Legislature(1995 - 1996)
02/14/1996 01:37 PM Senate CRA
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
SB 20 ALASKA MUNICIPAL BASIC SERVICES PROGRAM
Number 400
CHAIRMAN TORGERSON brought up SB 20 as the next order of business.
The committee began by hearing an overview by the Alaska Municipal
League (AML). The chairman stated that SB 20 is an attempt to
rewrite the municipal assistance and revenue sharing programs that
the State of Alaska has in place. The original intent of the bill
was to come up with a creative formula that all the municipalities
in the State of Alaska would think was a wonderful thing. Over the
years, that hasn't been achieved without creating winners and
losers. The intent is to prioritize services deemed necessary,
which the state will reimburse municipalities for performing. The
state will reimburse for mandated services. We will do this
without actually changing much of the formula. The formula is
maintained the same. There will be some changes in allocation of
funds, because we are raising the minimum entitlement up to
$40,000.
Number 415
SENATOR KELLY asked if there is a fiscal note for SB 20.
CHAIRMAN TORGERSON responded there is not a fiscal note for SB 20.
We are making the changes within the funds appropriated to
municipal assistance and revenue sharing. There is a spreadsheet
in members' bill packets showing that. He has asked the AML to
give approximately a 15 minute overview of how things are now, and
how SB 20 would change things.
JOE MURDY, Alaska Municipal League President, Anchorage Assembly
Member, thanked Chairman Torgerson for his work on SB 20. Mr.
Murdy introduced Mayor Tom Green, Vice-President of the Alaska
Conference of Mayors. Mr. Murdy stated that Mayor Mystrom of the
Municipality of Anchorage, President of the Alaska Conference of
Mayors, was not able to attend, but he sends his greetings and
urges support of SB 20. Mr. Murdy noted that a letter from Mayor
Mystrom had been distributed to committee members. Other members
of the Alaska Conference of Mayors assisting in the presentation
were: Mayor Dennis Egan of the City & Borough of Juneau, George
Weurtz, Assembly member from the Municipality of Anchorage and Co-
Chairperson of the AML Legislative Committee, Drew Scalzi,
President of the Kenai Peninsula Borough Assembly, Kevin Ritchie,
Executive Director of the AML, and Tom Greene, Mayor of Nondalton,
Vice President of the Alaska Conference of Mayors, and 1st Vice
President of the AML. Other municipal officials were on-line via
teleconference to offer comments and support, as well as in the
audience today. Between the AML and the Conference of Mayors, the
group represents over 135 municipalities, and over 95 percent of
Alaska's population. The issue in SB 20 is fully supported by the
members of both groups. Most of the concepts in SB 20 were
proposed by a committee of the Alaska Conference of Mayors.
Number 468
MAYOR DENNIS EGAN, City & Borough of Juneau, stated SB 20 is a
critical goal of both state and local governments. The safe
communities fund legislation is one of the first steps in what will
be a long process to create stability in taxation and services for
citizens. Mayor Egan explained some charts which give an overview
of the partnership between state and local governments in providing
services. The first chart shows that municipal budgets together,
are approximately the same size as the state operating budget. The
main overlap is the provision of education services, which is a
constitutionally mandated responsibility of state government, but
is largely administered on the local level. The second and third
charts show an overview of state and local government services.
Please note that a large number of the state services overlap with
the services of local governments, for example: public safety,
transportation, health and social services, and education. These
charts show that there is no clear distinction between the state
and local responsibilities. The fourth chart shows how state and
local government is paid for in Alaska. People who assert that
Alaska has very few or no personal taxes are clearly wrong. Alaska
funds over 40 percent of it's services from personal taxes and
fees, and the vast majority of those are collected by local
governments. Alaska's fiscal crisis is the wedge of the pie chart
marked "state reserves, 10 percent." He added that although
Alaska's municipalities are proud of our role in supporting
Alaska's budget, we have been given little choice in the matter.
