Legislature(2013 - 2014)BARNES 124
04/04/2013 08:00 AM House COMMUNITY & REGIONAL AFFAIRS
| Audio | Topic |
|---|---|
| Start | |
| HB193 | |
| HB174 | |
| Presentation: Fy 2014 State Plan for the Community Services Block Grant Program | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 174 | TELECONFERENCED | |
| *+ | HB 193 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| + | TELECONFERENCED |
HB 174-PERS CONTRIBUTIONS BY MUNICIPALITIES
8:18:52 AM
CO-CHAIR LEDOUX announced that the next order of business would
be HOUSE BILL NO. 174, "An Act requiring each municipality with
a population that decreased by more than 25 percent between 2000
and 2010 that participates in the defined benefit 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; reducing the rate of interest
payable by a municipality with a population that decreased by
more than 25 percent between 2000 and 2010 that is delinquent in
transmitting employee and employer contributions to the defined
benefit plan of the Public Employees' Retirement System of
Alaska; giving retrospective effect to the substantive
provisions of the Act; and providing for an effective date."
8:19:35 AM
CO-CHAIR LEDOUX reminded the committee that public testimony had
remained open.
8:20:05 AM
GREG MOYER, Interim Manager, City of Galena, reminded the
committee that in 2008 the largest industry in Galena, the
military, 600 airman, left and June 30, 2008, the salary floor
for the Public Employees' Retirement System (PERS) was set in
law. Therefore, the population of Galena decreased
significantly and is still reeling from the aforementioned
circumstances. Although it's a blessing to have the
infrastructure from the base, Galena doesn't have the population
to support it as the population has dropped from around 800 to
under 500. As the interim manager, he said his job is to save
Galena from not being a first class city. The salary floor in
Galena is $1.5 million, which are the salaries Galena has to
have otherwise it is penalized plus interest. Galena, he
emphasized, will never met that salary floor as Galena is almost
half of that now and is looking to gain more efficiencies by
cutting more in the next budget. Mr. Moyer opined that Galena
is looking for a legislative fix [without] re-opening all the
PERS issues. Although he understood that it's difficult to help
a couple of communities when other communities also fall [in
arrears with the salary floor]. This legislation, HB 174, is
structured such that communities have to have had a population
change in 2000-2010. He noted that there has been discussion of
changing the floor amount for Galena to June 30, 2012, which
would help. However, a legislative fix is necessary to save
Galena so that other steps can be taken to move on and survive.
8:24:53 AM
CO-CHAIR LEDOUX inquired as to what happens if this legislation
isn't passed and the communities don't pay what is required
under existing law.
8:25:19 AM
SCOTT RUBY, Director, Division of Community & Regional Affairs,
Department of Commerce, Community & Economic Development,
explained that similar situations have happened to smaller
municipalities, which have basically become nonfunctional and
any revenue that they have received has been used to pay off
their debt. For example, several cities in the Yukon-Kuskokwim
Delta dissolved in the early 1990s. The tax debt of those
municipalities, including Tuluksak, Newtok, and Tununak, was not
on the scale of what is being targeted with HB 174. The
aforementioned municipalities maintained the minimum amount of
government by having a budget and holding a council meeting and
elections each year, but stopped providing services. These
municipalities only existed in order to continue to qualify for
the revenue sharing program until the debt was repaid at which
point they were allowed to dissolve. Mr. Ruby explained that
prior to dissolving any corporation, whether it be a nonprofit,
for-profit, or municipal corporation, it must be free of debt or
have an entity that is willing to accept liability for that
debt. The issue with Galena is that it has much more debt, such
that the revenues from revenue sharing and other sources
wouldn't outpace the rate at which they're accumulating those
debts. Therefore, the most likely scenario [without HB 174]
would be for Galena to stop functioning as a municipality and
the school would likely return to a Rural Education Attendance
Area (REAA). Although Galena would likely try to dissolve, it
would legally exist until it resolved all of its debts. Mr.
Ruby pointed out that Galena can't declare bankruptcy because
there is no such statute allowing municipalities to go bankrupt,
which is a requirement of the Internal Revenue Service (IRS)
code.
8:28:05 AM
CO-CHAIR LEDOUX inquired as to what the state would do if a
municipality continued to function but didn't pay.
MR. RUBY deferred to the PERS Board.
8:28:50 AM
JIM PUCKETT, Director, Division of Retirement and Benefits,
Department of Administration, stated that the only tool
available to intercept funds is through revenue sharing.
8:29:26 AM
REPRESENTATIVE HERRON inquired as to the administration's
position on this specific circumstance.
MR. PUCKETT answered that the administration has no position on
HB 174, but clarified that's not to say that the administration
doesn't recognize that these communities that have lost
population simply don't have a means to address their situation.
He said a fix will have to come from the legislature.
8:29:55 AM
REPRESENTATIVE FOSTER highlighted that Galena's salary floor was
set at $1.5 million in 2008 while today its total salary base is
$700,000-$750,000. He further highlighted that Galena is paying
22 percent on the about $750,000 difference; these are salaries
that they don't even have. Therefore, Galena is going to get
farther and farther behind with no way in which to catch up.
The legislation before the committee, therefore, attempts to
rectify a situation that wasn't foreseen in 2008 and is no fault
of Galena.
8:31:18 AM
CO-CHAIR NAGEAK asked whether HB 74 is limited to only those
municipalities with operations that decreased by more than 25
percent.
