Legislature(2017 - 2018)BARNES 124
02/28/2017 08:00 AM House COMMUNITY & REGIONAL AFFAIRS
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| Audio | Topic |
|---|---|
| Start | |
| HB47 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB 47 | TELECONFERENCED | |
HB 47-MUNICIPAL PERS CONTRIBUTIONS/INTEREST
8:01:48 AM
CO-CHAIR PARISH announced that the only order of business would
be HOUSE BILL NO. 47, "An Act requiring certain municipalities
with a population that decreased by more than 25 percent between
2000 and 2010 that participate in the defined benefit retirement
plan of the Public Employees' Retirement System of Alaska to
contribute to the system an amount calculated by applying a rate
of 22 percent of the total of all base salaries paid by the
municipality to employees of the municipality who are active
members of the system during a payroll period; authorizing the
administrator of the defined benefit retirement plan of the
Public Employees' Retirement System of Alaska to reduce the rate
of interest payable by certain municipalities that are
delinquent in transmitting employee and employer contributions
to the retirement plan; and providing for an effective date."
8:02:41 AM
PAUL LABOLLE, Staff, Representative Neal Foster, Alaska State
Legislature, presented HB 47 on behalf of Representative Foster,
prime sponsor. He paraphrased the sponsor statement [included
in the committee packet], which read as follows [original
punctuation provided, with some formatting changes]:
HB 47 seeks to correct an unintended consequence of
the PERS "salary floor" established in Senate Bill 125
of the 25th Legislature.
Senate Bill 125 changed the PERS system from a
multiple employer plan to a cost share plan. It
transferred the individual liability of the 160 PERS
employers and consolidated it so that all the
employers share in that liability.
Senate Bill 125 also created what is commonly referred
to as the 2008 salary floor. This requires employers
contribute 22% of annual salaries or 22% of FY 08
salaries, whichever is greater. The floor was
instituted to ensure that the system could not be
"gamed" by discouraging employers from replacing PERS
employees with contract hires to reduce their base
contribution to the system.
Some municipalities have found themselves under the
2008 floor through no fault of their own. A large
change in population results in a reduced tax base,
which affects the services a city can provide. As
that financial reality drives a city to downsize,
current law exacerbates this problem by keeping their
PERS contribution at the 2008 level. This bill
targets the communities whose population has dropped
by more than 25% since the previous census.
HB 47 will address this issue in two ways:
1. Establish a new floor of FY 2012 for communities
whose population decreased by more than 25% between
2000 and 2010.
2. Allows the PERS administrator to negotiate penalty
interest rates on delinquent payments.
HB 47 does not intend to repeat the "2008 floor"
debate but to correct one of the unintended
consequences caused by the arbitrary line that debate
created.
I urge your support of this legislation.
8:04:48 AM
MR. LABOLLE stated that from a fiscal point of view, as the
[amount owed in] payments continues to increase and communities
are unable to pay, and because the communities cannot, under
state law, declare bankruptcy and cannot dissolve without first
resolving their debts, these communities "turn off the lights
and leave the keys in the door," and as a result the state must
pay the entirety of the Public Employees' Retirement System
(PERS) obligation, not just its own portion of it.
MR. LABOLLE named the following communities cited in HB 47 that
have lost population: Anderson, St. George, Atka, Pelican, and
Galena. Of the five, Pelican and Galena are the only ones that
would be affected by the proposed legislation, because Anderson
and St. George no longer have any PERS employees and Atka is
presently above the 2008 salary floor in its gross salaries.
8:06:17 AM
REPRESENTATIVE NEAL FOSTER, Alaska State Legislature, as prime
sponsor of HB 47, stated that one of the concerns was that
municipalities would contract out for their employees so that
the employees were not actually on their rolls, thus the
communities were not responsible for having to contribute to the
retirement system. He indicated a floor was set to prevent
municipalities from gaming the system, which was a good thing;
however, it was not foreseen that communities such as Galena
would have a military base leave its small community and end up
having to substantially reduce the number of people on the
employee rolls. When that happened, he said, Galena's bill
began adding up, because the municipality is liable for a
minimum amount of payment into the retirement system, and yet it
has significantly lower personnel on its employee rolls. He
echoed Mr. Labolle's caution that the community may just shut
down and [leave the state with the full payment obligation]. He
said HB 47 provides the opportunity to continue to allow those
affected by this issue to continue to operate as a municipality
and be able to pay at least a minimal rate rather than walking
away without paying anything.
