Legislature(2021 - 2022)SENATE FINANCE 532

02/17/2021 09:00 AM Senate FINANCE

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09:02:30 AM Start
09:03:33 AM Presentation: Alaska Municipal League – Municipal Impacts from State Budget Actions
10:36:51 AM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ Alaska Municipal League - Municipal Impacts from TELECONFERENCED
State Budget Actions
+ Bills Previously Heard/Scheduled TELECONFERENCED
                 SENATE FINANCE COMMITTEE                                                                                       
                     February 17, 2021                                                                                          
                         9:02 a.m.                                                                                              
                                                                                                                                
9:02:30 AM                                                                                                                    
                                                                                                                                
CALL TO ORDER                                                                                                                 
                                                                                                                                
Co-Chair  Stedman   called  the  Senate   Finance  Committee                                                                    
meeting to order at 9:02 a.m.                                                                                                   
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Senator Click Bishop, Co-Chair                                                                                                  
Senator Bert Stedman, Co-Chair                                                                                                  
Senator Lyman Hoffman                                                                                                           
Senator Donny Olson                                                                                                             
Senator Natasha von Imhof                                                                                                       
Senator Bill Wielechowski                                                                                                       
Senator David Wilson                                                                                                            
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
None                                                                                                                            
                                                                                                                                
ALSO PRESENT                                                                                                                  
                                                                                                                                
Nils  Andreassen,   Executive  Director,   Alaska  Municipal                                                                    
League.                                                                                                                         
                                                                                                                                
SUMMARY                                                                                                                       
                                                                                                                                
PRESENTATION:  ALASKA MUNICIPAL  LEAGUE    MUNICIPAL IMPACTS                                                                    
FROM STATE BUDGET ACTIONS                                                                                                       
                                                                                                                                
Co-Chair Stedman discussed the agenda.                                                                                          
                                                                                                                                
^PRESENTATION: ALASKA  MUNICIPAL LEAGUE    MUNICIPAL IMPACTS                                                                  
FROM STATE BUDGET ACTIONS                                                                                                     
                                                                                                                                
9:03:33 AM                                                                                                                    
                                                                                                                                
NILS  ANDREASSEN,   EXECUTIVE  DIRECTOR,   ALASKA  MUNICIPAL                                                                    
LEAGUE, informed  that he  had a  comprehensive presentation                                                                    
for the  committee. He  wanted to provide  a big  picture of                                                                    
local governments  and how they  interacted with  the state,                                                                    
as   well   as   how   state   budget   decisions   affected                                                                    
municipalities. He discussed the presentation "Condition of                                                                     
Communities - Fiscal Futures" (copy on file).                                                                                   
                                                                                                                                
Mr. Andreassen turned to slide 2, "State Budget and                                                                             
Municipal Implications":                                                                                                        
                                                                                                                                
     Those  municipalities that  contribute the  greatest to                                                                    
     the state's  economy, experience the brunt  of cuts and                                                                    
     cost-shifting                                                                                                              
          ?The   Governor's   proposed  FY20   budget,   for                                                                    
          instance,  included  cuts,  clawbacks,  and  cost-                                                                    
          shifting of nearly  $900M - $850M of  that fell on                                                                    
          just 20 local governments                                                                                             
                                                                                                                                
     Indirect   costs  to   municipalities   are  the   more                                                                    
     significant  challenge,  and  may impact  rural  Alaska                                                                    
     disproportionally                                                                                                          
          ?Direct cuts like Community Assistance reduce the                                                                     
          capacity of local governments                                                                                         
          ?Reductions to things like public radio and TV,                                                                       
          or the ferry system, impact communities                                                                               
                                                                                                                                
     Most reductions  that impact  local governments  do not                                                                    
     reduce  the size  of State  government, they  eliminate                                                                    
     the State's  support for partners that  are fundamental                                                                    
     to quality of life and economic health                                                                                     
                                                                                                                                
     Unfunded  mandates, cost-shifting,  or reductions  that                                                                    
     result  in  resident  expectations shifting  local  all                                                                    
     push local governments toward few options                                                                                  
          ?Increased or new taxes                                                                                               
          ?Reduction in the provision of services                                                                               
          ?Reduced capital investments and maintenance                                                                          
          ?Eliminate programs and staff                                                                                         
                                                                                                                                
Mr.  Andreassen  acknowledged  that  he  did  not  have  the                                                                    
expertise of the  Office of Management and  Budget (OMB) nor                                                                    
the Legislative  Finance Division, and he  would welcome any                                                                    
adjustments to his figures.                                                                                                     
                                                                                                                                
9:06:10 AM                                                                                                                    
                                                                                                                                
Mr. Andreassen looked at slide 3, "The Basics":                                                                                 
                                                                                                                                
     165 cities and boroughs out of 224 communities                                                                             
          ?19 boroughs 11 Home Rule; 1 First Class; 7                                                                           
          Second Class                                                                                                          
         ?145 cities  11 Home Rule; 18 First Class                                                                              
          ?1 organized under federal law - Metlakatla                                                                           
                                                                                                                                
     Home Rule may do anything not prohibited by law                                                                            
    General Law may only do those things allowed by law                                                                         
     Few musts all boroughs, home rule/first class cities                                                                       
       education, planning/platting, and taxation                                                                               
                                                                                                                                
     Serve 825,000 Alaskans                                                                                                     
     Employ 7,700 Alaskans, or 20,000 combined with schools                                                                     
     Tax Revenue: FY18 $1.83B to FY19 $1.86B                                                                                    
     Revenues: FY19 $2.55B to FY20 $2.57B                                                                                       
     Expenses: FY19 $2.54B to FY20 $2.63B                                                                                       
                                                                                                                                
Mr.   Andreassen  commented   that  there   had  been   much                                                                    
discussion about  home rule communities during  the COVID-19                                                                    
pandemic.  He  acknowledged   that  there  were  overlapping                                                                    
jurisdictions  between boroughs  and cities.  He cited  that                                                                    
the   overall  number   of   people   that  Alaska's   local                                                                    
governments  were  serving  were greater  than  the  state's                                                                    
population  in  some  respects.   He  commented  that  local                                                                    
governments were  a significant employer. He  explained that                                                                    
the  difference between  tax revenue  and total  revenue was                                                                    
that  total revenue  included  federal  and state  transfers                                                                    
such as  community assistance. He would  discuss revenues in                                                                    
more detail at a later part of the presentation.                                                                                
                                                                                                                                
9:09:34 AM                                                                                                                    
                                                                                                                                
Mr. Andreassen  reviewed slide 4, "Variation,"  which showed                                                                    
four   state  maps   depicting  the   areas  of   the  state                                                                    
participating   in  Public   Employees'  Retirement   System                                                                    
(PERS), police  powers, school  contribution, and  the Power                                                                    
Cost  Equalization  (PCE)  Fund.   He  wanted  to  show  how                                                                    
different communities  in the state were.  Local governments                                                                    
were  impacted differently  by  state  budget decisions.  He                                                                    
cited  that out  of 165  cities and  boroughs in  the state,                                                                    
only 64 were PERS employers.  Out of 165 cities and boroughs                                                                    
in  the state,  only  34 made  the  school contribution.  He                                                                    
noted that  just over 100 local  governments and communities                                                                    
benefitted from the  PCE Fund. He pointed out  that 70 local                                                                    
governments  out of  165 had  police  powers. He  emphasized                                                                    
that  not every  local government  experienced state  budget                                                                    
decision-making the same.                                                                                                       
                                                                                                                                
Mr.  Andreassen  discussed slide  5,  "What  pays for  State                                                                    
government?" He relayed that the  slide came from Department                                                                    
of  Revenue,   and  showed  a  graphic   entitled  "Relative                                                                    
Contributions  to  Total State  Revenue:  FY  2020." He  had                                                                    
added information in blue about  where local governments fit                                                                    
into  the picture.  The information  showed $1.8  billion in                                                                    
local government  tax revenue,  which put  local governments                                                                    
just above petroleum and above  investment earnings in terms                                                                    
of  the   total  number  that  funded   state  programs.  He                                                                    
considered  local governments  and  the  provision of  state                                                                    
services as part of the big picture.                                                                                            
                                                                                                                                
9:12:11 AM                                                                                                                    
                                                                                                                                
Mr.  Andreassen   presented  slide  6,   "Local  Government:                                                                    
Revenues":                                                                                                                      
                                                                                                                                
     FY19 revenue was $2.5 billion                                                                                              
     Property Tax: 15 of the 19 boroughs, and 21 cities,                                                                        
     with total revenue - $1.46 billion                                                                                         
          ?Of this, local Governments collect State                                                                             
          Property Tax of $256M                                                                                                 
                                                                                                                                
     Sales Tax: 95 cities and 9 boroughs have a sales tax,                                                                      
     with total revenue - $260 million                                                                                          
                                                                                                                                
     Additional Taxes and Fees: Tobacco, raw fish, car                                                                          
     rental, alcohol, and bed = $146 million                                                                                    
                                                                                                                                
     State and Federal transfers approximately 20% of local                                                                     
     government budgets                                                                                                         
          ?Federal Payment in Lieu of Taxes (PILT -$31M)                                                                        
          and Secure Rural Schools (SRS)                                                                                        
          ?Community Assistance                                                                                                 
          ?Grants                                                                                                               
                                                                                                                                
     Revenue is less the State's mandatory exemptions                                                                           
     ?Mandatory Senior Citizen and Disabled Veteran                                                                             
     Property Tax Exemption                                                                                                     
          ?Applications increased from 27k in 2010 to 47k                                                                       
          in 2020                                                                                                               
          ?Exempted taxes over that period have gone from                                                                       
          $49M to $95M in that same period                                                                                      
                                                                                                                                
Senator von  Imhof asked  if there was  a change  whereby e-                                                                    
commerce purchases included local sales tax.                                                                                    
                                                                                                                                
Mr. Andreassen  answered in the  affirmative. He  noted that                                                                    
there had been a decision  made by the Alaska Supreme Court.                                                                    
Most states now  that had sales tax had  passed online sales                                                                    
tax  laws,  and  Alaska's  local governments  had  the  same                                                                    
ability.  There   was  a  commission  to   work  with  local                                                                    
governments to collect  the taxes. The value of  the tax was                                                                    
approximately 5  percent. Physical sales tax  collection was                                                                    
about the  same as  what was collected  in remote  sales tax                                                                    
collection.                                                                                                                     
                                                                                                                                
