Legislature(1999 - 2000)
03/20/2000 09:02 AM Senate FIN
| Audio | Topic |
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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 20, 2000
9:02 AM
TAPES
SFC-00 # 53, Side A and Side B
CALL TO ORDER
Co-Chair John Torgerson convened the meeting at
approximately 9:02 AM.
PRESENT Co-Chair John Torgerson, Co-Chair Sean Parnell,
Senator Al Adams, Senator Lyda Green, Senator Pete Kelly,
Senator Gary Wilken and Senator Leman were present when the
meeting started. Senator Phillips arrived later.
Also Attending: SENATOR ROBIN TAYLOR; SENATOR KIM ELTON; SUE
MOSSGROVE, Aide, Senator Taylor; SHARON CLARK, Aide, Senator
Miller; DON LOVATNY, Volunteer, American Diabetes
Association, Board Member, Pacific Northwest Board of ADA;
CHRIS HOLZWARTH; JULIE BURNS; MICHELLE CASSANO; GORDON
EVANS, Lobbyist representing the Health Insurance
Association of America; KEVIN RITCHIE, Executive Director,
Alaska Municipal League
Attending via Teleconference: From Anchorage: JANICE ADAIR,
Director, Division of Environmental Health, Department of
Environmental Conservation; STEVE VAN SANT, State Assessor,
Division of Municipal and Regional Assistance, Department of
Community and Economic Development; from Glennallen: DOUG
RHODES; From Fairbanks: BONNIE WILLIAMS, Assembly Member,
Fairbanks Northstar Borough and Chair, Finance Committee
SUMMARY INFORMATION
SB 271-FEES FOR FOOD ESTABLISHMENT INSPECTIONS
The Committee heard from the sponsor, the Department of
Environmental Conservation and a bar/restaurant owner. The
bill was HELD in Committee.
SB 276-REQUIRE HEALTH INS COVERAGE FOR DIABETES
The Committee heard from the sponsor and various members of
the public. The bill was HELD in Committee.
SB 227-MUNICIPAL PROPERTY TAX LEVY LIMITATION
The Committee heard from the sponsor, the Department of
Community and Economic Development, the Municipal League and
members of the public. The bill was HELD in Committee.
SENATE BILL NO. 271
"An Act relating to fees charged for inspections by the
Department of Environmental Conservation; and providing
for an effective date."
This was the second hearing for this bill in the Senate
Finance Committee.
SUE MOSSGROVE, Aide to Senator Taylor, testified the sponsor
introduced SB 271 as a matter of fairness for all businesses
providing food services, from restaurants to day care
centers. Currently, she stated food inspection fees are
included as a part of the permit process within the
Department of Environmental Conservation Food Safety and
Sanitation program. However, she noted some establishments
were charged the fees but not receiving services. She said
this legislation was introduced to separate the inspection
fee from the permit process so establishments were not
charged a fee unless they were actually inspected.
Co-Chair Torgerson noted that the member's packets included
information in response to requests made at the previous
hearing by the Committee to the department. He relayed the
Committee's intent at the last meeting was to follow the
sponsor's intent to charge for actual inspections but also
to identify the high risk health areas to possibly adopt
statutes to exempt some facilities from inspections or
require biannual inspections for others.
JANICE ADAIR, Director, Division of Environmental Health,
Department of Environmental Conservation testified via
teleconference from Anchorage and reviewed the handout
provided to the Committee by her division. [Copy on file].
Part 1: Risk Based Inspection Frequency Protocol, Risk
Level = # of routine inspections per year - this showed
how the division views food service facilities to
determine the relative risk it may pose to public
health. It also shows the process preparation or what
was being done with the food, or what types of
physical, microbial and chemical hazards might be
generally present.
Ms. Adair noted that the number of annual inspections shown
on this chart was the ideal not the actual.
Second page of Part 1 showed the considerations that
may increase or decrease the optimal number of annual
routine inspections.
Ms. Adair told the Committee that the division was currently
reviewing compliance history and targeted populations to see
if a facility should be given a lessor or higher risk level
ranking.
