Legislature(1993 - 1994)
02/18/1993 09:00 AM Senate CRA
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* first hearing in first committee of referral
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+ teleconferenced
= bill was previously heard/scheduled
SENATE COMMUNITY & REGIONAL AFFAIRS COMMITTEE
February 18, 1993
9:00 a.m.
MEMBERS PRESENT
Senator Randy Phillips, Chairman
Senator Robin Taylor, Vice Chairman
Senator Rick Halford
MEMBERS ABSENT
Senator Al Adams
Senator Fred Zharoff
COMMITTEE CALENDAR
SENATE BILL NO. 62
"An Act relating to the public school foundation program;
and providing for an effective date."
SENATE BILL NO. 102
"An Act relating to municipal property tax exemptions for
certain residences and to property tax equivalency payments
for certain residents; and providing for an effective date."
SENATE BILL NO. 88
"An Act relating to grants to municipalities, named
recipients, and unincorporated communities; establishing
capital project matching grant programs for municipalities
and unincorporated communities; establishing a local share
requirement for capital project grants to municipalities,
named recipients, and unincorporated communities; and
providing for an effective date."
SENATE BILL NO. 89
"An Act making appropriations for capital project matching
grant programs; and providing for an effective date."
PREVIOUS SENATE COMMITTEE ACTION
SB 62 - No previous action to record.
SB 102 - No previous action to record.
SB 88 - See Community & Regional Affairs minutes
dated 2/16/93.
SB 89 - See Community & Regional Affairs minutes
dated 2/16/93.
WITNESS REGISTER
Senator Jay Kerttula
State Capitol
Juneau, AK 99801-1182
POSITION STATEMENT: Opposed to SB 102
Bruce Geraghty, Deputy Commissioner
Department of Community & Regional Affairs
P.O. Box 112100
Juneau, AK 99811-21-00
POSITION STATEMENT: Offered information on SB 102
Kent Swisher
Alaska Municipal League
217 Second St., Suite 22
Juneau, AK 99801
POSITION STATEMENT: Testified in support of SB 102
Connie Sipe, Executive Director
Older Alaskans Commission
P.O. Box 110209
Juneau, AK 99811-0209
POSITION STATEMENT: Testified on SB 102
Duane Guiley, Director of School Finance
Department of Education
801 W. 10th St., Suite 200
Juneau, AK 99801
POSITION STATEMENT: Offered information on SB 62
Carl Rose, Executive Director
Association of Alaska School Boards
Juneau, AK 99801
POSITION STATEMENT: Supports SB 62
Sharon Macklin
DeBarr Road
Anchorage, AK 99504
POSITION STATEMENT: Stated concerns with SB 62
Willie Anderson
NEA-Alaska
105 Municipal Way
Juneau, AK 99801
POSITION STATEMENT: Stated concerns with SB 62
ACTION NARRATIVE
TAPE 93-7, SIDE A
Number 001
The Senate Community & Regional Affairs Committee was called
to order by Chairman Randy Phillips at 9:00 a.m.
CHAIRMAN RANDY PHILLIPS introduced SB 102 (MUNICIPAL
PROPERTY TAX EXEMPTIONS) as the first order of business.
Number 015
SENATOR JAY KERTTULA said the state has sufficient income,
and as long as the state does have sufficient income, we
shouldn't be taking from the senior programs. If it becomes
necessary to do so, then it should be done in the same
manner and not exceeding the percentage of other programs,
including the operating of general government.
Senator Kerttula voiced his concern with statements that
have been made by the Alaska Municipal League on SB 102. He
said the seniors don't draw on municipal services; the
primary costs to the municipalities is the schools.
Senator Kerttula believes it is fair to consider giving a
senior citizen property tax reduction, both at the borough
and at the state level. He said seniors do not have the
costs to the boroughs that the ordinary family or does.
However, seniors do put a lot of money into the state just
through normal living expenditures.
Senator Kerttula stated he believes that overall it is a big
mistake to change this program. He said the state gives the
municipalities revenue sharing, municipal services and other
funds from this state to help offset whatever they may do
for the seniors and their property contributions at the
local level.
Number 088
CHAIRMAN PHILLIPS said state statute says the program has to
be funded at $9 million, yet the legislature, year after
year only funds one-third of it. He said he has a real
problem: either the commitment is there or its not.