Senator  von Imhof  asked if  there  was approximately  $1.3                                                                    
million collected for e-commerce  taxes from $260 million in                                                                    
total taxes.                                                                                                                    
                                                                                                                                
Mr.  Andreassen  agreed  about   that  of  about  106  local                                                                    
governments, only  34 were participating in  the program and                                                                    
would have  to sign on and  adopt the uniform code.  For the                                                                    
current  fiscal  year  there  would be  just  short  of  $10                                                                    
million collected.                                                                                                              
                                                                                                                                
9:16:00 AM                                                                                                                    
                                                                                                                                
Senator Wilson asked if there was  a way to know how much of                                                                    
the online sales tax might  be over collected because of zip                                                                    
code  variation.  He used  the  example  of  a zip  code  in                                                                    
Wasilla.                                                                                                                        
                                                                                                                                
Mr.  Andreassen  noted  that taxing  outside  of  boundaries                                                                    
would  be  against the  law.  He  furthered that  for  those                                                                    
jurisdictions that  joined the remote sales  tax commission,                                                                    
the sales tax boundaries were  GIS coded for sellers to use.                                                                    
A contractor had mapped out  the areas. Applications for tax                                                                    
refunds could be taken up with sellers.                                                                                         
                                                                                                                                
Mr.  Andreassen   spoke  to  slide  7,   "Local  Government:                                                                    
Expenditures":                                                                                                                  
                                                                                                                                
     In FY19, the total expenditures by local governments                                                                       
     in Alaska was $2.5 billion                                                                                                 
           Contributed $130 million into PERS  5% of total                                                                      
          expenditures                                                                                                          
          ?Carry $4.2 billion in bond debt                                                                                      
                                                                                                                                
     Contributed   $486    million   as    local   education                                                                    
     contribution 20% of total expenses                                                                                         
          ?Municipalities contribute over 25% of State's                                                                        
          overall obligation to public education                                                                                
          ?Required local contribution - $256 million in                                                                        
          2018                                                                                                                  
          ?+ $230 million beyond what is required                                                                               
                                                                                                                                
     Public  safety  -  40  with  combined  budgets  of  $75                                                                    
     million more than DPS                                                                                                      
     Quality  of  Life    pools,  libraries,  rec and  youth                                                                    
     centers, parks                                                                                                             
                                                                                                                                
     Public    Facilities,    Works    and    Transportation                                                                    
     Infrastructure                                                                                                             
          ?Water and sewer                                                                                                      
          ?Landfills                                                                                                            
          ?Roads and transit                                                                                                    
          ?Ports and harbors                                                                                                    
                                                                                                                                
Mr.  Andreassen  noted  that  all the  charts  he  did  were                                                                    
inflation  adjusted. He  pointed to  the line  graph on  the                                                                    
slide that  showed municipal  expenditures had  tracked down                                                                    
over time  since FY  13, and  it was  possible to  see local                                                                    
governments adjusting to the new fiscal reality.                                                                                
                                                                                                                                
Mr. Andreassen displayed slide 8, "Vetoes Review  FY20 and                                                                      
FY21":                                                                                                                          
                                                                                                                                
     Vetoes  were  directed  at programs  that  reflect  the                                                                    
     values of the Administration,  and its priorities. They                                                                    
     were  described  as  hard   choices,  and  impacting  a                                                                    
     variety  of stakeholders,  but just  as  hard a  choice                                                                    
     would  have   been  to  address  the   State's  revenue                                                                    
     shortfall.  Instead,  these  vetoes  were  directed  at                                                                    
     social support systems that Alaskans  rely on. The FY22                                                                    
     budget  may reflect  this  same  prioritization. If  we                                                                    
     look at how vetoes were  ascribed, they fall into three                                                                    
     or four buckets.                                                                                                           
                                                                                                                                
     Health and Social Services                                                                                                 
          ?38 of 240 vetoes affected public health                                                                              
          programs, including behavioral and mental health                                                                      
                                                                                                                                
     Local Governments and Schools                                                                                              
          ?38 vetoes applied to local governments, schools                                                                      
          and the university system                                                                                             
                                                                                                                                
     Courts, Fish/Game Management, Transportation                                                                               
          ?24 vetoes were directed at limiting the capacity                                                                     
          of courts or justice system                                                                                           
          ?29 vetoes applied to management of fish and game                                                                     
         in the state, or environmental monitoring                                                                              
          ?17 vetoes fell on DOT programs, specifically to                                                                      
          either AMHS or rural road/airport maintenance                                                                         
                                                                                                                                
     Many  FY21 vetoes  were made  thinking CARES  Act funds                                                                    
     could be applied  in their place, which we  know now is                                                                    
     not the  case. Local governments  had to make  these up                                                                    
     on their own.                                                                                                              
                                                                                                                                
Mr.   Andreassen  thought   that  vetoes   fell  into   four                                                                    
categories  that affected  local  governments. He  recounted                                                                    
that the Alaska Municipal League  (AML) had analyzed all the                                                                    
vetoes  made  within  the  FY  20  and  FY  21  budgets.  He                                                                    
acknowledged  that the  legislature had  done great  work to                                                                    
adjust and respond  to many of the vetoes  that occurred. He                                                                    
mentioned  impacts to  courts,  the Department  of Fish  and                                                                    
Game, and the Alaska Marine Highway System (AMHS).                                                                              
                                                                                                                                
9:20:56 AM                                                                                                                    
                                                                                                                                
Mr.  Andreassen  referenced  slide   9,  "School  Bond  Debt                                                                    
Reimbursement":                                                                                                                 
                                                                                                                                
     Background:  State had  committed to  paying 70/60%  of                                                                    
     all   school   bond   debt,  with   30/40%   match   by                                                                    
     communities, but  with clause that  held municipalities                                                                    
     liable for  100%. There's  a current  moratorium, which                                                                    
     calls  into  question  the   State's  ability  to  meet                                                                    
     Constitutional obligations.                                                                                                
                                                                                                                                
     Challenge: Total debt $800,000,000.                                                                                        
                                                                                                                                
     Options:                                                                                                                   
     1.Absorb through current or added revenues                                                                                 
     2.Examine  legal  options  based on  past  payments  by                                                                    
     State creating condition of confidence                                                                                     
     3.Not paying affects credit rating                                                                                         
                                                                                                                                
     Impact:                                                                                                                    
     ?Other priorities removed from budgets                                                                                     
     ?Taxes increase                                                                                                            
     ?Spend from emergency reserves                                                                                             
                                                                                                                                
Mr. Andreassen  thought school  bond debt  reimbursement was                                                                    
one of  the more  significant issues for  municipalities. He                                                                    
recalled that   the total  debt left for the  current fiscal                                                                    
year  was  about   $800  million,  and  he   knew  that  the                                                                    
governor's  proposed FY  22 budget  contained  a 50  percent                                                                    
reduction to what was owed  for the fiscal year. School bond                                                                    
debt reimbursement had  been vetoed out of  the previous two                                                                    
budgets  at  100 percent  and  50  percent, which  signified                                                                    
roughly  $200 million  that the  state had  shifted back  to                                                                    
local governments between  FY 20 and FY 22.  He relayed that                                                                    
many local governments  had adjusted to the  cuts in various                                                                    
ways including drawing down savings.                                                                                            
                                                                                                                                
Senator  von Imhof  had recently  learned that  $180 million                                                                    
had  come to  school district  via Coronavirus  Aid, Relief,                                                                    
and  Economic Security  (CARES)  Act funding.  She asked  if                                                                    
school districts  could put some  of the funds  into savings                                                                    
if the legislature raised the cap on fund balances.                                                                             
                                                                                                                                
Mr.  Andreassen thought  it would  be helpful  to allow  for                                                                    
school  districts  to carry  forward  the  funds for  future                                                                    
fiscal years. He did not know  if the federal funds could be                                                                    
applied to school debt reimbursement.                                                                                           
                                                                                                                                
Mr. Andreassen continued  to address slide 9.  He noted that                                                                    
the   same  group   of  communities   experienced  lack   of                                                                    
reimbursement for school bond debt  as well as the mandatory                                                                    
senior exemption.                                                                                                               
                                                                                                                                
9:24:04 AM                                                                                                                    
                                                                                                                                
Mr.   Andreassen  showed   slide  10,   "School  Bond   Debt                                                                    
Reimbursement  What's Ahead":                                                                                                   
                                                                                                                                
     18 cities and boroughs who carried this debt in FY20-                                                                      
   Wrangell, Unalaska and Hoonah dropped off since then                                                                         
                                                                                                                                
     8 of 16 remaining have only eight years left                                                                               
                                                                                                                                
     In FY26, debt reimbursed reduces by about half, to                                                                         
     about $48M                                                                                                                 
                                                                                                                                
     Is the State still required to reimburse for vetoed                                                                        
     amounts, pending appropriation?                                                                                            
                                                                                                                                
     Could vetoed amounts get re-amortized, within the debt                                                                     
     repayment schedule?                                                                                                        
                                                                                                                                
     What is the right level of school debt that the State                                                                      
     is able to carry?                                                                                                          
                                                                                                                                
     Local bonding allows Legislature to bypass a GO bond                                                                       
     and statewide vote, or corresponding legislation                                                                           
     -What replaces the current moratorium?                                                                                     
     -What are the impacts of the current moratorium?                                                                           
                                                                                                                                
Mr. Andreassen drew attention to  the table on slide 10 that                                                                    
listed the amount  of school bond debt  per municipality. He                                                                    
contended  that  while the  law  allowed  the state  to  not                                                                    
reimburse  for  school bond  debt  during  the fiscal  year,                                                                    
local governments  had to pay  the debt. He argued  that the                                                                    
vetoed amounts  needed to be  carried into future  years and                                                                    
taken up  by the state's  debt manager  as part of  its debt                                                                    
schedule.                                                                                                                       
                                                                                                                                
Co-Chair  Stedman   thought  the   funds  were   subject  to                                                                    
appropriation.                                                                                                                  
                                                                                                                                
Senator Wilson  asked if AML was  going to file suit  so the                                                                    
third branch of government could make the decision.                                                                             
                                                                                                                                
Mr.  Andreassen  stated  that AML  was  looking  into  legal                                                                    
considerations  around  the   state's  obligation  regarding                                                                    
school bond debt reimbursements.                                                                                                
                                                                                                                                
Senator  Wilson asked  if AML  would be  challenging matters                                                                    
around the senior exemption.                                                                                                    
                                                                                                                                