Part 2: Inspection Risk Levels by Office - shows where
division offices are located, the numbers of inspectors
in those offices and how the overseen facilities are
divided between each office by the risk level. This
shows the total of risk levels two through four, what
the division concentrates on and then the average
number of facilities per inspector.
Part 3: Food Safety and Sanitation Office Jurisdictions
- a map showing the jurisdiction areas of each office.
Ms. Adair pointed out that the Nome office was run by the
Norton Sound Health Corporation and that the state has a
designated grant to the corporation to operate the program
in that area.
Second page of Part 3 - listing of those communities
shown on the map and which office oversees them.
Part 4: 1999 Food Safety and Sanitation Facilities -
this breaks down the different types of facilities,
gives a count by facility type, whether or not they are
permitted and whether or not they pay a fee. These are
divided by their risk level.
Ms. Adair noted that several of these facility types were
not permitted and did not pay fees. She directed attention
to exempted facilities.
Part 5: Number of Inspections, Fee'd Facilities and
Inspectors by Year - showing the percentages of fee's
facilities that were inspected in the years 1997
through 1999.
Ms. Adair corrected an error on this page changing the
number of Fee'd Facilities in calendar year 1999 to 5022.
She told of the inspectors who took advantage of the
Retirement Incentive Program (RIP) and of other vacant
positions. She also talked about the reduction of the
program. She said the combination of these factors took a
toll on the number of inspections that were performed.
Co-Chair Torgerson asked about the increase of facilities
during the time indicated on the handouts and if these were
new facilities or if the department added existing
facilities to their inspection list. Ms. Adair assured that
this was a dynamic industry with many new businesses
entering continually and that the department had not added
any existing facilities to the program. She said seafood
processors add to the fluctuation because they don't always
operate every year. She explained permits are issued every
year so if a processor does not open in a particular year,
there would be no permit applied for and the facility would
not be counted.
Co-Chair Parnell asked of the number of facilities inspected
each year, what percentages were in Anchorage, Fairbanks and
Juneau. Ms. Adair responded to the facilities in Anchorage
saying the only inspections done in the Municipality of
Anchorage were processors involved in inter-state commerce
and the railroad. She said she would provide information on
Juneau and Fairbanks.
Co-Chair Parnell wanted to know if the state was performing
restaurant inspections in Anchorage, Chugiak or Girdwood.
Ms. Adair replied that Anchorage is the only community that
has adopted its own program and does its own restaurant
inspections. All other restaurant inspections were performed
by the state, she said.
Co-Chair Parnell asked if it wasn't more common in the US
that the local government do restaurant inspections. Ms.
Adair said it was but there are so few facilities in
communities to generate the fees to support a local program.
She stressed that even Anchorage has to fund 50 percent of
the inspection program from its general fund. She estimated
that Juneau could only minimally fund a program and that
other communities could not. She said state inspectors are
sent to communities when needed and can cover several
communities.
Co-Chair Torgerson asked if any other communities had
provided the services in the past but then turned the
program back to the state. Ms. Adair responded that the City
of Fairbanks had collected fees and paid $60,000 to contract
with the state for the inspections. However, she said the
program was dropped after the state fees were increased
because the state could collect more revenue through
increased fees than what could be collected from the city.
Part 6: Revenue Lost from Exempt Food Facilities - this
included Headstart programs in schools and other
charitable food service organizations and the revenues
lost to the program
Co-Chair Torgerson asked if these facilities are exempt from
paying the fee but not from being inspected. Ms. Adair said
that was correct.
Co-Chair Torgerson asked how this information tied into the
information of Part 4, which showed the exempt facilities
broken down by type of facility. Ms. Adair replied that the
information on Part 6 was reflected on the Part 4 chart
except for temporary food service facilities, which did not
fit into any of the categories.
Senator Adams asked if the Anchorage inspectors did
inspections of seafood processors in Dutch Harbor and
Unalaska. Ms. Adair said that was correct however she noted
that currently, the inspector from Valdez was doing the
Aleutian Peninsula inspections because his wife was
currently living there.
Senator Adams asked the frequency of the visits to this
largest seafood processing area in the state. Ms. Adair
explained that Dutch Harbor mostly produces fresh frozen
seafood, which is a very low risk. The remainder of the
processing, such as surimi imitation crab, requires an
inspector to visit three times annually.
