Legislature(1999 - 2000)
05/04/1999 08:08 AM House CRA
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* first hearing in first committee of referral
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+ teleconferenced
= bill was previously heard/scheduled
HJR 23 - COMMUNITY DEVELOP FUND/PFD/BUD RESERVE CO-CHAIRMAN HALCRO announced that the final order of business before the committee would be HOUSE JOINT RESOLUTION NO. 23, Proposing amendments to the Constitution of the State of Alaska relating to the community development fund, the permanent fund, and the budget reserve fund. Number 1681 REPRESENTATIVE DAVIS, Sponsor of HJR 23, Alaska State Legislature, recalled that three questions were brought forth at the last meeting which have been addressed in a memorandum. Representative Davis believed that HJR 23 would develop into a revenue source for local municipalities to deal with many of the funding schemes put in place by past legislatures. People have come to depend on those programs. This legislation goes a long way in correcting and continuing valuable programs that would be subject to decreasing funding. Representative Davis pointed out that the concerns regarding the eligibility of these funds is addressed on page 1, lines 14-16. CO-CHAIRMAN HARRIS moved to adopt CSHJR 23, Version LS0573\D, Cook, 4/8/99, as the working document before the committee. There being no objection, it was so ordered. REPRESENTATIVE DAVIS pointed out that the language incorporated on page 1, lines 14-16 of the proposed CS should be broad enough to accommodate the formation of additional municipalities and other municipalities under statute. With regard to the question of how the fund will be invested and who will administer it, Representative Davis said that initially the Department of Revenue will invest and administer the fund. It is possible that in the future the legislature could establish an investment group similar to the Permanent Fund Corporation. Representative Davis emphasized that this resolution merely puts the question to the voters as to whether this fund should be created, no statute is established. Therefore, there is much leeway for future legislatures to develop the statute. With regard to the distribution of the funds, Representative Davis said it was his intention that the funds be distributed with no strings attached. Here again, this will be left up to future legislatures. CO-CHAIRMAN HALCRO understood that when the permanent fund was developed, such investment and distribution questions were determined after the fund was established. He asked if that was Representative Davis' understanding as well. REPRESENTATIVE DAVIS replied yes. The constitutional amendment for the permanent fund only asked if a savings account should be established. How the earnings would be distributed or spent was not addressed. REPRESENTATIVE MURKOWSKI asked if the community development fund would mesh with any long-term fiscal plan. REPRESENTATIVE DAVIS said that he believed it would. This fund is the answer to the elimination of municipal assistance and revenue sharing which is the intent. He noted that this legislation was offered during the last legislature. As this fund grows, the state would be able to transfer many of its functions and expenditures to municipalities. REPRESENTATIVE MURKOWSKI noted that former Governor Hickel had discussed an individual community permanent fund. How would this fund relate to the former Governor Hickel's idea? REPRESENTATIVE DAVIS stated that he was not exactly sure, but the idea for this fund came from the former Governor Hickel's idea. There are definitely differences between the two proposals. He indicated that Representative Moses may have a similar proposal as well. Number 2205 KEVIN RITCHIE, Alaska Municipal League (AML), noted that the committee should have two brown sheets from the AML. He said that this legislation is a way to eliminate the general funds for state revenue sharing and potentially capital matching grants. This is part of a long-range fiscal plan. The public needs to know that those services most important to them, roads, police, fire, et cetera, are things that can continue. Therefore, this would be important in selling a long-range fiscal plan to the public. Mr. Ritchie stated that the legislature will have to answer the question, "Does this somehow hurt the state budget?" He pointed out that the "Alaska Plan" and the community development fund are endowments. A separate endowment of $750 million would be set aside for the community development fund. The AML feels that would further the state's goals to transition programs to municipalities. He emphasized the importance of those municipalities being able to accept those programs. Furthermore, municipalities would need to be assured that there will be a long-term source of funding that will not be reduced in one year, two years, or three years. He indicated that this fund would be a way to achieve such. MR. RITCHIE referred the committee to the example listed on the bottom of the first page of the AML document. The example points out that currently there are separate state and local road maintenance shops. Local governments in some communities would not be able to accept, consolidate and pay for road maintenance. Historically, the state has only been able to commit funds for road maintenance for one year. Mr. Ritchie said that having a fund like the proposed community development fund would allow a long-term plan between state and local governments. For that reason, the AML supports this legislation. Mr. Ritchie noted that page 2 of the AML document is an example of what could comprise a long-range fiscal plan. By doing this, municipalities would not be after a windfall of funds from the state. As funding increases, so would the level of services provided by municipalities. As funding increases, there would also potentially be a decrease in the level of service provided by the state. That is why page 2 of the AML document has $0 indicating that there would not be a net revenue increase for local governments. CO-CHAIRMAN HARRIS referred to page 2 of the AML document which has a heading, "Eliminate $68 million State GF to:". If the state eliminates some areas, how would the municipality eliminate those as well because those figures are bracketed. MR. RITCHIE explained that it would take two years for the community development fund to create revenue. Therefore, the elimination of municipal revenue sharing is not recommended for this year. This would be a transition from revenue sharing to a community development fund. He pointed out that the revenue in brackets which would be eliminated for revenue sharing and municipal capital matching grants could be replaced with a gas tax and the community development fund. He reiterated that this is just an example and there are many options. CO-CHAIRMAN HARRIS asked if it was the intent to include education funding. MR. RITCHIE replied no. Currently, education funding is approximately $800 million. Mr. Ritchie said that it would be difficult to imagine placing enough money in the community development fund to replace that type of state funding. He reiterated that this is just an example and there are many options. CO-CHAIRMAN HALCRO asked if there was anyone who would like to testify on HJR 23. There being no one, the public testimony was closed. Number 2600 CO-CHAIRMAN HARRIS moved to report CSHJR 23, Version LS0573\D, Cook, 4/8/99, out of committee with individual recommendations and the accompanying two fiscal notes. There being no objection, it was so ordered.
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