Mr.  Andreassen asserted  that  it made  sense  that if  the                                                                    
state's   statutory   obligation   to   school   bond   debt                                                                    
reimbursement debt  needed to be  carried forward,  that the                                                                    
same would  be true  of the  senior property  tax exemption.                                                                    
He cited that in the last  ten years, the amount owed by the                                                                    
state to  local governments for the  senior citizen property                                                                    
tax exemption totaled about $761 million.                                                                                       
                                                                                                                                
Co-Chair Stedman  suggested that  AML could  file litigation                                                                    
if it  so desired. He  stated that the legislature  had been                                                                    
working  on policy  to get  school  bond debt  reimbursement                                                                    
paid  in   full  as  well   taking  care  of   the  Regional                                                                    
Educational  Attendance Area  (REAA) issue.  He thought  the                                                                    
legislature   had    a   policy   disagreement    with   the                                                                    
administration.                                                                                                                 
                                                                                                                                
Mr. Andreassen  pointed out  that the  AML was  not faulting                                                                    
how  the   legislature  had  approached  school   bond  debt                                                                    
reimbursement, but  rather was  interested in the  matter of                                                                    
tracking  debt   accurately.  He  thought   considering  the                                                                    
moratorium  in  place  on school  bond  debt  reimbursement,                                                                    
there  needed  to be  new  solutions  for addressing  school                                                                    
construction  and  major  maintenance. While  local  bonding                                                                    
allowed for  the legislature to bypass  a general obligation                                                                    
bond and a statewide vote  or corresponding vote, he thought                                                                    
without  the mechanism  in place  there was  an increase  in                                                                    
overall need for school construction and major maintenance.                                                                     
                                                                                                                                
9:28:15 AM                                                                                                                    
                                                                                                                                
Mr. Andreassen addressed slide 11, "Municipal Bond Bank":                                                                       
                                                                                                                                
     Lawsuit related to oil tax credit corporation, which                                                                       
     State lost, resulted in uncertainty for the Alaska                                                                         
     Municipal Bond Bank to issue any further bonds.                                                                            
                                                                                                                                
     Supreme Court No. S-17377                                                                                                  
                                                                                                                                
     On consideration of the State's Petition for Rehearing                                                                     
     filed on 9/28/2020, and the Apellant's Response filed                                                                      
     on 11/10/2020.                                                                                                             
                                                                                                                                
     It Is Ordered:                                                                                                             
     The Petition for Rehearing is DENIED.                                                                                      
     Entered at the direction of the court.                                                                                     
                                                                                                                                
     This may have real implications for the many local                                                                         
     governments that utilize this instrumentality of the                                                                       
     State.                                                                                                                     
                                                                                                                                
Mr. Andreassen  expressed that  AML was  seriously concerned                                                                    
about  the future  of  the Alaska  Municipal  Bond Bank.  He                                                                    
directed attention  to a list  on the slide that  showed how                                                                    
different local  governments had  unutilized the  bond bank.                                                                    
He noted  that small communities particularly  depended upon                                                                    
the bond bank  for its ability to carry  forward and address                                                                    
infrastructure needs.                                                                                                           
                                                                                                                                
Co-Chair  Stedman asked  for Mr.  Andreassen to  add another                                                                    
column to the  chart to include the  outstanding balance per                                                                    
capita for the communities listed.                                                                                              
                                                                                                                                
Mr. Andreassen agreed to add the information.                                                                                   
                                                                                                                                
Senator von  Imhof did not  understand the link  between the                                                                    
oil  tax credit  bonding  attempt and  the Alaska  Municipal                                                                    
Bond Bank. She did not understand the effect of the ruling.                                                                     
                                                                                                                                
Co-Chair Stedman  thought the question was  best directed to                                                                    
the Department  of Law.  He affirmed that  there was  a link                                                                    
and  a concern  to be  address.  He thought  the issue  went                                                                    
beyond just  the bond  bank to the  matter of  other bonding                                                                    
opportunities  for   the  state.   He  mentioned   that  the                                                                    
constitution  dictated  that bonds  had  to  be for  capital                                                                    
projects.  He affirmed  that the  committee could  receive a                                                                    
briefing on the matter at some point.                                                                                           
                                                                                                                                
Senator Hoffman asked what AML had  done to get the issue of                                                                    
the bond bank clarified.                                                                                                        
                                                                                                                                
Mr. Andreassen  relayed that AML  had filed an  amicus brief                                                                    
in   support   of   the   state's   position,   asking   for                                                                    
clarification. The  AML authority needed  clarification from                                                                    
the court  that the ruling, as  it pertained to the  oil tax                                                                    
corporation,  should  not  extend  to  existing  authorities                                                                    
(particularly like the bond bank).  He thought the bond bank                                                                    
would be  better able  to answer  specific questions  on the                                                                    
matter.                                                                                                                         
                                                                                                                                
Mr. Andreassen turned to slide 12, "Community Assistance":                                                                      
                                                                                                                                
     Background:   In   place   since  1968,   this   is   a                                                                    
     redistribution of  state resource wealth  for equitable                                                                    
     use by local governments  to provide essential services                                                                    
     and keep local tax rates low.                                                                                              
                                                                                                                                
     Challenge: Meet needs where little tax base.                                                                               
                                                                                                                                
     Options:                                                                                                                   
     1.  Absorb through  current revenues    difficult  with                                                                    
     addition of other cost-shifting                                                                                            
     2. Increase taxes    25% of local  governments did this                                                                    
     in the 2000s, when revenue sharing went away                                                                               
     3. Close    this represents  more than 70% of  14 local                                                                    
     government budgets, and they will  no longer be able to                                                                    
     operate                                                                                                                    
                                                                                                                                
     Impact:                                                                                                                    
     ?Local government services revert to the State                                                                             
     ?Local governments divest of powers                                                                                        
     ?Local governments increase taxes                                                                                          
                                                                                                                                
Mr.  Andreassen  referenced  one of  the  original  formulas                                                                    
shown  on  the  slide  that  showed  how  the  state  funded                                                                    
community  revenue sharing,  which  was a  formula that  was                                                                    
attributed  specifically  to   the  different  powers  local                                                                    
governments took  up as  well as  the services  provided. He                                                                    
commented  that  there  had  been  ongoing  erosion  of  the                                                                    
assistance over time.                                                                                                           
                                                                                                                                
9:32:01 AM                                                                                                                    
                                                                                                                                
Mr. Andreassen  looked at slide 13,  "Community Assistance                                                                      
Municipal Impact":                                                                                                              
                                                                                                                                
     Affects every single community, with ranges from:                                                                          
     ?Small cities -$75-80,000                                                                                                  
     ?Medium cities -$80-95,000                                                                                                 
     ?Large cities - $115-250,000                                                                                               
     ?Boroughs - $300-900,000?Largest boroughs -$1.4-6.1 M                                                                      
                                                                                                                                
Mr.  Andreassen  highlighted that  the  graph  on the  slide                                                                    
showed the decline of revenue  sharing. The graph started in                                                                    
1985 and showed  just over $165 million. There  was a period                                                                    
of time in  the early 2000's when  community assistance went                                                                    
away.  He thought  the Legislative  Research Division  could                                                                    
point to communities closing doors,  and he referenced sales                                                                    
tax revenues and rates increasing  during the period of time                                                                    
in response to the  state action. Local governments recently                                                                    
saw  reduction to  community assistance  by  50 percent.  He                                                                    
noted  that  when  the Community  Assistance  Fund  was  not                                                                    
capitalized,  there had  been an  erosion  in payments.  The                                                                    
slide  showed  a  table  of   a  list  of  communities  with                                                                    
community assistance  payments for  FY 21  through FY  23 as                                                                    
compared  to  statute. The  formula  included  a per  capita                                                                    
adjustment,   which  was   lost  when   the  fund   was  not                                                                    
capitalized.   He   thought   all   communities   had   seen                                                                    
significant reductions.                                                                                                         
                                                                                                                                
Mr. Andreassen reviewed slide 14, "Why invest in AMHS?":                                                                        
                                                                                                                                
     33 AMHS port communities                                                                                                   
          ?119,170 residents                                                                                                    
          ?2,275 employees                                                                                                      
          ?$332 million in taxes                                                                                                
          ?$584 million budgets                                                                                                 
          ?Tax as % of budget = 56%                                                                                             
          ?$73 million to education                                                                                             
          ?20 have police powers (60%)                                                                                          
          ?25 are PERS employers (75%)                                                                                          
          ?15 receive $3.7 million in PCE                                                                                       
          ?$720 million in Bond debt                                                                                            
          ?$24 million in fisheries taxes                                                                                       
                                                                                                                                
     106 cities served only by air                                                                                              
          ?62,795 residents                                                                                                     
          ?1,064 employees                                                                                                      
          ?$54 million in taxes                                                                                                 
          ?$137 million budgets                                                                                                 
          ?Tax as % of budget = 39%                                                                                             
          ?$6.5 million to education                                                                                            
          ?43 have police powers (40%)                                                                                          
          ?34 are PERS employers (32%)                                                                                          
          ?94 receive $16.3 million in PCE                                                                                      
          ?$25 million in Bond debt                                                                                             
          ?$4.2 million in fisheries taxes                                                                                      
                                                                                                                                
Mr.  Andreassen mentioned  the graph  in the  middle of  the                                                                    
slide that showed  declining funding for AMHS  over time. He                                                                    
noted that  port communities had  active economies  and were                                                                    
good contributors  to state  priorities. The  economies took                                                                    
on  bond debt,  were less  reliant on  community assistance,                                                                    
were  major  contributors to  PERS  and  education, and  had                                                                    
police   powers.   He    asserted   that   providing   basic                                                                    
transportation   to  communities   would  strengthen   local                                                                    
governments. He  thought providing ferry service  was a good                                                                    
way  for  the  state  to strengthen  local  governments.  He                                                                    
mentioned  that some  cities  could only  be  served by  air                                                                    
without the ferry system. He  thought the committee had been                                                                    
cognizant of the plight of AMHS.                                                                                                
                                                                                                                                
Mr.  Andreassen  continued  his remarks.  He  thought  while                                                                    
there was  potentially going  to be  no cruise  ship season,                                                                    
AML saw a  significant option for AMHS to meet  the needs of                                                                    
coastal communities and out of state travelers.                                                                                 
                                                                                                                                