Ms. Adair clarified that the retail restaurant fees had
increased and are expected to cover more services that just
the cost of inspections. She stated that the fees cover the
entire cost of the program with the exception of recovery of
travel costs, which is prohibited by statute. She detailed
the other services such as training, response to an
emergency, and resolving complaints. She noted that it is
just as important to a facility to know it is not the cause
of a food borne illness.
Co-Chair Torgerson asked about putting exemptions into
statute for facilities with a low risk level that may not
require an inspection every year.
Ms. Adair responded that there was currently no statutory
requirement for an inspection and that the inspection is
what the department performs to verify compliance to the
food safety requirement. While she was aware that other
states had laws that dictated the number and frequency of
inspections based on the type of facility, she stressed the
system needed to be flexible. She gave as an example, the E.
coli outbreak that was traced to undercooked ground beef.
Before this outbreak, she explained, ground beef was not
considered a threat by the general public. Since the 1993
incidence at Jack-in-the-Box restaurants, those facilities
that serve hamburgers were given a higher risk level, which
requires more frequent inspections.
Co-Chair Torgerson wanted to know why the fiscal note did
not indicate a loss of revenue considering the provision of
SB 271 to inspect only certain facilities. He noted that the
division only performed half of the ideal number of
inspections. Ms. Adair responded that when the vacant
positions were filled, the division hoped to increase the
number of inspections. She warned that if the fees were
taken away, the number of positions would need to be
reduced. She told the Committee that she had figured how to
change the program so everyone pays a flat fee whether or
not the facility was inspected. She added that those
facilities that are inspected would then pay an additional
cost. Therefore, she calculated if the number of inspections
stayed the same, about half of the facilities would pay an
inspection fee and the remaining facilities would pay a flat
fee to support the entire program.
Co-Chair Torgerson asked if the Committee were to consider
the flat fee and also keep Senator Taylor's bill in mind,
the Committee would need to know what the flat fee would pay
for.
Ms. Adair was concerned about charging an extra fee whenever
an inspection was performed. She understood the complaints
that caused the bill to be introduced, but thought it would
only change the complaint. She explained the complaint would
change from "I'm paying for inspections that I'm not
getting" to "Every time they come in and do an inspection,
they hand be a bill even if they don't find anything.
They're in here to pad their budget."
Co-Chair Torgerson agreed in part but did not think the
witness was making the case as to what services the fees
covered. He stated that many facilities do not know what
functions the fee goes to pay for. He wanted to find a
compromise for the department and the bill's sponsor.
Senator Leman asked if it was reasonable to implement a flat
fee or whether some facilities cause the department to exert
more effort and if the fee system should be framed
differently.
Ms. Adair responded that was the reason the department used
permitting time and inspection time to calculate the fee.
She explained that some canneries took up to 18 hours to do
an inspection as opposed to a convenience store that may
only take 30 minutes. The theory, she said was that there
are some kinds of services and some compliance issues that
take more time for the department to process than others.
She noted that is the purpose for the different risk levels.
She added that some facilities that have a proven compliance
record would not need inspections as frequently as others
would.
Co-Chair Torgerson did not think there would be that hard of
time proving the need for different fees for the risk
levels. He did not mind charging more of restaurants for re-
inspections for restaurants with low scores. Ms. Adair noted
there are re-inspection fees already in place for those
facilities that score low and must be revisited to ensure
compliance.
Co-Chair Torgerson stated the reason behind the bill was a
small espresso stand that is charged the same amount as a
200-seat restaurant. He surmised that the risk was
undeniably different.
Senator Green wanted to confirm the exemptions shown on Part
6 and whether the lost revenues represented by the $300,000
lost fees were then calculated into the for-profit fees. Ms.
Adair noted there are general funds in the program but that
most went to support seafood related activities. She said
the lost revenues were off set by higher fees charged to the
retail food service facilities.
Co-Chair Torgerson tried to clarify the $279,920 was the
current amount collected or the total of all costs. Ms.
Adair responded that amount is what the department would
collect if all the facilities were charged a fee, including
the currently exempted facilities.
Co-Chair Torgerson asked what would be the revenue loss if
the additional exemptions were permitted. Ms. Adair answered
$36,625.
