Legislature(1993 - 1994)
02/18/1993 09:00 AM Senate CRA
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
CHAIRMAN RANDY PHILLIPS introduced SB 102 (MUNICIPAL
PROPERTY TAX EXEMPTIONS) as the first order of business.
Number 015
SENATOR JAY KERTTULA said the state has sufficient income,
and as long as the state does have sufficient income, we
shouldn't be taking from the senior programs. If it becomes
necessary to do so, then it should be done in the same
manner and not exceeding the percentage of other programs,
including the operating of general government.
Senator Kerttula voiced his concern with statements that
have been made by the Alaska Municipal League on SB 102. He
said the seniors don't draw on municipal services; the
primary costs to the municipalities is the schools.
Senator Kerttula believes it is fair to consider giving a
senior citizen property tax reduction, both at the borough
and at the state level. He said seniors do not have the
costs to the boroughs that the ordinary family or does.
However, seniors do put a lot of money into the state just
through normal living expenditures.
Senator Kerttula stated he believes that overall it is a big
mistake to change this program. He said the state gives the
municipalities revenue sharing, municipal services and other
funds from this state to help offset whatever they may do
for the seniors and their property contributions at the
local level.
Number 088
CHAIRMAN PHILLIPS said state statute says the program has to
be funded at $9 million, yet the legislature, year after
year only funds one-third of it. He said he has a real
problem: either the commitment is there or its not.
SENATOR KERTTULA said local governments don't consider
seniors particularly important and they aren't going to
provide the benefits at the local level unless they have to
and it is mandated. He said it would be fairer perhaps if
it were funded totally, but if we don't fund it fully, it is
not so unfair that they pay the difference for the reason he
stated. Seniors don't draw on the programs that cost local
government, i.e., schools.
Number 155
BRUCE GERAGHTY, Deputy Commissioner, Department of Community
and Regional Affairs, directed attention to the Governor's
transmittal letter, which states that due to declining
revenues, it has become apparent over the past several years
that the state can no longer afford to fully pay for the
municipal reimbursement program for the mandatory senior
citizens or disabled veterans property tax exemption. As a
result, municipalities have not been reimbursed in full for
the tax revenues lost through the mandatory property tax
exemptions. SB 102 will allow municipalities to decide
whether they wish to exempt such property from taxation in
whole or in part. If they choose to exempt the property,
they will lose tax revenue, but that decision will be up to
the individual municipality and will not be mandated by the
state.
Mr. Geraghty pointed out that the total reimbursements to
municipalities for calendar year 1992 would have been $13.6
million. The legislature funded the program at $2.8
million, which amounts to about 20 percent of the total
funding. He added that the legislature funds the renters
rebate program at about 85 percent, which is a little over
$800,000.
Number 195
CHAIRMAN PHILLIPS asked for an explanation of the January 1,
1993 effective date. BRUCE GERAGHTY answered there was
discussion on whether they make this effective on January 1,
1994, and they determined there wasn't a lot of difference
between making it retroactive to this year. They have
received applications for this year, and, unless the
legislature so determines to put money into the fund this
year, the program will go unfunded in FY 94.
Mr. Geraghty said since the original bill was introduced, in
discussions with the Department of Law, it was determined
that Section 1 is not necessary and they are proposing that
it be deleted in a committee substitute.
Number 218
CHAIRMAN PHILLIPS asked if disabled veterans were taken out
of the bill, how much money and people would that involve.
BRUCE GERAGHTY responded that he didn't have the exact
figures, but his understanding was that the disabled
veterans are a small portion of the program. CHAIRMAN
PHILLIPS requested that he be provided that breakdown.
Number 235
KENT SWISHER, Alaska Municipal League, stated the League's
support for SB 102, but added that they are requesting a
couple of minor changes in the bill.
Mr. Swisher noted that when the program started out it was a
very small program. However, now it is a great big program
and it is an expensive program, both in terms of the state
and its obligation, largely unfunded, and the municipalities
and their contributions to this program. There is
approximately $10 million a year in terms of funding
shortfall. He said that's a large enough number to be a
significant problem, especially when it is coupled with the
decline over the last few years of municipal assistance and
revenue sharing.
Mr. Swisher outlined three suggested changes to SB 102: (1)
require that any local property tax relief program for
senior citizens and disabled veterans be approved by the
voters; (2) allow locally established property tax relief
programs to grant deferments on property taxes as well as
exemptions; and (3) exempt the value of property optionally
exempted under a local program to provide tax relief for
senior citizens and disabled veterans from the full and true
value determination prepared by the Department of Community
& Regional Affairs, which is a determining factor in the
level of funding under the education foundation and the
state revenue sharing programs.
Mr. Swisher said the municipalities strongly feel these
exemptions are decisions that should be made locally. They
are not insensitive to the concerns of senior citizens, but
it is necessary to balance whether this exemption is most
helpful to seniors who may be struggling or perhaps to the
younger family who may also be struggling. He suggested
that perhaps, as public policy, the question of need should
at least be considered.
Number 290
Addressing the amendments proposed by the League, BRUCE
GERAGHTY said they think the municipalities can already deal
with the requirement for an election to approve the
ordinance. He said he wasn't quite sure that access to a
deferral system isn't already available. There is nothing
that says municipalities can't institute a deferral system.
The department prefers that the municipalities have as much
flexibility as possible.
Speaking to the third amendment to remove it from the tax
rolls, Mr. Geraghty said the state tax assessor has brought
that up, and he thinks that it is a matter of it being in
the proper location to exempt so it doesn't affect the
education formula. He added that he would get more
information on the issue.
SENATOR TAYLOR commented that it was his understanding local
communities are not allowed to exempt property from that
calculation. He believes that a program should be based
upon what a tax mill generates in a community, not what the
department calculates a community being capable of
generating. He said it raises a policy issue that needs to
be resolved because there are many communities where the
department doesn't have a tax base. Furthermore, he would
be very hesitant to provide an additional exemption as
suggested by Mr. Swisher, because that exemption might very
well be abused.
Number 350
CONNIE SIPE, Executive Director, Older Alaskans Commission,
explained that the Commission has not yet taken an official
position on SB 102, although they have been discussing it
and have some concerns with it.
Ms. Sipe said she always thought that under the old system
there was some exemption from ad valorem value at either
revenue sharing or school taxation for these exempted
properties so that the municipalities did have some benefit
despite the fact that they weren't fully reimbursed by the
state.
Ms. Sipe noted that seniors have also raised the same
concern as addressed by Senator Taylor about the fairness
between the communities.
Concluding, Ms. Sipe said seniors would like some
consideration of something like the deferral system, or if
it is going to go to local option, perhaps the state could
preserve a mandatory hardship level and have it defined so
that it would be fair between cities. She added that 30
percent of seniors have incomes below $15,000 and that
includes their longevity bonus and permanent fund dividend.
Number 395
CHAIRMAN RANDY PHILLIPS requested that the Older Alaskans
Commission provide the committee with any recommended
changes. He stated SB 102 would be back before the
committee the following Thursday.
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