SENATE BILL NO. 210 "An Act relating to the community revenue sharing program; changing the name of the community revenue sharing program to the community assistance program; and relating to the municipal property tax exemption on the residence of a senior, a disabled veteran, and a widow or widower of a senior or disabled veteran." 10:21:43 AM Co-Chair MacKinnon discussed the CS for SB 210, which had been adopted on April 6, 2016. Public testimony had opened on closed on the same date. She clarified that the committee was considering bill version H. 10:22:11 AM AT EASE 10:23:06 AM RECONVENED Vice-Chair Micciche discussed the fiscal note, from DCCED (OMB component 2879); with appropriation and allocation to Community and Regional Affairs. He shared that the note showed $6.1 thousand of fiscal impact in FY 17 with no additional costs, positions, or capital. He relayed that the committee believed that the department could handle the minor amount of work resultant from the bill, and it intended to zero out the fiscal note. Co-Chair MacKinnon asked for the support of the committee to zero out the fiscal note. The fiscal note was amended to zero. She informed that the committee would request the Legislative Finance Division (LFD) to provide a forthcoming zero fiscal note. Vice-Chair Micciche relayed a concern from his district and mentioned a spreadsheet that showed an increase in community revenue sharing in some communities, and a larger proportion of decrease of community revenue sharing in other communities. He asked if Co-Chair MacKinnon could explicate and confirm that no communities in the state would receive an increase. Co-Chair MacKinnon asked LFD staff to explain the breakdown of how the state would assist communities under the bill. ALEXEI PAINTER, FISCAL ANALYST, LEGISLATIVE FINANCE, discussed the spreadsheet "FY 17 Community Revenue Sharing Estimates," (copy on file). He explained that under the status quo distribution of $60 million versus the proposed distribution of SB 210 (under any amount), no community would receive more funding under the formula in the Community Revenue Sharing Program. The bill would change the way that pro-rating worked, so if one were to compare a pro-rated base in the status quo program to a pro-rated base in the new program, it was true that some communities would be better or worse off. He reiterated that when compared to the original $60 million program, no community would receive more funding under SB 210. Vice-Chair Micciche thought that when some people had initially looked at the calculations; it had showed an actual increase for Aleutians East, False Pass, and some other areas. He asked if Mr. Painter could explain the logic of the bill and its relationship to the PCE program. Co-Chair MacKinnon stated that there was a policy decision, and referred to the SB 196, which had just passed from committee. She explained that SB 196 had proposed a change to the PCE Fund structure, in which excess earnings would be diverted to the revenue sharing program. It was estimated to be in the amount of $17 million for FY 17. She considered the two bills to be interrelated. 10:27:36 AM Vice-Chair Micciche stated that the bill being considered (SB 210) would change the name of the program from Community Revenue Sharing to Community Assistance. He continued that the program funding had been reduced from $60 million to $38.2 million, half of which was expected to come from PCE Endowment Fund earnings. Co-Chair MacKinnon stated that for FY 17, if the fund was not re-charged, there would be $38,200,000 available under the current stepdown in statute. She continued that under SB 210, the pro-rated share would be changed. If there was expected earnings on the PCE Fund, there would be $17 million to go to the Community Revenue Sharing Program. Senator Hoffman stated that the governor's proposal was to spend $50 million on the revenue sharing program in the current year, and increase the amount to $60 million in subsequent years. The committee was evaluating whether or not the state could continue to fund the program at the same high level. Since the state no longer had surplus revenue to share, he thought the title change to the Community Assistance Program was more appropriate. He thought by changing it to a $30 million program, it would not necessitate funding an additional $35 million in the current year. He noted that the fund had $115 million, and in order to get a three-year average the fund would have to contain $150 million. Subsequently, the governor had requested the additional $35 million. If the legislature moved forward and reduced the program, the state would not have to come up with $35 million, and there would be enough funding already to cover a $30 million program. He did not believe the state could continue on the path it was on. He thought it was more likely that the program could survive at the lower funding level. He noted that each legislature would have to consider the financial conditions of the state at the time. 10:31:00 AM Vice-Chair Micciche thought it was unjustified to simply end the program, and thought the bill was an appropriate action. He referred to other bills that impacted municipalities, and thought that SB 210 had a much smaller impact. He thought that the bill was a healthy compromise. Co-Chair MacKinnon stated that the bill was from the Senate Finance Committee, and asked that any input be directed