Legislature(2003 - 2004)
03/18/2004 08:03 AM House STA
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HB 431-MUNICIPAL DIVIDEND PROGRAM Number 0100 CHAIR WEYHRAUCH announced that the first order of business was HOUSE BILL NO. 431, "An Act relating to the municipal dividend program; and providing for an effective date." Number 0130 ADAM BERG, Staff to Representative Carl Moses, Alaska State Legislature, testifying on behalf of Representative Moses, sponsor, offered the committee a brief sectional analysis on the bill. Section 1, he said, establishes the municipal dividend; it sets the amount given to each municipality at $250 per person. Number 0162 REPRESENTATIVE SEATON, in response to a request from Chair Weyhrauch, moved to adopt HB 431 for discussion purposes. Number 0179 CHAIR WEYHRAUCH objected "for discussion purposes." MR. BERG said that [the bill] would give the borough "the dividend," based on the total population of the borough, minus the population of all the incorporated cities within the borough. He explained that it gives the boroughs the chance to apply some of their funding to their unincorporated communities. In response to a question from Chair Weyhrauch, he confirmed that [HB 431] is a scaled-down "resurrection" of a bill introduced formerly in the legislature. He explained that [HB 431, as opposed to the formerly proposed legislation] does not give any direction to the municipalities regarding how to spend the money. CHAIR WEYHRAUCH said one of the questions people always seem to have regarding [changes to] the permanent fund is how it will affect their individual permanent fund dividend (PFD). He asked if the sponsor might have discussed how the bill might effect the PFD. MR. BERG answered yes. He pointed to [a page entitled "Analysis of current statutory payout versus HB 431," by the Alaska Permanent Fund Corporation], which is included in the committee packet. He noted that the bottom two lines show the difference in the PFD with and without HB 431. Number 0293 CHAIR WEYHRAUCH asked how the bill would affect the inflation- proofing of the permanent fund. MR. BERG said it does not affect [it]. He turned to Section 2 of the bill, which he explained [ensures] that the transfer of money from the earnings reserve account happens only after PFDs and inflation-proofing have been "taken care of." CHAIR WEYHRAUCH asked how [HB 431] would affect the growth of the corpus of the permanent fund. MR. BERG turned again to the handout and pointed out that the two lines above the bottom two lines show "the difference and how it affects the total value of the permanent fund." He noted the amounts on those lines of $45,644 and $48,165. Number 0416 REPRESENTATIVE HOLM asked if the sponsor has given any thought to the fact that the population is going to grow. MR. BERG indicated that some consideration had been given to that issue; however, he stated that the main intent of the bill is to attempt to help municipalities. REPRESENTATIVE HOLM noted that since the first PFD in 1982, the state of Alaska has grown by 200,000 people. He asked what would happen to "this program" when the population grows by another 200,000 people in the next 20 years. MR. BERG replied that the amounts can be changed by statute. Furthermore, if the municipal dividend fund grew to the point that it was "getting huge," Section 2 [ensures] that the amount that can be transferred can never be more than the balance of the earnings reserve account after dividends and inflation- proofing have taken place. Number 0512 REPRESENTATIVE HOLM opined that population growth isn't factored in well, which doesn't give a fair analysis of what will truly happen. He said, "I know it's all theoretical anyway, but it gives us a little better idea of what the true picture is." He questioned whether the huge growth pattern over the last 20 years has been based upon the fact that [the state] provides "these services" or upon the fact that "we have the right reason for people to move to Alaska." MR. BERG responded, "Actually, ... the people know it's coming from the permanent fund." He noted that "they" do estimate an annual municipal population growth of approximately 1.15 percent. He said the fiscal note does reflect the population growth. REPRESENTATIVE HOLM stated that he realizes what the number is, but he suggests that that number is "not even close to being reality." He said, "If you go back the last 20 years, 1.15 percent doesn't get us there." Number 0618 REPRESENTATIVE SEATON said: As I look at this ... your projections are that ... in ... fiscal year 2015, the permanent fund itself would be $2.52 billion less with this program, and that if the ... personal dividends were still calculated the same, there'd be basically a $250 per person dividend given to the communities and $90 of that would come out of each person's personal dividend. Is that the way I interpret this? MR. BERG answered yes; the estimated effect on people's dividend would be $90 [less]. In response to a follow-up question from Representative Seaton, he confirmed, "Our numbers aren't based on performance of the fund, except