Legislature(1993 - 1994)
03/10/1993 09:15 AM Senate FIN
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
MINUTES
SENATE FINANCE COMMITTEE
March 10, 1993
9:15 a.m.
TAPES
SFC-93, #35, Side 1 (428-end)
SFC-93, #35, Side 2 (575-425)
CALL TO ORDER
Senator Steve Frank, Co-chair, convened the meeting at
approximately 9:15 a.m.
PRESENT
Sen. Frank, Co-chair Sen. Pearce, Co-chair
Sen. Rieger Sen. Kerttula
Sen. Kelly
Senator Sharp arrived soon after the meeting began. Senator
Jacko attended the latter portion of the meeting.
ALSO ATTENDING: Representative Fran Ulmer; Andrew Grose,
President, WESTRENDS, and Head of the Western Legislative
Conference, Denver, Colorado; Dave Tonkovich, fiscal
analyst, Legislative Finance Division; and aides to
committee members and other members of the legislature.
SUMMARY INFORMATION
PRESENTATION BY ANDREW GROSE, PRESIDENT
WESTRENDS
AND
HEAD OF THE WESTERN LEGISLATIVE CONFERENCE
DENVER, COLORADO
CSHB 45 - Act making appropriations to the Department
of (Fin) Education for support of kindergarten,
primary, and secondary education and community
schools programs and for school
construction debt retirement; and
providing for an effective date.
SCS CSHB 45 (Fin) was reported out of
committee with a "do pass" recommendation.
Total appropriation: $774,327,070.
WESTRENDS - PRESENTATION BY ANDREW GROSE
Upon convening the meeting, Co-chairman Frank acknowledged
Representative Fran Ulmer and asked that she introduce the
guest speaker. Representative Ulmer advised that Andrew
Grose is the head of the council of state governments for
the western region. He is also President of WESTRENDS.
WESTRENDS conducts analysis of trends, undertakes research
projects, reviews population changes, economic projections,
etc. It recently completed a report on the West, including
Alaska. Mr. Grose will share information from that report.
ANDREW GROSE, President, WESTRENDS, explained that the
impetus behind WESTRENDS when it was established in 1986 was
legislative need to look ahead five to ten years and
anticipate how change might impact policy decisions.
WESTRENDS issued a report in 1989 titled, "The Dynamic West,
A Region in Transition." That report was upbeat--almost a
celebration of the West. The newest report entitled, "The
West Comes of Age: Hard Times, Hard Choices" is more
sobering. Copies will be provided to all U.S. legislators
next month. Mr. Grose said he would speak to the most
salient points of the report from a policy making
perspective.
Topics of importance relate to:
1. Nature of the change in the demography of the West
in the last ten years.
2. Changing economy of the West and relative decline
in that economy over the decade of the '80s.
3. Impact of changing populations and declining
economies on state governments.
Mr. Grose acknowledged that WESTRENDS is knowledgeable about
the West as a region rather than an expert on any individual
state.
Speaking to demography, Mr. Grose said that western
population increases are slowing. Each decade since World
War II has slowed somewhat, even though increases are
running at twice the national rate. Alaska was the second
fastest growing state in the West, behind Nevada. It was
also the only western state to grow faster during the 1980s
than in the 1970s.
Population is defined as:
1. Natural (births over deaths)
2. Residual (immigration versus outmigration)
Alaska's rate is high in both areas with natural growth
being twice as high as immigration. The 1991-92 growth rate
was almost 3%. That would equate to 30% growth in the
decade and would place Alaska second or third nationwide.
Of major importance to demography are:
1. Changes in the nature of the population of the
West
2. Changes in age compositions
The changing nature of the population results from
"tremendous foreign immigration." More immigrants came to
the United States in the 1980s than at any time since the
first decade of the 20th Century. Of all foreign
immigration, 40% came to the West which has 20% of the
national population. The rate of western immigration was
thus twice that of the rest of the country. During the
1980s, approximately 11,000 of the 148,000 new Alaskans came
from foreign countries. By contrast, 54% of California's
population increase was from foreign immigration. One in
ten Californians, today, came from a foreign country in the
last ten years. While the cultural, economic, and political
impact in other states is less than in California, it is
nonetheless a significant factor in all western states.
