  it  as  a  local                                                               
contribution.                                                                                                                   
                                                                                                                                
SENATOR  ELLIS questioned  how  enforcement  and penalties  would                                                               
work for late or non-payment issues.                                                                                            
                                                                                                                                
SENATOR   BUNDE   said   the    Department   of   Revenue   (DOR)                                                               
representative  could answer  in greater  detail, but  collection                                                               
would be a  simple payroll deduction for those  who are employed.                                                               
For  the self-employed  and  unemployed, the  tax  would be  paid                                                               
directly  to the  state. Anyone  in default  would be  subject to                                                               
collection of the debt just like with any other bill.                                                                           
                                                                                                                                
SENATOR KOOKESH noted that DOR  estimates that residents from the                                                               
unorganized  borough have  earned  $5.5 million  in income  since                                                               
2004.  For  comparison  purposes,  he  was  curious  whether  the                                                               
department knew how  much people in organized  boroughs earned in                                                               
the same period. REAAs have  contributed far more than $2 million                                                               
to the economy of the state  and he was interested in whether the                                                               
sponsor had reviewed that information.                                                                                          
                                                                                                                                
SENATOR  BUNDE  replied  he  didn't have  the  earned  income  in                                                               
organized areas at his fingertips,  but he is looking at personal                                                               
local contribution. People living in  areas with a sales tax make                                                               
a personal local contribution to  services including schools. And                                                               
property  owners living  in communities  with  property tax  also                                                               
make a local contribution to support schools.                                                                                   
                                                                                                                                
"The contributions  that we all  make to our state's  economy are                                                               
appreciated and  are vital to  our growth, but  I view that  as a                                                               
separate issue than what is the personal local contribution."                                                                   
                                                                                                                                
2:00:30 PM                                                                                                                    
                                                                                                                                
SENATOR KOOKESH: responded he brought  the question up because it                                                               
needs an answer before the bill goes forward.                                                                                   
                                                                                                                                
CHAIR GARY  STEVENS noted  Mr. Fried and  Mr. Harlamert  from the                                                               
Department of Revenue  were present to answer  questions. He then                                                               
informed the sponsor that his intention  was to bring the bill up                                                               
at a future meeting.                                                                                                            
                                                                                                                                
2:00:53 PM                                                                                                                    
                                                                                                                                
KEVIN  RITCHIE,  Alaska  Municipal  League (AML),  said  the  AML                                                               
legislative  committee  believes  that the  way  the  Legislature                                                               
deals  with  the unorganized  area  is  a key  issue.  Assemblies                                                               
routinely  work to  find  ways  to pay  bills  while making  life                                                               
better for  residents and  that's what  the Legislature  is doing                                                               
for the  unorganized area.  He stressed that  the equity  of this                                                               
type of tax requires serious discussion.                                                                                        
                                                                                                                                
2:03:57 PM                                                                                                                    
                                                                                                                                
The AML has  spent considerable time discussing  the evolution of                                                               
local government  and this  is yet another  discussion of  how to                                                               
govern the  unorganized borough. This  is a very  important issue                                                               
and the  AML would like to  be fully engaged. Certainly  there is                                                               
nothing that says that the  unorganized borough may not be taxed,                                                               
but the key is how that will come about, he concluded.                                                                          
                                                                                                                                
CHAIR GARY STEVENS opened teleconference testimony.                                                                             
                                                                                                                                
2:04:48 PM                                                                                                                    
                                                                                                                                
JOHN  BORG  from  Eagle  testified   that  the  argument  against                                                               
implementing a  statewide income  tax is  that it  would unfairly                                                               
impact  lower  income   people  and  he  thought   the  $424  tax                                                               
assessment  would similarly  impact low-income  adults. Also,  he                                                               
disagreed with  the idea that  families that pay for  home school                                                               
materials should also  be expected to pay for a  school that they                                                               
don't use. There is no logic to that, he said.                                                                                  
                                                                                                                                