for in the event [that] the fund wasn't paying dividends - obviously there would be no municipal dividends going out either." Number 0868 REPRESENTATIVE SEATON turned to the last page of the five-page handout entitled "HB 431 Municipal Dividend Estimates," [included in the committee packet], which shows a yearly municipal dividend [payment] of $157,195,000. He also turned attention to a graph [entitled "Funding History for State Revenue Sharing and Safe Communities Program," included in the committee packet]. He said, "I'm just wanting to make sure that that's what the proposal is, is to have the ... revenue sharing in safe communities - not only [to] reinstate some of that, but [to] expand it by three times what it's been in the last eight years." He referred to the back page of the previously mentioned handout with the chart on it and noted that it shows a total for 1998 of $50 million [comprised of] "revenue sharing" and "safe communities." MR. BERG said he doesn't have that copy. CHAIR WEYHRAUCH said copies would be made available. Number 0918 JIM COOPER, Mayor for the City of Palmer; President, Alaska Municipal League, testified in support of HB 431. He stated that without this type of legislation, communities will be facing serious consequences. He said HB 431 would provide money where it is actually needed at the local level where it can be used to the best advantage of the people, while bypassing the red tape associated with the monies typically received as grants from the state or the federal government. MR. COOPER told the committee that "we" performed a survey in February, which was based on 73 communities. At that point, he said, more than half of the communities said that they didn't have the financial resources to provide the minimum, basic public services. Three of the four communities reported facing economic downturn, which Mr. Cooper said is obviously made more difficult due to the elimination of state revenue-sharing payments. He stated his belief that in the mid 80s the revenue sharing safe communities [total] was $136 million, which then declined to $50 million, and now is rising to $157 million. He said, "So, we're basically in the ball park if we had continued to raise the monies from the 1986 time frame." MR. COOPER revealed that five of the six communities said that they anticipate significant revenue shortfall this year, while two of the municipalities will be making cuts in public services. Half [of the municipalities] report that they have already laid off workers, while two out of three report that they need to raise fees, such as the rates for water and sewage, harbor fees, and land fills, to counteract the loss of money. He posited that it's obvious that [the proposed legislation] is a necessary step because doing nothing could result in a strong potential that 30 communities will be phased out this next year, which would have a compounding effect on other communities. MR. COOPER noted, "Approximately one in three jobs in the urban areas depend on providing goods, services, and transportation in the rural communities." If the smaller communities close, then the onus will fall to the larger communities to provide services to all the people who will have moved to the larger communities. He stated, "I think we have to remember that the municipal government is the best deal in the state; we're the ones that provide, typically, a lot of the essential services which are: revenue collection, grants administration, ... elections, ... road maintenance, [and] property liability insurance." He concluded, "I think that we need to look at what we want to do and what we're trying to do for our communities, and this is definitely a step in the right direction." Number 1111 CHAIR WEYHRAUCH asked Mr. Cooper to clarify what "closure of communities" means. MR. COOPER explained that communities without revenue sharing will not have monies with which to be able to function and will literally "turn the key, turn off the lights, shut off the water, and walk away." He said the revenue sharing of last year ranged from 4 percent of some of the communities' budgets up to 90-plus percent. Number 1150 REPRESENTATIVE SEATON turned to a handout [showing the revenue sharing totals of Alaska municipalities for fiscal year 2003]. He noted that the total for Anchorage was [$10,403,815]. He then turned back to the previously cited ["HB 431 Municipal Dividend Estimates"] page and pointed to where it shows that Anchorage would receive $67,267,500. He noted other examples. He asked, "Is that your estimate of how this would go, as well?" MR. BERG surmised that he is "speaking in general to the program, per se." He said he is not certain he agrees with the figures. He said he thinks the Alaska Municipal League has said that it would like to have revenue sharing and safe communities at a level not to go below "what we had three years ago." Number 1230 CHAIR WEYHRAUCH said he has a question about one of the terms in the bill. He stated, "It says the amount transferred to the fund shall be distributed to the department as dividends to the municipalities." He asked how