Legislature(1995 - 1996)
04/23/1996 01:45 PM House FIN
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* first hearing in first committee of referral
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= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
SENATE BILL 20
"An Act establishing the Alaska municipal basic
services program, relating to certain programs of state
aid to municipalities and recipients in the unorganized
borough; and providing for an effective date."
DEB DAVIDSON, STAFF, SENATOR JOHN TORGERSON, testified in
support of the proposed legislation. She stated that SB 20
would change the name of the Revenue Sharing program to
"Priority Revenue Sharing for Municipal Services", and would
change the Municipal Assistant Fund to the Safe Communities
Fund. The change would require that payments from the Safe
Communities Fund be used for specific prioritized purposes.
The intent of the changes would more accurately reflect the
purposes for which payments received are used. The programs
appear to be a type of "slush fund" for communities and the
change in name and requirements would help dispel that
notion.
Ms. Davidson concluded, the date of payment has been changed
so that communities receive entitlement from both Priority
Revenue Sharing and the Safe Communities Fund on July 31st
of each year. Previously, payments from revenue sharing
were made on July 31st and municipal assistance payments
were made on February 1st.
Representative Martin spoke against the fiscal note. Ms.
Davidson discussed the fiscal note and the amount that the
general fund would lose from moving the date. Part of the
reason for the earlier payment would combine the two
programs. By raising the minimum entitlement for each
community from $25 thousand dollars to $40 thousand dollars
would remove some funding from the larger communities.
Those communities were willing to make that shift
recognizing that the smaller communities require those funds
to remain solvent. Ms. Davidson added that the sponsor felt
that the lose of interest was worth the agreement from the
large municipalities to contribute to the small communities.
Those payments would be made on July 31st, at the beginning
of the State fiscal year. Currently, revenue sharing is
also paid on July 31st. Municipal assistance is currently
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paid in February and the appropriation for that payment is
made the prior year. It would be up to the municipalities
to invest that money to earn the interest. The State would
not be giving them the extra money in interest.
Representative Kelly asked the intent of Section 10. Ms.
Davidson replied that Section 10 would address the base
amount account. When the municipal assistance program
began, it was enacted so that the State would have the gross
receipts business tax. Municipalities received a portion of
money back from that tax. That tax was then repealed in
1978. The program was written so that those municipalities
who had received money in 1978, would receive the same
amount every year as established their first year.
Under the current program, that is the amount paid. The
remainder of the fund appropriation was then paid to all the
municipalities on a per capita basis. The result was that
as appropriations to the fund decreased through the years,
individual municipalities would then deal with varying
percentage reductions. She added, the total dollar amount
would be reduced although the distribution of that would be
proportional among the communities.
In response to Representative Therriault's question, Ms.
Davidson explained that smaller communities are currently
having difficulty in maintaining their operating budget and
the services that they are required to provide. That being
the reason to increase the minimum entitlement for smaller
communities from $25 thousand dollars to $40 thousand
dollars. Representative Therriault questioned the State's
benefit. Ms. Davidson clarified that the municipalities
rely on the State to the extend that they receive funds
through the Municipal Assistance Program. Should they
dissolve, the responsibility of those services would return
to the State. Representative Martin questioned if "safe"
communities had been defined.
SENATOR JOHN TORGERSON noted that there was no specific
definition for that. He added that any group could qualify
under "safe" community if they receive revenue sharing.
Representative Martin reiterated his concern with the
increased costs to the State. Senator Torgerson responded
that he did not agree with the fiscal note as submitted by
the Department. He pointed out moving the payment date back
to July should create a surplus to the State rather than an
expenditure.
Representative Grussendorf responded to Representative
Martin's concern regarding a safe community. He explained
that criteria for a safe community would include the ability
to respond to the need for hospital beds, police and fire
protection. He emphasized that would be the same criteria
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used by the Municipal Assistance Program.
TOM NICOLOS, (TESTIFIED VIA TELECONFERENCE), CITY COUNCIL,
CITY OF BARROW, BARROW, spoke in support of the proposed
legislation. He urged the Committee's passage of the bill.
KEVIN RITCHIE, ALASKA MUNICIPAL LEAGUE, ALASKA CONFERENCE OF
MAYORS, JUNEAU, noted that the proposed legislation is the
highest priority of the Alaska Municipal League (AML) and
the Alaska Conference of Mayors. All communities have
reached consensus on the bill after two years work.
Mr. Ritchie commented that the current plan would not
increase the appropriation, although, it would be allocated
differently. The program is looking at a $4.5 million
dollar reduction in funding. He suggested that the
legislation would require more accountability from each
community especially for basic services.
In response to Representative Therriault's comments, Mr.
Ritchie stated that the majority of communities do provide
public safety, stressing that public safety is the top
priority of most communities. Programs have been
significantly cut over the years, restricting services to a
minimum in many communities. Mr. Ritchie stated that there
are 160 communities in the State.
(Tape Change, HFC 96-133, Side 2).
Mr. Ritchie listed public safety services offered by the
communities.
* Police
* Fire
* Water/sewer
* Emergency Medical Services (EMS)
He added, the concept addresses public safety as well as
health issues. Mr. Ritchie stressed that the bill would
work with the established budget caps. The roads program
will strengthen the relationship with the State and would be
used as part of the long-range fiscal planning.
LAMAR COTTEN, DEPUTY COMMISSIONER, DEPARTMENT OF COMMUNITY
AND REGIONAL AFFAIRS (DCRA), stated that the Department does
support the concept of SB 20 which would eliminate the "hold
harmless" clause, placing the poorer communities at a
disadvantage.
Mr. Cotton suggested that the $40 thousand dollar allocation
would amount to a combination of municipal assistance and
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revenue sharing. Those communities are the smallest and
have the least ability to raise revenue in their areas. He
stressed that it was the Administration's position that a
corporation exist at the local level to provide these
essential services. Small communities get nothing for free,
paying either through taxes or user fees.
Mr. Cotten advised, that the Administration questions the
date, recommending that checks be issued in October or
November.
BOB BARTHOLOMEW, DEPUTY DIRECTOR, INCOME AND EXCISE AUDIT
DIVISION, DEPARTMENT OF REVENUE, pointed out that the
Administration does support the bill, although, would like
to see the fiscal note reduced, resulting in a loss of
interest income in the amount of $130 thousand per month.
Secondly, he added, the impact would be substantial in as
much as July and August are the largest financial out-lays
to the State. The Administration would request that the
delivery date be changed to October or November, which would
move the date forward two to three months. That change
would keep the State from experiencing a cash flow problem.
SB 20 was HELD in Committee for further discussion.
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