Co-Chair Torgerson requested exploring the flat fee for
health services related to facilities by risk and also the
intent of the bill to pay for inspections when they occur
instead of across the board. He asked for another summary
that incorporates these scenarios and includes the current
amount of general fund support for the program.
DOUG RHODES testified via teleconference from Glennallen
about his concerns of the price of the inspections. He told
of being charged for two inspections of his facility, one
for the kitchen portion and the other for the bar portion,
saying the two are located in the same building within ten
feet of each other. He warned this expense would result in
no more small roadside businesses. He thought there were too
many Department of Environmental Conservation employees in
his area and spoke of the frequent travel of inspectors.
Co-Chair Torgerson assured the witness that Committee was
trying to work through his concerns.
Senator Green asked if the two places were inspected on the
same day or different times. Mr. Rhodes said the inspections
were done on the same day.
SENATOR ROBIN TAYLOR did not oppose a flat rate for an
annual permit that included the cost of inspections. He was
concerned about the ability of the department to raise the
fees to cover the costs of the department's program. He
complained that the inspectors were driving new Ford
Explorers to perform the inspections and he understood why
the small operators questioned the amount of their fees.
Senator Taylor continued that the legislature's intent is to
downsize the department but that the department would not
comply.
Senator Leman clarified that the previous year the
Department of Environmental Conservation budget was actually
increased.
Co-Chair Torgerson ordered the bill HELD in Committee.
SENATE BILL NO. 276
"An Act requiring that health care insurers provide
coverage for treatment of diabetes."
This was the first hearing for this bill in the Senate
Finance Committee.
SHARON CLARK, Aide to Senator Miller read the sponsor
statement into the record.
SB 276 would require that health insurers in Alaska
provide coverage for diabetes equipment, training and
education as deemed necessary by state licensed health
care providers. To date, 37 states have enacted
legislation providing similar diabetes coverage.
Over 30,000 Alaskans are affected by diabetes. Without
education or proper treatment, diabetes can lead to
kidney failure, amputation, nerve damage, blindness and
other associated suffering; and the resulting costs are
often avoidable through patient education on proper
nutrition, exercise, blood sugar monitoring and
medication.
Education is the foundation of quality diabetes care.
It is the process of providing the person with diabetes
the knowledge and skills needed to perform self-care,
prevent crisis and make important life style changes
required to effectively avoid complications. Through
proper education, the diabetic may assume his/her
appropriate role as an active participant in the
treatment plan.
A number of published studies by the American Diabetes
Association (ADA) show decreased in health care
utilization for people with diabetes receiving
appropriate education and access to supplies.
A Milliman study for the ADA estimates annual savings
of $917 per person with diabetes that translates into
savings for the insurance industry as well.
SB 276 promotes better health, and ultimately, lower
health costs for the people of Alaska.
I urge your support of SB 276.
She told of Ms. Betsy Turner-Bogren and her son, Max
Bogren's visit to Juneau and the Senate Labor and Commerce
Committee to testify about Max's experiences with diabetes.
She referred to a handout detailing the visit. [Copy on
file.]
She mentioned two concerns voiced in the previous committee.
One dealt with whether the coverage should be mandated and
the other was raised by Senator P. Kelly and related to the
use of the word "nutrition". She stated the concerns were
addressed in two proposed amendments before the Committee.
Co-Chair Torgerson stated his intent was not to consider any
amendments at this meeting to allow members an opportunity
to review them.
Senator Leman supported the bill in concept but was
concerned that if the coverage is provided, the door is
opened for reimbursement of all types of charges without
review.
Tape: SFC - 00 #53, Side B 9:49 AM
Senator Leman mentioned a pump that cost $5,600, as an
example. He was also concerned about the amount of time
necessary to provide education. He had initially heard that
an average of six hours of training per year at $250 would
be average, but had since heard that training could go much
longer and cost up to $1500.
Ms. Clark remembered when the issue was raised in the Senate
Labor and Commerce Committee but noted that different
patients had different needs, different types of diabetes
and therefore, different amounts of training. She agreed
there would be situations where some patients would require
more training than just six hours per year. She said that
Senator Miller thought there would be justification for the
additional training for some people.
