Legislature(1997 - 1998)
01/31/1997 09:03 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
31 January 1997
9:03 a.m.
TAPES
SFC-97, #27, Side 1 (000 - 590)
Side 2 (590 - 232)
CALL TO ORDER
Senator Bert Sharp, Co-chairman, convened the meeting at
approximately 9:03 a.m.
PRESENT
In addition to Co-chairman Sharp, Senators Pearce, Phillips,
Donley, Torgerson, Parnell and Adams were present when the
meeting convened.
ALSO ATTENDING: Bill Rolfzen, State Revenue Sharing,
Division of Municipal and Regional Assistance, Department of
Community and Regional Affairs; Vern Voss, Cash Manager,
Treasury Division, Department of Revenue; Dennis Egan,
Mayor, City of Juneau; Kevin Ritchie, Director, Alaska
Municipal League; Mike Greany, Director, Division of
Legislative Finance; and aides to committee members and
other members of the legislature.
Via Teleconference: Marlin Starnes (ph), Mayor pro tempore,
Delta Junction; Pat Poland, Department of Community and
Regional Affairs, Anchorage; Carolyn Floyd, Mayor, City of
Kodiak; Rick Mystrom, Mayor, City of Anchorage; George
Wuerch, Anchorage Assemblyman; Jerome Selby, Mayor, Kodiak
Island Borough; Edwin Anderson, Mayor, Bristol Bay Borough;
and Dave Bouker, Dillingham.
SUMMARY INFORMATION
CS FOR SENATE BILL NO. 29(CRA)
Senator John Torgerson testified before the committee on
behalf of this bill. He moved amendment #1 and without
objection it was adopted. Amendment #2 was moved and after
discussion between committee members and Mr. Bill Rolfzen it
was unanimously decided to separate this amendment at the
request of Senator Adams. Amendment #2(a) was moved and
without objection it was adopted. Later without objection
it was rescinded. Amendment #2(b) was moved and then
withdrawn by Senator Torgerson. Amendment #3 was not
submitted. Co-chairman Sharp held the bill in committee.
CS FOR SENATE BILL NO. 29(CRA)
"An Act relating to certain programs of state aid to
municipalities and recipients in the unorganized
borough; and providing for an effective date."
Senator John Torgerson, sponsor of the bill, explained that
SB 29 was essentially the same bill as last year, SB 20. He
said the bill renamed municipal assistance to priority
revenue sharing and renamed the rest to safe communities
fund. Under safe communities funds it is indicated that the
money spent out of this fund must go to certain public
purposes and identifies those purposes as police protection,
fire protection, water and sewer, solid waste management and
other services. It required the municipalities to list the
amount of money received from this on a notice to taxpayers
to show money coming from the state and identified it as a
safe communities fund. It removed a hold harmless provision
from the base amount and allowed that amount to be
proportionately reduced in the event of a reduction in this
appropriation. The base amount was $12.4 million that was
set in 1978. It had not been reduced as the rest of the
program through budget cuts. The hold harmless provision
would be taken off and allowed to be reduced as the rest of
the program. This legislation would also raise the minimum
entitlement to smaller communities from $25,000 to $40,000.
This is in recognition that it costs more money to operate a
local government. Some thirty communities in rural Alaska
would be affected. It also moved the date of payment. One
portion of revenue sharing is paid in July and municipal
assistance is paid in February. This would move the
February portion of $29,400,000. up to the July 31st date
and they would both be paid at the same time. This was an
important component to the bill because the municipalities
would now have the opportunity to invest that money to
offset the amount it cost to raise the minimum entitlement
from $25,000 to $40,000. It would be revenue neutral as far
as communities were concerned.
Senator Adams said he supported the bill as presented,
however, some difficulty would arise with regards to
amendment #2 in stating the minimum amount of money to be
presented and it would have an impact on small communities.
Senator Torgerson offered amendment #1. He said the amounts
could be set mathematically in the statutes by using the
terminology one-third versus two-thirds in both of these
programs and AS 29.60. 360 and 370. Due to reductions in
the programs that were applied last year the one-third
versus two-thirds amount did not work for that calculation.
This amendment was given by the administration to set this
base amount in and use this as a guideline for a starting
point. Senator Adams indicated he had no objection to this
amendment. Without objection amendment #1 was adopted.