8:08:35 AM
REPRESENTATIVE RAUSCHER asked how much the state is "on the hook
for."
MR. LABOLLE answered that to know the amount in total, an
actuarial study needs to be done, and a study will at some point
be completed and the results will be added to the proposed
legislation before it is heard by the House Finance Committee.
In regard to the difference in cost going forward, he advised
that for the two affected communities: Take the FY 08 floor,
subtract the FY 12 floor, and multiply that by 22 percent - the
contribution rate - and that equals the "worst-case scenario,"
which is about $186,000. He explained that neither Galena nor
Pelican are at that worst-case scenario, at FY 12; they are
paying above that. He said, "What those ... gross salaries will
be in the future is indeterminate, so we don't know what the
total cost will be, but that's as bad as it gets."
REPRESENTATIVE RAUSCHER, in reference to the aforementioned
municipalities, asked, "How bad off are they?"
MR. LABOLLE responded that he is not well acquainted with
Pelican, but it is a small fishing town that has been dwindling
over the years. He added that although the proposed legislation
would certainly help Pelican, it may not be enough help. He
said Galena is doing quite well, having begun biomass heating
and doing quite a bit within the community to be self-
sufficient; however, it still has a looming, crushing debt. In
response to a follow-up question, he renamed the list of
communities.
8:12:34 AM
CO-CHAIR PARISH noted that the list of communities affected is
found on "the second page of your first fiscal note."
8:12:52 AM
MR. LABOLLE, in response to Representative Rauscher, reiterated
the reasons why Anderson, St. George, and Atka would not be
affected by the proposed legislation. He stated that in FY 12,
gross salaries for Galena were $755,000 and were up to $913,000
for FY 16 gross salaries. Pelican's gross salaries were down to
$105,000 and are now up to $135,000. He concluded, "So, those
employees' salaries are growing."
8:14:08 AM
REPRESENTATIVE SADDLER asked if the affected communities
increased their contribution to PERS in the face of their
reduced employee counts or "did they just let it ride at the
same rate?" He explained he was trying to figure out why the
increasing delinquencies occurred.
MR. LABOLLE answered that Galena maintained its 22 percent
payment on current gross salaries rather than paying the 2008
floor, which he confirmed would have been more money.
REPRESENTATIVE SADDLER concluded then that Galena had "adhered
... to one of the requirements and not the other."
MR. LABOLLE answered that is correct. In response to a follow-
up question, he said whether or not Galena should be held
culpable for that choice is the policy call of the committee.
REPRESENTATIVE SADDLER said he knows that the U.S. Department of
Defense (DoD) offers economic readjustment funds to communities
that are affected by base closures. He asked if the City of
Galena obtained any benefit from DoD for economic readjustment
after the air station was closed.
MR. LABOLLE deferred to representatives from Galena to answer
the question. He did offer his awareness that "they did leave
behind a significant amount of fuel for the city," which has
been using that as a bridge while working on its biomass energy
source. In response to a follow-up question, he offered his
understanding that the military had pulled out of Galena in
2008.
REPRESENTATIVE SADDLER questioned whether HB 47 would be a fix
for only a couple of specific situations and if other
communities might experience such a "large reduction" [in
population]. He said he wants to ensure the legislature sets
the right policy for the future rather than just fixing an
individual situation that potentially could be fixed by "working
a deal or special appropriation or a special assessment." He
said, "I don't know whether this is an appropriate situation to
be making ongoing future policy." He cautioned that one
solution that might work for Galena may not work for another
community.
MR. LABOLLE proffered that the way the 2008 law was passed tied
the hands of the administration and did not allow a deal to be
made. The administration has to collect the '08 floor or the
gross salaries, whichever is greater - it has no negotiating
option in statute - and delinquent payments must be assessed the
statutory 12 percent interest rate - the administration has no
option on that.
REPRESENTATIVE SADDLER said he had not gone through the statute
to figure out what 12 percent is, but surmised it is a good deal
higher in the current market. He asked whether there is a
section in [the proposed bill] that might reset that interest
rate.