municipalities would be defined. Number 1258 KEVIN RITCHIE, Executive Director, Alaska Municipal League and Alaska Conference of Mayors, defined a municipality as "any municipal political subdivision, be it a city, a borough, a unified municipality." CHAIR WEYHRAUCH asked if Elfin Cove, as a community association, [would be a municipality]. MR. RITCHIE answered that unless it is specifically chartered as a municipality under state law, it would not be considered one. MR. RITCHIE confirmed that revenue sharing is proposed for elimination in "this budget," and there are a number of small communities around the state that will not be able to provide services without some base of revenue sharing. He echoed Mr. Cooper's estimation that municipalities really are a good deal. He said a municipality can exist with a municipal budget of $150,000 to $300,000 - a small amount of money. Beyond that, he stated, even though there is limited tax authority in communities, the ability was created to provide services, apply for and administer grants, and administer utility systems, for example. He explained that there really is no other money for providing the base services. CHAIR WEYHRAUCH observed that so far, the testimony has shown that this [proposed legislation] is critical to small communities. He turned to larger communities, such as Anchorage and Fairbanks, and he asked how much revenue sharing those two large municipalities receive and what they would receive under [HB 431]. Number 1349 MR. RITCHIE said he thinks that the last revenue sharing number was about $30 million. He added, "And also, municipal capital matching grants were also proposed for elimination - so about $45 million." He said, "This is looking at about $150 million, so approximately three times the amount of money." In terms of what that means to a large community, he said huge things are happening every day, for example, the issues surrounding the retirement for public employees and teachers. He continued as follows: It's not entirely -- I mean I couldn't say that this is a direct offset to local taxes and local taxes would go down, because there [are] so many things happening in the world; but, in fact, this would create the kind of stabilization ... of taxation that will really benefit communities. And in some communities they may decide to lower taxes and, in fact, in all reality the state may decide to have municipalities do more in some cases. For example, the governor is recommending municipalities handle all of the match for [the Department of Transportation and Public Facilities (DOT&PF)] projects. You know, those types of things -- obviously there's a sorting out process that has to happen, because the state and the municipalities are partners in all of this. Number 1418 REPRESENTATIVE LYNN asked how this would relate to maintaining the senior property tax exemption throughout the state. MR. RITCHIE responded that the Alaska Municipal League's long- held position has been that it's a good program, which it wants funded. He said, "This would be an avenue for permanently funding the senior citizen property tax exemption; you wouldn't hear from us again on that." Number 1443 REPRESENTATIVE HOLM asked Mr. Ritchie if he would consider that all municipalities have a reason to exist. MR. RITCHIE noted that yesterday, in the House Special Committee on Ways and Means, the issue was raised that 50 years ago, before there was revenue sharing, there were still communities throughout Alaska. Many of these are viable communities that have been in existence for thousands of years. However, 50 to 100 years ago, infant mortality was at an unacceptable rate, access to doctors was unacceptable, education was not good, health facilities were basically nonexistent, and electricity [was not available]. "In today's world," he said, "it's not fair, and people probably won't accept those same types of conditions, even though that's the way it was a hundred years ago." Without the services that are currently available, people in smaller communities would start moving away to urban areas and the small communities would probably collapse. Mr. Ritchie asked, "Can all communities be saved?" He answered no, there's probably economic pressures that will make people move away from communities. However, he opined that many of the small communities that don't have much of a tax base but have existed on the same site for years are certainly viable and deserve to exist. Number 1529 REPRESENTATIVE HOLM pointed out that after the gold rush some towns didn't exist any more. He questioned whether [HB 431] would artificially extend the length and duration of a municipality's lifetime. MR. RITCHIE characterized that that as an excellent question. He said, "This program alone will take a community that might have to close out as a municipal government, lower the quality of life for its citizens, not be able to provide the services that are required, and [have] that cause people to move away." However, if there is a major industry in a community, such as a mine that closes down, and the only reason the people are there is for