04/06/1995 09:15 AM Senate FIN

                                                                               
       SENATE BILL NO. 96                                                      
       "An  Act relating to  municipal activities  or services                 
  mandated      by state statute."                                             
                                                                               
  Co-chair Halford invited  Josh Fink  to join the  committee.                 
                                                                               
                                                                               
  Mr. Fink testified, "Just as the U.S. Congress is attempting                 
  to address  the  considerable  financial  hardship  unfunded                 
  federal  mandates placed  on state  governments, many  state                 
  legislatures  are beginning  to  address the  same financial                 
  hardships   unfunded   state   mandates   place   on   local                 
  governments.  In  fact, at present sixteen  states currently                 
  have laws which  either limit  or prohibit state  government                 
  from   imposing   unfunded   mandates   on   municipalities.                 
  Additionally, more  than  20 other  state  legislatures  are                 
  actively considering  such legislation.  SB96  is introduced                 
  this year to  remedy the problem of  unfunded state mandates                 
  in Alaska.   This  legislation is  a high  priority for  the                 
  Alaska  Municipal League, the Municipality of Anchorage, the                 
  Fairbanks North Star  Borough, and the Alaska  Conference of                 
  Mayors.   Unfunded  mandates cause  cash-strapped  cities to                 
  decrease basic  municipal  services such  as public  safety,                 
  road maintenance, and the local contribution to education to                 
  schools, in order to pay for the unfunded mandates which are                 
  a  much lower priority.   Moreover, as the unfunded mandates                 
  increase  for local  governments, aid to  municipalities has                 
  been  cut more  than 55%.    A good  example  is the  Senior                 
  Citizen's Property Tax Exemption which has increased 300% in                 
  cost to local  governments in  the last several  years.   As                 
  municipalities  and local  governments  struggle to  provide                 
  services  mandated,  but  not  funded,  by  the legislature,                 
  increased  property and other local taxes  have been used as                 
  the  funding  vehicle.   The  principle  imperative  of this                 
  legislation is that the State  government should not require                 
  municipalities  by  statute,  appropriation, regulation,  or                 
  administrative action to implement any program,  service, or                 
  activity  which  significantly impacts  municipality budgets                 
  unless the  legislature provides  new funding  to cover  the                 
  costs  of  these  mandates.    SB  96 sets  up  a  mechanism                 
  preventing  state  government  from  imposing  new  unfunded                 
  mandates.   However,   the    legislature   is    ultimately                 
  constitutionally  capable of  imposing such  mandates  if it                 
  desires.                                                                     
                                                                               
  Mr. Fink  gave a  bill analysis,  which is  attached to  the                 
  minutes. Senator Zharoff  inquired as to the  effective date                 
  of January 1, 1996.   By  signing the bill  now, he asked if                 
  preexisting law  is complicated?   Mr.  Fink responded  that                 
  there  would  not be  an effect  on  any mandates  that this                 
  legislature,   this  year,   would   have  imposed   whether                 
  legislation or  budgetary.   It would  become effective  the                 
  second session of this legislature.                                          
                                                                               
  Brad  Pierce was invited  to join  the committee.  He stated                 
  that the governor has  no official stand on  this bill.   He                 
  said  that  the  governor  has   stated  on  many  different                 
  occasions that there is no intent to pass off costs to local                 
  governments.    He said  he  was  asked to  come  before the                 
  committee and speak  to general  policy considerations.   He                 
  stated there is  a concern that  this bill is premature  and                 
                                                                               
                                                                               
  unnecessary.  Other states that have enacted these laws have                 
  a much longer  history of  state and local  relations.   The                 
  handout he provided, entitled, "1991  State and Local Taxes:                 
  U.S. Average versus Alaska  as Shares of Income of  a Family                 
  of Four",  shows that  state and  local  taxes combined  are                 
  minor  compared to  other states.   At  every family  income                 
  level the higher tax burden is  what municipalities in other                 
  states  are  complaining about.   We  do  not have  the same                 
  situation  in Alaska.  He  referred to a  study done in 1992                 
  indicating  that  the average  household  of 2.8  persons in                 
  Alaska received $19,600  in state  and local services,  plus                 
  $2600 in  PFD's,  while paying  $2,000  in state  and  local                 
  taxes.  He suggested that  a realignment of responsibilities                 
  is going to have to occur.  The administration fully intends                 
  to  involve  municipalities in  the  realignment.   The main                 
  concern is that in  other states, the intent of this type of                 
  legislation is to freeze  relations where they are now.   He                 
  expressed that municipalities  have it good in the  state of                 
  Alaska.  That it  is the state that pays for  a good portion                 
  of the  schools, maintaining  jails, prosecuting  criminals,                 
  and a vast array of public services that are the province of                 
  local  governments  elsewhere.    Such  services  he  listed                 
  included social services,  environmental protection,  health                 
  care, etc.   This administration will  be looking at a  long                 
  range  financial  plan,  and  performance  measures  of  the                 
  effectiveness of  state programs.   He did  not endorse  the                 
  bill.                                                                        
                                                                               
  Kevin Richie, Alaska  Municipal League, was invited  to join                 
  the committee.  He testified that this bill is very much the                 
  same as the  federal bill that  is relieving the state  from                 
  unfunded mandates.  This is a moral imperative.  There are a                 
  number  of  processes   in  the  bill  to   allow  a  mutual                 
  relationship  and  understanding.    In  essence,  it  is  a                 
  statement  by  the  legislature  saying   what  the  federal                 
  government  has  done  for  the  states. He  encouraged  the                 
  legislature to allow the municipalities to come to the table                 
  when discussing  mandates.  Regarding  the need to  do this,                 
  there are significant  costs that  can be passed  on to  the                 
  municipalities.   He  cited  an  example  where the  DEC  is                 
  considering water  standards which  are considerably  higher                 
  than  those recommended  by the  federal government.   In  a                 
  municipality  such  as  Anchorage, the  potential  costs for                 
  meeting those additional mandates, which  could be passed on                 
  by regulation,  could be  approximately $200  million.   The                 
  Municipal League sees this as a very important statement.                    
                                                                               
  Co-chair Halford brought to the  attention of the committee,                 
  an Amendment recommended  by the  sponsor that would  repeal                 
  the existing provisions that require municipal fiscal notes.                 
                                                                               
  Mike Greany, Director,  Legislative Finance Division,  spoke                 
  to the issue  of preparing a fiscal  note to this bill.   He                 
  feels  there  will  need  to  be   a  fiscal  note  for  the                 
                                                                               
                                                                               
  Legislative  Finance   Division  in  order  to  fulfill  its                 
  requirements.  He stated that  his office is researching the                 
  costs. Co-chair Halford requested that  Mr. Greany come back                 
  to the committee once  he has determined the costs,  at that                 
  time the amendments will be considered.                                      
                                                                               
  End,   Tape #26, Side 1                                                      
  Begin, Tape #26, Side 2