MR. BOLE answered that there is no provision under HB 47 to
reset the interest rate, but there is a provision that would
allow the PERS administrator to "negotiate the delinquent
interest rate for affected communities." He said the 12 percent
interest rate is "not set by the number 12," but is set by the
expected actuarial return, which is 8 percent, then one and a
half times that, which is 12.
8:18:44 AM
REPRESENTATIVE DRUMMOND said she feels like she has seen this
bill at least twice in the last four years. She stated that the
aforementioned communities had paid "all of the PERS supports
for employees that they had when they had them." She asked for
confirmation that HB 47 would assist those communities that have
lost employees and, thus, fallen below the floor that was set in
2008, and those communities paid the contributions for the PERS
employees at the time they actually had the employees and
continue to pay for any PERS employees they do have; "it's just
that the floor was set artificially high and they have fallen
below in some cases."
MR. LABOLLE confirmed that is correct.
8:19:48 AM
REPRESENTATIVE SADDLER clarified that communities pay only part
of the PERS obligation, while the State of Alaska pays the rest.
MR. LABOLLE clarified that the communities have paid their gross
salary requirement of 22 percent; however, they paid it on their
current employees and not on the 2008 floor.
REPRESENTATIVE SADDLER asked if the State of Alaska had paid in
excess of that 22 percent.
MR. LABOLLE deferred to the administration.
8:20:47 AM
REPRESENTATIVE WESTLAKE said HB 47 looks like a good bill. He
observed, "You're locking down the floor; you're going from 2000
to 2010 on that." He asked, "Is there a reason we're going to
an off year, a 2012 level, as we're talking about the PERS
rather than the chronological lock ... that we have on here?"
MR. LABOLLE answered that 2012 is the "bottoming out point" for
both the affected communities; it's the point at which the
salaries of those communities stopped going down and "started
going back up."
8:21:25 AM
REPRESENTATIVE TALERICO asked if "the bill that we would submit"
to Galena "would be about 50 percent of their current employees'
salary level."
MR. LABOLLE answered that [Galena's] gross salaries were at
approximately $1.5 million in FY 08 and now are at approximately
$900,000.
REPRESENTATIVE TALERICO asked for clarification that "they're
still well above the 22 percent because of that floor that's
structured there."
MR. LABOLLE answered that [Galena] is below the FY 08 floor, but
above the FY 12 floor.
8:22:30 AM
REPRESENTATIVE RAUSCHER expressed concern that people will see
the state bailing out these communities from bankruptcy and will
get the message that they will "get a break" if they don't pay
the state back and instead spend their money on something else.
MR. LABOLLE said he thinks it is better to have [municipalities]
pay what they can rather than have the state be on the hook for
the entire amount.
8:24:44 AM
REPRESENTATIVE FOSTER indicated that he thinks [Representative
Rauscher made] a valid point. He said he thinks this is a
policy call and "you take things on a case-by-case basis." He
opined that the situation where a military base relocates is one
for which the state can make an exception, but perhaps in a case
where a smaller military unit moves out the decision may not be
the same. He said it is a subjective issue.
8:25:40 AM
MR. LABOLLE pointed out that because the metric of the bill is
based on the 2000 and 2010 Censuses, the information has already
been gathered on the aforementioned communities and all the
details about each them are known.
8:26:11 AM
REPRESENTATIVE SADDLER stated that the legislature is encouraged
not to pass legislation that benefits any one person or entity.
He asked if the sponsor thinks that "the narrow applicability"
of the proposed legislation is cause for concern.
MR. LABOLLE answered that "the single entity is not specified in
legislation." He said the proposed legislation has to do with
population loss, and it just so happens that there are only five
communities with such a high population loss. He said the bar
was set high on purpose, and when the bill sponsor initiated HB
47, he did not know how many communities would be affected.
REPRESENTATIVE SADDLER asked Mr. Labolle to talk about the
circumstances under which the four communities besides Galena
experienced a large drop in population.
MR. LABOLLE deferred to Representative Talerico for information
pertaining to Anderson; he said Pelican is a fishing community
that has lost people that have moved elsewhere; and he said he
could not answer the question in relation to St. George and
Atka.