mining, then the people will move away because they don't have jobs, not because the programming exists or doesn't exist. He told Representative Holm, "I don't think - in the sense that you're talking about - that it's going to significantly extend the lives of communities where their employment base moves away. But, especially in communities that have ... a viable subsistence base, this will allow them to operate a municipal government and continue to exist." REPRESENTATIVE HOLM said he is trying to find the balance here. Number 1637 REPRESENTATIVE BERKOWITZ asked if the Alaska Municipal League has done any analysis regarding what the impact of [HB 431] on local property tax or local sales tax rates across the state. MR. RITCHIE answered no, adding there are "so many unknowns out there." He said this year there are issues regarding economies; most of the communities around the state are in trouble as well as the fishing, mining, and timber industries. In addition to that economic struggle, Mr. Ritchie listed the following state cuts: the proposed elimination of revenue sharing; municipal capital matching grants; assumption of greater responsibility for "DOT match"; and a five-percent salary increase mandated by the state for funding a state retirement system, which most of the municipalities are in and cannot avoid. He said, "If this were to be adopted, I could say with somewhat great certainty that it would ... at least stabilize the increase of taxes, and in some cases could either reduce taxes or, again, if this were to pass it's very possible the state would say, 'Well, now that you've got all this money, we'd like you to do a few extra things.'" REPRESENTATIVE BERKOWITZ stated: This is one of the things that is really intriguing to me about the notion of a community dividend. And we're in a transitional period in Alaska's history. When we created the state and when we devised the system we have now, it was done with the idea that you needed to do things through Juneau, because most of the communities didn't have the ability to be sufficient, and that the state would provide a lot of the services and take over a lot of the responsibilities. It seems that we've reached the point where many of the communities now are in a position to take care of themselves to a greater degree than was possible in the past - not all the communities, but particularly the major communities. And that there should be, as companion to this type of legislation, some investigation as to [which] state services are being provided could be provided better at the local level. And if there's any analysis that's been done on that, I'd be really interested to see it. MR. RITCHIE replied that "we've" actually proposed that study a number of times and would gladly participate with the state in it. He said "we" feel that on a local level in government, people in communities can - without a state program and state administration - decide what things are really needed to make the community better. He stated the reality is that taxes are not really that low around the state. Most of the larger communities are above $1,000 per capita in local tax generation. MR. RITCHIE said former Governor Walter Hickel would speak to an issue regarding a concept of the PFD that he said the public may think is "really good." For example, when services are needed at the local level, one possibility is to give people a higher dividend. The federal government would take a portion of it and then the municipal government would tax, as well. He said, "And so, by taking the federal government out of the tax loop by providing some assistance directly to a municipality - which is not taxed by the government and would be a good public purpose - you've ... given your local taxpayers sort of a tax break from federal taxes on providing local services." He opined that that concept is probably pretty viable and sellable to the public. Number 1818 REPRESENTATIVE SEATON noted that the proposed program would provide basically 38 percent of the budget of the Municipality of Anchorage. He asked if that revenue sharing would affect the municipal tax cap. MR. RITCHIE stated his understanding that the answer to that is no. He noted that one of the things that has been a significant problem to a number of communities with locally imposed tax caps is that they did not anticipate or count reductions in state funding. Therefore, when the state takes services away that has to be replaced, or takes revenue sharing away, there is no mechanism within the tax cap to adjust for that. Number 1867 JACK SHAY, Member, Alaska Municipal League (AML) board of directors, testifying on behalf of AML, told the committee that the AML represents approximately 60 percent of the organized municipalities in the state, and probably over 98 percent of the population. He admonished the committee to listen carefully to former Governor Walter Hickel, who he said, "planted the seeds that have resulted in this plan." Mr. Shay said [HB 431] addresses some important elements. He said the municipalities are in trouble. He stated that [Version D before the committee] is