CS FOR SENATE BILL NO. 210(FIN) am "An Act relating to the community revenue sharing program; and changing the name of the community revenue sharing program to the community assistance program." 9:43:39 AM Co-Chair Neuman MOVED to ADOPT the proposed committee substitute for HCS CSSB 210(FIN), Work Draft 29-LS1593\N (Shutts, 4/14/16). There being NO OBJECTION, it was so ordered. PETE ECKLUND, STAFF, REPRESENTATIVE MARK NEUMAN, explained that the only change to the bill was the effective date, which would leave the current revenue sharing formula in place for FY 17. He stated that when the bill took effect in FY 18, $30 million would be distributed as a new community assistance program, as opposed to community revenue sharing. He noted the document in member packets, "SB 210: Community Assistance Payments FY 18-19"(copy on file). 9:46:04 AM Representative Gara understood that the fund had been capitalized so that the annual payout would not disappear. Mr. Ecklund responded that the fund had not been capitalized in the FY 17 operating budget, which meant that one-third, or $38 million, of the $115 million, would be distributed in FY 17 as community revenue sharing. 9:46:50 AM Representative Gara queried the capitalization formula that had been used in the past. Mr. Ecklund replied that current statute stated that whatever the balance of the fund, one-third had to be distributed until there was less than $60 million in the fund. He stressed that under the current program, with no further capitalizations, the last community revenue sharing would be distributed in FY 18. 9:47:50 AM Representative Gara asked what was being use to capitalize the fund in the past. Co-Chair Thompson stated that general funds had been used. Mr. Teal added that the capitalization of the fund came from progressive oil tax proceeds, and when oil prices fell and progressivity went away there was no funding source for the program. He furthered that if the price of oil did not increase the program would falter until prices increased; at the restart the program funding would be at the $60 million distribution level. Representative Gara wondered whether general funds had been used to capitalize progressivity after ACES. Mr. Teal replied in the affirmative. He clarified that unrestricted general funds had been used under ACES, and were still being used, it was a matter of naming the source of the revenue. He added that the named revenue stream would be well in access of the funding for the program and would not contain phase out provisions for community assistance. Representative Kawasaki queried the version of the Community Assistance Payments FY 16-18, Non-Unified Boroughs by Community, prepared by the Legislative Finance Division. 9:51:15 AM ALEXI PAINTER, ANALYST, LEGISLATIVE FINANCE DIVISION, ALASKA STATE LEGISLATURE, clarified that the document dated April 15, 2017 included incorporated boroughs, which were eligible at an amount that was one-nineteenth the base of the program. He said that it had been requested that the committee see all communities that received distribution, some of which were unincorporated. Representative Kawasaki understood that the Fairbanks Northstar Borough would receive $1.93 million in addition to what Chena Hot Springs, Ester, Ester Dom, Fox, and Golstream combined would receive. Alexi responded in the affirmative. Vice-Chair Saddler asked Mr. Painter read the title of the document he was referring to, and then to explain what the document represented. 9:53:00 AM AT EASE 9:55:15 AM RECONVENED Co-Chair Thompson clarified that the title of the chart being referred to was "SB 210 Community Assistance Payments FY 18-19." Representative Kawasaki requested a chart that reflected the percentages side-by-side, year-by-year. Vice-Chair Saddler asked what the second column on the chart, "SB 210 Distribution: $30 million' represented. Mr. Ecklund responded that the column represented the bill before the committee, with an effective date of January 1, 2017; the new community assistance program would come into effect in FY 18. 9:57:37 AM Representative Gara expressed concerned about too deep of a cut to revenue sharing program. Co-Chair Thompson purported that if action was not taken now, in two years revenue sharing would be zero. Mr. Ecklund agreed. Representative Gattis believed that the state had no revenue to share to support community assistance. Representative Kawasaki stated that community revenue sharing had been established to support communities that were not directly involved in oil and gas development, or other resource development, to receive a share of the state's common interest resources. He expressed concern that the City of Fairbanks would receive public assistance when the revenue sharing had been intended for the aforementioned communities. He contended that many of the communities that participated in revenue sharing could not institute and income tax, and might not have a tax base. He added that many of those communities raised revenue through sales taxes. He rejected the characterization that revenue sharing was public assistance for communities, and believed that the revenue sharing should continue even during times of fiscal uncertainty. 10:01:03 AM Vice-Chair Saddler thought that those same communities that received extra petroleum dollars through revenue sharing during positive times should also be responsible to pay to make up for any deficit in revenues during times of low oil prices. Representative Gara spoke to Anchorage's "weirdly worded tax cap." He said that a 67 percent reduction in revenue sharing would drive the need for other sources of revenue or cuts in Anchorage services equaling $2.7 million. Co-Chair Thompson wondered whether Representative Gara was referencing the numbers off of the correct chart. Mr. Ecklund replied that he did not believe so. He added that the chart he was looking at reflected that the distribution for Anchorage under SB 210, in FY 18, would be $4.473 million. Representative Gara stated that he was referring to both charts. He apologized that he had been looking at the numbers for the Mat-Su. He noted that the current chart did not include historical comparisons. 10:04:03 AM Co-Chair Neuman noted that the price of oil had been on the rise when revenue sharing had first been introduced, and the price for municipalities to heat homes and buildings had increased rapidly. He said that in the event of a drop in oil prices the intention had been to ramp-down the program. He stated that many communities in rural Alaska would not be able to survive without revenue sharing, which could end up costing more money if the state has to step in an manage those communities. He explained that the legislation would "lock-in" a community assistance program that would help communities plan their yearly budgets. He stressed that the state did not currently have any excess revenue, which made it essential to make adjustments to the program. He expressed support for the current version of the bill. Co-Chair Thompson expressed support for the current bill version. He reiterated that without the legislation, in two years the revenue sharing would end altogether. He stressed that the program supported the operating budgets of over 100 rural communities in the state. He lamented that if the program shut down the state would end up funding those budgets, or that the affected communities would shut down. 10:08:41 AM Representative Gara relayed that he was not debating the legislation. He wondered whether Anchorage would be forced to raise property taxes in order to absorb the cuts to the program by FY 18. He thought that it would be useful to know that the community revenue sharing amounts were for all communities during previous time of low oil prices. 10:10:13 AM Co-Chair Neuman admitted that he did not know what communities would do. He disagreed with Representative Gara about needing the information concerning what had happened in the past in order to move the bill. 10:10:45 AM Representative Edgmon favored the approach of the bill. He did not believe that the distribution was equal for every community involved, but noted that the legislation had the support of the Alaska Municipal League. Co-Chair Thompson expressed the desire to move the bill from committee. Vice-Chair Saddler reviewed the fiscal note. 10:12:08 AM Co-Chair Neuman MOVED to REPORT HCS CSSB 210(FIN) out of committee with individual recommendations and the accompanying fiscal notes. There being NO OBJECTION, it was so ordered. HCS CSSB 210(FIN) was REPORTED out of committee with a "do pass" recommendation and with one new fiscal note from the House Finance Committee for Fund Cap; and one previously published zero fiscal note: FN1 (SFC for CED). 10:12:34 AM RECESSED 6:54:17 PM RECONVENED