8:28:21 AM
REPRESENTATIVE TALERICO offered that a change in the management
plan at the Clear Airforce Station and a new shift structure
resulted in more of its active members living elsewhere and
commuting to the base.
8:29:33 AM
REPRESENTATIVE RAUSCHER observed that although there is a zero
fiscal note, the proposed legislation would cost the state
$1,014,000.
MR. LABOLLE responded that the fiscal note is actually
indeterminate and there certainly will be a cost associated with
HB 47. He said the actuarial study he mentioned before will,
when done, give a guideline, but will not give an exact cost.
He explained that under HB 47, the unfunded liability in PERS
will be increased slightly. He said David Teal from Legislative
Finance described that increase when compared to the entire
system as "decimal dust."
8:31:36 AM
KATHIE WASSERMAN, Executive Director, Alaska Municipal League
(AML), told the committee that she had been the mayor of the
City of Pelican for over eight years, and the reason [for the
drop in population there] was not just people moving to Juneau,
but that the main economic driver of Pelican for about 80 years
was a cold storage, which was purchased by Kake Tribal
Corporation, who then went into bankruptcy and left town. She
said that took away the majority of jobs, and many fishermen
went elsewhere to sell their fish. In terms of whether Pelican
is a viable community, she said that is up in the air. She
pointed out that many small communities such as Pelican rely on
the certain decisions made by the legislature.
MS. WASSERMAN stated that AML and all 164 municipalities - or at
least all those with PERS employees - have been working for many
years on this issue. She said HB 47 morphed from a study done
related to termination costs and below-the-floor costs, which
have taken a toll on most municipalities by not allowing them to
be flexible with their workforce, because if a municipality
falls below the 2008 floor, it automatically incurs added
expenses. She said, "So, in order to trim ... your employee
base, you're going to look at adding money to your budget,
rather than ... depleting your budget, ... in some ways." She
stated that when "these other communities" that could not pay
the below-the-floor cost began incurring 12 percent, "we saw
that amount just skyrocket." She said at some point the state
will not get that money, because those cities do not make enough
in any year to be able to pay the amount they owe the state.
MS. WASSERMAN stated:
To say that "well, we don't want to set a precedent,"
and "these communities have got to pay what they owe,"
remember: this all came about because we have taken
on the responsibility to pay 22 percent of the ...
state PERS retirement system that was mismanaged by
the state.
MS. WASSERMAN stated that AML supports HB 47 as a help to a few
small communities. She indicated that AML would work with
communities to find ways to manage their personnel in a better,
more effective way.
8:35:47 AM
CO-CHAIR PARISH opened public testimony on HB 47, acknowledging
that he had not done so prior to Ms. Wasserman's testimony.
8:36:00 AM
REPRESENTATIVE SADDLER offered an analogy of someone who has a
car loan and cannot make payments because of job loss but then
starts getting late fees and higher interest rates, which
snowball. He asked if the analogy illustrates what is happening
with some municipalities.
MS. WASSERMAN answered yes. She indicated that when this issue
first came to her attention, Galena had a bill for $194,000.
Years later, that community could be facing a bill of over one
million dollars. She said, "At some point, you just don't keep
tacking on thousands and thousands and thousands of dollars [in]
interest, because nobody's going to win. The state ... can't
collect from very small communities." She said Pelican does not
have the ability to pay 12 percent interest. She added, "I mean
they didn't even go out and get something for this bill." She
reiterated that these small communities have taken on the
state's liability. She concluded, "So, at some point, it's just
not going to happen."
REPRESENTATIVE SADDLER suggested that the analogy that may fit
more closely is one related to credit card debt with high
interest rates rather than car payments. He noted that Ms.
Wasserman had said this is not a community obligation but is a
state obligation. He asked, "Does a local municipality bear any
responsibility for the retirement cost for its employees or is
that entirely a state cost?"
MS. WASSERMAN answered that municipalities have taken
responsibility by paying 22 percent of salary, and a great
portion of that goes to the unfunded liability. She emphasized
that municipalities have not fought and will not fight that 22
percent.
REPRESENTATIVE SADDLER asked how much the state has taken on
above the 22 percent threshold as part of its "agreement to help
bear that cost for the poly subs."