simplified and excellent, because it protects the PFD and protects the inflation-proofing of the fund in very bad times, in case of extreme growth and falling markets. MR. SHAY said every state gives fiscal aide to cities, towns, and counties, "and so forth," and it is a well-recognized principle of our republic that [Alaska] does this. He emphasized that [AML] endorses and urges passage of [HB 431]. CHAIR WEYHRAUCH called upon former Governor Walter Hickel to testify. Number 2000 WALTER HICKEL, former Governor of Alaska, testifying on behalf of himself, commended the committee for working on HB 431. He offered his background regarding the issue: Mr. Hickel said he came up with "this idea" many years ago and presented it in many places throughout the state, and "people were really for it." He expressed that Alaska is a different state with a government structure, rather than the private structure of many of the Lower 48 states. He indicated his involvement over 50 years ago. The resources, he said, were not given to the people directly, but were given to the future state, so that it could pay the bills the federal government had been paying. MR. HICKEL said he thinks the state has paid out about $5 or $6 billion in dividends. He opined, "If half of that [had] gone to the villages and cities ..., we'd probably have the greatest public system on earth; we'd have the finest schools, the finest roads, the finest public buildings." Consequently, he observed, it isn't the individual's obligation to do a lot of things; it's the collective obligation, which is why Alaska is called the "owners' state." He continued as follows: I was trying to keep it quite simple. The dividend would [have] just kept on going, but half of that dividend would have gone to the area in which the person lived, even if it wasn't an organized municipality. And I was thinking that the money that went to those villages or those cities, that it would be -- at least 90 percent of it had to go to capital, because pioneering countries need capital. And once they get capital, the local economy moves up and does different things. And so, ... your program is a start in the right direction, but I think somehow, some day, it should be tied to what the individual gets: [If he gets] $100 dividend a year, the area in which he lives gets $50; if he gets $1,000, they get $500. They just split it, whatever it is. And so, it's just not tied into something. Do whatever you want to do. I think the state supports you. I know the [Alaska] Municipal League, the times I took it to them - even the last time about a year ago in Valdez - they voted unanimously for a community dividend. MR. HICKEL said he knows a lot of people say that the government isn't efficient, for example, but he reiterated that [in Alaska], the government has an obligation of ownership, and has a responsibility to do things that other state governments do not. He concluded, "I'd like to invite all Alaskans to participate because it's for their benefit." He offered to answer questions from the committee. REPRESENTATIVE BERKOWITZ noted his appreciation of Mr. Hickel's' presentation of his ideas. Number 2284 BOB BARTHOLOMEW, Chief Operating Officer, Alaska Permanent Fund Corporation, Department of Revenue, in response to a question by Chair Weyhrauch, explained what "(b) and (c)" refer to [from page 2, line 10 of HB 431], as follows: "'(b)' is the amount transferred for the dividend, and '(c)' is the amount transferred for inflation-proofing." He explained that half of the amount available goes to the dividend, while the amount designated to offset the effects of inflation is transferred from the earnings reserve to principle. Whatever money is left in the earnings reserve would be used to "make the transfer under (e)" [in Section 2 of the bill]. In response to a question from Chair Weyhrauch, he revealed that the calculations are all based on the financial statements and are estimated up until June 30, and it's usually some time in July that the accounting records are closed and the final numbers are available. The amount of the dividend is announced in September. CHAIR WEYHRAUCH asked what timing would be on the announcement of the municipal dividend. He added, "Because you could calculate backwards, then, and people could figure out the dividend ...." MR. BARTHOLOMEW responded, "Yes, and the Permanent Fund usually announces in July what the amount of the transfer to the Permanent Fund Division will be. So, we've already made our decision in July if you're going to get "x" dollars. They have to complete the application process, determine how many people are going to be eligible, [and] do the actual math." In response to a follow-up question from Chair Weyhrauch, he confirmed that it would be July when the municipalities would know "what the actual amount would be." CHAIR WEYHRAUCH asked when the transfers would take place. TAPE 04-38, SIDE B Number 2358 MR. BARTHOLOMEW indicated it could take place any time after "our" agreement with the Department of Revenue, which he said he thinks is the 20th business day of July. CHAIR WEYHRAUCH asked