9:36:47 AM                                                                                                                    
                                                                                                                                
Mr.   Andreassen    discussed   slide   15,    "Power   Cost                                                                    
Equalization":                                                                                                                  
                                                                                                                                
     Established in 1985                                                                                                        
     Provides economic assistance to communities and                                                                            
     residents in areas where kWH costs are 3 to 5 times as                                                                     
     high as the average of urban areas.                                                                                        
                                                                                                                                
     PCE was established at the same time that urban                                                                            
     communities benefited from major state-subsidized                                                                          
     energy projects such as the Four Dam Pool, Bradley                                                                         
     Lake, and the Alaska Intertie.                                                                                             
                                                                                                                                
     Rural  communities  not on  the  road  system that  are                                                                    
     dependent on diesel fuel do  not benefit from the large                                                                    
     subsidized  energy   projects,  and  PCE  is   a  cost-                                                                    
     effective  alternative   to  provide   comparable  rate                                                                    
     relief to rural residents.                                                                                                 
                                                                                                                                
Mr.  Andreassen cited  a list  of communities  on the  slide                                                                    
that especially  depended on the  PCE. He thought the  FY 22                                                                    
budget   included  continued   payment  of   PCE,  and   AML                                                                    
encouraged continued support of the program.                                                                                    
                                                                                                                                
Co-Chair Stedman  asked if the program  pertained to payment                                                                    
for the first 500 kilowatts.                                                                                                    
                                                                                                                                
Mr. Andreassen thought Co-Chair Stedman was correct.                                                                            
                                                                                                                                
                                                                                                                                
Senator  Hoffman thought  the  community  of Arctic  Village                                                                    
paid a rate  $1 per kilowatt, which was 20  times the amount                                                                    
paid  by  other communities  with  a  rate  of 5  cents  per                                                                    
kilowatt.                                                                                                                       
                                                                                                                                
Mr. Andreassen thought that Senator Hoffman was correct.                                                                        
                                                                                                                                
Mr. Andreassen added that both  the PCE and the ferry system                                                                    
brought down  the transactional  cost of  communities, which                                                                    
meant the communities  had a better ability  to see economic                                                                    
development   occur,  which   was   a   priority  of   local                                                                    
governments.                                                                                                                    
                                                                                                                                
Senator   von   Imhof   observed   that   Mr.   Andreassen's                                                                    
presentation  had some  slides that  pertained to  CARES Act                                                                    
funding. She  thought transportation  and AMHS  had received                                                                    
some CARES Act funding. She  referenced slide 12, and police                                                                    
protection  as well  as hospitals.  She  thought safety  and                                                                    
health were highlights  of CARES Act funding,  and she hoped                                                                    
the  presentation would  address  how the  funds had  offset                                                                    
municipality spending.                                                                                                          
                                                                                                                                
Mr. Andreassen affirmed that he would touch on the topic.                                                                       
                                                                                                                                
9:39:52 AM                                                                                                                    
                                                                                                                                
Co-Chair Stedman  spoke to slide  15 and noted that  many of                                                                    
the communities listed  on the were not  well established as                                                                    
cash economies. He continued that  the income needed to meet                                                                    
expenditures was  questionable. He discussed  differences in                                                                    
communities and  mentioned a community in  his district that                                                                    
had  no   Christmas  lights   due  to   the  high   cost  of                                                                    
electricity.                                                                                                                    
                                                                                                                                
Mr.   Andreassen  presented   slide  16,   "PERS:  Actuarial                                                                    
Determined Contribution Rate":                                                                                                  
                                                                                                                                
     Total rate is 30.11%                                                                                                       
          ?Pension Benefits is 20.89% = Normal cost of                                                                          
          2.58% / Past service rate of 18.31%                                                                                   
          ?Healthcare Benefits is 3.12% - No past service                                                                       
          rate                                                                                                                  
          ?DCR is 6.10%                                                                                                         
                                                                                                                                
     FY19 $592M Municipal Payroll                                                                                               
          ?PERS is $132 million w/ 22% cap                                                                                      
            50M more at full rate                                                                                               
                                                                                                                                
     64 municipal employers = 18% of PERS                                                                                       
     15k PERS/TRS DB employees                                                                                                  
     29k PERS/TRS DC employees                                                                                                  
                                                                                                                                
Mr.  Andreassen relayed  that another  AML priority  was the                                                                    
state's pension  system. He mentioned  a graph on  the slide                                                                    
that showed  PERS and the Teachers'  Retirement System (TRS)                                                                    
unfunded   liability.  He   referenced   the  $2.3   billion                                                                    
additional appropriation  five or  six years  previously. He                                                                    
noted that  the healthcare side of  benefits was overfunded.                                                                    
He argued that  when looking at the  state's pension system,                                                                    
there  were  64 percent  of  municipal  employers that  made                                                                    
roughly 18 percent of the  overall pension system. Currently                                                                    
employees  were hired  with defined  contribution plans.  He                                                                    
saw  an opportunity  cost when  considering recruitment  and                                                                    
retention  of police  and fire  service employees  and other                                                                    
members of the work force.                                                                                                      
                                                                                                                                
9:43:40 AM                                                                                                                    
                                                                                                                                
Mr.  Andreassen  spoke to  slide  17,  "How should  we  look                                                                    
forward?" The slide showed a  line graph entitled 'Inflation                                                                    
Expenditures 10  Year Budget.' He  was glad to see  that the                                                                    
governor's  ten-year  plan  produced by  OMB  mentioned  1.5                                                                    
percent inflation  proofing being  tied to the  state budget                                                                    
going  forward.  He thought  it  was  worth looking  at  the                                                                    
bigger  picture  and noted  that  the  1.5 percent  was  not                                                                    
applied to the  whole state budget. He thought  it was worth                                                                    
noting  that the  Alaska Permanent  Fund Corporation  (APFC)                                                                    
and the Alaska Retirement  Management Board both used higher                                                                    
rates  of inflation.  He suggested  that the  state was  not                                                                    
thinking of how things would cost moving forward.                                                                               
                                                                                                                                
Co-Chair  Stedman thought  the ten-year  plan was  not worth                                                                    
the paper  it was printed  on since  it was not  possible to                                                                    
forecast that far in the  future. He mentioned examples such                                                                    
as the great  recession and the COVID-19  pandemic. He noted                                                                    
there  were substantial  deficits in  the plan.  He asserted                                                                    
that  the committee  would be  considering a  three-to-four-                                                                    
year  plan  in  which  to  make  changes.  He  stressed  the                                                                    
importance of short-term planning.                                                                                              
                                                                                                                                
Senator von Imhof  thought it was important  to consider the                                                                    
reality that  20 percent  of the  state's revenue  came from                                                                    
oil  and  about 60  percent  to  70  percent came  from  the                                                                    
Permanent Fund. She asserted that  commodity markets, and to                                                                    
some degree the  equity market, were at the  whims of supply                                                                    
and  demand  rather than  being  related  to inflation.  She                                                                    
thought it was not possible to project increased revenues.                                                                      
                                                                                                                                
Co-Chair   Stedman  noted   that  the   ten-year  plan   was                                                                    
statutorily  required,  and  his   comments  should  not  be                                                                    
considered overly disparaging.                                                                                                  
                                                                                                                                
Mr. Andreassen  commented that there  were many  things that                                                                    
were  not   included  in   state  planning,   and  community                                                                    
assistance and  other formulas did  not take  inflation into                                                                    
consideration.                                                                                                                  
                                                                                                                                
9:47:30 AM                                                                                                                    
                                                                                                                                
Mr.  Andreassen   displayed  slide  18,  "Keeping   up  with                                                                    
Education":                                                                                                                     
                                                                                                                                
    Appears to keep up with inflation, but reality is:                                                                          
          ?Adjustments for ADM                                                                                                  
          ?Fails to adjust for increased costs of health or                                                                     
          retirement                                                                                                            
                                                                                                                                
     Schools asked to do more with less                                                                                         
                                                                                                                                
     Avoiding litigation:                                                                                                       
           Kasayulie rural inadequacy                                                                                           
          ?Mat Su operations v. instruction                                                                                     
            etchikan  public education clause                                                                                   
                                                                                                                                
     Wheelock  (2017)  argues   that  the  Public  Education                                                                    
     Clause has not been challenged,  and that "a claim that                                                                    
     the  state  has  the   responsibility  to  fund  public                                                                    
     education  at  a  minimally  constitutionally  adequate                                                                    
     level could succeed" (p. 125).                                                                                             
                                                                                                                                
Mr. Andreassen  relayed that AML  was looking  into unfunded                                                                    
mandates  imposed  upon  schools   and  did  not  see  state                                                                    
expenditures meeting  the school's needs. He  cited that the                                                                    
committee  had  met with  the  Department  of Education  and                                                                    
Early  Development (DEED)  Commissioner Michael  Johnson the                                                                    
previous  week  and  had  discussed  the  school  bond  debt                                                                    
reimbursement and  whether the state was  following the law.                                                                    
He  considered  the  question of  the  state's  progress  in                                                                    
avoiding litigation.  He qualified  that he was  not arguing                                                                    
for litigation  but thought  there was  a valid  question to                                                                    
consider. He thought  there were many that  would argue that                                                                    
the   constitutional   education    requirement   could   be                                                                    
successfully challenged. He  suggested the legislature think                                                                    
about how  to adjust  appropriately for inflation  and other                                                                    
school and community needs when  considering where the state                                                                    
was headed.                                                                                                                     
                                                                                                                                
Mr. Andreassen referenced slide  19, "Community and Regional                                                                    
Jails":                                                                                                                         
                                                                                                                                
     15  local governments  provide  community and  regional                                                                    
     jails  on  behalf  of   the  State's  criminal  justice                                                                    
     system; and these  jails are an integral  part of local                                                                    
     and state law enforcement.                                                                                                 
                                                                                                                                
     Community  and  regional  jails are  essentially  State                                                                    
     holding cells for pre-trial services.                                                                                      
                                                                                                                                
     State  funding for  community  and  regional jails  has                                                                    
     been static  for the  last six  years, and  if adjusted                                                                    
     for  inflation  represents  pre-2002  levels  of  State                                                                    
     investment.                                                                                                                
                                                                                                                                
     In many  cases, State funding  is only 50% of  the full                                                                    
     cost of  managing the jail  on the State's  behalf, and                                                                    
     in all cases less than it needs to be.                                                                                     
                                                                                                                                