MS. WASSERMAN answered, "This year I think the actuarial
required rate is 25 percent, so 25.1, so I think year it's 3.1
percent."
8:39:09 AM
REPRESENTATIVE RAUSCHER told Ms. Wasserman that there are always
two sides to every story and he appreciated hearing her side.
8:39:44 AM
JON KORTA, Mayor, City of Galena, emphasized the importance of
HB 47 for communities such as Galena that have seen population
decreases in the last decade. He related that the Galena
forward operating location (FOL) was closed by the U.S. Air
Force on 10/1/10 as part of the Base Realignment and Closure
(BRAC), but the process had been in motion for four years. He
said the air force base was the main source of employment for
residents of Galena, and not surprisingly, the base closure
resulted in a reduction of the population. He said in 2000, the
City of Galena had 675 residents; in 2010, the community had
470, which represented a 30 percent decline. He said the City
of Galena was again hit by hardship in the spring of 2013, when
ice dammed the Yukon River and inundated the city, leading to a
federal disaster declaration.
MR. KORTA said the 2008 floor established by current law did not
prevent a municipality from gaining PERS by contracting out work
previously performed by municipal employees in order to avoid
making ongoing contributions to PERS. He said the current
minimum contribution is based on the level of salaries that
existed in 2008. He said, "This purpose does not account for
Galena's situation." He said it neither intended nor does it
contemplate municipalities with sharply declining populations.
He said HB 47 does not change the PERS policy, but recognizes
nuance, because the proposed legislation would recognize those
communities, like Galena, that suffered a minimum 25 percent
decline in population between 2000 and 2010. He said to put
that in perspective, the 25 percent threshold would represent
the loss of 75,000 people from Anchorage or 8,000 people from
Juneau. He asked the committee to consider what would happen if
the borough's population declined by 30,000, while at the same
time Fort Wainwright and Eielson Air Force Base were closed. He
said the demand for municipal administrative and public services
would decline sharply, and so would the municipality's ability
to provide these services having lost the region's economic
driver.
MR. KORTA said HB 47, which would move the floor from 2008 to
2012 for the communities that have experienced these huge losses
does not provide a loophole allowing Galena, or any other
community with a similar population loss between 2000 and 2010,
to "game the system now or in the future." He said the City of
Galena's budgeted payroll for fiscal year 2015 (FY 15) is "above
the 2012 amount for 17 employees," though the city's
circumstances are not a result of any choices that it made. He
said the relationship between the declining population and the
declining payroll is clear: Fewer residents lead to fewer
public employs, which in turn leads to lower public payroll.
Mr. Korta stated that based on the 2008 floor, the City of
Galena is required to pay an amount "owed by a city
substantially larger than Galena." Galena's required PERS
contribution approaches half of the city's entire payroll. He
said the City of Galena's FY 08 salary total was $1,513,365 for
36 employees; therefore, the city's annual minimum PERS
contribution is $332,940. He said in FY 12, the City of
Galena's payroll was $765,000 for 17 employees, and that is the
year that HB 47 proposes to move the floor for cities that saw a
decrease in population between 2000 and 2010. He said under the
2008 floor, the City of Galena's annual minimum PERS
contribution is nearly half of the city's entire payroll cost.
He stated that for the City of Galena, the difference in PERS
contributions between the 2008 and 2012 floors is $154,000. He
indicated that the difference would continue to increase going
forward. Under statute, any unpaid amount accrues interest at
12 percent.
MR. KORTA stated, "This ever-increasing obligation adds to an
already stressed situation." He said the city's financial
situation was so severe in FY 11 that it required a low-interest
loan through the Alaska Municipal Bond Bank to address the
severe cash flow crisis that was preventing the city from being
able to secure fuel for heat and electricity. He emphasized
that if the city cannot pay its bills, "the lights go out in
Galena." He opined that the 2008 floor was a "solid piece of
legislation furthering its own policy," but it does not account
for cities that have suffered massive population contractions.