if the time that the transfers under [subsections] (b) and (c) take place is defined in statute. MR. BARTHOLOMEW answered no. He explained as follows: What they'd say is at the end of the year, and we have taken that to be June 30th. And then, we did just go through with the attorney general's office last year, to [ask], ... "What's a defensible position for us to take on when we should make that transfer?" And that's what led us to adopt that approximately 20th business day. CHAIR WEYHRAUCH asked Mr. Bartholomew, "If we were to adopt this, there would be no reason to put a date certain as to when these transfers would occur under the municipal dividend program?" MR. BARTHOLOMEW replied that if there wasn't a date certain, then "we" would probably follow what has been done regarding the transfer to the dividend fund. Unless a later date was given, he added, "we" probably would be ready to make the transfer in late July. CHAIR WEYHRAUCH offered his understanding that if there was a situation where the municipality was facing a dire financial situation and potential bankruptcy, it wouldn't file an injunction to get "this money" in advance, because it would be distributed in a normal course and the state would have to bridge any fiscal impact to that municipality. He asked if that was Mr. Bartholomew's position. MR. BARTHOLOMEW answered that's right. He said he thinks "we" have good legal ground to say that, based on how the statutes are currently written, "we" have the obligation of the 20th business day. He said, "I think if you were trying to get it sooner, we would just say, 'We don't have any authority to make that transfer.'" CHAIR WEYHRAUCH said this is what would be called, in a "fisheries' situation," an allocated decision by the legislature. He stated his assumption that the corporation has no position on the bill. MR. BARTHOLOMEW answered that's correct. He said [the corporation] tries to provide information regarding amounts, but stays neutral in regard to the allocation or use of what's available. Number 2274 REPRESENTATIVE SEATON noted, "All of our other transfers are based on the earnings and the success of the fund and this is a flat $250 per person." He asked Mr. Bartholomew if he could offer any insight regarding whether there would be "any positives or any negatives to that proposed allocation method." MR. BARTHOLOMEW said he thinks the only difference is that "we" would have to rely on external sources for determining "that population amount, or whatever the calculation was going to be." He opined, "As long as it's clearly defined who's responsible to determine population and then help us come up with a dollar amount, I think we can make it work just as well as a formula or a set dollar amount." Number 2232 REPRESENTATIVE BERKOWITZ asked if it would be easier, from an administrative perspective were the state to adopt a percent of market value (POMV), and then, perhaps, through some percentage on that POMV, make an allocation to the municipalities. MR. BARTHOLOMEW said the [Alaska Permanent Fund Corporation Board of Trustees] definitely has recommended its preference to get away from the current way of accounting for realized income and having a volatile payment stream that is high some years and low others. The board recommends that the way all payouts from the permanent fund are determined is changed. He noted that HB 431 uses the current formula. He said he thinks the board would recommend any distribution plan - to the extent that it can - work toward adopting a POMV approach, and then, through the legislative decision-making, decide how the money is to be allocated. REPRESENTATIVE BERKOWITZ asked what the differences are between taking a portion from the permanent fund and allocating it "this way," as opposed to, for example, taxing that portion back, which he said he thinks would allow the taxation of nonresident workers. He clarified as follows: So, here we're talking about $250 per person. If we were to allocate the full amount, tax $250 back per person, would that have individual tax consequences, and [if we] have $250 back per Alaskan, would that allow us to tax $250 to nonresident workers? MR. BARTHOLOMEW answered he doesn't know. Number 2128 CHAIR WEYHRAUCH turned to Amendment 1, which read as follows: On page 1, line 11 Between "Amount of" and "dividends" Insert "municipal" Change "dividends" to "dividend" Number 2114 REPRESENTATIVE GRUENBERG objected. He opined that dividends should still be plural, because otherwise it would be considered just one dividend, when it really will be a number of dividends to the various municipalities. CHAIR WEYHRAUCH asked if there was objection to just inserting the word "municipal". There being none, Amendment 1 [as amended] was adopted. Number 2080 CHAIR WEYHRAUCH turned to Amendment 2, which read as follows: From page 1, line 14 Through page 2, line 1 Delete "or other population data that, in the judgment of the department, is reliable" Insert "that reside in the boundaries of that municipality" CHAIR WEYHRAUCH stated his reasons for Amendment 2: First, he said he wants the legislature to