The change in ethnic composition has not been so dramatic in
Alaska. However, Alaska has experienced a dramatic increase
in the percentage of its black population. It is, in fact,
the largest increase in that segment of the population of
any state (approximately five times the national rate). Mr.
Grose agreed that when working from a small base such as
Alaska's black population, it does not take much to
experience a large percentage increase. That is true for
most of the western states with the exception of California.
Co-chair Pearce asked how WESTRENDS accounts for movement of
military people. Mr. Grose explained that, in conducting a
census, individuals who are temporarily assigned to a
certain location are counted in terms of their home of
record.
Mr. Grose next directed attention to handouts (appended to
these minutes as attachments) and accompanying slides. He
noted that when California is removed from the equation, the
greatest population increase in the West results from
natural growth (births over deaths).
The West has the smallest percentage of white residents
compared to the rest of the nation. It also has the largest
percentage of Hispanics and Asian-Americans.
Speaking to age composition, Mr. Grose pointed to categories
ranging from:
1. Under five
2. School age
3. Over sixty-five
He then noted western growth in those categories far greater
than the rest of the country. The West has more preschool
and school age children than other states. Further, while
the West has fewer individuals over sixty-five than the rest
of the nation, that category is growing much faster in the
West than elsewhere. That makes sense in western states
such as Arizona and Nevada which have experienced
substantial growth in retirement populations. However, the
highest rate of increase in the entire West was in Alaska.
Mr. Grose advised that he found that curious and could not
explain it. It indicates a lot more older people are
remaining in Alaska than ever before. Senator Kelly pointed
to the fact that the state pays them to stay.
Referring to economic issues, Mr. Grose noted an overall
economic decline. Decline remains a question of
manufacturing jobs versus non-manufacturing jobs as well as
the international nature of the regional economy which
relies on investments, exports, and tourism.
Mr. Grose next directed attention to changes in per capita
income. He explained that unlike every decade since World
War II, in the 1980s the West was either last or next to
last in growth in all measures of income (personal income,
family income, gross state product). Alaska lags well
behind both the regional and national average for growth in
this area. Mr. Grose acknowledged the phenomenon of the
"energy factor" present in Alaska, Montana, Wyoming, and
Colorado.
End, SFC-93, #35, Side 1
Begin, SFC-93, #35, Side 2
He explained that the decrease in the price of oil had a
great impact on 1980-90 economic figures in Alaska.
However, other western states with no association with this
energy factor also lost income when compared to other parts
of the nation. That is significant. A review of median
family income by region evidences lowest increases in the
West. Alaska experienced the smallest increase, with the
exception of Montana and Wyoming.
The West is next to last in terms of growth in gross state
products. It is "dead last" if California is removed from
consideration. In this area of growth, Alaska was next to
last to Wyoming.
Speaking to growths in manufacturing employment, Mr. Grose
noted that the Northeast lost jobs, and the rest of the
nation gained in percentage. The biggest winner, however,
in personal and median family income was the Northeast.
That calls into question conventional wisdom regarding
manufacturing jobs as the answer to economic growth and
prosperity. The nation as a whole lost approximately 4% of
its manufacturing jobs. The West enjoyed a large percentage
increase. Alaska enjoyed a "respectable increase in what is
a very small manufacturing base."
Mr. Grose next spoke to the economic impact of tourism. He
noted conventional wisdom that tourism jobs are not
particularly good in terms of income. Data appears to
reflect that. Tourism is the number one industry in the
West. It is number one in nine western states, including
Alaska. More people are employed in tourism and related
jobs than any other single sector of the economy.
Job growth between 1985 and 1990 was good in the West,
although the South enjoyed a greater percentage of growth.
Alaska showed healthy growth in tourism jobs (third in the
West after Hawaii and Nevada, the national leaders).
Tourism spending shows that the West is "far and away" the
leader. The variable is foreign tourism. The West
experienced a much greater increase in this area than the
rest of the country. Foreign tourists spend far more per
day than domestic travelers. Alaska experienced only modest
growth in foreign tourism. The state's growth in tourism
spending was relatively low, even though there was healthy
growth in tourism jobs.
The West is the national leader in exports. Review of the
period between 1987-90, shows significant growth. In the
value of exports per capita, the West is far ahead. Alaska
has the highest value in the United States. Those exports
relate primarily to timber and fisheries. Twenty-five
percent of all U.S. exports and one-half of the growth,
during the above-noted three years, came from the West's
five coastal states. While Alaska ranks 47th in population,
it ranks 27th in total exports. Exports are thus extremely
important to the state.