Number 508
MAYOR EGAN stated that since 1986, when oil revenues began
decreasing, the state has cut municipal assistance and revenue
sharing by over 60 percent, without generation of new revenue by
the state nor significantly decreasing the overall dollar amount of
its' budget. He noted that the State of Alaska and municipalities
share the same citizens. It simply doesn't matter whether a tax or
a fee is a local tax or fee, or a state tax or fee: the cost is
still the same to our citizens. However, how taxes and fees are
structured may be of critical importance to all taxpayers in terms
of equity and affordability. If the State of Alaska continues to
ignore the impact of its actions on local services and local taxes,
our ability to offer safe communities to our citizens will be
threatened. We believe that rebuilding the relationship between
the state and local governments is absolutely critical. The
framers of the state constitution felt so strongly about the future
relationship between state and local governments, it specified that
there must be a local government agency in the executive branch.
This is the only executive branch agency specified in the
constitution. He asks that it be remembered that cutting revenue
sharing is not cutting the state budget, it is a new sales tax or
property tax increase to the taxpayers of Alaska, and should be
represented to the public as such.
Number 532
SENATOR RANDY PHILLIPS commented that Hillside people would debate
the question that services provided by troopers and city police are
indistinguishable.
MAYOR EGAN replied that there are some situations like that. He
thinks that if there was a debate like that in Juneau, they would
finally distinguish between troopers and city police. There is
only one trooper in Juneau anyway.
Number 539
SENATOR KELLY asked how much state money Juneau has received for
schools between 1986 and 1996.
MAYOR EGAN responded that there has been no percentage increase in
that period.
SENATOR KELLY asked if Juneau was not receiving more money today.
MAYOR EGAN replied Juneau is receiving more money, but the
population has gone up a tremendous amount.
SENATOR KELLY said the Conference of Mayors has good numbers on
revenue sharing, and he asked if the conference has any numbers on
education funding. He doesn't discriminate between education and
road service at the local level. He asked how much money Juneau
has received for education, on a percentage basis, since 1986.
MAYOR EGAN responded that he didn't have that information in front
of him, but he would get those figures for Senator Kelly. He
pointed out that the local school district's budget is $40,000,000,
and over 50 percent of that comes from local tax payers.
SENATOR KELLY asked then if half came from the state.
MAYOR EGAN replied that it comes from the state and from the
federal government. 5.8 mills of property tax increases were due
directly to decreases in state shared revenue and municipal
assistance.
SENATOR KELLY stated he is trying to make the point that there has
been a tremendous increase in the amount of money that the state
has sent to municipalities to fund education. The state considers
that as one pot of money. Mayor Egan would like to differentiate
between municipal revenue sharing and education. The state thinks
education funding is also assisting local governments. That is his
point.
Number 560
GEORGE WEURTZ, Assembly Member, Anchorage Municipal Assembly,
commented that the education issue is a dispute whether it is added
up as local or state. According to the state constitution,
education is a state responsibility. As the state becomes
increasingly concerned with finding ways to balance its own budget,
shifting more budget problems to local taxpayers increases. The
governor's proposed budget for this year includes direct cuts
estimated to be in excess of $15,000,000. In addition to the 8%
cuts to municipal assistance and revenue sharing, there are direct
cuts to school transportation, elimination of funding for the state
senior citizen tax, and cuts to many other programs. Mr. Weurtz
itemized some of the cuts. He contended that little or no
consideration has been given by the state to the escalating and
cumulative effects of these cuts on local taxes and local public
services. He thinks SB 20 is a good step in the direction of a
win-win solution for everyone.
SENATOR RANDY PHILLIPS asked, regarding the language on page 4,
line 17--[end of Side A]
TAPE 96-6, SIDE B
--communities, versus municipal assistance; isn't it the same cat,
only a different color?
MR. WEURTZ responded that the issue is the priority of where the
money needs to be spent. These dollars are focused on the
functions that create a safe community for our citizens.