be specific that "we" rely on the permanent fund recipient. Second, he said he wants to specify that those recipients would reside in the boundaries of the municipality. He opined, "If we're going to address community impacts and impacts in [the] municipality, it should be contingent on the people living there." He noted that almost $17 million in dividends is sent out of state. He indicated that if people aren't residing in the state, then the municipalities won't experience the impact of that resident and "they should not be increased by that amount of money for that municipal dividend." Number 2025 REPRESENTATIVE BERKOWITZ suggested that everything after line 12 [on page 1] be deleted. CHAIR WEYHRAUCH concurred with that suggestion, "because that does get to the person residing in the municipality." Number 2001 REPRESENTATIVE SEATON mentioned permanent fund dividend applications and asked, "How does the nexus of ... that other data set occur?" REPRESENTATIVE BERKOWITZ said he doesn't think "we" should be the ones to figure it out. He said if [the legislature] were to specify in statute how the department or division "figures it out," that might tie their hands in some way that could conceivably be constitutionally impermissible. He mentioned that U.S. Census data is available, as well as tax information. He said, "At a basic level, you get down to a certain point and it's guess work, but in the smaller communities, it's not guess work. I think you can probably just have a pretty straight- forward knowledge of how many people are living there." CHAIR WEYHRAUCH proffered that there's a rational basis from which to draw between a person residing in a municipality and one who does not reside there. He noted that the resident uses roads, medical services, schools, and water and sewer. He said, "You probably could even discriminate on that basis." Number 1928 REPRESENTATIVE SEATON expressed the need to clarify the definition of resident. CHAIR WEYHRAUCH responded that his use of the word resident refers to one who is "domiciled in and living in the community, using the municipal services and affecting that community directly." Number 1884 REPRESENTATIVE HOLM asked if it is to be anticipated that "all municipalities will give us the straight scoop." He asked if there would be some specific oversight by the State of Alaska to make sure that it isn't "getting duped" by certain municipalities. CHAIR WEYHRAUCH said, "I would hope there would be." REPRESENTATIVE HOLM questioned whether the result would be another audit function. He mentioned the fiscal note. Number 1843 BILL ROLFZEN, State Revenue Sharing, Municipal Assistance, National Forest Receipts, Fish Tax, PILT; Juneau Office; Division Of Community Advocacy; Department of Community & Economic Development (DCED), testified as follows: This language was pulled out of our existing statutory language for the revenue sharing program. For the past, at least, 30 or 40 years now, it's been the department's responsibility to come up with an annual municipal population determination. We work closely with the state demographer and the Department of Labor, who annually comes up with the statewide population for all the communities, using permanent fund dividend applications. In fact, several years ago, we had the application amended so that applicants had to put their physical address on their application versus their [post office box] or mailing address. Annually, we receive ... that data from the state demographer in the fall. On January 15th, we send out municipal populations to all the municipalities. They have until April 1 to appeal that determination, based on a local head count census. We've found, over the last few years, based on this change in the application, that very few municipalities appeal our numbers, because they're very reliable. But we do allow them that opportunity, but it has to be based on local counts. And the requirement is that a resident has to live in that municipality at least six months out of that calendar year. MR. ROLFZEN noted that currently the department is in the middle of a population appeal process, which will conclude on April 1. The numbers will be certified on June 1. CHAIR WEYHRAUCH asked Mr. Rolfzen, "When you said 'this language,' what language did you refer to?" MR. ROLFZEN answered, "Population data that, in the judgment of the department, is reliable." CHAIR WEYHRAUCH asked, "The state already has some experience with this language and its applicability in the state?" MR. ROLFZEN answered, "Exactly." Number 1742 CHAIR WEYHRAUCH suggested adding the word "physically" between the words "residing" and "in", on page 1, line 12 of the bill. MR. ROLFZEN responded that that would work for [DCED]. CHAIR WEYHRAUCH said, "I'm going to move that as [a new] Amendment 2, to add the word physically." REPRESENTATIVE GRUENBERG referred to the original Amendment 2 [text provided previously] and asked if the committee was going to adopt it. CHAIR WEYHRAUCH responded, "No, I withdrew that amendment." Number 1729 CHAIR WEYHRAUCH asked if there was any objection to [the new] Amendment 2. There