SENATOR KERTTULA said local governments don't consider
seniors particularly important and they aren't going to
provide the benefits at the local level unless they have to
and it is mandated. He said it would be fairer perhaps if
it were funded totally, but if we don't fund it fully, it is
not so unfair that they pay the difference for the reason he
stated. Seniors don't draw on the programs that cost local
government, i.e., schools.
Number 155
BRUCE GERAGHTY, Deputy Commissioner, Department of Community
and Regional Affairs, directed attention to the Governor's
transmittal letter, which states that due to declining
revenues, it has become apparent over the past several years
that the state can no longer afford to fully pay for the
municipal reimbursement program for the mandatory senior
citizens or disabled veterans property tax exemption. As a
result, municipalities have not been reimbursed in full for
the tax revenues lost through the mandatory property tax
exemptions. SB 102 will allow municipalities to decide
whether they wish to exempt such property from taxation in
whole or in part. If they choose to exempt the property,
they will lose tax revenue, but that decision will be up to
the individual municipality and will not be mandated by the
state.
Mr. Geraghty pointed out that the total reimbursements to
municipalities for calendar year 1992 would have been $13.6
million. The legislature funded the program at $2.8
million, which amounts to about 20 percent of the total
funding. He added that the legislature funds the renters
rebate program at about 85 percent, which is a little over
$800,000.
Number 195
CHAIRMAN PHILLIPS asked for an explanation of the January 1,
1993 effective date. BRUCE GERAGHTY answered there was
discussion on whether they make this effective on January 1,
1994, and they determined there wasn't a lot of difference
between making it retroactive to this year. They have
received applications for this year, and, unless the
legislature so determines to put money into the fund this
year, the program will go unfunded in FY 94.
Mr. Geraghty said since the original bill was introduced, in
discussions with the Department of Law, it was determined
that Section 1 is not necessary and they are proposing that
it be deleted in a committee substitute.
Number 218
CHAIRMAN PHILLIPS asked if disabled veterans were taken out
of the bill, how much money and people would that involve.
BRUCE GERAGHTY responded that he didn't have the exact
figures, but his understanding was that the disabled
veterans are a small portion of the program. CHAIRMAN
PHILLIPS requested that he be provided that breakdown.
Number 235
KENT SWISHER, Alaska Municipal League, stated the League's
support for SB 102, but added that they are requesting a
couple of minor changes in the bill.
Mr. Swisher noted that when the program started out it was a
very small program. However, now it is a great big program
and it is an expensive program, both in terms of the state
and its obligation, largely unfunded, and the municipalities
and their contributions to this program. There is
approximately $10 million a year in terms of funding
shortfall. He said that's a large enough number to be a
significant problem, especially when it is coupled with the
decline over the last few years of municipal assistance and
revenue sharing.
Mr. Swisher outlined three suggested changes to SB 102: (1)
require that any local property tax relief program for
senior citizens and disabled veterans be approved by the
voters; (2) allow locally established property tax relief
programs to grant deferments on property taxes as well as
exemptions; and (3) exempt the value of property optionally
exempted under a local program to provide tax relief for
senior citizens and disabled veterans from the full and true
value determination prepared by the Department of Community
& Regional Affairs, which is a determining factor in the
level of funding under the education foundation and the
state revenue sharing programs.
Mr. Swisher said the municipalities strongly feel these
exemptions are decisions that should be made locally. They
are not insensitive to the concerns of senior citizens, but
it is necessary to balance whether this exemption is most
helpful to seniors who may be struggling or perhaps to the
younger family who may also be struggling. He suggested
that perhaps, as public policy, the question of need should
at least be considered.
Number 290
Addressing the amendments proposed by the League, BRUCE
GERAGHTY said they think the municipalities can already deal
with the requirement for an election to approve the
ordinance. He said he wasn't quite sure that access to a
deferral system isn't already available. There is nothing
that says municipalities can't institute a deferral system.
The department prefers that the municipalities have as much
flexibility as possible.
Speaking to the third amendment to remove it from the tax
rolls, Mr. Geraghty said the state tax assessor has brought
that up, and he thinks that it is a matter of it being in
the proper location to exempt so it doesn't affect the
education formula. He added that he would get more
information on the issue.
SENATOR TAYLOR commented that it was his understanding local
communities are not allowed to exempt property from that
calculation. He believes that a program should be based
upon what a tax mill generates in a community, not what the
department calculates a community being capable of
generating. He said it raises a policy issue that needs to
be resolved because there are many communities where the
department doesn't have a tax base. Furthermore, he would
be very hesitant to provide an additional exemption as
suggested by Mr. Swisher, because that exemption might very
well be abused.
