SENATE BILL NO. 97 "An Act authorizing additional appropriations for public education and for community revenue sharing based on the price of Alaska North Slope crude oil, and adjusting the formula for payments to communities." 9:12:21 AM Co-Chair Hoffman stated that high oil prices added operating burdens to local governments and schools. TIM GRUSSENDORF, STAFF, SENATOR HOFFMAN, highlighted some changes to SB 97. He began with Section 1, which presented the formula and the money that would be appropriated to the Department of Education. Section 2 addressed a technical change, which would assure that the fund would always reach $180 million. Section 3 would add a new sub-section D, which was a calculation that would add the new formula to the revenue sharing. 9:15:07 AM Mr. Grussendorf presented "Goal: Increase Community Revenue Sharing when there is a GF Surplus" (copy on file). He stated that $89/per barrel was the trigger-point, but there was still an effort to make a more accurate trigger-point. He stated that the decision to use $89 per barrel, because it was the amount needed to balance the state's budget. He looked at line G, and stated that revenue-sharing would eliminate the $60 million, that it was formulated to do. He looked at line H, and stated that the full revenue sharing would be $82 million. He looked at line J, and stated that the revenue would be due to the progressive taxation of oil. He explained that the excessive revenue would not go directly into the formula, but would be calculated out as the same proportion as the first $60 million. He stressed that as long as the formula was above $60 per barrel, the formula should produce at least $60 million. 9:18:26 AM Co-Chair Stedman queried the payout date. Mr. Grussendorf replied that the payout date was not yet solidified. He stated that the revenue sharing would go out at the beginning of the fiscal date. He noted that the payout date would probably be sometime in August. 9:19:04 AM Co-Chair Stedman commented that a determination of the price trigger needed to be solidified. He stated that cost stress on small communities would be alleviated. 9:20:38 AM Senator Thomas wondered if the date was referring to the 90 day period. Mr. Grussendorf replied that that was one option, and they were looking at the yearly average. Senator Thomas wondered if there was consideration for tax credit return based on progressivity, and wondered if there was a comparison. Co-Chair Stedman requested a rough concept of the revenue. Mr. Grussendorf replied by referring to line J of the spreadsheet. Co-Chair Stedman would like to call it credits, rather than progressivity. Mr. Grussendorf agreed. 9:23:01 AM Co-Chair Stedman wondered if $3.5 billion referred to spending. Mr. Grussendorf replied with 3.2 percent or $22 million would be collected in credits. Co-Chair Stedman stated that $2.5 billion would be collected, and reiterated that it was a small fraction of the progressivity. He stressed that all of the terms would be open for discussion. 9:24:08 AM Senator Olson wondered if there would be possible retro- active mandates for tax payments. Mr. Grussendorf requested further explanation. Senator Olson referred to discussion related to retroactive tax collecting. He wondered if there was a retroactive date for the tax. Mr. Grussendorf replied that there were no discussions regarding retroactive tax collections. 9:25:22 AM Senator Olson wondered if there would be an increase in the rural school districts. Mr. Grussendorf replied education would be separate, after the formula was established. 9:26:19 AM Senator Olson looked at column D, and wondered what impact the potential rise 28 percent might have on the state. Mr. Grussendorf was unsure. Senator Olson noticed that they would not only get 3.2 percent, but an additional 8 percent. He wondered how much that would increase the revenue. Mr. Grussendorf replied that the spreadsheet did not include that amount. 9:27:11 AM Co-Chair Stedman stated that the progressivity tax was included to ensure that the percentage does not decline the state's share of the oil profits. 9:28:51 AM Co-Chair Stedman reiterated that the concept was on the table for discussion. Co-Chair Stedman looked at one fiscal note from the Department of Education and Early Development, which showed an increase of $22 million in K-12 funding; and another fiscal note from the Department of Commerce, Community, and Economic Development that showed an increase of $22 million in community revenue sharing. LUKE HOPKINS, MAYOR, FAIRBANKS (via teleconference), spoke in favor of SB 97. He stated that there was a backlog of school maintenance. He remarked that revenue sharing had been used in years prior, to avoid tax payer contributions. He remarked that when oil prices grew, they had to apply an appropriation in order to cover increased costs. 9:31:56 AM JOHN BOLLING, CITY OF CRAIG (via teleconference), spoke in favor of SB 97. He stated that the municipality appreciated the Legislature's appropriation of money. 9:32:41 AM BRYAN ZACK, HOMER (via teleconference), spoke in favor of SB 97. He requested a change from $84 per barrel to be used as a trigger point. 9:35:57 AM ELAINE PRICE, SOUTHEAST ISLAND SCHOOL DISTRICT (via teleconference), spoke in favor of SB 97. 9:36:33 AM BEAR KETZLER, CITY OF TANANA (via teleconference), spoke in favor of SB 97. 9:38:19 AM BRUCE JOHNSON, EXECUTIVE DIRECTOR, ALASKA COUNCIL OF SCHOOL ADMINISTRATION, spoke in favor of the concept of SB 97. He explained that there was an extraordinary cost related to heating and oil costs. He offered his assistance in the continued refinement of the bill. 9:39:17 AM Co-Chair Stedman suggested consideration for the amount that was proposed for the revenue sharing and the schools. Mr. Johnson agreed to help. 9:39:53 AM JOHN ALCANTRA, NATIONAL EDUCATION ASSOCIATION OF ALASKA, spoke in favor of SB 97. He stressed that 89 seemed too high a trigger. 9:42:13 AM KATHY WASSERMAN, ALASKA MUNICIPAL LEAGUE, spoke in favor of SB 97. She stressed that the municipalities agreed to share in the funds when oil prices go up. She reiterated that many communities face high oil prices, and find it difficult to provide basic services. She stated that basing one day as a target was unfair, but getting an average on holidays might be better. She offered to work with the Legislature in determining the best approach. 9:44:23 AM Co-Chair Stedman closed public testimony. Co-Chair Hoffman stated that the struggling municipalities and school districts had asked for assistance. He stated that there may have been an initial concern of relying on the funds. He stressed that the funds would only be available in times of high oil prices. SB 97 was HEARD and HELD in committee for further consideration.