     ?Haines receives $247k for $500k in expenses                                                                               
     ?Kodiak receives $1.1M for $1.4M in expenses                                                                               
     ?Petersburg receives $173k for $393k in expenses                                                                           
     ?Seward receives $368k for $685k in expenses                                                                               
     ?Dillingham receives $555k for $674k in expenses                                                                           
                                                                                                                                
Mr.  Andreassen  noted  that  the graph  on  the  slide  was                                                                    
adjusted for  inflation. He thought  the state's  payment to                                                                    
local governments  for the  previous six  years had  been $7                                                                    
million  and   had  not  increased  according   to  need  or                                                                    
inflation. Many  local governments received half  the budget                                                                    
from the  state to complete  the state service of  jails. He                                                                    
noted that the topic had  been flagged for the Department of                                                                    
Public  Safety. He  encouraged members  to consider  why the                                                                    
payment had been  $7 million for six  years when considering                                                                    
the matter in budget subcommittee.                                                                                              
                                                                                                                                
Co-Chair Stedman  reminded that  the answer  to most  of Mr.                                                                    
Andreassen's  questions was  that  Alaska  had a  structural                                                                    
deficit.                                                                                                                        
                                                                                                                                
9:51:03 AM                                                                                                                    
                                                                                                                                
Senator Wilson  asked if all the  communities with community                                                                    
jails also had active police forces.                                                                                            
                                                                                                                                
Mr. Andreassen answered in the affirmative.                                                                                     
                                                                                                                                
Co-Chair Stedman  explained that  the legislature  was aware                                                                    
of many of the issues, which  needed to be balanced when the                                                                    
budget was  contemplated. He thought  it was clear  that the                                                                    
state  had not  been  able to  make  payroll with  recurring                                                                    
revenue for over 5 years.                                                                                                       
                                                                                                                                
Mr.  Andreassen thought  local  governments  would have  the                                                                    
same experience as the state  when it came to delivering the                                                                    
state service of jails if it was not funded.                                                                                    
                                                                                                                                
Mr.   Andreassen    showed   slide   20,    "Addressing   an                                                                    
Infrastructure Deficit":                                                                                                        
                                                                                                                                
     How do we plan for a $21.2 billion list of                                                                                 
     infrastructure needs, in terms of time and resourcing?                                                                     
     ?School construction and major maintenance                                                                                 
     $2.3 billion                                                                                                               
     ?Water and Wastewater  rural                                                                                               
     $1.6 billion                                                                                                               
     ?Water and Wastewater  urban                                                                                               
     $1.6 billion                                                                                                               
     ?Local capital needs                                                                                                       
     $4 billion                                                                                                                 
     ?Port and Harbor needs                                                                                                     
     $389 million                                                                                                               
     ?State deferred maintenance                                                                                                
     $2 billion                                                                                                                 
     ?STIP                                                                                                                      
     $5 billion                                                                                                                 
     ?Broadband                                                                                                                 
     $2 billion                                                                                                                 
     ?Jails                                                                                                                     
     $500 million                                                                                                               
                                                                                                                                
Mr.   Andreassen  stated   that  to   a  large   extent  the                                                                    
presentation made a case for  addressing the state's revenue                                                                    
shortfall.  He   emphasized  that  there  was   value  being                                                                    
delivered by local governments that  depended upon the state                                                                    
in partnership.  He thought the  state needed to be  able to                                                                    
address  its  budget  deficit.   He  highlighted  the  total                                                                    
infrastructure deficit  and thought  the information  gave a                                                                    
good sense of needs and how resources were being deployed.                                                                      
                                                                                                                                
Co-Chair  Bishop   asked  where   Mr.  Andreassen   got  the                                                                    
information for the  $2 billion for broadband  listed on the                                                                    
slide.                                                                                                                          
                                                                                                                                
Mr. Andreassen cited that the  information was from an older                                                                    
report and  could be  an estimate. He  offered to  follow up                                                                    
with communities to get an updated number.                                                                                      
                                                                                                                                
Co-Chair  Bishop thought  the  number seemed  low and  would                                                                    
appreciate updated figures.                                                                                                     
                                                                                                                                
Senator  Wilson  asked  if   AML  supported  the  governor's                                                                    
general obligation  (GO) bond proposals  and the use  of the                                                                    
Alaska  Housing  Finance  Corporation's (AHFC)  dividend  to                                                                    
leverage federal funds.                                                                                                         
                                                                                                                                
Mr.  Andreassen  supported  the idea  of  the  state  taking                                                                    
necessary measures  to support infrastructure but  could not                                                                    
comment  on  what  was  in  the GO  bond  package  that  was                                                                    
proposed.  He asserted  that the  $350 million  bond package                                                                    
barely addressed  the priority list for  school construction                                                                    
and  major  maintenance for  the  current  fiscal year,  and                                                                    
barely addressed  the port and  harbor needs of  the current                                                                    
fiscal year.  He stated that  AML considered the  proposal a                                                                    
step in  the right direction  but recognized that  the state                                                                    
had not  kept all its  debt obligations such as  school bond                                                                    
debt  reimbursement. He  could not  comment specifically  on                                                                    
the AHFC approach and how the state deployed its resources.                                                                     
                                                                                                                                
Co-Chair  Stedman looked  at the  $389 million  in port  and                                                                    
harbor  needs  and  asked  what   comprised  the  total.  He                                                                    
wondered if new construction was included.                                                                                      
                                                                                                                                
Mr.  Andreassen informed  that a  later slide  would address                                                                    
the issue.                                                                                                                      
                                                                                                                                
9:55:00 AM                                                                                                                    
                                                                                                                                
Mr. Andreassen  reviewed slide 21, "School  Construction and                                                                    
Major Maintenance Grants":                                                                                                      
                                                                                                                                
     Inventory                                                                                                                  
          1,008 schools                                                                                                         
          429 older than 40 years old in FY21                                                                                   
          461 are original construction                                                                                         
         23 million square feet x replacement cost                                                                              
          (274.23/sq) = $6.3 billion                                                                                            
          757 municipal owned/maintained schools                                                                                
                                                                                                                                
     More than 75% of all schools in Alaska are owned by                                                                        
     local governments                                                                                                          
                                                                                                                                
     DEED just updated regs that for major maintenance                                                                          
     requests must be above $50,000 instead of $25,000                                                                          
                                                                                                                                
     Also   considering    tying   energy    efficiency   to                                                                    
     eligibility                                                                                                                
                                                                                                                                
     ?Average $ funded = 16%                                                                                                    
     ?1,047 projects requested                                                                                                  
     ?114 funded                                                                                                                
     ?11% of projects funded                                                                                                    
                                                                                                                                
Mr. Andreassen thought it was  important to note that of the                                                                    
total  that had  been  advanced by  communities and  schools                                                                    
each year,  16 percent had  been funded. A large  portion of                                                                    
the school  districts were REAA  school districts,  and more                                                                    
bond debt  was utilized by school  districts. Without school                                                                    
bond  debt  reimbursement, there  was  a  shift in  who  was                                                                    
applying for the limited resource of grant funding.                                                                             
                                                                                                                                
Mr. Andreassen turned to slide 22, "School Needs":                                                                              
                                                                                                                                
     ?FY22 School Construction = $162M                                                                                          
          ?REAAs $145M     Municipal $17M                                                                                       
                                                                                                                                
     ?FY22 Proposed Budget = $0 - GO Bond                                                                                       
                                                                                                                                
     ?FY22 Major Maintenance = $187M                                                                                            
          ?Municipal $119M     REAAs $68M                                                                                       
                                                                                                                                
     ?FY22 Proposed Budget = $0 - GO Bond                                                                                       
                                                                                                                                
     ?Compare to FY15 Maintenance List                                                                                          
          ?Municipal $72M     REAAs $98M                                                                                        
                                                                                                                                
     Removal of bond reimbursement program has shifted                                                                          
     competition between REAAs and municipal                                                                                    
                                                                                                                                
     FY22 Six-year plan = $1.3B    FY22 Need: $500M                                                                             
   ?If calculated on average request = $2.8B since FY11                                                                         
     ?16 Districts did not submit any project needs                                                                             
     ?Districts/Municipalities report not submitting when                                                                       
     likelihood of funding is so low                                                                                            
                                                                                                                                
Mr. Andreassen  thought DEED would be  completing its school                                                                    
construction  and major  maintenance  report  soon, and  the                                                                    
numbers  on the  slide would  be updated.  He observed  that                                                                    
there  was   split  between   REAAs  and   municipal  school                                                                    
districts. He noted that in  comparing the FY 15 maintenance                                                                    
list to  the FY   22 list, there  was a shift  as previously                                                                    
mentioned.   He used the  example of Anchorage being  on the                                                                    
FY 22 list,  when during the school  bond debt reimbursement                                                                    
program  there   was  not   the  same   competition  between                                                                    
municipalities  and  REAAs.  He thought  the  six-year  plan                                                                    
pointed to about $1.3 billion  in need, but from the average                                                                    
request there was  probably a total closer  to $2.8 billion.                                                                    
He did not  see anything in the FY 22  budget to address the                                                                    
matter.                                                                                                                         
                                                                                                                                
Co-Chair Bishop  thought that the maintenance  list could be                                                                    
considered  inaccurate and  pointed  out that  that were  16                                                                    
districts that  did not even  apply. He thought there  was a                                                                    
fee for the  pre-engineering to get on the  list. He thought                                                                    
the number  did not reflect  the true amount  of maintenance                                                                    
needed.                                                                                                                         
                                                                                                                                
Mr.  Andreassen thought  there was  no incentive  for school                                                                    
districts  to  apply  for  the  funding  based  on  the  low                                                                    
percentage of  programs that were  funded (11 percent  to 16                                                                    
percent).                                                                                                                       
                                                                                                                                
Co-Chair  Stedman  relayed that  almost  20  years ago,  the                                                                    
legislature  had funded  the entire  major maintenance  list                                                                    
for one year, and the following  year the list was as big or                                                                    
bigger  as people  realized the  items would  be funded.  He                                                                    
encouraged his  district to apply for  the major maintenance                                                                    
list. He  thought when  the legislature  prioritized capital                                                                    
spending,  it   had  a  tendency  to   look  at  maintenance                                                                    
obligations.  He  reminded that  education  was  one of  the                                                                    
state's constitutional  requirements. He thought it  was not                                                                    
advisable  to not  apply for  the  major maintenance  school                                                                    
list.                                                                                                                           
                                                                                                                                
