Legislature(2007 - 2008)HOUSE FINANCE 519
02/14/2008 01:30 PM House FINANCE
| Audio | Topic |
|---|---|
| Start | |
| SB72 | |
| HB147 | |
| HB200 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | HB 200 | TELECONFERENCED | |
| += | HB 147 | TELECONFERENCED | |
| += | SB 72 | TELECONFERENCED | |
| + | TELECONFERENCED |
CS FOR SENATE BILL NO. 72(FIN)
"An Act relating to the community revenue sharing
program; and providing for an effective date."
1:45:22 PM
Representative Thomas MOVED to ADOPT the work draft for
CSSB 72(FIN), labeled 25-LS0506\F, Cook, 2/13/08. There
being NO OBJECTION, it was so ordered.
1:46:04 PM
SUZANNE ARMSTRONG, STAFF, CO-CHAIR MEYER, recalled that
last year during testimony on SB 72 there were elements
that surfaced as important in a statutory program:
fairness, stability, affordability, and sustainability.
She maintained that the Community Revenue Sharing proposal
contains these elements.
Ms. Armstrong referred to a handout entitled "Community
Revenue Sharing" (copy on file.) She explained the
elements of the proposed revenue sharing: the fund, the
formula, and the mechanics.
Ms. Armstrong highlighted page 4, Community Revenue Sharing
Fund. The purpose of the fund is for making community
revenue sharing payments to local communities. It consists
of appropriations of 20 percent of the revenue generated
under the progressivity surcharge, not to exceed the great
of $50 million or the amount to bring the fund balance to
$150 million. Interest earned on the fund may be
appropriated to the fund. The money in the fund does not
lapse and is not a dedicated fund.
Ms. Armstrong explained the formula on page 5. If the fund
balance at the end of the fiscal year, June 30, is at least
$50 million, there will be revenue sharing. Without
further appropriation, the Department of Commerce,
Community and Economic Development will distribute one
third of the fund balance as revenue sharing payments. The
amount of distribution is very similar to the amounts used
during the last two years - $50 million as grants in the
capital budget.
Ms. Armstrong turned to the chart on page 6 to show how the
basic payments are distributed.
1:48:23 PM
Representative Nelson asked if these were place holder
numbers or actual numbers. Co-Chair Meyer replied that
they are good place holders and work similarly to last
year's capital budget distribution.
Representative Gara pointed out that in 2007 there were
Energy Assistance and PERS, instead of revenue sharing. He
asked if there was a PERS reduction this year. Co-Chair
Meyer said this legislation is separate from PERS/TRS.
Ms. Cunningham related that this bill is separate from SB
125, which deals with PERS/TRS changes. In previous years
revenue sharing was not done through statutory program, but
as grants in the capital budget, and was used to assist
communities with energy assistance and rising retirement
costs.
1:50:29 PM
Representative Kelly thought it was important to follow
through with Representative Gara's point. He agreed that
it was an addition to the PERS/TRS payment.
Co-Chair Meyer compared it to a three-legged stool: the
PERS/TRS fix, revenue sharing, and education funding. He
added that the $50 million figure was a place holder. The
Governor is proposing $75 million.
Representative Nelson noted that under the Governor's
proposal it would be a 50 percent increase and would a
matching grant program. The revenue sharing could then be
used for operating costs as well as for capital
expenditures, which she thought was good because some
communities ran into red tape in the past. Co-Chair Meyer
said there were no strings attached. Anchorage will be
using it for property tax relief.
Representative Nelson recalled the heroes list, those
communities that paid retirement costs into the future.
She wondered if the hero communities would be accounted for
in other areas of the budget. Co-Chair Meyer thought that
would happen in the PERS/TRS fix.
Ms. Armstrong agreed that would be addressed in SB 125.
1:54:18 PM
Representative Gara pointed out that the minimum amount an
unincorporated city would get is $20,000 to $25,000, which
he thought was low. He recalled that last year's minimum
was closer to $40,000. He shared a history of the amount
allotted for revenue sharing. He expressed concern about
cutting the amount. Co-Chair Meyer noted different ways
revenue sharing has been implemented throughout the years.
Ms. Armstrong explained that the basic payments in this
bill are similar to the basic payments allowed for in the
capital budget grant last year. There is also a per capita
distribution on top of the basic payment. Representative
Gara repeated that $20,000 was too small. Co-Chair Meyer
agreed, but thought the amount would go to very small
communities that didn't need as much money.
1:56:18 PM
Ms. Armstrong turned to page 7, the Per Capita
Distribution. She explained that the remaining balance of
the $50 million is distributed per capita. Communities in
an unorganized borough cannot have a total payment that
exceeds the city basic payment. The excess amount is then
distributed to the remaining qualifying communities in the
unorganized borough. The population of each city in a
borough is deducted from the total borough population.
