Legislature(1993 - 1994)
04/12/1993 09:20 AM Senate FIN
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* first hearing in first committee of referral
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+ teleconferenced
= bill was previously heard/scheduled
SENATE BILL NO. 88
An Act relating to grants to municipalities, named
recipients, and unincorporated communities;
establishing capital project matching grant programs
for municipalities and unincorporated communities;
establishing a local share requirement for capital
project grants to municipalities, named recipients, and
unincorporated communities; and providing for an
effective date.
Co-chair Pearce directed that SB 88 be brought on for
discussion, noted a prior committee hearing on the
legislation, and referenced proposed amendments.
SENATOR ROBIN TAYLOR and SHELBY STASTNY, Director, Office of
Management and Budget, came before committee. Co-chair
Pearce directed attention to an amendment by Senator Taylor
and asked that members designate it Amendment No. 2.
Senator Taylor explained that instead of merely utilizing
the population base and differentiating on a percentile
basis what each community should pay toward capital grants,
the amendment factors in actual community ability to pay.
The Senator explained that it would not be proper for a
community such as Wrangell, with a mill levy of $73.0 to
$75.0, to be classed with Anchorage, which has a tax base of
$10 million, and the North Slope Borough with $12.3 billion.
Those with a greater tax base should pay a greater
percentage.
Senator Taylor next referenced a spread sheet attached to
Amendment No. 2, saying it presents figures for additional
dollars driven into the formula as a result of the proposed
amendment.
When queried by Co-chair Pearce for his comments, Mr.
Stastny noted that when the capital matching grant program
was originally introduced by the administration, two years
ago, it included an "ability to pay" concept. That formula
was removed from the bill prior to introduction in the
current legislature. The administration has no objection to
the concept or the amendment.
Senator Kerttula MOVED for adoption of Amendment No. 2. No
objection having been raised, Amendment No. 2 was ADOPTED.
Co-chair Pearce next directed attention to Amendment No. 1.
She explained that it results from correspondence from
Anchorage Mayor, Tom Fink. That correspondence speaks to
opposition to increase of the match ratio from 70/30 to
50/50. Senator Rieger MOVED for adoption of Amendment No.
1. Senator Kelly OBJECTED and inquired concerning
percentage changes. Senator Kerttula noted that population
is not necessarily a good factor on which to base grants.
Ability to pay based on the tax base is a better indicator.
He then questioned whether communities aside from those with
large tax bases could easily accumulate matching funds, and
he voiced support for the amendment.
Senator Rieger pointed to need to extend the proposed
amendment beyond July 1, 1994, and indicated need for an
amendment to Amendment No. 1, deleting most of subsection
(1) at page 11, lines 1 and 2. The only language from the
subsection to be retained should be "the local share
percentage is." Co-chair Pearce concurred. Senator Rieger
then MOVED for adoption of the amendment to Amendment No.
1. Senator Kelly again OBJECTED. He suggested that if
municipalities are to be weaned from state dollars, the
50/50 match is a better plan for the state general fund.
Senator Kelly then REMOVED his OBJECTION. No further
objection having been raised, the amendment to Amendment No.
1 was ADOPTED. Co-chair Frank noted that passage of the
proposed bill would not prohibit the legislature from making
designated grants.
(Senator Jacko arrived at the meeting at this time.)
Senator Kelly stressed that grant funding would go a lot
further if the match is 50/50 rather than 70/30. Senator
Rieger concurred in comments by Co-chair Frank that even
with the proposed matching grant program, designated grants
would continue to be made. He then voiced his belief that
the higher the local match requirement, the greater the
disparity between municipalities favored by the direct grant
approach and those not favored by appropriations flowing
through a mechanism similar to the proposed bill. He voiced
skepticism as to how the program is likely to work. Some
communities will be funded 100%, while others will match
70/30. A 50/50 match would increase that disparity.
Co-chair Pearce directed that the roll be called on adoption
of Amendment No. 1:
YEAS: Kerttula, Rieger, Jacko, Frank, Pearce
NAYS: Sharp, Kelly
The motion CARRIED on a vote of 5 to 2, and Amendment No. 1
was ADOPTED.
Co-chairman Pearce called for additional amendments. None
were offered. She then directed that Amendments 1 and 2 be
incorporated within a draft CSSB 88 (Finance).
The Co-chair next referenced two fiscal notes from the Dept.
of Community and Regional Affairs. The first seeks an
accounting clerk III and a grant administrator III as well
as associated computer equipment. An additional $10.0 is
sought, on the second note, for regional offices. A note
from the Dept. of Administration requests four additional
positions with associated travel, contractual, and
equipment. The Co-chair expressed concern regarding the
magnitude of the fiscal notes. She then questioned whether
the grant process within the proposed bill would be that
much more onerous than current capital grants.
Shelby Stastny again came before committee accompanied by
JACK FARGNOLI, Office of Management and Budget. Mr.
Fargnoli explained that meetings with Dept. of
Administration staff indicate that past budget reductions
have left the department only one person to deal with
municipal grants under Title 37. There are no auditors, and
accounting clerks serve a number of sections. The proposed
bill would impose a new work load on the department. In
addition, it calls for extension of matching requirements to
existing programs. Individual accounts will have to be set
up for all municipalities under the matching grants portion
of the bill, and verifications and determinations will be
required for match criteria under the existing municipal
grant program. That creates need for an auditor. The
department does not have one. An accounting clerk would
also be needed to split his or her time between the two
programs.