10:00:00 AM                                                                                                                   
                                                                                                                                
Mr.  Andreassen  looked  at slide  23,  "Municipal  Roads  -                                                                    
Transportation":                                                                                                                
                                                                                                                                
     Roads                                                                                                                      
          ?5,500 road miles = DOT road miles                                                                                    
          ?Municipal transportation budgets = $190 million                                                                      
          ?Annual   Need    =   $154-308    million   annual                                                                    
          maintenance ($28k/mile)                                                                                               
                                                                                                                                
     ?Projects within boroughs: STIP allocation $2.8                                                                            
     billion ($4k/capita)                                                                                                       
     ?Projects outside boroughs: STIP allocation $1.9                                                                           
     billion ($47k/capita) Municipal Roads - Transportation                                                                     
                                                                                                                                
     Municipal Airports                                                                                                         
          ?Juneau International (City and Borough of                                                                            
          Juneau)                                                                                                               
          ?Merrill Field (Municipality of Anchorage )                                                                           
          ?Ketchikan International (Managed by Ketchikan                                                                        
          Gateway Borough)                                                                                                      
          ?Kenai Municipal Airport                                                                                              
          ?Kodiak Municipal Airport                                                                                             
          ?Wasilla Municipal Airport                                                                                            
                                                                                                                                
     Majority of State airports maintained by contracts,                                                                        
     which include with cities and boroughs                                                                                     
                                                                                                                                
Mr.  Andreassen noted  that  roads  comprised a  significant                                                                    
part of municipal budgets.                                                                                                      
                                                                                                                                
10:01:08 AM                                                                                                                   
                                                                                                                                
Mr.  Andreassen  reviewed slide  24,  "Ports  and Harbors  -                                                                    
Transportation":                                                                                                                
                                                                                                                                
     133 Public Ports and Harbors                                                                                               
     -DOT&PF owns 16 harbors                                                                                                    
     -Municipalities own 11 ports and harbors                                                                                   
    82 municipal facilities were transferred by DOT&PF                                                                          
                                                                                                                                
     Grant program signed into law in 2006-24 harbors                                                                           
     transferred since then                                                                                                     
                                                                                                                                
     ?Total Need 2010: $595 million                                                                                             
                                                                                                                                
     ?Ports and Harbor Matching Grants (2007-2019)                                                                              
          ?AS 29.60.800                                                                                                         
          ?Requested: 98    Awarded: 45                                                                                         
          ?$199,273,401.50(total project need $398,546,803)                                                                     
          ?Total harbor grants awarded- $84,529,551.00                                                                          
                                                                                                                                
     ?AMHS terminals (STIP): $68.25 million                                                                                     
          ?No other port and harbor improvements included                                                                       
                                                                                                                                
Mr. Andreassen  thought ports and  harbors showed  a glaring                                                                    
example  of  where  state transportation  planning  was  not                                                                    
connected back to the local  level. He cited that Alaska had                                                                    
more coastline than the rest  of the United States combined,                                                                    
and he thought that there was  a huge gap in state planning.                                                                    
He discussed  the transfer  of properties  by the  state and                                                                    
the  necessary  construction. He  pointed  out  the list  of                                                                    
municipal  debt  reimbursement  projects under  the  heading                                                                    
"TIDSRA/HB528  Municipal   Projects."  Each  of   the  local                                                                    
governments listed had taken out  bond debt to upgrade ports                                                                    
and harbors.  The state had  not been able to  reimburse for                                                                    
the projects, and  the amounts were not funded in  the FY 22                                                                    
budget. He  noted that some  of the same districts  also had                                                                    
school bond debt.                                                                                                               
                                                                                                                                
Co-Chair   Stedman  referenced   matching  grant   funds  as                                                                    
mentioned by Mr. Andreassen, which  used federal funding. He                                                                    
thought it would  be inadvisable to use the  funds for ports                                                                    
and harbors because of delays  with the funds. He noted that                                                                    
the state  harbor matching grant  program was a  50/50 match                                                                    
and  targeted  $10  per year.  Communities  that  wanted  to                                                                    
participate  could   have  50  percent  of   initial  harbor                                                                    
construction paid for  by the state. The  maintenance of the                                                                    
harbors would be the responsibility  of the municipality. He                                                                    
thought it was  unlikely that the legislature  would want to                                                                    
involve federal funds in harbors.  He referenced the state's                                                                    
challenge  with  meeting   expenditures  and  mentioned  the                                                                    
Harbor Matching Grant Fund.                                                                                                     
                                                                                                                                
10:06:02 AM                                                                                                                   
                                                                                                                                
Mr.  Andreassen addressed  Co-Chair  Stedman's comments.  He                                                                    
clarified  that the  slide  was not  a  suggestion that  the                                                                    
projects  be   included  in  the   Statewide  Transportation                                                                    
Improvement  Program (STIP),  but rather  a suggestion  that                                                                    
the  Department  of  Transportation  and  Public  Facilities                                                                    
(DOT) consider port and harbor  infrastructure as a piece of                                                                    
the state's economy.                                                                                                            
                                                                                                                                
Co-Chair Stedman  asserted that DOT  did not plan  for ports                                                                    
and harbors, which  led to dilapidated harbors  and the need                                                                    
for the Harbor Matching Grant Fund.                                                                                             
                                                                                                                                
Mr. Andreassen agreed. He noted  that in 2010 the Army Corps                                                                    
of Engineers  conducted a survey  of port and  harbor needs,                                                                    
and  the  same  survey  had  been done  again  in  2020.  He                                                                    
referenced the bar  graph on the slide,  which reflected the                                                                    
survey results and showed that  the need had doubled between                                                                    
the two periods of time.                                                                                                        
                                                                                                                                
Mr.  Andreassen discussed  slide  25,  "Municipal Water  and                                                                    
Sewer":                                                                                                                         
                                                                                                                                
     SRF from 1989-2019 - a  total of 275 projects that were                                                                    
     advanced,                                                                                                                  
     ?30   were  applied   for   from   cities  within   the                                                                    
     Unorganized Borough for a total of $34,301,207                                                                             
     ?245 projects (89% of all  projects) advanced by cities                                                                    
     within  organized boroughs  or  by boroughs  themselves                                                                    
   account for $504,349,476 (93% of the total funding).                                                                         
                                                                                                                                
     VSW  from 2015-2020  - 259  projects have  been funded,                                                                    
     including a total of $80,202,219  of State funding, the                                                                    
     25% match for federal funds of $224,584,607.                                                                               
     ?Of that,  206 projects within the  Unorganized Borough                                                                    
     accounted for  $61,740,725 of State funding,  or 77% of                                                                    
     the total State expenditure.                                                                                               
                                                                                                                                
     The  loan program  required nearly  the same  amount of                                                                    
     State funding  as the  grant program:  $61,471,546 from                                                                    
     2015-2019 compared to the  VSW's $61,740,725 from 2015-                                                                    
     2020.                                                                                                                      
     ?SRF funds  are not free,  with the majority  repaid to                                                                    
     the State over time at 1.5% interest                                                                                       
                                                                                                                                
Mr. Andreassen noted that the  State Revolving Loan Fund and                                                                    
Village Safewater Program were  good programs with different                                                                    
roles,   that  were   not  meeting   the   total  needs   of                                                                    
communities.   He   thought   the  Indian   Health   Service                                                                    
maintained a list of needs, which was roughly $1.6 billion.                                                                     
                                                                                                                                
10:08:47 AM                                                                                                                   
                                                                                                                                
Mr. Andreassen presented slide 26, "COVID's Impacts":                                                                           
                                                                                                                                
     Local   governments  have   experienced  the   pandemic                                                                    
     differently,  but all  have felt  an  impact. The  real                                                                    
     differences are 1) lost  revenue, and 2) implementation                                                                    
     of public health actions.                                                                                                  
                                                                                                                                
     Adak  lost $555k in lost taxes and fees                                                                                    
     Anchorage  lost $23 million in taxes and fees                                                                              
     Anderson  60% decline due to lost tourism                                                                                  
    Aniak  did not bill city customers for three months                                                                         
     Brevig Mission    closed bingo and  pull tabs resulting                                                                    
     in lost staff                                                                                                              
     Chevak   closed bingo and  pull tabs resulting in staff                                                                    
     reductions                                                                                                                 
     Coffman Cove  reduced moorage fees                                                                                         
     Cordova    revenues declined  by $500,000Craig    sales                                                                    
    tax down 20%, bed tax down 50%; employee furloughs                                                                          
     Denali Borough  lost $4.25 million in taxes and fees                                                                       
     Dillingham     forgiving   interest  and  penalties  on                                                                    
     taxes, utility fees                                                                                                        
     Fort Yukon    lost about $300,000 due  to gaming; staff                                                                    
     reductions                                                                                                                 
     Grayling  30% reduction in revenue                                                                                         
     Holy Cross    bingo and  pull tab closures  resulted in                                                                    
     employee layoffs                                                                                                           
     Hughes -  $23,000 reduction resulted in  staff and hour                                                                    
     reductions                                                                                                                 
     Huslia   down   8%  leading  to  reduction   to  public                                                                    
     services                                                                                                                   
     Juneau  lost $34.82 million in taxes and fees                                                                              
     Kake losses of 35-45%; staff reductions                                                                                    
    Kenai Peninsula Borough  lost $4.5 million in taxes                                                                         
     Ketchikan Gateway  -lost $4.75 million                                                                                     
     Marshall  furloughs and reduced hours                                                                                      
     Metlakatla  lost $1.15 million in fees                                                                                     
     Petersburg  lost $420k in taxes and fees                                                                                   
     Platinum - $35,000 decrease                                                                                                
    Sand Point  lost more than $400k in taxes and fees                                                                          
     Saxman  reducing staff                                                                                                     
     Seward  lost $2.5 million in taxes                                                                                         
     Shaktoolik 2-5% drop in sales tax                                                                                          
     Skagway  lost $8.82 million in taxes and fees                                                                              
     Soldotna  stayed the same                                                                                                  
     St. Michael  lost nearly $150k in taxes and fees                                                                           
     Unalakleet  lost $5,000Whittier  loss of $2 million                                                                        
                                                                                                                                