Number 350
CONNIE SIPE, Executive Director, Older Alaskans Commission,
explained that the Commission has not yet taken an official
position on SB 102, although they have been discussing it
and have some concerns with it.
Ms. Sipe said she always thought that under the old system
there was some exemption from ad valorem value at either
revenue sharing or school taxation for these exempted
properties so that the municipalities did have some benefit
despite the fact that they weren't fully reimbursed by the
state.
Ms. Sipe noted that seniors have also raised the same
concern as addressed by Senator Taylor about the fairness
between the communities.
Concluding, Ms. Sipe said seniors would like some
consideration of something like the deferral system, or if
it is going to go to local option, perhaps the state could
preserve a mandatory hardship level and have it defined so
that it would be fair between cities. She added that 30
percent of seniors have incomes below $15,000 and that
includes their longevity bonus and permanent fund dividend.
Number 395
CHAIRMAN RANDY PHILLIPS requested that the Older Alaskans
Commission provide the committee with any recommended
changes. He stated SB 102 would be back before the
committee the following Thursday.
Number 430
CHAIRMAN RANDY PHILLIPS introduced SB 62 (PUBLIC SCHOOL
FOUNDATION PROGRAM) as the next order of business.
DUANE GUILEY, Director of School Finance, Department of
Education, said one major criticism of the existing formula
for distributing state aid is the area cost differential.
In response to this concern, the Alaska 2000 Finance
Committee recommended formulation of the Alaska School Price
Index Committee. He highlighted six primary areas of change
that were recommended by that committee and are contained
within SB 62.
First, it would change the Alaska School Price Index which
would serve as a replacement for the current area cost
differential. The ASPI is a weighted price differential
based on expenditures as reported by districts during FY 89
and FY 92. The districts in the base were the eight school
districts that currently have an area differential of 1.0
under the area cost differential.
SENATOR TAYLOR commented that prior to the last major change
in the foundation formula, Southeast Alaska did not have a
school in it that was at 1.0. Anchorage was the only one
that was 1.0. When the foundation formula passed, Southeast
Alaska got lumped in with Anchorage and has been stuck there
ever since, and that's where a major portion of the single
site problem came from.
DUANE GUILEY said there two very positive things about this
approach as compared to other studies to try to determine
differences in cost. One is that this approach was based
upon total expenditures incurred by the district, which
includes local contributions. So those communities that
have contributed heavily to the education of the students
are awarded through this system because those contributions
are reflected in salaries passed to staff, prices paid for
good and services and choices made at the local level.
Those communities that did not contribute at the max or
anywhere close are not rewarded in this system because they
did not have the dollars which to flow the negotiated
agreements, to the data points that were measured for staff
salaries and for the benefits afforded to those staff.
Secondly, other studies in the past have concentrated as
Anchorage as the base. By expanding the base out beyond
Anchorage, it allows the opportunity for even Anchorage to
come up above 1.0. Mr. Guiley said every district in the
state was afforded the opportunity to be placed at something
greater than 1.0.
TAPE 93-7, SIDE B
Number 001
There was brief discussion on teacher salaries and the
number of unemployed teachers looking for work in the
various communities.
Number 040
DUANE GUILEY continued his overview on changes in SB 62.
Vocational education instructions units will be calculated
by multiplying enrollment in grades 9-12 by a revenue
weighing factor. Gifted and talented instructional units
will be calculated by multiplying the enrollment in grades
K-12 by 4 1/2 percent, and then multiplying that product by
a revenue weighing factor. This is an attempt to remove
gifted and talented from special education and treat it as a
separate unit.
The bill also establishes a hold harmless provision to
ensure that no district would receive less as the change is
made to the new funding formula. The provision would remain
in effect for three years.
The due date of the student enrollment projection is being
changed to a later date in order to provide more accurate
information to the legislature and to the Governor's office
in establishing a budget for the following year.
Mr. Guiley said they have established a type of forward
funding by asking that a district be allowed to use the
greater of the current year enrollment or the prior year
enrollment, whichever would generate more money for the
school district. This would provide an opportunity that the
school district would know their minimum level of budget
dollars at the time they are making staffing decisions and
budget plans.
SENATOR TAYLOR asked if there was a change made in the caps
in the tax equivalents. DUANE GUILEY answered that they
were not recommending any changes in the tax equivalents.
As the basic need calculation is raised, the basic need
drives the cap, and as the basic need goes up, the cap goes
up. It will change the calculation in the following years
for the three districts that are at the 35 percent cap.