CHAIR GARY STEVENS pointed out  that people in organized boroughs                                                               
pay  property tax  to support  schools whether  they use  them or                                                               
not.                                                                                                                            
                                                                                                                                
2:07:16 PM                                                                                                                    
                                                                                                                                
JOE  BANGHART,  superintendent,   Iditarod  School  District,  in                                                               
McGrath explained that  his job includes balancing  the books and                                                               
preparing a  budget for the  McGrath school  district,which isn't                                                               
on  the  road  system.  Everyone   is  certainly  concerned  with                                                               
preparing young  people with  a good  education, but  the McGrath                                                               
REAA is  faced with a projected  deficit of at least  $605,000 in                                                               
the '06 school year.                                                                                                            
                                                                                                                                
Instead of  a flat rate tax  on REAA residents, he  suggested the                                                               
committee consider other options. A  graduated scale tax based on                                                               
income or a state income  tax would better accommodate low-income                                                               
individuals. Another option is to  tax workers that come into the                                                               
state and work short term.                                                                                                      
                                                                                                                                
He  reported  that his  district  receives  just $70,000  of  the                                                               
annual  $600,000 in  pass through  funds.  Because of  population                                                               
shifts that  are occurring  in rural  areas of  the state,  he is                                                               
concerned that if  a tax were levied more people  might leave and                                                               
further impact the school.                                                                                                      
                                                                                                                                
If  an agreement  were  made, how  would the  money  be spent  to                                                               
ensure that it  would benefit the children, he  asked. In closing                                                               
he used the following analogy:                                                                                                  
                                                                                                                                
     Our  school  district  has  a   serious  cut  ...  that                                                                    
     requires  50  stitches to  close  our  system or  we're                                                                    
     going to bleed to death.  Current offers in Juneau only                                                                    
     provide  5  to  10  of these  stitches.  The  blood  is                                                                    
     flowing and soon we will bleed to death.                                                                                   
                                                                                                                                
2:13:16 PM                                                                                                                    
                                                                                                                                
CHAIR  GARY  STEVENS  thanked Superintendent  Banghart,  for  his                                                               
comments and specific suggestions.                                                                                              
                                                                                                                                
2:13:37 PM                                                                                                                    
                                                                                                                                
DARROLL HARGRAVES,  Local Boundary Commission (LBC)  chair, spoke                                                               
in support of the concept of  SB 112 and noted that in particular                                                               
it is a means to remove disincentives for borough incorporation.                                                                
                                                                                                                                
He argued that  it is clearly an impediment  to borough formation                                                               
when you consider  that REAA school districts  aren't required to                                                               
make  a local  contribution  to support  schools while  municipal                                                               
school districts are required to do  so. SB 112 would remove that                                                               
impediment by leveling  the playing field so  that everyone would                                                               
pay taxes  to help  support state services  offered on  the local                                                               
level.                                                                                                                          
                                                                                                                                
MR. HARGRAVES referenced  pages 115-122 of the  LBC annual report                                                               
for details about taxing unorganized  areas. He acknowledged that                                                               
the bill  might need technical  refinements and that the  LBC was                                                               
available to lend assistance in that regard.                                                                                    
                                                                                                                                
2:17:41 PM                                                                                                                    
                                                                                                                                
CHAIR GARY STEVENS  thanked Mr. Hargraves for  both his testimony                                                               
and efforts on behalf of the LBC.                                                                                               
                                                                                                                                
SENATOR KOOKESH  asked Mr. Hargraves  to send  a copy of  the LBC                                                               
minutes in which  it went on record in support  of the concept of                                                               
SB 112                                                                                                                          
                                                                                                                                
MR. HARGRAVES replied:                                                                                                          
                                                                                                                                
     The commission put the concept  together for its report                                                                    
     that it submitted to you  earlier in the session. There                                                                    
     has been  no specific action  on [SB] 112.  The concept                                                                    
     itself is in the report that we referred to you.                                                                           
                                                                                                                                