Mr.  Andreassen  thought  more  work  was  needed  to  fully                                                                    
understand  the  impacts  of  COVID-19  on  communities.  He                                                                    
stressed    that   everyone    experienced   the    pandemic                                                                    
differently.  He  discussed   lost  revenues.  He  mentioned                                                                    
hugely increased community costs  and the state's allocation                                                                    
of  CARES  Act  funding.   He  mentioned  additional  public                                                                    
health,  public safety,  hospital and  schools' action  that                                                                    
could be  covered by CARES  Act funding; while  lost revenue                                                                    
could  not  be mitigated  by  the  funds. He  discussed  the                                                                    
impacts  of  COVID-19  on revenue-generating  activities  in                                                                    
small  communities.  He  discussed the  revenue  impacts  of                                                                    
reduced tourism.                                                                                                                
                                                                                                                                
10:11:27 AM                                                                                                                   
                                                                                                                                
Mr. Andreassen spoke to slide 27, "COVID's Impacts":                                                                            
                                                                                                                                
     In response to the pandemic and impacts of vetoes,                                                                         
     local governments have maintained fiscal stability                                                                         
     and:                                                                                                                       
          ?Implemented furloughs or reduced staff hours                                                                         
        Eliminated or reduced programs or services                                                                              
          ?Increased or added new taxes                                                                                         
          Waived fees or other normal charges                                                                                   
        ?Accessed grant programs or took out loans                                                                              
          Reduced capital budget                                                                                                
          ?Spending down of emergency reserves                                                                                  
          Eliminated travel and training                                                                                        
          ?Adjusted prior year appropriations.                                                                                  
                                                                                                                                
     At  the   same  time,  the  Governor   asked  of  local                                                                    
     governments   appropriate   local  level   actions   in                                                                    
     response to  the pandemic. This  meant that  instead of                                                                    
     statewide orders,  local governments were  charged with                                                                    
     implementing  public  health mitigation  strategies  in                                                                    
     response to CDC and DHSS guidance. This included:                                                                          
          ?Emergency   operations   centers   and   incident                                                                    
          commanders in place                                                                                                   
          ?Metrics for evaluating risk levels and responses                                                                     
          ?Public health mitigation measure                                                                                     
          ?Economic support mechanisms                                                                                          
                                                                                                                                
Mr.  Andreassen  thought  the  slide gave  an  idea  of  how                                                                    
communities had responded to the pandemic.                                                                                      
                                                                                                                                
Senator Wielechowski asked if AML  had a position on whether                                                                    
the  legislature should  pass a  law extending  the disaster                                                                    
declaration.                                                                                                                    
                                                                                                                                
Mr. Andreassen  relayed that AML supported  the extension of                                                                    
the disaster declaration.                                                                                                       
                                                                                                                                
Senator Wielechowski  asked if Mr. Andreassen  could discuss                                                                    
the  impact  to  communities  if  the  declaration  was  not                                                                    
reenacted.                                                                                                                      
                                                                                                                                
Mr.  Andreassen emphasized  that local  governments depended                                                                    
upon  the state  for many  things during  emergency response                                                                    
and  emergency management.  He  felt  local governments  had                                                                    
lost  a partner  without  a disaster  declaration in  place.                                                                    
Many  of the  items  on the  slide  became more  challenging                                                                    
without the state  being able to respond.  He continued that                                                                    
AML  was  concerned  about what  actions  local  governments                                                                    
would have to take.                                                                                                             
                                                                                                                                
Mr. Andreassen  displayed slide 28, "CARES  Act Doesn't Make                                                                    
us Whole":                                                                                                                      
                                                                                                                                
     157 cities  and boroughs have applied  for and received                                                                    
     at least their 1stdisbursement of CARES Act funds                                                                          
      26 communities  have not requested  CARES Act  funds -                                                                    
     only 8 of those are municipal                                                                                              
   ?$18M of $568M not yet disbursed, or 3% of all funds                                                                         
      88% of  all funds reported spent  by original deadline                                                                    
     of 12/30/2020                                                                                                              
     ?91   recipients  expended   90%  or   more  of   their                                                                    
     allocation by the original deadline                                                                                        
     ?Many   delayed  attributing   expenditures  when   the                                                                    
     extension occurred                                                                                                         
                                                                                                                                
     Expenditures:                                                                                                              
     ?Payroll $193M                                                                                                             
     Public Health $65M                                                                                                         
     ?Economic Support $225M                                                                                                    
     Other$18M                                                                                                                  
                                                                                                                                
     The CARES Act CRF  came with restrictions, and provides                                                                    
     that payments from  the Fund may only be  used to cover                                                                    
     costs that:                                                                                                                
     1.  are  necessary  expenditures incurred  due  to  the                                                                    
     public   health   emergency   with   respect   to   the                                                                    
     Coronavirus Disease 2019 (COVID19);                                                                                        
     2. were not  accounted for in the  budget most recently                                                                    
     approved as  of March 27,  2020 (the date  of enactment                                                                    
    of the CARES Act) for the State or government; and                                                                          
     3.  were  incurred during  the  period  that begins  on                                                                    
     March 1, 2020, and ends on December 30, 2020.                                                                              
                                                                                                                                
Mr.  Andreassen  stated  that the  majority  of  cities  and                                                                    
boroughs had applied for and  received CARES Act funding. He                                                                    
shared  that  that  AML  had   hired  a  CARES  Act  program                                                                    
coordinator  and had  worked with  communities  to help.  He                                                                    
thought communities  had also  received the  funding through                                                                    
other  sources such  as tribal  allocation. He  thought some                                                                    
communities were so small there  was concern about liability                                                                    
of taking on the funds.                                                                                                         
                                                                                                                                
10:16:25 AM                                                                                                                   
                                                                                                                                
Senator Hoffman  asked about communities that  did not apply                                                                    
for CARES  Act funding and  asked if  the law allowed  for a                                                                    
regional entity to  apply on behalf of a  community. He used                                                                    
the   example  of   the  Association   of  Village   Council                                                                    
Presidents,  which comprised  approximately 60  communities.                                                                    
He  thought some  cities  might not  have  the resources  to                                                                    
carry out  the funding request.  He asked if the  matter had                                                                    
been considered  by the Congressional  delegation and  if it                                                                    
was considered in light of the extension of the CARES Act.                                                                      
                                                                                                                                
Mr.  Andreassen  informed that  the  CARES  Act allowed  for                                                                    
transfer  between governments.  The prime  recipient (tribes                                                                    
or  local  governments) would  receive  the  funds and  then                                                                    
grant  them to  a regional  or local  government level.  The                                                                    
first recipient would be responsible for reporting.                                                                             
                                                                                                                                
Senator Hoffman  asked if  Mr. Andreassen  was aware  of any                                                                    
communities that had done the  fund transfer, and if AML was                                                                    
assisting in getting the funding transfer accomplished.                                                                         
                                                                                                                                
Mr. Andreassen  was not  aware of  any communities  that had                                                                    
engaged  in  a  fund  transfer.   He  stated  that  AML  had                                                                    
suggested  the  transfer  and  had   tried  to  provide  the                                                                    
pathways. He  commented on the  challenges of the  CARES Act                                                                    
experience for cities and boroughs that  had to put a lot of                                                                    
new processes into  place. He thought there had  been a high                                                                    
level of risk and uncertainty.  He thought that there was an                                                                    
opportunity with the extension of the CARES Act deadline.                                                                       
                                                                                                                                
Mr. Andreassen  noted that the  majority of CARES  Act funds                                                                    
received  by  local governments  were  not  in the  form  of                                                                    
economic support.  There had  been a  significant investment                                                                    
into the  state's economy. He discussed  restrictions on the                                                                    
funds and  exemptions. The funds  had displaced  some losses                                                                    
in budgets.                                                                                                                     
                                                                                                                                
10:20:00 AM                                                                                                                   
                                                                                                                                
Mr.   Andreassen    referenced   slide   29,    "CARES   Act                                                                    
Expenditures":                                                                                                                  
                                                                                                                                
     ?Decontamination trailer                                                                                                   
       ease of airport facilities                                                                                               
     ?Monitors for fishing season                                                                                               
     ?Small scale quarantine/isolation unit                                                                                     
     ?Ambulance                                                                                                                 
     ?Renovate apartments for quarantine                                                                                        
     ?Pumps and equipment for water/sewer                                                                                       
     ?Updating city building for sanitation                                                                                     
     ?Transit van to assist elders                                                                                              
     ?Childcare assistance                                                                                                      
     ?Commercial grade washer/dryers                                                                                            
     ?Heating oil and utility assistance                                                                                        
     ?Food credit at local restaurants                                                                                          
     ?Software upgrades                                                                                                         
     ?Cameras for inmate/visitor communications                                                                                 
     ?Modifications to the clinic                                                                                               
     ?Air purifiers and sanitizing                                                                                              
     ?Updates to community pools, showers                                                                                       
     ?Telework and cloud-based solutions                                                                                        
     ?Shipping costs for PPE and emergency vehicles                                                                             
     ?Property assessment technology  virtual                                                                                   
     ?Internet connectivity for students                                                                                        
     ?Water delivery                                                                                                            
     ?Grants to hospitals                                                                                                       
     ?Project postponement fees                                                                                                 
     ?Non-congregate setting conversions                                                                                        
                                                                                                                                
Mr. Andreassen showed slide 30, "FEMA upgrades":                                                                                
                                                                                                                                
     ? Biden Administration  announces 100% reimbursement of                                                                    
     eligible expenses since January  2020, and expansion of                                                                    
     eligibility                                                                                                                
          ? All  work eligible under FEMA's  existing COVID-                                                                    
          19   policies,    including   increasing   medical                                                                    
          capacity, noncongregate  sheltering, and emergency                                                                    
          feeding  distribution will  be reimbursed  at 100%                                                                    
          federal share.                                                                                                        
          ?  The  costs  to  support the  safe  opening  and                                                                    
          operation   of    eligible   schools,   child-care                                                                    
          facilities, healthcare  facilities, non-congregate                                                                    
          shelters,  domestic   violence  shelters,  transit                                                                    
          systems,  and other  eligible  applicants will  be                                                                    
          eligible after Jan. 21.                                                                                               
          ?  Provision  of  personal  protective  equipment,                                                                    
          disinfecting services and supplies                                                                                    
                                                                                                                                
     ?  State  and  Local  Governments  can/should  consider                                                                    
     items charged  to CARES Act/CRF  that could  be applied                                                                    
     to  FEMA for,  and  the difference  then available  for                                                                    
     economic recovery  or to meet  other needs,  that would                                                                    
   still be eligible to apply to the CARES Act funding.                                                                         
                                                                                                                                