Senator Torgerson offered amendment #2. The minimum
entitlement would not be allowed to be held harmless. He
wanted it to be reduced along with the program so that it
would be equal. If there was no reduction in this then any
reduction in the entitlement would come out of the tax based
communities to raise this minimum entitlement. All
communities should be treated equally. Any future
reductions would be prorated.
Senator Adams said he had no problems with the first section
of the amendment. However he objected to page 7, following
line 13 which reported an amount. The legislature could put
any amount they want in municipal systems revenue sharing
and it is determined on an annual basis instead of trying to
put it in a statute. The way it was noted there would be a
reduction in the communities throughout the State,
especially the smaller communities.
Bill Rolfzen, State Revenue Sharing, Division of Municipal
and Regional Assistance, Department of Community and
Regional Affairs was invited to join the committee. He said
that amendment #2 established an over all minimum
entitlement for this program at $40,000. After a
municipality's revenue sharing payment and safe communities
payment if they are not at $40,000 it is added to their over
all entitlement bringing them up to that amount. However,
if there was a cut to the FY 97 appropriation the over all
minimum entitlement would be reduced. If there was a ten
percent cut from 1997 to 1998 the over all minimum
entitlement to communities would be $36,000.
Senator Torgerson asked if the amount of $29,402,300 was
shown and Mr. Rolfzen indicated it was so that in future
fiscal years whatever the appropriation was it could be
compared to this year to come up with a percentage.
Senator Adams indicated that his concern was with this
reduction. He suggested the question be divided and a vote
be taken separately. He asked for this division based on
the fact that the majority could put in any money amount
they wanted and a minimum entitlement amount was not
necessary.
Co-chairman Sharp divided amendment #2 accordingly.
Amendment 2(a) included up through line 12 and amendment
2(b) included lines 14 through 19. A vote was taken and
unanimously approved. Senator Torgerson moved amendment
Torgerson moved amendment #2(b). Senator Parnell requested
that there be further testimony taken from several mayors
present or via teleconference. Senator Torgerson moved
amendment #2(b) be removed from the table for the present
and without objection it was removed.
Mr. Vern Voss, Cash Manager, Treasury Division, Department
of Revenue was invited to join the committee. He explained
consolidation of payments to be made 31 July instead of one
in February. It would require the general fund to pay out
monies and if there were not enough funds, to borrow from
the Constitutional Budget Reserve. Senator Torgerson said
it would be assumed the communities would reinvest the money
thereby using the money to make the transition to the
$40,000. He said there were difficulties with the fiscal
note from the Department of Revenue with regards to managing
the funds differently. There should only be a one year
transition and not a continuation of the fiscal note.
Dennis Egan, Mayor, City of Juneau was invited to join the
committee. He said the members of the Alaska Municipal
League and the Alaska Conference of Mayors felt this bill
introduced by Senator Torgerson was so critical to cities
throughout Alaska. He gave a short background on the "safe
communities" bill. Creating safer communities was the most
important goal of State and local governments. It would
help create stability, taxation and insure services to our
citizens. He explained several charts with the assistance
of Mr. Kevin Ritchie, Director, Alaska Municipal League. He
noted that combined municipal budgets were approximately the
same size as the State's operating budget. The main
budgetary overlap was the provision of education services,
which is a constitutionally mandated responsibility of the
state government but was being administered locally. Charts
number two and three showed an overview of State and local
government services. Many of these services also overlapped
with the services of local governments. Public Safety,
Transportation, Health and Social Services and Education
were noted in particular and Mayor Egan said there was no
clear line drawn between State and local responsibilities.
Chart number four indicated how State and local governments
were paid for in Alaska. Alaska funds over forty percent of
its services from personal taxes and user fees. A vast
majority of those were collected by local governments under
the authority of the State government. Alaska's
municipalities are proud of their role in supporting
Alaska's budget. Since the beginning of the oil revenue
crisis in 1986 the State of Alaska has been gradually
withdrawing the municipal share of Alaska's oil wealth by
cutting municipal revenue sharing over sixty percent without
any significant decrease in the State budget. The State of
Alaska and the cities and boroughs of Alaska both share
exactly the same citizens and taxpayers. It does not matter
to citizens if they are driving on a state or municipal road
when they have to depend on safe roads to go to work. It
does not matter to citizens whether a municipal police
officer or State trooper responds to an emergency. It does
not matter if a tax or fee is a local or State tax or fee.