Co-Chair Torgerson thought this was an important bill but
also thought the education provision was broad based. He
suggested that a patient could go to college to learn about
diabetes and the insurance company would have to pay the
tuition.
Ms. Clark said Senator Miller had stated in the previous
committee that he hoped health care providers would be self-
limiting and that statute would not impose a limit to the
amount of money to reimburse training. She deferred to
members in the audience waiting to testify who live with
diabetes every day.
Co-Chair Torgerson wanted to know how other states and other
insurance carriers addressed this issue.
DON LOVATNY, Volunteer, American Diabetes Association, Board
Member, Pacific Northwest Board of ADA testified that he has
had diabetes for 21 years and that diabetes takes a lot of
time in one's life. He explained there are two types of
diabetes: Type 2 affects about 80 percent of those with the
disease and usually requires no insulin treatment and Type 1
does require insulin and also extends hospital stays by an
average of one day per visit. He stated that
hospitalization costs about $1620 per day in Alaska for a
patient with diabetes. His organizations' goals are to keep
those people out of the hospital.
Mr. Lovatny told the Committee that diabetes is on the rise
and is the seventh leading cause of death in Alaska,
according to the Bureau of Vital Statistics. He listed
percentages of those affected and the costs for treatment.
Mr. Lovatny stressed that rationing of services was not the
answer and urged the Committee to pass the legislation.
CHRIS HOLZWARTH passed out buttons to the Committee members.
He spoke of his history with diabetes and how his recently
acquired insulin pump has improved his life. He stated that
different people require different amounts of care and that
the educational needs differ for different patients to learn
what they need to know to survive the disease. He stated
that Mr. Lovatny had given up much of his time to assist
with learning how to use the pump and give general insight
on living with the disease.
Senator Leman clarified that he was not opposed to funding
the education, but warned that without some constraint, the
highest costing method of service would always be utilized.
He praised Mr. Lovatny for donating his time to Mr.
Hollsworth in helping educate Mr. Hollsworth.
JULIE BURNS Mother of Chris Hollsworth, talked about Mr.
Lovatny's assistance. However, she noted that it was only
because of his employment with the provider of the pump that
he was able to help them.
She stressed that family members need training as well. As
the family cook, she said it is important for her to know
what to feed her son and the implications his diet has on
his health.
She then talked about the amount of time diabetics must
spend on insurance matters to obtain coverage for daily
needs. She went into detail about the supplies, such as
syringes and test strips, that are not covered by insurance
yet still necessary.
MICHELLE CASSANO spoke of her appreciation that 37 other
states adopted similar legislation to what was before the
Committee. She noted that of these states, there have been
no repeals of these statutes.
Ms. Cassano stressed that a diabetic has diabetes every day
and that there is no cure. She added there have been no
reports of abuse of the new laws in other states.
She told of studies showing that when a patient properly
cares for diabetes, the incidence of related complications
is greatly decreased.
GORDON EVANS, Lobbyist representing the Health Insurance
Association of America (HIAA) testified that his
organization opposed any mandate but had since made some
concessions. He told of how he proposed to his client, a cap
of $250 per person per year. He said he then agreed to a
$1000 cap with a sunset clause to review the appropriateness
of the amount that but his client said he had spoken out of
line and could only offer a maximum of $750. He stated that
the average annual cost for these diabetes-related services
is $1000 and that his client directed him to meet the amount
halfway at $500. He had warned his client that the
legislation would be adopted in some form, either with a
reasonable cap or no cap at all and insurance would be
required to pay the entire amount.
Mr. Gordon relayed that the HIAA was in support of the
proposed Amendment #2.
Co-Chair Torgerson commented that it was not his intent to
negotiate a cap amount. He stated that the Committee planned
to research the matter, learn what other states allow and
discuss the merits of the coverage.
Co-Chair Torgerson ordered the bill HELD in Committee.
SENATE BILL NO. 227
"An Act relating to the limitation of levy of municipal
ad valorem taxes in home rule and general law
municipalities; and providing for an effective date."
This was the first hearing for this bill in the Senate
Finance Committee. Co-Chair Torgerson stated his intent for
the Committee to learn about the upcoming ballot initiative,
99PTAR - An Act providing property tax and assessment
relief, which this bill would amend if both measures were
adopted into statute.