SENATOR KOOKESH  reiterated his desire  to receive a copy  of the                                                               
minutes supporting  the concept  of SB 112  because he  heard him                                                               
specifically  say that  "we support  the concept  on Senate  Bill                                                               
112."                                                                                                                           
                                                                                                                                
MR. HARGRAVES said:                                                                                                             
                                                                                                                                
     I can tell  you it was supported  in the formation                                                                         
     of our  report to  you. Local  Boundary Commission                                                                         
     members   were   surveyed    to   see   how   they                                                                         
     individually felt about this  since this bill just                                                                         
     came up.  And we  did have unanimous  support from                                                                         
     them to support this and speak to its support.                                                                             
                                                                                                                                
He referenced pages 115-122 of the LBC annual report and                                                                        
said the specific concept is addressed there.                                                                                   
                                                                                                                                
2:19:14 PM                                                                                                                    
                                                                                                                                
CHAIR  GARY STEVENS  asked Senator  Kookesh if  he was  satisfied                                                               
with the answer.                                                                                                                
                                                                                                                                
SENATOR KOOKESH replied he wasn't satisfied.                                                                                    
                                                                                                                                
CHAIR  GARY STEVENS  asked  if he  needed a  copy  of the  annual                                                               
report.                                                                                                                         
                                                                                                                                
SENATOR KOOKESH replied,  "It's interesting that SB  112 came out                                                               
after  the  annual meeting  and  for  him to  specifically  state                                                               
that.... the commission is supportive  of [SB] 112 is peculiar to                                                               
me."                                                                                                                            
                                                                                                                                
2:19:43 PM                                                                                                                    
                                                                                                                                
MR. HARGRAVES  clarified it  is the  concept that  the commission                                                               
has gone  on record  as supporting, but  they aren't  speaking in                                                               
support of the specifics of SB 112.                                                                                             
                                                                                                                                
CHAIR  GARY   STEVENS  reiterated  that  on   pages  115-122  the                                                               
commission  supported  the  concept,   but  they  have  taken  no                                                               
position on the bill.                                                                                                           
                                                                                                                                
MR. HARGRAVES said that is correct.                                                                                             
                                                                                                                                
2:20:28 PM                                                                                                                    
                                                                                                                                
RICHARD SCHULTZ, former Alaska State  Senator, testified from Tok                                                               
in support of SB 112. As  the sponsor pointed out, the bill meets                                                               
the guidelines  established in the Constitution  under Article 1,                                                               
Section 1,  but it also  satisfies Article 1, Section  2; Article                                                               
10, Section 3; and Article 10, Section 6.                                                                                       
                                                                                                                                
This  is  the   fairest  way  to  approach   the  inequities  and                                                               
disparities  that exist  between  the  organized and  unorganized                                                               
areas  and the  argument  that people  in  the unorganized  areas                                                               
aren't  paying their  fair  share is  legitimate.  SB 112  allows                                                               
areas to remain  unorganized while putting them  on equal footing                                                               
with the organized areas.                                                                                                       
                                                                                                                                
MR.  SCHULTZ  pointed  out  that  if  the  bill  passed  and  the                                                               
unorganized areas  ultimately decided  they didn't like  it, they                                                               
would  still  have  the constitutional  ability  to  petition  to                                                               
become  a borough  and if  that were  successful, the  area would                                                               
have the authority to determine the local tax structure.                                                                        
                                                                                                                                
The debate is in the legislative  court, which is where it should                                                               
be.  But be  cognizant  that the  unorganized  borough is  nearly                                                               
unanimous  in   its  opposition  to  mandatory   boroughs  as  an                                                               
additional layer of unwanted and unnecessary government.                                                                        
                                                                                                                                