It still comes out of the pocket of essentially the same
citizen. However, how the taxes and fees were structured
was a critical importance to all taxpayers. If the State of
Alaska ignored the impact of its actions on local services
and local taxes the ability to offer safe communities to
citizens would be threatened. This bill was very important
in rebuilding the state and local partnership and focusing
the use of state revenue sharing on the most important joint
priority of safe communities.
Senator Adams referred to amendment #2(b) and said that this
bill did not make the communities stable because the
amendment says there is no minimum of $40,000 unless monies
appropriated for municipal assistance would never be
reduced. If the amount appropriations to municipal
assistance would be reduced by ten percent, passage of this
amendment would not give communities $40,000 but $36,000.
Mayor Egan said it would be a reduction of ten percent and
communities throughout the State would like it kept at
$40,000 and would like the revenue sharing to remain the
same.
Senator Torgerson said the reason he wanted this amendment
in was because larger municipalities receiving more than
$40,000 would contribute the difference to the reduction.
The bill would equalize the program and recognize that all
would share equally to any reductions to the program.
Senator Adams asked the Alaska Municipal League to advise
how many small communities are in IRS category presently
because smaller communities cannot take any more cuts. They
are subject to IRS prosecution because they cannot make
their payments. The larger communities can take the cuts
because they have a source of funding they can get to.
Senator Torgerson said under this bill each community would
have $15,000 more. In the future any reductions in the
program would be shared equally.
Senator Phillips asked about priority for State Troopers or
city police and Mayor Egan said in his area there were few
State Troopers and more city police. In response to Senator
Torgerson's comments he said it would have to be pointed out
that the smaller communities throughout the State would have
to have some minimum level or the Department of Community
and Regional Affairs would become a super department because
the State of Alaska would be managing all the communities
and would be providing staff because these communities would
continue to fail.
Carolyn Floyd, Mayor, City of Kodiak testified before the
committee via teleconference. She stated she was President
of the Conference of Mayors and member of the Board of
Directors of the Alaska Municipal League. She urged and
supported passage of SB29 without further amendments. She
stated both the Conference of Mayors and the Alaska
Municipal League have a strong commitment to create safe
communities and strong local economies. She felt this bill
would help set a minimum of entitlements in order to
continue attracting new local business.
George Wuerch, City of Anchorage assemblyman, testified
before the committee via teleconference. He stated he was
serving as chairman of the AML legislative committee. He
said this was an important piece of legislation being an
opportunity to reverse funding legislation throughout the
State, to continue toward common goals and share the burden
collectively. This would assure that the money given the
local communities was spent on the proper things; police,
fire, emergency medical, water and sewer issues. He fully
supported and urged passage of SB 29 and noted they were
ready to share their portion of the burden with the State
and local governments.
Senator Parnell referred Mr. Wuerch to page five of the
bill, section nine, (d) other services determined by the
governing body that have the highest priority. He asked if
this meant the money did not have to be spent on public
safety related purposes, but rather were these funds for
basic governmental services or for anything else the
municipalities wanted. He wanted something on the record
establishing why this language should remain. Mr. Wuerch
responded that the whole reason for this bill was for safe
communities.
Senator Parnell asked if the municipality of Anchorage spent
municipal assistance funds on anything other than what would
be construed as making a community safer. Mr. Wuerch
deferred to Rick Mystrom, Mayor, City of Anchorage.
Rick Mystrom, Mayor, City of Anchorage testified before the
committee via teleconference. He responded to Senator
Parnell that the money was not defined specifically for
safety. He said there were four important elements to the
bill. The most important one was the movement of the
payment to 31 July. He further noted that they had been
working for the last two and a half years on this bill.
Marlin Starnes, Mayor pro tempore, Delta Junction, testified
before the committee via teleconference. He said he
supported section nine on priorities and especially the
section where the money could be spent on a number of things
for the community. He urged passage of this bill.
Senator Torgerson said this bill would move funding ahead by
six months. That meant if the bill were signed into law,
both payments would be received 31 July of this year. Mr.
Starnes said he did not feel that the bill needed any
amendments.
Jerome Selby, Mayor, Kodiak Island Borough, testified before
the committee via teleconference. He said it was important
for the municipalities to have flexibility in using their
funds. It may be necessary to fix a leaking water pipe
before spending the funds for something else. He noted they
were still restricted under section (5) as to what the funds
could be spent on however it was important to be able to
make decisions about the spending at the local level. Five
communities on Kodiak Island were struggling to stay alive.