Speaking to foreign and direct investment, Mr. Grose noted
that the rate of increase for the West (1977-90) is far
greater than the rest of the country. Most of the foreign
manufacturing investment occurred in California. There is
considerably more Asian than European investment in the
West. Alaska is second only to Hawaii in Asian investments.
The West equals growth and opportunity. That is extremely
good news for Alaska. The West is fertile territory for new
job creation by small businesses. The region is also far
ahead of the rest of the country in the number of women-
owned business to female population. Alaska is number two,
nationwide, for new job creation from small businesses. It
is number six for women-owned business, and number one for
minority-owned businesses. The latter ranking reflects
Alaska's native corporations and their considerable economic
power.
Speaking to economic diversity, Mr. Grose noted that western
states are the least diverse in the nation. The West is
also more reliant on outside sources for goods and services.
Mr. Grose acknowledged that in eleven of the thirteen
western states, the biggest increases in exports were in
agriculture and natural resources. In six of the states,
the largest increases were in minerals and petroleum. This
practice of exporting natural resources and importing
finished goods reflects colony status. It is not a source of
strength in terms of long-term economic prospects.
Economic problems become political problems and translate to
more taxes and restricted services. The big loser for most
of the West was education. Pointing to a slide presenting
changes in state revenues per capita, Mr. Grose noted that
the smallest increase was in the West. Alaska had the
smallest revenue gains of all western states.
Mr. Grose next spoke to the percentage of income devoted to
state and local taxes. He explained that even though the
economic capacity of the West shrank in the last ten-year
period, the percentage of income allocated for taxes dropped
slightly because of initiatives like Proposition 13 and
other tax limitations and caps. Eleven of the twenty states
that have adopted such initiatives are in the West. Mr.
Grose next explained how tax figures are calculated and
further spoke to tax capacity and tax effort. The ideal
situation is to have high capacity and low effort. That is
not the case in the West. There is little difference
between the two, and the gap is closing. That is the
reverse of the situation in the northeast where capacity is
increasing.
Speaking to educational funding, Mr. Grose noted that in the
period 1960 to 1989, the West approaches the national
average. In the most recent ten years, however, it is
substantially behind the rest of the country. The increase
in the region was 1.5 percent per year while it was 3.0 for
the rest of the nation. The West started the decade with
the highest per capita spending on K-12. The region thus
had some "fat to live on" through the decade. The question
is, Can the region go another ten years like that and still
be okay? Mr. Grose directed attention to an additional
slide setting forth figures for both the 1979-80 and 1989-90
school years. In the ten-year period there was an extremely
small increase in Alaska. Alaska and Hawaii, the two biggest
spenders in education, had the smallest increases. The West
as a whole moved from expenditure of $4,000 to $5,000 per
pupil.
Pointing to a slide containing figures for teachers'
salaries, Mr. Grose noted that Alaska, Hawaii, and Utah are
the only states that did not maintain the CPI. He
acknowledged that Alaska probably had artificially high
salaries during the pipeline boom. During the last decade,
those pay levels became more realistic.
In his concluding remarks, Mr. Grose reiterated that
WESTRENDS is not an expert on any particular state.
Knowledge of regional trends is important to state
legislators. In light of the economic decline in the West,
there is need for regional cooperation to address the
problem.
Senator Kelly explained that growth of the senior citizen
population in Alaska could be directly attributed to the
fact that seniors are paid to remain within the state.
Residents over 65 years of age receive a $250 monthly
longevity bonus. All residents also receive a yearly
dividend of approximately $1,000.00. Alaska has no state
income tax. Further, seniors over 65 do not pay property
taxes. State government is thus subsidizing that portion of
the population, and more senior citizens are remaining in
Alaska because of those programs.
Senator Kelly next voiced his belief that Alaska's black
population increase is military oriented. He further
advised of Alaska's huge veteran population.
Co-chairman Frank directed that the meeting be recessed at
this time.
RECESS - 9:50 a.m.
RECONVENE - 11:05 a.m.