In  terms  of the  bill  mechanics,  he suggested  that  accurate                                                               
information  about how  many  people live  in  a particular  area                                                               
should  come from  Permanent  Fund  Dividend applications  rather                                                               
than  from the  Department of  Revenue and/or  the Department  of                                                               
Labor and Workforce Development (DOLWD).  Even if the tax weren't                                                               
deducted   from  the   dividend,   you'd   still  have   accurate                                                               
information about who owed and who didn't owe.                                                                                  
                                                                                                                                
He expressed respect  for Mr. Hargraves and  appreciation for the                                                               
time he has spent serving on  the LBC. Nonetheless he opined that                                                               
system  and the  regulations that  have been  written are  out of                                                               
control and  are causing  more problems than  they are  worth. He                                                               
stated  support for  the legislation  and said  he believes  that                                                               
most people in  the unorganized areas want  the mandatory borough                                                               
issue to go  away. If it requires some sort  of a tax assessment,                                                               
then the  unorganized area wants to  sit at the table  to address                                                               
that. Certainly no one  is eager to pay a head  tax, but it would                                                               
give  the unorganized  areas  some legitimacy  when  it comes  to                                                               
addressing issues of statewide equity.                                                                                          
                                                                                                                                
In a closing comment he suggested  that PL 874 money would not be                                                               
affected in  the REAAs  if the  head tax were  to pass,  but that                                                               
Eddy Jeans could give a definitive answer.                                                                                      
                                                                                                                                
2:26:08 PM                                                                                                                    
                                                                                                                                
CHAIR GARY  STEVENS thanked former  Senator Schultz for  his past                                                               
and present service to the state.                                                                                               
                                                                                                                                
2:26:30 PM                                                                                                                    
                                                                                                                                
WILLIAM MILLER, President, Dot Lake  Village Council testified on                                                               
behalf  of  the council,  which  is  the  governing body  of  the                                                               
federally  recognized  tribe of  Dot  Lake.  After reviewing  the                                                               
bill, he had a number of comments and recommendations.                                                                          
                                                                                                                                
On page 1,  line 7 he would prefer that  the word "employed" were                                                               
used rather than "residing" because  of the number of people that                                                               
work in the area but don't live there.                                                                                          
                                                                                                                                
Page 1,  line 8 indicates  that the tax  amount would be  set and                                                               
this would be  expensive for the individuals living  on a limited                                                               
income. In addition,  the bill doesn't address  the disabled, the                                                               
unemployed and  those living on  Social Security  and retirement.                                                               
He would prefer that the language  say the tax would not exceed 1                                                               
percent  of income.  He also  recommended  deleting "by  dividing                                                               
amount" from page 1, lines 9-10.                                                                                                
                                                                                                                                
Page 2, lines 5-11 deals with  the payment method, which could be                                                               
devastating to  individuals that live from  paycheck to paycheck.                                                               
He suggested  a preferred method  would be to withhold  the taxes                                                               
the same  way that employers presently  withhold unemployment tax                                                               
so tax payments would be spread throughout the year.                                                                            
                                                                                                                                
He opined  a percentage-of-income tax payment  is appropriate for                                                               
employed individuals and  the self-employed would pay  the tax at                                                               
year-end based on the federal income tax form.                                                                                  
                                                                                                                                
Using Senator  Bunde's figures, he  said that tax of  $13 million                                                               
or 2.5 percent would be generated.                                                                                              
                                                                                                                                
In  conclusion Mr.  Miller emphasized  that employed  individuals                                                               
should pay the tax and not everyone in the REAA.                                                                                
                                                                                                                                
2:32:54 PM                                                                                                                    
                                                                                                                                
CHAIR GARY STEVENS asked Mr.  Miller to send his written comments                                                               
to the committee if at all possible.                                                                                            
                                                                                                                                
MR. MILLER agreed to do so.                                                                                                     
                                                                                                                                