However, they did not adjust the 35 percent base at all.
SENATOR TAYLOR requested that Mr. Guiley draft an amendment
adjusting that 35 percent base so that he can insert it in
the bill. He said people in his community pay 10 or 11
mills and maybe have a third or fourth of it go to
education, whereas in the North Slope Borough they pay a lot
less in taxes and yet they receive five to six times the
amount of money they need to run their schools.
Number 110
CARL ROSE, Executive Director, Association of Alaska School
Boards, stated their support for SB 62.
Mr. Rose was a member of the Alaska School Price Index
Committee. He said the methodology that was used and the
points that were considered in reviewing the Alaska School
Price Index were valid considering the disparity in the
state. The attempt was to try to provide equity. He said
there were some problems in trying to provide a statewide
perspective, but it was felt that the attempt was a good
one. The Department of Education is working on some minor
adjustments to address some of the needs of the single site
issue.
Mr. Rose said the Association is concerned that current
enrollment figures be used in the state budget planning.
Speaking to the hold harmless provision, Mr. Rose asked that
the department consider being more clear on the review in
three years. He said the three-year review leads some to
believe that this issue would be reviewed in three years,
but he thinks, more accurately, we're trying to transition
from where we are now to where we think we have to be in
three years.
Number 220
SHARON MACKLIN, representing the Anchorage School District,
said the school district has taken a position that if there
is a rewrite to the foundation formula this year, they would
like it to be equitable to the Anchorage School District.
The school district feels that the proposal on the table is
not equitable. Although there are some parts of the bill
that they support, they feel that overall they are coming
out on the short end of the stick.
Ms. Macklin directed attention to a graph provided to the
committee by the district outlining the areas they believe
are not equitable. She said they go from three funding
communities to one which results in a large loss, as does
the change in the formula for gifted children.
Number 276
DUANE GUILEY clarified that the board felt that vocational
education is significantly short-funded across the state and
they wanted to increase the funding level to vocational
education to all school districts, so the amount per student
was increased by approximately 50 percent from what's
currently provided. The board felt the gifted and talented
program was over-funded and they wanted to decrease that
level of funding. He added that special education is the
fastest growing program in Alaska with basically no limits
on it, and this is an attempt to establish a limit on that
program and to provide a flat rate of funding.
Mr. Guiley also clarified that by existing regulation,
Anchorage is a unified city borough and by regulation they
are one funding community. He said the Anchorage School
District has been granted exceptions in the past, and, as
they move to the new funding formula, the Commissioner
wanted to dissolve all exceptions that have been previously
awarded and go by the regulatory definition of "funding
community."
Number 305
CHAIRMAN RANDY PHILLIPS told Ms. Macklin that he shared her
concerns. As he understand the new formula, Anchorage will
get 30.1 percent, and under the existing formula, they get
30.7 percent. This is an overall state increase of $12
million of which Anchorage only gets $476,000, and yet they
have 38 percent of the school enrollment, but they are only
getting about 29 percent of the funding.
Number 335
WILLIE ANDERSON, representing NEA-Alaska, stated they are
supportive of parts of the bill, but have serious concerns
about other parts of the bill.
Mr. Anderson said the school price index issue is one of the
areas where they are generally supportive of the attempt to
equalize the funding process. They don't agree with all of
the conclusions made, but they think it can be worked out so
that it becomes a better area of differentials than it
currently is.
NEA-Alaska is supportive of the centralized correspondence
secondary funding.
NEA-Alaska has serious concerns about the area of gifted and
talented funding. It is their belief that the gifted
program is a program that is population driven. The
students who are in the special education program are there
because they are certified and qualified for that program,
and that's the way to get to the cost issue he said. They
believe the gifted program should be covered and should
continue under the same level of funding that it is at now
as opposed to a flat rate of funding.
NEA-Alaska supports the transition period in the hold
harmless provision.
Mr. Anderson said it is NEA-Alaska's belief that the issue
of single and small site districts should be addressed once
and for all on a long term basis.
There being no further witnesses present to testify on SB
62, CHAIRMAN RANDY PHILLIPS closed the public hearing and
stated it would be back before the committee in the next of
couple of weeks.
Because the committee had lost its quorum, CHAIRMAN RANDY
PHILLIPS held over action on SB 88 and SB 89 until the
following Tuesday.
There being no further business to come before the
committee, the meeting was adjourned at 10:38 a.m.
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