The proposed bill would further the underlying policy goals of
the regulatory structure and help ensure that municipalities are
able to continue contributing to PERS, while recognizing that a
city "cannot and should not have to make the contribution of a
city that has a significantly larger population." He opined
that recognizing that the City of Galena is not the same
community it was before the base closed and 30 percent of its
population moved away is good policy that would help ensure that
the community continues to contribute to PERS while keeping its
lights on. He concluded, "Recognizing the reality of sharply
declining populations is a worthy amendment and is just plain
fair."
8:46:11 AM
REPRESENTATIVE SADDLER asked if the U.S. Department of Defense
(DoD) offered the City of Galena any economic readjustment
assistance either through goods or services, financing,
equipment, or cash. He also asked if the military facility that
had been in Galena was a "forward air station."
MR. KORTA reiterated that it was an FOL. He said that he was
not the mayor at that time, but the most significant
contribution offered by the air force at that time was fuel,
which the community was able to utilize and still uses to this
day to operate a boarding school on the base. He said the use
of that fuel has allowed the City of Galena to "grow that
program." He related that the city is transitioning away from
diesel fuel and into biomass. In response to a follow-up
question from Representative Saddler, regarding the value of the
fuel, he deferred to the city manager.
8:47:37 AM
SHANDA HUNTINGTON, Manager, City of Galena, offered her
recollection that the City of Galena received 1.9 million
gallons of fuel in 2009 to support the boarding home school
program. In response to a follow-up question, she said she
thinks the value placed on the fuel at the time was $1.92 [per
gallon].
8:48:28 AM
REPRESENTATIVE RAUSCHER expressed appreciation for the testimony
given by the mayor of the City of Galena.
8:48:52 AM
REPRESENTATIVE WESTLAKE asked if the fuel was a federal or state
asset at the time.
MR. KORTA said he assumes that it was a federal asset.
8:49:20 AM
MS. HUNTINGTON began to paraphrase her written testimony
[included in the committee packet], which read as follows
[original punctuation provided, with some formatting changes]:
My name [is] Shanda Huntington and I am the city
manager for Galena, Alaska. Before serving as the city
manager, I served as the city clerk for 6 years. I was
also born in Galena, grew up there, and raised my
children in Galena. I would like to follow up on Mayor
Korta's testimony with information relating to
Galena's population decline, the base closure, and the
effects on city payroll and finances.
As Mayor Korta said, the air force base officially
closed in 2010, following a multi-year drawdown. In
1990, before base realignment, Galena's population was
847. Galena has always been a small city and the base
was the driver of economic activity. According to the
2000 census, the number of residents, which does not
include all of the Air Force personnel, was 675. That
number had dropped to 470 with the 2010 census. 205
people may not sound like a lot, but it represents a
30% decrease in the City's resident population between
the two censuses. 30% of residents moved away, but the
decline in the city's economic activity was much
greater. Without the base, the decline in demand for
city services was disproportionate to the population
decrease.
For FY 2008, the current floor year, Galena's salary
total was $1,513,365.19 for 36 employees. Therefore,
Galena's annual minimum PERS contribution is $332,940.
In FY 2012, the amended floor year, Galena's payroll
was $765,776 for 17 employees. Between FY 2008 and FY
2012, Galena's payroll was cut in half, reflecting the
decrease in population and in economic activity.
Galena's current annual minimum PERS contribution of
$332,940 is nearly half of the City's FY 2012 total
payroll costs. Allowing a floor year of 2012 for
cities that experienced a drastic decrease in
population changes Galena's annual minimum
contribution to $168,940.
For Galena, the difference in PERS contributions
between the 2008 floor and FY 2012 actual payroll is
$164,000. This difference will continue going forward
creating an ever increasing obligation. By statute,
any amount unpaid accrues compounded interest at 12%.
This ever-increasing obligation adds to an already
stressed situation. The City's financial situation was
so severe in FY 2011 that it required a low interest
loan through the Alaska Municipal Bond Bank to deal
with a severe cash flow crisis that was preventing us
from being able to secure fuel for heat and
electricity. Simply put, if Galena can't pay its
bills, the lights go out in Galena.
Reasonably adjusting the floor year for severely
impacted cities does not mean that the cities will pay
the minimum amount only. Modifying the floor year
changes Galena's minimum annual contribution from
$332,940 to $168,940; the actual contribution may be
higher. For FY 2013, Galena would in fact pay more
than that amended minimum. For FY 2013, Galena added
one employee, for a total payroll of $895,784.53. For
FY 2013, Galena's contribution would have been above
the 2012 floor by approximately $30,000.