End, SFC-93, #57, Side 1
Begin, SFC-93, #57, Side 2
Mr. Fargnoli attested to understaffing at both accounting
and supervisory levels.
Co-chair Pearce questioned need for involvement of both the
Dept. of Administration and Dept. of Community and Regional
Affairs. Mr. Fargnoli explained that both department are
utilized under the present program. Efficiencies are to be
gained by having the new capital matching grants program
parallel the existing structure. Mr. Stastny commented that
one of the programs functions as a matching grants program
under municipal assistance while the other issues from
revenue sharing. Senator Kerttula suggested that the two
could be combined.
In response to a question from Co-chair Pearce, Mr. Fargnoli
explained that the Dept. of Administration would be
administering the new matching grants, created by SB 88, for
municipalities as well as extension of matching requirements
to the existing municipal grant program. The Dept. of
Community and Regional Affairs would provide parallel
administration for unincorporated communities.
Discussion followed between the Co-chair and Mr. Fargnoli
regarding existing staff at both departments. Mr. Fargnoli
noted considerable difference between Dept. of
Administration dealings with municipalities having
institutional governments and interaction of the Dept. of
Community and Regional Affairs with unincorporated
communities that do not have access to personnel, financial
resources for development of grant proposals, financial
planning, economic development, etc. Co-chair Pearce
suggested that, with that in mind, one would expect the
fiscal note from the Dept. of Community and Regional Affairs
to be larger than that from the Dept. of Administration.
However, the reverse is true. Mr. Fargnoli acknowledged
that were the programs starting from scratch, the request
from the Dept. of Community and Regional Affairs would be
the larger. At the present time, Dept. of Administration
staff is maxed out in terms of what it can handle. An
integer increase in the number of positions is thus needed.
Co-chair Pearce queried members regarding action on the
fiscal notes. Senator Kelly questioned need for staff
increases at the Dept. of Administration. Co-chair Pearce
requested that Senator Jacko and Co-chair Frank, chairmen of
the respective budget subcommittees, review the notes and
report back to committee at the next meeting. She then
directed that the bill be HELD in committee pending that
review and preparation of Senate Finance Committee fiscal
notes for the departments, if necessary.
Discussion followed between Co-chair Frank and Mr. Stastny
concerning the flow of funding to nonprofit groups and
percentage allowances for administrative costs. Mr. Stastny
noted that the 10% administrative allowance was incorporated
within the bill by Senator Phillips when the legislation was
before Senate Community and Regional Affairs. The intent
was to prohibit municipalities from charging more than 10%.
Co-chair Frank questioned whether an administrative fee was
appropriate in situations where a municipality merely acts
as a pass through from the state to a nonprofit or other
grantee.
SENATOR RANDY PHILLIPS came before committee and cited an
example where municipal engineering and administrative costs
on a highway project within his district utilized $450.0 of
the $1.1 million project. Both Senator Kelly and Co-chair
Frank voiced need to establish the 10% administrative fee as
the maximum rather than the rule.
Further discussion of engineering/architectural and
administrative costs followed. Co-chair Frank voiced need
to distinguish between pass-through situations and true
administrative services. Co-chair Pearce asked that Co-
chair Frank and staff work on proposed amendments. Senator
Kelly suggested that the committee provide guidelines but
leave the ultimate decision to administrators of individual
grants. Co-chair Frank concurred in the need to provide
more direction. Co-chair Pearce suggested that a letter of
intent might be appropriate.
Senator Kerttula inquired about savings that might derive
from combining the grant program within a single department
rather than the present division between two agencies. Mr.
Stastny agreed that perhaps some savings could be achieved.
He questioned, however, whether the Dept. of Community and
Regional Affairs has authority to make grants to
municipalities.
Co-chair Frank asked how legislative designation portions of
the bill would work. Mr. Stastny acknowledged that the
provisions represent a change in the current bill over the
one introduced in the past legislature. He then explained
that communities would be required to submit projects to the
Office of Management and Budget for inclusion within the
budget. The legislature would either approve and fund or
deny approval as it reviews and acts on the capital budget.
Senator Kelly asked if the administration would only include
70/30 projects rather than 100% matches in the program. Mr.
Stastny said that is how the capital budget had evolved in
the past. The legislature then adds direct grants in the
process of its budget review. Water and sewer projects
within the Dept. of Environmental Conservation and school
projects in the Dept. of Education would be requested per
the current process.
Further discussion followed between Co-chair Frank and Mr.
Stastny concerning inclusion of community projects in
priority order. Mr. Stastny explained that legal opinion
indicates that the legislation cannot direct the Governor to
fund projects in priority order. The bill thus states that
the Governor should present them by priority or submit
information explaining why they are not so listed. The
Office of Management and Budget expects that they will be in
priority order.
Co-chair Pearce noted the newly enacted requirement that
legislation impacting municipalities carry a municipal
fiscal note. The note from the Dept. of Community and
Regional Affairs appears to be a better fit for the
appropriation bill rather than SB 88. She then asked that
the department provide a municipal fiscal note indicating
the percentage impact on each community rather than the
specific $65 million dollar amount set forth on the present
note.
Co-chair Pearce directed that the meeting be briefly
recessed prior to proceeding to discussion of SB 128.
RECESS - 10:00 A.M.
RECONVENE - 10:05 A.M.
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