Legislature(2013 - 2014)BARNES 124


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08:03:00 AM Start
08:03:56 AM HB193
08:18:52 AM HB174
08:49:25 AM Presentation: Fy 2014 State Plan for the Community Services Block Grant Program
09:28:41 AM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Moved CSHB 174(CRA) Out of Committee
Moved Out of Committee
+ Presentation: FY14 State Plan for the Community TELECONFERENCED
Services Block Grant Program by Dept. of
Commerce, Community & Economic Development
+ Bills Previously Heard/Scheduled 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)                                                               
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                                                               
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                                                               
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                                                               
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                                                               
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.                                                                                                     

Document Name Date/Time Subjects
HB 193 - Sponsor Statement.pdf HCRA 4/4/2013 8:00:00 AM
HB 193
HB 193 - Sectional Analysis.pdf HCRA 4/4/2013 8:00:00 AM
HB 193
HB 193
HB193 - Fiscal Note - DOR-TAX-04-03-13.pdf HCRA 4/4/2013 8:00:00 AM
HB 193
HB193- Fiscal Note - DCCED-DCRA-04-03-13.pdf HCRA 4/4/2013 8:00:00 AM
HB 193
HB 193 Letter of Support - Municipality of Anchorage.pdf HCRA 4/4/2013 8:00:00 AM
HB 193
HB 174 Sponsor Statement.pdf HCRA 4/4/2013 8:00:00 AM
HB 174
CSHB 174 Work Draft.pdf HCRA 4/4/2013 8:00:00 AM
HB 174
HB 174 ver A.pdf HCRA 4/4/2013 8:00:00 AM
HB 174
HB174-Fiscal-Note-DOA-DRB-3-22-13.pdf HCRA 4/4/2013 8:00:00 AM
HB 174
HB 174 - 1 Cities & Bouroughs Impacted by Salary Floor.pdf HCRA 4/4/2013 8:00:00 AM
HB 174
HB 174 - 2 Affected Muniticaplities - PERS Employer Salaries for FY08 - FY12.pdf HCRA 4/4/2013 8:00:00 AM
HB 174
HB 174 - 3 Affected Muniticaplities -PERS Employer Salaries for FY08 - FY12.pdf HCRA 4/4/2013 8:00:00 AM
HB 174
HB 174 - 4 Total Active PERS employees.pdf HCRA 4/4/2013 8:00:00 AM
HB 174
HB 174 - 5 Population Decreases - 2010 AK Cities by Population - US Census.pdf HCRA 4/4/2013 8:00:00 AM
HB 174
FFY 14 State Plan CSBG Community Services Block Grant.pdf HCRA 4/4/2013 8:00:00 AM
State of Alaska Division of Community and Regional Affairs