CS FOR HOUSE BILL NO. 45(FIN)
An Act making appropriations to the Department of
Education for support of kindergarten, primary,
and secondary education and community schools
programs and for school construction debt
retirement; and providing for an effective date.
Co-chair Drue Pearce reconvened the meeting, with all
members in attendance, at approximately 11:05 a.m. She then
directed that CSHB 45 (Fin) be brought on for discussion.
A draft SCS CSHB 45 (Fin) dated 3/9/93 was distributed for
committee review. Co-chair Pearce also noted a proposed
amendment by Senator Kerttula. Directing attention to the
draft Senate Finance version of the bill, Co-chair Pearce
advised of two major changes. She explained that the House-
passed version of the bill mistakenly cited FY 94 numbers.
Those were not the numbers contained in the bill passed by
House Finance. For single site schools, the Senate Finance
version utilizes Dept. of Education numbers for FY 93 ADM.
Those are the numbers the House asked be used. Further, the
twelve single sites listed in the draft reflect the list of
single sites negotiated with the House majority caucus.
Co-chair Steve Frank MOVED for adoption of the draft SCS
CSHB 45 (Fin). Senator Kerttula OBJECTED. He then inquired
regarding single site schools included within the draft,
asking if they were the sites highlighted in yellow on a
tabulated handout from the Alaska Department of Education.
Co-chair Pearce answered affirmatively. She then read the
following list of sites which she explained were included in
the House bill but not in the Senate Finance draft: Galena,
Hoonah, Hydaburg, Kake, Klawock, Pelican, Skagway, Tanana,
and Yakutat. The new total for single sites is $2,291,770.
The House number, utilizing the correct FY 93 figures would
be $3,358,050.
Senator Kerttula inquired concerning the basis for removal
of the above-listed sites. Co-chair Pearce said, "We worked
with the House to negotiate a list, and those were the ones
that dropped out." She further advised of original caucus
discussion not to include any single sites within the bill.
The House bill included all twenty-one. Negotiations
between the House and Senate led to the compromise list.
Senator Kerttula suggested that some of the poorest
districts would be impacted by the cut, specifically noting
Klawock. Co-chair Pearce explained that, with one
exception, those that were removed are receiving forest
receipt moneys. Senator Kerttula noted that Wrangell and
Petersburg both receive forest receipt funds as well. He
observed that Craig is included in the Senate Finance bill
and acknowledged that the district is in "desperate shape."
Senator Kerttula reiterated his opposition to adoption of
SCS CSHB 45 (Fin). Co-chair Pearce called for a show of
hands on the motion. The motion CARRIED on a vote of six to
one, and SCS CSHB 45 (Fin) was ADOPTED.
Senator Kerttula MOVED for adoption of his amendment. He
acknowledged that in light of corrected House funding, the
$760,670,230 and $811,929,330 set forth in the third
paragraph of the amendment would have to be adjusted to FY
93 numbers. He noted, however, that the basic purpose of
the amendment, to increase the instructional unit from
$61,000 to $64,000 would not change. OBJECTIONS to the
motion and amendment were voiced. Senator Kerttula told
members that the instructional unit was negotiated to
$61,000 during the past session. In light of the
inflationary spiral, it should have been raised to $65,000.
The unit had not been raised for five or six years prior to
the recent increase. There is great support for an
additional increase from the educational community and the
public. The increase would approximate $36 million. Given
new, unplanned for, funding sources ($1.4 billion), the
legislature can afford to modestly raise the instructional
unit. It would provide benefits across the board to both
urban and rural districts. Senator Kerttula reiterated his
support for the increase based on need.
Senator Kelly inquired concerning the funding level prior to
last year's increase to $61,000. Senator Kerttula answered
that it was previously set at $60,000.
Co-chair Pearce called for a show of hands on Senator
Kerttula's amendment. The motion FAILED on a vote of one to
six, and the amendment was NOT ADOPTED.
Senator Kelly MOVED that SCS CSHB 45 (Fin) pass from
committee with individual recommendations. No objection
having been raised, SCS CSHB 45 (Fin) was REPORTED OUT of
committee. Co-chairs Pearce and Frank and Senators Jacko,
Kelly, Rieger, and Sharp signed the committee report with a
"do pass" recommendation. Senator Kerttula signed "increase
inst. unit."
ADJOURNMENT
The meeting was adjourned at approximately 11:15 a.m.
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