Ms. Armstrong addressed what happens when the amount
available is larger than $50 million, page 8. The formula
has a "floating" basic payment structure.
Ms. Armstrong described what happens when there is less
than $50 million available, page 9. The floating payment
kicks in, but in reverse. The basic rationale is that
every community would retain their slice of the pie.
1:58:26 PM
Representative Nelson asked if it was a 50/50 distribution
regarding base and per capita. Ms. Armstrong replied that
it was actually 40 percent basic payment and 60 percent per
capita. Representative Nelson asked if that was flexible.
Co-Chair Meyer said it was.
Representative Crawford asked who does the counting of
population. Ms. Armstrong reported that the Department of
Commerce does it. There is language in the bill defining
how population is considered. She recalled it was by PFD
qualification or by an allowable method that the department
determines appropriate.
1:59:49 PM
Representative Gara said he understands there are two
methods of revenue sharing, an appropriation or an
endowment. He related that he does not understand creating
a $150 million endowment to spin off $50 million. Co-Chair
Meyer reported the Senate's concept of the progressivity
rate for three years so municipalities could adjust.
Ms. Armstrong added that it was to provide stability to
communities.
Ms. Armstrong continued with page 10. She explained that a
minimum base has been inserted in order to protect smaller
communities when there is less than $50 million available
for a program. The minimum borough basic payment in the
draft proposal is $220,000.
Ms. Armstrong showed page 11 to explained the minimum basic
payments when the program is at $36 million
Ms. Armstrong turned to page 12 to explain the fund
mechanics. Each of the three years there would have to be
a payment of $50 in order to keep the fund balance at $150
million.
Ms. Armstrong explained page 13, a hypothetical example of
what happens when oil prices fall below $60 per barrel and
remain there through FY 2013.
2:03:56 PM
Ms. Armstrong reported on page 14 that the fund has bounce
back potential. Interest may be appropriated to the fund
by the legislature. Other revenue such as general funds
may be appropriated to the fund. Most importantly, when
higher oil prices trigger the surcharge, the fund can
immediately recover to the $150 million level and payments
the following year would be $50 million.
Ms. Armstrong summarized the revenue sharing program on
page 15. She reviewed the four elements need to decide if
it meets the test: fairness, stability, affordability, and
sustainability. The fund has basic payments that adjust
with the funds available for the program, coupled with a
per-capita payment. The communities will know payment
levels well in advance. The program is funded when the
surcharge is triggered or other appropriations are made.
The fund has quick "bounce back" potential, as long as the
total cost of the program is a sustainable cost for the
state.
Co-Chair Meyer commented that public testimony would be
held at another time. He noted that there is an on-line
revenue sharing model available to look at. He emphasized
that there was an attempt to keep the distribution similar
to the last two year's distributions.
2:06:50 PM
Representative Thomas asked if the overhead could be made
available. Ms. Armstrong said she would make the
information available.
Representative Gara requested more information about the
progressivity surcharge formula on page 5, lines 4 and 5,
"20 percent of the money received by the state during the
previous calendar year under AS 43.55.011". Ms. Armstrong
said that was the statutory reference. Representative Gara
asked for a projection of 20 percent at various oil
projections. Ms. Armstrong agreed to provide that
information to the committee. She referred to subsection
(b) on page 5 as a work in progress. The intent is that it
would be 20 percent of the money received under the
surcharge in an amount not to exceed $50 million or what it
would take to capitalize the fund at $150 million.
Representative Gara inquired if the intention is that the
fund never exceeds $150 million. Ms. Armstrong replied
that subject to legislative appropriation, it could. This
draft bill idealizes a $50 million revenue sharing program.
Representative Gara commented that it makes it a maximum of
$50 million, which will decrease with inflation. He said
he liked the progressivity element.
2:10:25 PM
Co-Chair Meyer commented on what happens when oil prices
are higher.
Representative Kelly noted that there are at least three
competing schemes for the same oil dollars.
Representative Crawford thought that this bill might be a
direct conflict with the progressivity piece. He thought
the concepts should be combined.
Ms. Armstrong pointed out that a constitutional amendment
would trump statute.
2:13:06 PM
Representative Joule said that there is nothing that
prohibits the legislature from earmarking funds for revenue
sharing down the line. The challenge could be in the first
five years.
Ms. Armstrong referred to documents that portrayed how the
payments would look under several scenarios.
Representative Gara wished to hear from the Administration
on the bill.
CSSB 72(FIN) was heard and HELD in Committee for further
consideration.
2:16:09 PM
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