2:33:50 PM                                                                                                                    
                                                                                                                                
ISSAC JUNEBY, Chief of Eagle  Village, testified in opposition to                                                               
SB 112. As  Senator Bunde intended, the bill points  to all rural                                                               
areas  and  it  says  it  is   in  line  with  the  Alaska  State                                                               
Constitution.  However,  the  statement  is  used  in  the  wrong                                                               
context when used for tax purposes, he contended.                                                                               
                                                                                                                                
Another reason  he opposes SB  112 is that  there are no  jobs in                                                               
some rural  areas and  some people live  on very  limited incomes                                                               
and they couldn't afford to pay  a tax. He suggested that putting                                                               
money into resource development is preferable to this approach.                                                                 
                                                                                                                                
2:36:55 PM                                                                                                                    
                                                                                                                                
CHAIR GARY STEVENS thanked Mr. Juneby.                                                                                          
                                                                                                                                
2:36:58 PM                                                                                                                    
                                                                                                                                
JIM  NYGAARD, superintendent,  Southeast Island  School District,                                                               
expressed concern with  regard to SB 112 because it  puts the 225                                                               
students in his district at  risk. He explained that the district                                                               
is an  REAA with eight  sites. Between 60  and 70 percent  of the                                                               
children attending  school in  the district  live at  the poverty                                                               
level so the  discussion about generating taxes  locally is great                                                               
cause for concern.                                                                                                              
                                                                                                                                
Referencing  earlier  testimony on  the  PERS/TRS  impact to  the                                                               
state, he  reported that in  his district the PERS  increase from                                                               
FY 04 to FY  06 amounts to more than $250,000.  Both PERS and TRS                                                               
employees have  less reason to stay  and more reason to  move out                                                               
of state all the time.                                                                                                          
                                                                                                                                
He referenced the  analogy about needing 50 stitches to  sew up a                                                               
wound but  only having money  for 5 stitches. His  district can't                                                               
even afford to go to the doctor.                                                                                                
                                                                                                                                
Because  of teacher  retention,  children living  at the  poverty                                                               
level, and  the cost  of living  rate in his  REAA he  opposed SB                                                               
112.                                                                                                                            
                                                                                                                                
2:39:36 PM                                                                                                                    
                                                                                                                                
CHAIR GARY  STEVENS reiterated  the concerns  are that  costs are                                                               
getting higher  and that he doesn't  see any way for  his REAA to                                                               
fund the costs.                                                                                                                 
                                                                                                                                
MR.  NYGAARD replied,  "If  we  tax a  population  that's in  the                                                               
poverty  level,   it  only  accelerates  the   decline  of  other                                                               
opportunities."                                                                                                                 
                                                                                                                                
CHAIR GARY STEVENS thanked Mr. Nygaard.                                                                                         
                                                                                                                                
2:40:49 PM                                                                                                                    
                                                                                                                                
PATRICK DALTON  testified from  Delta Junction  in support  of SB                                                               
112. He  explained that  a local group  of citizens  conducted an                                                               
informal  survey  to  determine  whether  borough  formation  was                                                               
popular. Although  the community  didn't want  a borough,  it was                                                               
willing  to support  a direct  head  tax. He  clarified that  the                                                               
survey was  sent to  post office box  holders. Twenty  percent of                                                               
the  box holders  responded  and 80  percent  of the  respondents                                                               
favored some sort of a head tax rather than forming a borough.                                                                  
                                                                                                                                
He  reported  that  his  area   has  renewed  confidence  in  the                                                               
Legislature  because  with  this  action  it  is  acting  as  the                                                               
assembly for  the unorganized borough,  which is exactly  what it                                                               
is supposed to do.                                                                                                              
                                                                                                                                
2:42:14 PM                                                                                                                    
                                                                                                                                
IRENE  MEADE,  Delta  Junction   local  historian,  testified  in                                                               
support of  SB 112. She  reported that the community  has studied                                                               
forming a  borough a number  of times  over the last  30-40 years                                                               
and that the residents realize  that Fairbanks has designs on the                                                               
area because of its potential wealth.                                                                                           
                                                                                                                                