Forty thousand dollars might be their only funds to survive.
He felt the 31 July date was critical and asked larger
communities to help support the $40 thousand minimum. This
would help both large and small communities in terms of
having the 31 July date. This bill would help introduce
stability into the local communities. He urged passage of
the bill.
Co-chairman Sharp said that the larger communities were
willing to guarantee the $40,000 in future years by
absorbing the cuts out of their share of the municipal
revenue sharing. That is what would happen without amending
the bill to at least pro-rate any future cuts. In the past,
those in the minimum had not been subject to any reduction.
Other communities may have been subject up to thirty percent
reduction.
Mr. Selby advised that everyone had taken significant cuts
over the last several years. The "hold harmless" factor
that they are asking to be removed and is also featured in
this bill would distribute the money differently. All the
communities have been taking pro-rations and reductions. He
said it specifically reduced all payments in equal
proportion and specifically mentioned section 372, which is
the minimum payment section. It was their understanding
that it would be prorated.
Edwin Anderson, Mayor, Bristol Bay Borough testified before
the committee via teleconference. He supported monies going
into Public Safety and health services. His community was
coping with the situation and urged passage of SB 29. The
$40,000 minimum would have a very good impact because they
could take those on part time jobs to try to get the work
done that needed to be done in the communities.
Dave Bouker, Mayor, Dillingham, testified before the
committee via teleconference. He noted that the city of
Dillingham had suffered cuts in municipal assistance and
revenue sharing to the extent that four departments were
shut down, including a library, museum and the recreation
director and planner. Unfunded mandates received from the
State were causing problems, i.e. Title 47, which required a
substantial effort by the local community to take care of
inebriates. The other was DEC land fill requirements. In
addition to shutting down four departments there was a 5%
sales tax in Dillingham and the village rate on property tax
had been raised. That is not a cure all especially in the
rural areas because a large portion of the property is not
taxable, i.e. government land and those lands held by native
allotments. He recommended passage of SB 29.
Pat Poland, Director, Division of Municipal and Regional
Assistance, Department of Community and Regional Affairs
testified before the committee via teleconference. He
believed the bill as written represented a good faith effort
of the legislative, executive and municipal branches of
government to tackle some very difficult issues. He pointed
out there were fiscal implications associated with moving
the date forward from 1 February to 1 July. It was their
preference that the minimum entitlement be an equal dollar
amount. If the safe communities program were to be cut
significantly the municipality would not fall below the
amount they would get under revenue sharing. If the overall
minimum fell to $25,000 the revenue sharing payment would
not be reduced.
Senator Torgerson asked Mr. Rolfzen to explain page 7 of the
bill. Mr. Torgerson said the way the bill is currently
written what is prorated is the minimum payment. What would
be prorated would be the $4,544; it would be subject to a
ten percent cut. The intent is that the overall
entitlement is subject to proration.
Senator Adams requested the department look at the municipal
assistance budget. It was being reduced by 2.3 percent.
Without the language he referred to in section 13 every
community whether large or small would get a 2.3 percent
reduction. Mr. Rolfzen concurred. Senator Adams further
asked what would happen to communities around the State with
the 2.3 percent reduction if the amendment were included.
Mr. Rolfzen indicated that with the amendment the overall
minimum would not be $40,000 it would be $39,080. He
further explained that SB 29 does not affect the revenue
sharing program. It affects the municipal assistance
program. It amends the hold harmless, changes the name and
allows for an overall minimum entitlement. Under the
revenue sharing statutes there is a minimum entitlement for
cities of $25,000 times COLA.
Senator Adams renewed his objection of amendment #2(b).
(The committee took a brief at ease.)
Senator Torgerson moved amendment 2(b) be removed and
without objection it was withdrawn. He also moved amendment
2(a) be rescinded and without objection it was rescinded.
Amendment #3 was not submitted. Senator Torgerson requested
his bill be held over to a more proper date so the
amendments could be worked out. Co-chairman Sharp held the
bill in committee.
Co-chair Pearce announced that the overview of the changes
to the State's health insurance plan would be held Monday, 3
February 1997 at 9:00 a.m.
ADJOURNMENT
The meeting was adjourned at approximately 10:35.
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