CHAIRMAN TORGERSON informed Senator Phillips that there would be a
presentation on that subject by DCRA that will explain in more
detail what we're doing.
Number 582
SENATOR HOFFMAN stated, "The problem that I see is that that was
the governor's proposed cuts, and [interference] even further cuts
and those haven't been delineated by the budget subcommittees yet,
but it is my vision that what's going to happen is we're going to
see substantially higher cuts than what the governor asked from
this legislature."
MR. WEURTZ responded that is a point they're aware of and concerned
about. SB 20 brings us to the table to talk about equity and
fairness.
Number 575
SENATOR ZHAROFF stated that his concern is that as communities
dissolve, services will still be needed, and somebody is going to
have to provide services.
CHAIRMAN TORGERSON stated that is the main driving force behind
raising the minimum entitlement up to $40,000, in order to try to
shore up some of the communities that have been prorated down by
cuts. It should be higher, but what we're trying to do by changing
this formula is take the money out of existing communities. So
we're taking money out of tax-base communities. This approach has
the support of all the mayors and the assemblies. They recognize
that if we don't shore up local governments in rural Alaska, we're
not going to have local governments in rural Alaska.
Number 562
DREW SCALZI, President, Kenai Peninsula Borough Assembly, stated SB
20 is about stabilization. The state and municipalities need to
get revenues and expenditures stabilized in order to have safe and
prosperous communities. Mr. Scalzi explained three charts to the
committee: the first one illustrates how we fared; the second chart
gives proof of the correlation between local sales and property tax
increases and municipal assistance and revenue sharing; the third
chart illustrates the history of funding for municipal assistance
and revenue sharing programs. Sharing revenues with municipalities
is done in all 50 states, and Alaska is below the average in the
western states, even if one considers the education funding as part
of the revenue sharing. The major advantage of municipal
assistance and revenue sharing is that it gives municipalities
their share of Alaska's oil wealth without strings and the high
administrative costs, like most other state and federal programs.
However, the same flexibility is a disadvantage to municipalities,
which is a factor in determining why it has been cut so much.
Number 530
KEVIN RITCHIE, Executive Director, Alaska Municipal League, stated
that SB 20 would make six major changes:
1) change the name municipal assistance to safe communities;
2) tie funding to safe community types of issues;
3) the minimum entitlement for incorporated communities would
be set at $40,000;
4) the program retains the former allocation formulas, but
allows for a more equitable proration;
5) funding will be distributed on July 31;
6) only six communities would actually receive less funding if
a decrease in revenue sharing occurred.
MR. RITCHIE stated that the Alaska Municipal League and the Alaska
Conference of Mayors view SB 20 as a good first step in building a
revenue-sharing program that will continue to evolve and improve.
Number 485
MAYOR THOMAS GREENE, City of Nondalton, stated that municipal
governments have always been the leaders in finding creative ways
to meet community needs. A survey of members conducted by the AML
and the Alaska Conference of Mayors showed that all but two
communities responding reported significant service cuts and or tax
increases. Mayor Greene related some of the remarks from
communities. He stated that passing SB 20 will cost the state
almost nothing, but it will be an important step in improving the
process and ensuring accountability of funds.
Number 408
JUDITH SLAJER, Chief Financial Officer, Fairbanks North Star
Borough, testifying from Fairbanks, stated she was speaking on
behalf of the Mayor Jim Sampson. Ms. Slajer stated that the
Fairbanks North Star Borough supports SB 20.
CHAIRMAN TORGERSON asked Ms. Slajer to put the borough's support in
writing and submit that to the committee.
Number 390
PATRICK COLE, Mayor's Staff, City of Fairbanks, stated he was
representing the Mayor. He stated that the city supports SB 20.
CHAIRMAN TORGERSON informed everyone that SB 20 will not be passed
out of committee today, because not everyone has had a chance to
review it yet. It will probably be held for a week.