She discussed  potential mining development and  the expansion of                                                               
Fort Greeley as  a missile base and pointed out  that in the boom                                                               
cycles most of the workers  aren't residents so the money doesn't                                                               
stay in the local area.                                                                                                         
                                                                                                                                
Most residents are willing to support  the school system  and she                                                               
looks forward to listening to further debate on SB 112.                                                                         
                                                                                                                                
2:44:48 PM                                                                                                                    
                                                                                                                                
CHAIR  GARY STEVENS  said he  appreciated Ms.  Meade's historical                                                               
approach.                                                                                                                       
                                                                                                                                
2:44:53 PM                                                                                                                    
                                                                                                                                
DENNY  K   WEATHERS,  Hawkins  Island  resident,   testified  via                                                               
teleconference to oppose SB 112.  She said it's important to note                                                               
that prior  to 1980, the State  of Alaska had a  statewide school                                                               
tax. In April of 1980 the  Legislature repealed the tax after the                                                               
Department of  Revenue asked it  to do so. The  justification was                                                               
that withholding the  school tax in the absence of  an income tax                                                               
would be an  unnecessary burden on employers in  future years and                                                               
that the revenue would be marginal.                                                                                             
                                                                                                                                
Because SB  112 targets  just REAA  residents, she  suggested the                                                               
tax would  be discriminatory  and unconstitutional.  Pointing out                                                               
that  SB 112  charges all  REAA  residents whether  they use  the                                                               
school system  or not,  she suggested  that it  might be  time to                                                               
abolish the REAA and look into other means of education.                                                                        
                                                                                                                                
MS. WEATHERS  said her husband pays  a raw fish tax  that goes to                                                               
the community in  which he delivers fish, but  neither her family                                                               
nor her school district receive  anything from that tax. She also                                                               
pays the  Cordova sales  tax when  she shops  there and  that tax                                                               
goes to the  Cordova school system and not hers  so she's helping                                                               
yet another community.                                                                                                          
                                                                                                                                
Most of  the people that  own homes  in the Prince  William Sound                                                               
area  aren't  full  time  residents so  she  disagrees  with  Mr.                                                               
Hargraves when he talks about  SB 112 leveling the playing field.                                                               
She  has no  school building  and  no one  paid for  her to  home                                                               
school her children.                                                                                                            
                                                                                                                                
She said  this is yet  another example of the  government wanting                                                               
something that the  people oppose. Two wrongs don't  make a right                                                               
and the government needs to figure that out, she said.                                                                          
                                                                                                                                
Finally  she  asked  Mr.  Hargraves   to  clarify  his  statement                                                               
regarding  the  LBC supporting  the  concept  of the  legislation                                                               
because  when  she discussed  the  issue  with Mr.  Bockhorst  he                                                               
indicated the department didn't have a position on the bill.                                                                    
                                                                                                                                
2:50:30 PM                                                                                                                    
                                                                                                                                
CHAIR  GARY STEVENS  clarified that  Mr. Hargraves  said the  LBC                                                               
supports the  concept found  in the bill,  but it  didn't support                                                               
the bill  because SB  112 came  out after  the annual  report. He                                                               
directed her to pages 115-122 of the annual report.                                                                             
                                                                                                                                
MS. WEATHERS  replied the concept  wasn't written the way  SB 112                                                               
was written.                                                                                                                    
                                                                                                                                
2:51:23 PM                                                                                                                    
                                                                                                                                
P.R.   MILLER,  Delta   Junction  resident,   quoted  the   state                                                               
constitution  and   suggested  the  state  be   reorganized  into                                                               
delineated unorganized boroughs.                                                                                                
                                                                                                                                