STEVE VAN SANT, State Assessor, Division of Municipal and
Regional Assistance, Department of Community and Economic
Development testified via teleconference from Anchorage
about what the initiative would accomplish. He said the
initiative would provide that the assessors will assess
property at its market value until 2002 when assessments
could be increased but only by two percent annually. He
stated that the only exceptions to this was when a property
sells or in the case of new construction. He was uncertain
whether a major remodel would constitute a change in
assessment.
Mr. Van Sant listed the second implication of the initiative
as a provision that would require a reassessment for
properties that decrease in value in order to "follow that
decrease down."
Mr. Van Sant stated the initiative also requires that
municipalities may not levy an ad valorem tax for any
purpose in excess of one-percent, which he explained was a
change from the current three-percent provision. He detailed
that a one-percent ad valorem equaled ten mils and three-
percent ad valorem equaled thirty mils.
Mr. Van Sant continued that the bonded indebtedness is
included in the ten-mil cap under the provisions of the
initiative. Currently, he said bonded indebtedness was
outside of the thirty-mil ceiling. He elaborated that the
average mil rate in the state in 1999 was about 15 1/2 mils.
He noted that several municipalities were under the ten mils
but that several others were over.
Mr. Van Sant pointed out a typographical error in the
initiative language made by the measure's sponsor that
nonetheless would change the municipalities' ability to
assess business inventory based on a monthly assessment as
opposed to the current January 1 assessment date. He relayed
a question by an Anchorage Assembly Member to a state
assessor about changing the city's methodology to the
average monthly basis because most retailers tried to reduce
most of their inventory as of January 1 and pay less tax.
Mr. Van Sant shared that currently, statute requires that
"all taxes will be at the same rate." This initiative
changes that language, he stated so theoretically, a city
could charge a different rate to different property uses,
such as commercial property versus personal property. He
gave an example of the Kenai Peninsula Borough that might
decide to charge commercial facilities at ten mils and
residential property at five mils. He said the problem was
the ten-mil cap remained.
Mr. Van Sant told the Committee that statute does not
require property sales to be reported to an assessor, which
would make it difficult to track such transactions in order
to reassess property values. He stated that he has heard the
argument claiming that the passage of the initiative would
reduce the amount of staff needed in the assessor's office.
He disagreed, saying that tracking property ownership
transactions would require a great deal of effort. He added
that the initiative still required the assessor to assess
property to determine the increased or decreased value every
year with the restriction of only raising the assessed value
by two-percent per year.
Mr. Van Sant relayed another question he has been asked
about how much money the state would realize out of oil and
gas revenues if the measure passed. His answer was that for
the first 5 years, there would not much new revenue from oil
and gas. He explained that the North Slope and Valdez
garnered the most revenues from "AS.43.56 properties," the
oil and gas property. Most of that revenue from the North
Slope goes to pay dept service, he noted and if the
initiative passed, he predicted that Valdez would realize
revenues that would have been received anyway.
Co-Chair Torgerson noted the initiative allows a
differential rate for commercial and personal property. He
asked if the ten-mil provision applied to the total or to
each category. He wondered if an average could be applied
thus allowing a tax of 15 mils on commercial property and
only five mils on personal property so long as the total of
the jurisdiction was ten mils.
Mr. Van Sant responded that no more than ten mils could be
charged because the total amount any local government could
charge was ten mils. He did point out that in certain areas
of the state governed by both a city and a borough
government, the mil rate could be as high as 20 with each
governing unit allowed ten mills. He gave an example of the
City of Kenai, which could levy ten mils and the Kenai
Peninsula Borough, which could levy another ten mils on the
same property that was within both jurisdictions. This was
allowed under the current thirty mils statutes, but he
stressed this has never been realized. He warned that with
the other ramifications of the initiative, twenty mils could
begin to be levied where possible.
Co-Chair Torgerson did not know why different mil rates
could not be charged by category if the provision allowed a
differential rate.
Mr. Van Sant conceded that Co-Chair Torgerson's comment was
an argument that could be made. Mr. Van Sant also pointed
out that the initiative read that many service areas could
be lost because, under the total ten-mil cap, these areas
would push the levy over the ten-mil cap. Something would
have to give, he warned, either the service area or revenues
for local government.