Number 382
LAMAR COTTEN, Deputy Commissioner, Department of Community &
Regional Affairs (DCRA), stated that the department supports SB 20.
DCRA sees three essential features of SB 20:
1) no longer holding harmless the base amount;
2) a minimum grant of $40,000;
3) the funds would be distributed in July, instead of
February.
CHAIRMAN TORGERSON asked DC&RA to explain the spreadsheet
distributed to committee members. The intent of the spreadsheet is
to show last years' funding levels, what the hold-harmless is, and
the effect of removing the hold-harmless.
Number 340
BILL ROLFZEN, Division of Municipal & Regional Assistance,
Department of Community & Regional Affairs, explained the
spreadsheets distributed to the committee.
SENATOR KELLY asked if, under the current system, everyone would
get a check for the third column amount in February.
MR. ROLFZEN responded that is not correct. The first column, the
revenue sharing payments, go out on July 31 of each fiscal year.
The municipal assistance payments, the second column, go out
February 1.
CHAIRMAN TORGERSON stated that under SB 20, those payments would be
lumped together, because we're consolidating the program.
SENATOR KELLY asked if the state has currently been adding that
interest revenue on their own books.
CHAIRMAN TORGERSON responded, more than likely.
SENATOR KELLY commented that if it is a plus here, it's got to be
a minus somewhere else.
CHAIRMAN TORGERSON replied he is sure it would be. He asked how
much money that would be.
MR. ROLFZEN responded the municipal assistance distribution this
year was $31,900,000.
CHAIRMAN TORGERSON asked how much revenue sharing was.
MR. ROLFZEN responded it was approximately $26,000,000.
CHAIRMAN TORGERSON thinks that interest revenue would probably be
in the fiscal note from the department, when those become
available.
DC&RA staff responded that it would be roughly in the neighborhood
of $600,000.
CHAIRMAN TORGERSON noted that amount would only be for a yearly
basis, when we're referring to a six-month period. So he doesn't
think it will be that high. However, Senator Kelly is correct in
that there will be some impact somewhere.
There was a discussion on how accrual of interest would possibly
affect the amount of money available.
Number 264
SENATOR ZHAROFF asked about communities not included.
MR. COTTEN responded that Metlakatla participates in the revenue
sharing program as an unincorporated community, but they
participate in the municipal assistance program as a municipality.
That's why they're not included in the general spreadsheet.
Egegik, based on the date of incorporation, was not eligible for
the FY 96 revenue sharing program but was eligible for the FY 96
municipal assistance program.
It is noted that there is an attempt to take care of Metlakatla's
problem through other legislation.
MR. ROLFZEN stated that under SB 20, all of the municipal
assistance money will now have to be spent on priority public
services, whereas in the past, it could be spent by the
municipality for any public purpose for which they were legally
authorized to spend funds. This bill does not tinker with the
revenue sharing formula. It would take about 60% of the total
money and designate it for specific public services.
CHAIRMAN TORGERSON notes the existence of another spreadsheet
listing the hold-harmless portion, and how that is applied. The
chairman called Representative Long to testify.
Number 205
REPRESENTATIVE DON LONG, former mayor of Barrow and president of
the AML, stated he spent most of the last year working on this
subject. Currently, small communities are unincorporating because
there is no support from the state. Citizens of small communities
need support, just as do people of larger communities. He had no
specific statement to make relating to SB 20 at this time.
DONALD MOORE, Manager, Matanuska-Susitna Borough, stated he is
conveying support from the borough and Mayor Lacher for SB 20.
Right now, revenue sharing and municipal assistance is at about the
same level as it was in the late 1970's. The guessing game that
goes on from year to year is as much a hazard to us as the decline,
so we appreciate the work that's gone into the development of this
formula and this proposal.
CHAIRMAN TORGERSON, seeing that there was no further testimony,
stated that SB 20 would be held in order to receive further
comment.
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