HB 47 simply recognizes that reality of drastic
population decreases experienced by some Alaska
cities, using a clearly defined metric: a 25% decrease
in population according the 2000 and 2010 censuses.
The base closure has been very difficult for Galena.
As previously noted, Galena required a low interest
loan through the Alaska Municipal Bond Bank to secure
fuel for heat and electricity in FY 2011. In the last
several years, Galena's finances have stabilized and
there are even indicators of recovery after the
catastrophic decline. We cannot say what will happen
to Galena's population long-term, but we believe that
we've turned a corner in terms of population and
finances.
The City of Galena is adjusting to a new reality
following the base closure and loss of 30% of the
population. This legislation is one part of that
adjustment. I became city manager during a difficult
period for the City. Our finances have stabilized
somewhat over the last several years. Requiring the
City of Galena to pay to PERS a contribution owed by a
much larger city weakens Galena, and threatens its
ability to provide any contribution to PERS. We are
cautiously optimistic that the City will become
stronger and even grow over time. If and when Galena
becomes the city it was in 2008, the city will be
required to make a PERS contribution commensurate with
that size and payroll, and will do so gladly, but it's
not that city right now and the oversized PERS
contribution inhibits it from becoming so.
Recognizing the reality of drastically declining
populations is a matter of simple fairness. The
amendment recognizes this and ultimately promotes the
goals of PERS: ensuring that Alaska municipalities
continue to contribute their fair share to the system.
I'd like to thank the committee for taking time today
so that I may explain the importance of this amendment
for communities like Galena that have seen significant
population decreases in the last decade.
8:55:31 AM
REPRESENTATIVE SADDLER asked what the population of the school
is and whether the trend is that it is on the increase or
decline or holding steady.
MS. HUNTINGTON offered her understanding that currently the
population at the boarding home school is 225 students and the
number is increasing.
REPRESENTATIVE SADDLER said he appreciates that the City of
Galena is looking to the future and trying to build itself up as
an educational center. He remarked that by his calculation, the
aforementioned diesel price per gallon would mean that the total
value of the fuel was approximately $3.6 million. He asked if
the value of that was used solely for the school or if some of
it was used to help out with the municipal government's
expenses.
MS. HUNTINGTON recollected that in 2008, the City of Galena
transferred 300,000 gallons to its power plant, but was
penalized for three years following that, and she said she
thinks the City of Galena learned a hard lesson because of that.
She said right now the fuel is used solely for the school. In
response to a follow-up question, she said she believes there
are 385,000 [gallons remaining] in the tank.
8:57:39 AM
CO-CHAIR PARISH, after ascertaining that there was no one else
who wished to testify, closed public testimony on HB 47.
8:57:55 AM
REPRESENTATIVE RAUSCHER asked if the intent is to pass the bill
out of committee today.
CO-CHAIR PARISH answered no, but possibly as soon as Thursday.
8:58:18 AM
REPRESENTATIVE SADDLER said special interest legislation causes
him concern because it sets a bad overtone, and HB 47 would
address only those communities that "happen to fall into this
trench." He suggested he may speak with the bill sponsor to
consider all communities in the future that see such a
significant drop in population from Census to Census, because
what happens in each ten-year period may result in the need to
bring similar legislation back before the legislature.
[HB 47 was held over.]
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB47 Sponsor Statement.pdf |
HCRA 2/28/2017 8:00:00 AM |
HB 47 |
| HB47 Supporting Documents amended statutes 2.17.17.pdf |
HCRA 2/28/2017 8:00:00 AM |
HB 47 |
| HB47 Supporting Documents effected employers 2.17.17.pdf |
HCRA 2/28/2017 8:00:00 AM |
HB 47 |
| Korta PERS 2017.pdf |
HCRA 2/28/2017 8:00:00 AM |
|
| Huntington PERS 2017.pdf |
HCRA 2/28/2017 8:00:00 AM |
|
| HB047-DOA-DRB-02-24-17 Fiscal Note.pdf |
HCRA 2/28/2017 8:00:00 AM |
HB 47 |