to her office. She referred to discussion regarding the definition of "community" and how large a community should be. She recounted the same discussion pertaining to the size of schools. She had heard conversation about considering 50 residents to constitute a community, or whether 11 members in a geographic area qualified for community assistance of $96,000. She clarified that the bill did not propose a change to definitions of community, but noted that there was an anomaly in the Aleutians East Borough that had a population of 39 and received state assistance in the amount of $385,000. Mr. Painter clarified that the population of Aleutians East Borough was actually higher, and the 39 individuals were those that did not live in an incorporated borough. Co-Chair MacKinnon asked Mr. Painter to discuss why Aleutians East would get extra compensation if communities were already receiving funds from other sources. Mr. Painter stated that there were boroughs with incorporated communities that received the borough share of the program. Co-Chair MacKinnon clarified that the boroughs were overlaid upon the city or village designations, and both were getting assistance. Mr. Painter answered in the affirmative. Co-Chair MacKinnon asked Mr. Painter to create a spreadsheet to illustrate the cities with the boroughs overlaid atop, with associated revenues, to better understand how the program gave assistance to the boroughs. She thought the information would also be helpful in the next committee of referral if the bill was successful on the Senate floor. 10:35:04 AM AT EASE 10:39:14 AM RECONVENED Senator Dunleavy thought that he would benefit greatly from additional consideration of the bill. He wanted to discuss some questions about the bill with staff from LFD. Senator Olson referred to an earlier discussion about communities that did not have city governments. He commented that he would like a list of such communities, the population, and how much money each community was receiving from the revenue sharing program. Co-Chair MacKinnon stated she would be happy to hold the bill until the afternoon meeting. Vice-Chair Micciche opined that there were a lot of legislators that thought that it was time that the communities with tax authority and/or a fund balance move beyond community revenue sharing. He thought the bill was a healthy compromise. He acknowledged that the program was slightly advantaged to smaller communities that (in some cases) had the revenue sharing program as its only state support. He thought there were communities that objected to the proportional differences. He thought it was a healthy shift for larger communities that had a greater ability to provide for themselves. 10:41:30 AM Co-Chair MacKinnon stated that the conversation around the creation and reduction of the revenue sharing program had to do with Senator Hoffman's comments regarding the fact that the state could no longer afford to share funding it did not have. She pointed out that the governor was proposing multiple ways to provide revenues through taxing different industry groups and individual Alaskans. She suggested that larger communities had the ability (provided by the legislature) to tax themselves, and thereby had a greater ability for self-determination. She noted that the smaller communities, which had not already done so, still had the opportunity to tax themselves. Co-Chair MacKinnon relayed that some of her constituents, as well as other residents, had asked that all of Alaska be incorporated as boroughs so as to tax residents and contribute to education and other activities funded by the state. She thought the bill was a compromise. Instead of eliminating all revenue assistance to communities with taxing authority, the compromise was to reduce to a $30 million program and utilize earnings from the PCE Fund. She referred to the suite of interlocked bills, including one that concerned the Public Employees' Retirement System (PERS) and the Teachers' Retirement System (TRS). The committee had heard from a variety of people, including those that were highly vocal and critical of the legislature and cost-shifting. She discussed PERS and TRS liability. She thought it was fair to say that more conversation was needed on the topic. She agreed that proportionally, smaller communities were protected in a better way; and noted that if the previous bill went forward, part of the PCE fund would help lower GF spend. 10:45:08 AM Vice-Chair Micciche thought Co-Chair MacKinnon's remarks were well stated. He related that he tried to be able to put himself in other people's shoes. He referred to his 5- year tenure as mayor of an Alaskan community. He thought as mayor he would have taken issue with the proportional change proposed in the bill. He acknowledged the difference of his current role, as well as the changed fiscal climate. He reiterated that the bill was an appropriate compromise, especially considering a PCE Fund shift. SB 210 was HEARD and HELD in committee for further consideration. Co-Chair MacKinnon discussed the afternoon schedule, at which time the committee would do a full walk-through of the capital budget. She noted that she would work to move out SB 210 and SB 196 together so that they could travel together. She reiterated that the two bills were a portion of the same suite of bills. 10:46:37 AM AT EASE 10:47:02 AM RECONVENED Co-Chair MacKinnon discussed the afternoon schedule.