He takes  exception to  the idea  that his  area pays  nothing to                                                               
support the school and other  systems. He referenced the pipeline                                                               
running  through the  area, payment  in lieu  of taxes  money for                                                               
Fort Greeley and Black Rapids,  and borough start up money, which                                                               
amounts to  millions of dollars.  It's all coming from  the Delta                                                               
area for not being a borough  and the state would be very unhappy                                                               
if the area were to become a borough.                                                                                           
                                                                                                                                
He had two  ways figured out to fund schools.  First, anyone that                                                               
files a federal income tax form  could deduct $100 and donate the                                                               
money  to the  local  school. The  second  suggestion requires  a                                                               
payment of one percent of adjusted income.                                                                                      
                                                                                                                                
2:55:56 PM                                                                                                                    
                                                                                                                                
JOHN  KUNIK, Glennallen  resident,  testified via  teleconference                                                               
and took issue with page 2,  lines 20-22 because he believes that                                                               
this is a  dedicated tax. He suggested that  his area contributes                                                               
about $6.5  million into the  general fund when you  consider the                                                               
pipeline and PILT payments.                                                                                                     
                                                                                                                                
He  pointed out  that  most of  the  land in  the  area isn't  in                                                               
private hands  and isn't  taxable so  he didn't  understand where                                                               
the  money  would come  from  if  the  area  were forced  into  a                                                               
borough. The unemployment  rate in the area is high  and there is                                                               
no  detailed analysis  about land  values and  how much  it would                                                               
cost to implement a governmental structure.                                                                                     
                                                                                                                                
He asked the  LBC what would happen and who  would be responsible                                                               
if an  area were to  organize and subsequently found  it couldn't                                                               
afford to sustain the governmental structure.                                                                                   
                                                                                                                                
Where would the excess money come from, he asked.                                                                               
                                                                                                                                
2:58:59 PM                                                                                                                    
                                                                                                                                
MIKE   MURPHY,    Delta   Junction   resident,    testified   via                                                               
teleconference and said  he supports some sort of  tax for people                                                               
living and  or working  in the unorganized  boroughs simply  as a                                                               
measure of fairness.                                                                                                            
                                                                                                                                
2:59:31 PM                                                                                                                    
                                                                                                                                
AUDREY MURPHY, Delta Junction resident,  said everyone receives a                                                               
PFD  therefore   she  believes  everyone  could   afford  to  pay                                                               
something  for  education.  She concluded,  "I  want  to  support                                                               
education  because I  want to  live in  an educated  populace and                                                               
this is a good way to do this."                                                                                                 
                                                                                                                                
3:00:13 PM                                                                                                                    
                                                                                                                                
CHAIR  GARY STEVENS  asked Senator  Bunde if  he had  any closing                                                               
comments.                                                                                                                       
                                                                                                                                
3:00:47 PM                                                                                                                    
                                                                                                                                
SENATOR BUNDE asked that discussion  about mandatory boroughs and                                                               
education  be  kept  separate  because  they  are  two  different                                                               
issues.                                                                                                                         
                                                                                                                                
He  summarized   using  the  last   comments  from   his  sponsor                                                               
statement.                                                                                                                      
                                                                                                                                
          The  constitution says  that  all people  are                                                                         
          equal   and   entitled    to   equal   rights                                                                         
          opportunity  and  protection under  the  law.                                                                         
          And   all   people   have   a   corresponding                                                                         
          obligation  to the  people in  the state.  An                                                                         
          educated populace benefits  everyone and it's                                                                         
          critically  important  to see  that  Alaska's                                                                         
          children  get an  adequate education.  SB 112                                                                         
          is not an attempt  to penalize, but simply to                                                                         
          find additional funds.                                                                                                
                                                                                                                                
3:02:07 PM                                                                                                                    
                                                                                                                                
CHAIR GARY STEVENS announced he would hold SB 112 in committee.                                                                 
                                                                                                                                
There being no further business to come before the committee,                                                                   
Chair Gary Stevens adjourned the meeting at 3:02:23 PM.                                                                       
                                                                                                                                
                                                                                                                                

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