     ?   Potentially  $100M   from  local   governments,  if                                                                    
     capacity to submit for reimbursement                                                                                       
     ? Review  of DHSS  $330M   some  portion of  agency and                                                                    
     non-agency support                                                                                                         
     ? Unified Command expenses                                                                                                 
                                                                                                                                
Mr.  Andreassen encouraged  the committee  and the  state to                                                                    
look at  how to  reallocate funds to  take advantage  of the                                                                    
new opportunity  to be reimbursed  by the  Federal Emergency                                                                    
Management Agency.                                                                                                              
                                                                                                                                
Mr. Andreassen turned to slide 31, "Next Aid Package":                                                                          
                                                                                                                                
      Proposed right now at $350B                                                                                               
          ?State of Alaska  $827M  5th lowest in nation                                                                         
          ?Local Governments  $258M                                                                                             
                                                                                                                                
     AML  proposing floor  of  $1.25B  and additional  $500M                                                                    
     floor for localities                                                                                                       
                                                                                                                                
     Counties based on population; cities on CDBG                                                                               
     ?Some  Alaska   localities  on  both  lists,   but  not                                                                    
     consistent                                                                                                                 
     ?Denali Borough,  which will  have lost $7M  in revenue                                                                    
     last and this year, receives $409k                                                                                         
     ?Municipality  of Skagway,  which  lost  $9M just  last                                                                    
     year, receives $221k                                                                                                       
     ?Yakutat, Petersburg, Skagway, and  Haines should be on                                                                    
     both list, with consolidated cities                                                                                        
                                                                                                                                
     State role  in distributing census areas  funds ($16M);                                                                    
     city  funds maybe  ($46M)     otherwise direct  through                                                                    
     Treasury;   Treasury  will   track  disbursements   and                                                                    
     reporting                                                                                                                  
                                                                                                                                
Mr. Andreassen proposed that small population states had                                                                        
been penalized under the aid package formula.                                                                                   
                                                                                                                                
Mr. Andreassen showed slide 32, "AML Perspectives  A Case                                                                       
for Revenue":                                                                                                                   
                                                                                                                                
     ?Underfunded Priorities                                                                                                    
          ?Public safety, education, community assistance,                                                                      
          health                                                                                                                
          ?Pensions and debt, unfunded mandates                                                                                 
                                                                                                                                
     ?Economic Recovery and Growth                                                                                              
           Reducing    transaction     costs         energy,                                                                    
          transportation, broadband                                                                                             
          ?Third leg of "stool"                                                                                                 
                                                                                                                                
     ?Infrastructure Deficit                                                                                                    
          ?Water/sewer, local CIP, deferred maintenance,                                                                        
          roads, ports                                                                                                          
          ?Obligations like school construction and major                                                                       
          maintenance                                                                                                           
                                                                                                                                
10:24:09 AM                                                                                                                   
                                                                                                                                
Senator Wilson considered the slides  and estimated that the                                                                    
budget would have to be about  $31.5 billion to meet all the                                                                    
expected needs as  proposed by Mr. Andreassen.  He asked how                                                                    
the deficit would be addressed by revenue.                                                                                      
                                                                                                                                
Co-Chair Stedman asked what Senator Wilson had calculated.                                                                      
                                                                                                                                
Mr. Andreassen thought a big  portion of the $30 billion was                                                                    
the infrastructure  deficit. He  suggested that  the deficit                                                                    
could be paid down over  time. He relayed that AML struggled                                                                    
with  seeing  infrastructure  obligations  underfunded  over                                                                    
time,  which  had  been  occurring   because  of  a  revenue                                                                    
shortfall. He mentioned the $1  billion gap in the following                                                                    
year's  budget. He  thought the  state needed  some kind  of                                                                    
revenue measure to meet the needs of next year's budget.                                                                        
                                                                                                                                
Senator von  Imhof suggested thinking about  "new cash." She                                                                    
considered whether new  cash would be a  result of increased                                                                    
oil  revenue,  budget  cuts,  or   money  from  the  state's                                                                    
savings. She pondered  what to do with new  cash and thought                                                                    
Mr.  Andreassen  was  proposing  competing  priorities.  She                                                                    
thought the  governor proposed  that any  new cash  would be                                                                    
paid out in  dividends. She thought that  rather than paying                                                                    
the full  dividend, Mr. Andreassen was  suggesting using any                                                                    
additional  cash for  the competing  priorities laid  out in                                                                    
the presentation.                                                                                                               
                                                                                                                                
Mr. Andreassen relayed  that AML had formed  a fiscal policy                                                                    
the previous fall after considering  the same question posed                                                                    
by  Senator  von  Imhof. He  thought  the  organization  had                                                                    
agreed that  the state had clear  constitutional obligations                                                                    
and  queried how  the state  would  balance the  obligations                                                                    
with statutory obligations and other  needs of the state. He                                                                    
cited  public  education,   public  health,  public  welfare                                                                    
(including   public  safety)   as   obligations  that   were                                                                    
underfunded.                                                                                                                    
                                                                                                                                
10:28:02 AM                                                                                                                   
                                                                                                                                
Senator von  Imhof asked if  AML had a  one-page legislative                                                                    
priority list  that had  priorities and  accompanying dollar                                                                    
figures.                                                                                                                        
                                                                                                                                
Mr. Andreassen  stated that  AML had  a two-page  letter and                                                                    
would follow up with the committee.                                                                                             
                                                                                                                                
Co-Chair Stedman  lamented that there were  not enough funds                                                                    
to  keep  everyone  happy  and  that  the  state  needed  to                                                                    
prioritize its spending.                                                                                                        
                                                                                                                                
Senator  Hoffman asked  if AML  had discussed  the Permanent                                                                    
Fund Dividend (PFD) and if so,  what was its position on the                                                                    
dividend  amount and  what was  proposed  in the  governor's                                                                    
budget.                                                                                                                         
                                                                                                                                
Mr. Andreassen relayed that AML  had a resolution in support                                                                    
of the legislature finding a  solution regarding the PFD. He                                                                    
thought   there  were   as  many   opinions  amongst   local                                                                    
governments  as there  was in  the  legislature. He  thought                                                                    
local  governments  agreed  that stability  was  needed.  He                                                                    
continued that AML  had passed a resolution in  support of a                                                                    
sustainable  draw,  and  a  resolution  in  support  of  the                                                                    
sustainability  of the  Permanent  Fund's  future. He  noted                                                                    
that AML had no position on the governor's proposal.                                                                            
                                                                                                                                
Mr. Andreassen  reviewed slide  33, "Tax to  GDP    Where is                                                                    
Alaska,  compared  to  other states?"  The  slide  showed  a                                                                    
scatter plot. He explained that  the slide showed how Alaska                                                                    
compared to  other states in an  analysis of tax to  GDP. He                                                                    
observed  that  local  governments were  doing  their  part.                                                                    
State tax compared  to GDP was the lowest in  the nation. He                                                                    
thought knowing  how state taxation  related to  the economy                                                                    
was a new  way of looking at the  information. He considered                                                                    
that international  research indicated  that taxing  the GDP                                                                    
effectively would  result in  economic growth  while meeting                                                                    
infrastructure  needs such  as education.  He asserted  that                                                                    
there  was room  for the  state to  address its  tax to  GDP                                                                    
ratio, considering  that the tax  applied to one  portion of                                                                    
the GDP more than others.                                                                                                       
                                                                                                                                
Co-Chair  Stedman thought  that one  of the  challenges with                                                                    
charts  such as  the  one  depicted on  the  slide was  that                                                                    
Alaska  was the  only state  that owned  sub-surface rights.                                                                    
Most other  states had income  tax, sales tax, or  some form                                                                    
of property  tax. He thought  it was hard to  compare Alaska                                                                    
to other states.                                                                                                                
                                                                                                                                
10:32:15 AM                                                                                                                   
                                                                                                                                
Senator von Imhof  thought Co-Chair Stedman had  made a good                                                                    
point. She  thought Alaska was  the only state in  the union                                                                    
that paid  a cash dividend  to its citizens.  She questioned                                                                    
what  kind of  cash  potential was  taken  out of  citizen's                                                                    
pockets if imposing a sales  tax or income tax. She pondered                                                                    
if the state used additional  cash to invest in job-creating                                                                    
projects as in other states.                                                                                                    
                                                                                                                                
Mr. Andreassen  referenced slide  34, "Identifying  our seed                                                                    
corn,"  which  showed a  line  graph  and  a bar  graph.  He                                                                    
referenced Senator  von Imhof's comments and  considered how                                                                    
the state could do economic  development and look at its GDP                                                                    
in the  same way  it viewed the  Permanent Fund.  He thought                                                                    
the presentation  had described that if  transactional costs                                                                    
were lowered,  and investments were  made; models  had shown                                                                    
GDP growth.  He offered to  follow up with the  committee as                                                                    
it  considered prioritization  and cash.  He noted  that the                                                                    
Alaska  Conference   of  Mayors  had  been   discussing  the                                                                    
prioritization of GDP growth.                                                                                                   
                                                                                                                                
Co-Chair  Stedman commented  that it  might be  nice if  the                                                                    
Alaska Conference  of Mayors met  and discussed  what things                                                                    
might  look  like  if  the   Earnings  Reserve  Account  was                                                                    
significantly reduced,  which was being faced  currently. He                                                                    
thought  the  cost shifts  would  be  unbearable across  the                                                                    
state.                                                                                                                          
                                                                                                                                
Senator  Wilson appreciated  the  presentation. He  recalled                                                                    
that Mr. Andreassen was not  a legislator or state employee,                                                                    
but  rather  was a  registered  lobbyist.  He was  concerned                                                                    
about  allowing  registered   lobbyists  into  the  building                                                                    
before the general public.                                                                                                      
                                                                                                                                
Co-Chair  Stedman thanked  Senator Wilson  for his  comment,                                                                    
and recognized the point being made.                                                                                            
                                                                                                                                
Co-Chair  Stedman discussed  the  agenda  for the  following                                                                    
day.                                                                                                                            
                                                                                                                                
ADJOURNMENT                                                                                                                   
10:36:51 AM                                                                                                                   
                                                                                                                                
The meeting was adjourned at 10:36 a.m.                                                                                         
                                                                                                                                
                                                                                                                                

Document Name Date/Time Subjects
021721 SenFin - Condition of Communities.pdf SFIN 2/17/2021 9:00:00 AM
Alaska Municipal League