being none, [the new] Amendment 2 was adopted. Number 1719 REPRESENTATIVE SEATON asked if "with that" there is a full enough definition of six months. He said, "I mean, that's accepted now, and ... you don't see any problems if this definition's here (indisc. - coughing) testifying that in (indisc. - coughing) leaving that up to determination?" MR. ROLFZEN responded, "That's correct. We have regulations in place to implement population determinations on an annual basis, and our requirement is six months out of the year." Number 1700 CHAIR WEYHRAUCH noted the language on page 2, [lines 6-8], which read: (c) If the amount appropriated is not sufficient to fully fund municipal dividends for a fiscal year, the amount of each dividend shall be reduced on a pro- rata basis. CHAIR WEYHRAUCH introduced Conceptual Amendment 3, which would make the following changes: On page 2, line 6 Between "amount" and "appropriated" Insert "that would be" Between "appropriated" and "is" Insert "under subsections (a) and (b) of this section" CHAIR WEYHRAUCH, in response to a question from Representative Seaton, clarified that (a) and (b) refer to [Section 2] and not to "the transfers." Number 1635 CHAIR WEYHRAUCH asked if there was any objection to Conceptual Amendment 3. There being none, Conceptual Amendment 3 was adopted. Number 1628 CHAIR WEYHRAUCH turned to Amendment 4, which read as follows: On page 2, line 12 Delete "fully" CHAIR WEYHRAUCH explained that the word "fully" may be a matter of argument. Number 1583 CHAIR WEYHRAUCH asked if there was any objection to Amendment 4. There being none, Amendment 4 was adopted. Number 1565 REPRESENTATIVE GRUENBERG asked if it is constitutional for money to be transferred from the corporation to the department without an appropriation. Number 1512 MR. BARTHOLOMEW answered that he does not believe so. He stated his belief that all money remains in the earnings reserve of the permanent fund, until appropriated by the legislature. REPRESENTATIVE GRUENBERG suggested that to make "this" constitutional, the committee would need to offer an amendment. He noted that the language on page 2 looks like an appropriation would not be required. He asked if language should be added to say, "Subject to an appropriation for that purpose." MR. BARTHOLOMEW replied that the new subsection (e) that is being added in AS 37.13.145 is in the same section that deals with inflation-proofing and dividends, and those are based on appropriations that are in the annual operating budget, "or some appropriation bill." He said, "I believe by having it within that subsection, you're going to have it subject to the same requirements, and I think there is AG work stating it will not transfer without an appropriation." REPRESENTATIVE GRUENBERG said he doesn't want to draw a lawsuit; therefore, he asked Mr. Bartholomew if it would increase his comfort level or eliminate a possible question if the committee put a technical amendment in "to that effect." Number 1449 REPRESENTATIVE BERKOWITZ stated that Section 1 "says it clearly." He noted that the language in Section 1 specifies, "Subject to appropriations". MR. BARTHOLOMEW said, "And that would be in Title 29." In response to a comment by Representative Gruenberg, he said, "Having it stated in Title 29 and then following the legal guidance we have for 37.13.145, I think you have a clear record requiring appropriations." REPRESENTATIVE GRUENBERG explained that he had thought the phrase "Subject to appropriations" referred to the second transfer of money from the department to the municipalities. MR. BARTHOLOMEW, in response to a question from Representative Gruenberg, said he is comfortable that there will be good guidance. Number 1354 CHAIR WEYHRAUCH closed public testimony. Number 1342 REPRESENTATIVE CARL MOSES, Alaska State Legislature, as sponsor of HB 431, stated that this legislation is badly needed by the communities in Alaska. He said the health of the state depends upon the health of communities. He opined that HB 431 is a politically correct way to use the PFDs. He said, "It's the people's money, as far as I'm concerned, and this gives the money back to the local level where it can be administered and spent as they see fit." He stated that he thinks this will go a long way in improving the quality of life in Alaska. He encouraged the committee to move [HB 431]. CHAIR WEYHRAUCH said that no matter what happens with the bill, Representative Moses' service to the state is appreciated. Number 1279 REPRESENTATIVE SEATON referred to previous discussion regarding the $67 million that would go to Anchorage, whose current budget is [roughly] $248 [million]. He said he wanted to correct for the record that it's 27 percent, not 38 percent. Number 1260 CHAIR WEYHRAUCH removed his previous objection to [the original bill version]. Number 1248 REPRESENTATIVE GRUENBERG moved to report HB 431 [as amended, with individual recommendations and the accompanying fiscal notes]. There being no objection, CSHB 431(STA) was reported out of the House State Affairs Standing Committee.
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