Co-Chair Torgerson then asked about bonded to indebtedness
and if the witness had a legal opinion on whether or not
voter approved debt would fall under the cap of the
jurisdiction. He was unsure if the mill rate cap was
constitutional.
Mr. Van Sant had not yet received a legal opinion specific
to Co-Chair Torgerson's concerns but predicted there would
be many legal questions to be resolved including this
matter. He shared that the consensus was to wait and see
what happened with the election and address the concerns if
the measure were adopted.
Senator Phillips asked under what authority could an
unincorporated resident vote on a measure that would affect
only incorporated residents. He relayed that he was
receiving complaints from constituents saying that residents
of unincorporated areas had no business voting on this
initiative. Mr. Van Sant said there were legal questions
about this as well, but that the ability to tax was a
statewide ability and the proposed tax limit was a statewide
limit rather than for a particular local government.
Co-Chair Torgerson suggested the Legislature's legal council
could give some advice on these concerns.
Senator Phillips requested a written legal opinion from the
Division of Legal Services.
Senator Wilken questioned whether this initiative would
actually be approved and placed on the ballot. Mr. Van Sant
was unaware of any challenge to placing initiative on the
ballot.
SENATOR KIM ELTON testified that under the current system,
local voters could vote whether to raise or lower their mil
rate cap. Under the provisions of the initiative, he
stressed the only local choice would be whether to lower the
tax rate below ten mils.
Senator Elton then addressed SB 227 before the Committee
saying it would make two significant amendments to the
initiative. First, he said it would allow local voters to
set a higher mil rate for their community. Secondly, he
continued the bill would remove from the initiative, a
portion of the provision that states future bonded debt must
be held under the ten-mil cap. He explained that the deleted
portion would be debt for schools so that when a school bond
is placed on the ballot, voters don't' have to chose between
schools and other essential services, such as public safety.
Senator Elton agreed with the Alaska Municipal League
position that voters in other parts of the state have no
right to set tax rates for communities they don't reside in
without recourse by local voters.
Senator Elton stated that the initiative creates a
significant constitutional problem. He referred to Article
10 Section 1.
Tape: SFC - 00 #54, Side A 10:36 AM
Senator Elton warned that the initiative would discourage
communities from consolidating. He used Ketchikan as an
example, telling of discussions to merge the borough
government and the city government. If the initiative passed
and the two governments consolidated, he stated that local
government would have lost its ability to tax at a higher
than ten-mil rate.
He detailed the backup information that included legal
opinions from the Division of Legal Services. [Copy on file]
One opinion addressed the legislature's ability to amend the
language of an initiative.
Co-Chair Torgerson asked if that opinion actually said the
legislature could amend initiative language. Senator Elton
affirmed.
Senator Elton continued that the other opinion speaks of
whether an effective date of a bill could be predicated upon
the passage of an initiative. The Division of Legal Services
gave the opinion that the legislature has that ability as
well. Senator Elton noted this was not an unusual provision
reminding the Committee of the Frank Initiative that was
predicated upon voter approval of a capital move.
Co-Chair Torgerson asked if the legislature has a history of
amending the language of an initiative. Senator Elton was
unsure.
There was some discussion about previous campaign finance
reform issues.
Senator Elton continued detailing the backup material that
showed different communities, their current tax rates and
the effects of the mill rate cap.
Co-Chair Torgerson asked if the sponsor's intent with this
legislation was to amend the law if the initiative were
adopted but not to change the initiative itself. Senator
Elton affirmed.
KEVIN RITCHIE, Executive Director, Alaska Municipal League
testified about the negative affects the initiative would
have on municipalities. He stressed that local taxation is a
local issue. He added that most of the larger communities in
the state already had established tax caps. He listed those
boroughs and municipalities that have charter or voter
established tax caps.
Mr. Ritchie compared the initiative to Proposition 13 that
was adopted several years before in the State of California.
However, he pointed out that Alaska was not like California
in many ways and also that voters in the State of Idaho had
rejected a similar measure.