8:31:52 AM
PAUL LABOLLE, Staff, Representative Foster, Alaska State
Legislature, replied yes, HB 174 only applies to municipalities
that have lost more than 25 percent of their population between
census years 2000 and 2010. The committee packet should include
a spreadsheet listing all the PERS municipalities and their
population loss or gain during the 2000-2010 census period.
8:32:29 AM
CO-CHAIR NAGEAK inquired as to whether HB 174 addresses
municipalities that experience a 25 percent population decrease
in the future.
MR. LABOLLE answered that the legislation only speaks to a 25
percent reduction in population during the 2000-2010 census
period, and thus future population loss would have to be
revisited by the legislature.
8:33:06 AM
REPRESENTATIVE HERRON asked what the catalyst was for the 25
percent designation.
MR. LABOLLE responded that it was a bright line that reached
[the goal].
8:33:29 AM
REPRESENTATIVE HERRON noted that the debt will remain, and asked
whether there should be a way to ratify the debt that can't be
paid off.
MR. LABOLLE pointed out that HB 174 includes a retroactivity
clause that goes back to 2009 such that the 2008 would no longer
apply and basically erode the existing liability. He directed
attention to the fiscal note that includes a large supplemental
payment in fiscal year (FY) 13, which is the retroactivity
portion of the legislation.
8:34:28 AM
REPRESENTATIVE HERRON questioned whether it would make more
sense to ratify, forgive, an amount than to pay an amount.
MR. LABOLLE deferred to PERS, but speculated that the goal is to
make the system whole because if no [municipality] pays [their
debt] it would contribute to the unfunded liability that PERS
already has. In response to Co-Chair LeDoux, if the
municipality continues to function without paying, the system
continues to get an unfunded liability. Therefore, it's not a
good solution for the system. If a municipality becomes a
nonfunctioning government and only revenue sharing is collected
as an intercept, then [the system] misses out on the
current/existing salaries on which the municipality is paying.
Currently, Galena is unable to pay on $1.5 million but is able
to pay on the approximately $750,000 in existing salaries.
8:35:57 AM
REPRESENTATIVE FOSTER recalled a question from the last meeting
regarding how many communities are close to the threshold
provided in HB 174.
MR. LABOLLE, referring to a spreadsheet, pointed out the column
specifying the population percentage decrease and noted that
those over 25 percent are highlighted. If the committee wanted
to use another percentage, say 20 percent, then Angoon, Kake,
Nulato, and Tanana would qualify.
8:37:57 AM
CO-CHAIR LEDOUX inquired as to why 25 percent was chosen when
there are other communities that just miss that cut off.
MR. LABOLLE responded that 25 percent was a placeholder to start
the discussion.
REPRESENTATIVE FOSTER interjected that the percentage is a
policy call for the committee.
MR. LABOLLE encouraged the committee to obtain input from the
department before changing the percentage because he understood
the department's neutral position on HB 174 is due to its narrow
focus and limited fiscal impact.
8:39:48 AM
REPRESENTATIVE HERRON opined that there has to be recognition
that Anderson, Galena, Pelican, and even St. George lost
population because of major industry [withdrawal]. He expressed
the need to have sideboards [with regard to the population
change] in order to avoid including cities experiencing natural
attrition.
8:41:33 AM
CO-CHAIR NAGEAK reminded the committee that HB 174 is limited to
[population changes] during the 2000-2010 census period and any
[population] changes in the future would have to be revisited.
MR. LABOLLE confirmed that anything in the future would have to
be revisited by the legislature.
8:42:25 AM
CO-CHAIR LEDOUX commented that even those communities that lose
population slowly will be in the same position. Although HB 174
fixes things for four communities, she said she wasn't sure it
gets to the real problem that may be a systematic problem.
MR. LABOLLE mentioned that there is termination study
legislation that is reviewing the system as there is lots of
agreement that the system needs work. However, HB 174 isn't
targeting the system but rather attempting to save a couple of
communities.
8:43:46 AM
The committee took a brief at-ease.
8:44:40 AM
CO-CHAIR NAGEAK moved to adopt CSHB 174, Version 28-LS0656\U,
Wayne, 4/1/13, as the working document.
REPRESENTATIVE REINBOLD objected for purposes of discussion.
8:45:03 AM
MR. LABOLLE explained that Version U is the result of
Representative Herron's previous discussion regarding obtaining
a new snapshot. The legislation is now simpler such that the
following language is added to Section 1(a)(2):
", or, if the employer is a municipality in which the
population decreased by more than 25 percent between
2000 and 2010, according to the decennial census
conducted by the United States Census Bureau, the
corresponding payroll period for the fiscal year
ending June 30, 2012.
8:46:33 AM
REPRESENTATIVE REINBOLD withdrew her objection.
There being no further objection, Version U was before the
committee.
8:46:39 AM
CO-CHAIR LEDOUX commented that she wasn't sure HB 174 totally
solves all the problems with the system, but noted that it has
another committee of referral.
8:46:59 AM
CO-CHAIR NAGEAK moved to report CSHB 174, Version 28-LS0656\U,
Wayne, 4/1/13, out of committee with individual recommendations
and the accompanying fiscal notes. There being no objection,
CSHB 174(CRA) reported from the House Community and Regional
Affairs Standing Committee.