Legislature(1993 - 1994)

02/18/1993 09:00 AM CRA

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
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  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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