Mr. Ritchie detailed the impacts this initiative would have
on the State Of Alaska including that the loss in the first
year would add $125 to $150 million to the fiscal gap. He
shared that the reason the amount was not certain was
because of the uncertainty of whether the cap would be a
maximum of ten mils or a total of 20 mils depending on the
location of the property. According to the Department of Law
this matter would most likely be litigated because the
premise of a ten-mil cap in some places and a 20-mil cap in
others did not make sense, he said.
Mr. Ritchie continued with the impacts noting the two-
percent assessment increase restriction. He relayed that
California has had a 500 percent increase in property
values, which was the inspiration behind Proposition 13.
However, he noted that while Alaska sometimes has changes in
property values these are never increases, only decreases.
He referred to the economic difficulties in 1986 when
Anchorage property lost approximately 50 percent of the
assessed value. Since the property values have recovered, he
elaborated existing property owners would have essentially a
large tax break while others building new facilities or just
bought a new house would not. Therefore, he said the
individual tax burdens would be unequal.
Mr. Ritchie stated that the initiative's bond provision were
radical in that it would require all new bond provisions to
be included under the ten-mil property tax cap even if
approved by the local voters. He explained that this would
require communities to eliminate some teachers and education
programs to fund new school construction.
Mr. Ritchie described the impacts to each community,
specifically Anchorage and the municipality's current mil
rate of 17.9 that included a debt service of 3.25 mils and
the remainder going to other services. He noted that
previous debt service was exempt from the cap under the
provisions of the initiative, but noted that the deletion of
the remaining 4.9 mils over the cap would cost $73 million
dollars the next year. He calculated how this would affect
the school district funding.
Co-Chair Torgerson clarified that the initiative does not
prevent municipalities from imposing a different type of
tax. Mr. Ritchie answered that was correct.
Senator Phillips asked if the League planned to educate the
public on the repercussions of the initiative before the
election was held. Mr. Ritchie said it would.
Senator Green knew there were many people who were
discouraged by the cost of local government and their
property taxes. She asked what the implications of the
initiative would do to the real estate market saying she
thought it was onerous.
Mr. Ritchie responded that if the initiative passed, there
would be a strong incentive to not sell and to not build new
buildings. He doubted there would be much growth in the
construction industry.
Co-Chair Torgerson noted the bill's effective date is
January 1, 2001 and asked if the severability clause in the
legislation was standard with an initiative. Mr. Ritchie did
not know.
BONNIE WILLIAMS, Assembly Member, Fairbanks Northstar
Borough, Chair, Finance Committee testified via
teleconference from Fairbanks in support of the bill. She
encouraged the legislature to take a leadership role after
the session ended to get information regarding the
initiative to the voters.
Ms. Williams detailed the affect of the initiative on her
borough. It was noted that a written description of the
impacts was in the possession of the Committee. [Copy on
file] She stressed that the community would have to come up
with $16.9 million, lose road services, fire services and
that generally, the ten-mil rate cap was a potential
disaster for the borough. She noted that even if all
nonessential services were eliminated, such as libraries and
parks and recreation, only half of the needed money would be
saved. She said the obvious loser would be the local school
system because that was the only budget with adequate money
to fill the gap. She added that the local voters have always
supported funding for education and that the initiative
would take away the ability for local support.
Ms. Williams noted that the revenue tax had been in place,
which has worked well. She stated that the borough attorney
has advised the assembly that if the initiative passed both
the tax cap and the revenue cap would be in place and the
borough would not have an opportunity to obtain alternative
revenue sources.
Co-Chair Torgerson asked how many jurisdictions have revenue
caps. Mr. Ritchie listed the Fairbanks Northstar Borough,
the Municipality of Anchorage, the City and Borough of
Juneau, the Ketchikan Gateway Borough, Wrangell, Sitka,
Petersburg, the Kodiak Island Borough and possibly the Kenai
Peninsula Borough.
Co-Chair Torgerson stated that Ms. Williams' argument was
that other revenues could not be implemented without a
change to the local tax code, which would require local
voter approval.
Co-Chair Torgerson ordered the bill HELD in Committee.
ADJOURNED
Senator Torgerson adjourned the meeting at 10:56 AM.
SFC-00 (18) 03/20/00
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