SENATE BILL 20 "An Act establishing the Alaska municipal basic services program, relating to certain programs of state aid to municipalities and recipients in the unorganized borough; and providing for an effective date." SENATOR JOHN TORGERSON provided the Committee with a copy of Amendment #1, 9-LS0319\W.1, Cook, 4/19/96. [Copy on file]. 1 Senator Torgerson stated that Amendment #1 would put the program in-line. If a Native council or Native village is not incorporated within the State of Alaska as a non-profit entity, a waiver would be required to be signed stating that they could be sued under the laws of the State. He maintained that there are law suits currently pending and questions which need to be answered regarding tribal authority and municipal government. The amendment would remove the unincorporated communities, making them a non- profit corporation; then the funds paid to those areas would no longer be subject to court scrutiny. Representative Mulder MOVED to adopt Amendment #1. Representative Martin discussed his concern with the "broadness" of the term non-profit corporation. He asked if there would be a limit to one non-profit per area. Senator Torgerson stated that the Department of Community and Regional Affairs (DCRA) would make that determination before the grant was made. Representative Brown inquired how many villages would be affected through the passage of the legislation. Senator Torgerson replied that thirty-six (36) would be affected, and in order to receive the funding, another entity would need to be formed. The amendment would recognize those villages as corporations within Alaska subject to the laws. Currently, they are not. Representative Brown asked if there had been a specific problem which required this change. Senator Torgerson said that his intent was focused on future concerns in determining tribal council rights. He distributed "MEMBER ALERT, a Native American Rights Fund bulletin addressing the legal battle to save Alaska Native rights". [Copy on file]. Representative Brown OBJECTED to Amendment #1. A roll call was taken on the MOTION. IN FAVOR: Martin, Mulder, Navarre, Parnell, Therriault, Grussendorf, Kelly, Kohring, Hanley, Foster. OPPOSED: Brown. The MOTION FAILED (10-1). Representative Parnell MOVED to adopt Amendment #2. [Copy on file]. The amendment would delete the word "safe" throughout the proposed legislation. Representative Parnell thought that language would not fully describe what the funds purpose was. Senator Torgerson commented that each time the formula was 2 adjusted, large discrepancies surfaced. He stressed that there was support of the legislation, regardless if it made money or not. The support is not necessarily for the contents of the proposed bill, although, added that the municipalities had requested language which would guarantee them opportunity to lobby. To date, the program continues to be cut. The word "safe" and prioritizing have no affect on law, although, it would have an effect at the time members come to lobby their concerns. Senator Torgerson noted that he was "neutral" on Amendment #2. Representative Grussendorf pointed out that Page 5 lists the communities priorities. He stressed that the priority ranking indicates "safe" community interests. The intent is to protect public welfare. Representative Martin stated that he agreed with Amendment #2. There being NO OBJECTION, Amendment #2 was adopted. Representative Parnell informed members that following discussion with Senator Torgerson, he intended to WITHDRAW Amendment #3. [Copy on file]. Representative Therriault proceeded to MOVE to adopt Amendment #3. Representative Brown asked what type of accounting would be required to show that the money had gone for the purposes listed on Page 5. Representative Grussendorf spoke against Amendment #3. He ascertained that the category of use for the money should be indicated. He stressed the importance of not deleting the recommended language. This language specifies the items which the municipalities can return to the Legislature for, when it is indicated that the municipalities do not have safe communities. Co-Chair Hanley discussed the fact that there does not exist a legal ability within the State to delegate what the funds can be spent on. The municipalities pick their priorities. He continued that his concern exists, because the regulations do not require that the priority list be used. BILL ROLFZEN, STATE REVENUE SHARING, DIVISION OF MUNICIPAL & REGIONAL ASSISTANCE, DEPARTMENT OF COMMUNITY AND REGIONAL AFFAIRS, advised that the intention of the Department was indicated on Page 4, Line 31: "A municipality may not receive payment until it submits to the department a resolution approved by the governing body of the municipality..." He added that it was the intention of the Department that the priority list be included in the request. All municipalities, currently, must submit financial statements to the Department on a yearly basis. Co-Chair Hanley asked if the lists were required under 3 current law. Mr. Rolfzen replied that municipal assistance funds can be spent for any public purpose at the discretion of the municipality. Under the legislation, a general list would be required. Representative Brown questioned the purpose served with the additional accounting. Mr. Rolfzen replied, in the last ten years, the program has been cut 60%. A misconceived perception exists that the funds go toward salaries. The proposed accounting would clearly indicate the purpose of the funds spent. Mr. Rolfzen added, at present time, the municipal assistance money goes into the municipal general fund and is spent on public safety concerns. A direct track does not exist. Representative Grussendorf clarified that municipal assistance was the newer of the programs and could be used by the municipality for any services the municipality deemed necessary. As the appropriating authority for that money, the Legislature provides guidelines as to how the money should be spent. He voiced strong opposition to Amendment Representative Martin commented on the zero fiscal note by the Department of Community and Regional Affairs (DCRA). Mr. Rolfzen reiterated, presently, all municipalities as determined by law must submit a financial report to the Department. Under the revenue sharing program, the municipalities receive money for safety purposes. The Department tracks that money. The reports are already being received, and the only additional work would be for the new services. Representative Therriault thought that the material proposed for deletion would only place extra "verbiage" in statute. (Remaining testimony inaudible). Representative Grussendorf refuted that if the municipality should decide not to offer a service, they then should be the party responsible to their constituency. Co-Chair Hanley affirmed that additional reporting would require communities more intent in using the funds because of threat of having the funds withdrawn. He thought that smaller communities would more often be faced with that situation than the larger ones, as financial scrutiny was increased. A roll call was taken on the MOTION to adopt Amendment #3. IN FAVOR: Therriault, Brown, Kelly, Martin. OPPOSED: Mulder, Navarre, Parnell, Grussendorf, Kohring, Foster, Hanley. 4 The MOTION FAILED (4-7). Representative Martin MOVED to adopt Amendment #4, to Page 5, Line 2, deleting "July 31" and inserting "October 31". Representative Mulder OBJECTED. Representative Martin thought that the language would remove the earned interest opportunity; he opposed interest being earned by the municipalities. Representative Mulder stressed that SB 20 was a "gentle" balance. Changing the date would loose the support of the municipalities of Anchorage and Fairbanks. Representative Martin agreed that support from any government which could make more money would be lost. Senator Torgerson voiced opposition to Amendment #4. He added that there was a "minimum" entitlement to the unincorporated communities. The money is currently coming out of those taxed based communities which would benefit from having the date moved forward from February to July 1st. There is $238 thousand dollars being removed at this time. The larger communities have agreed to make this amount available to rural Alaska under the minimum entitlement. The trade-off was to move the date up to July in order that they could then take advantage of the increased interest. A roll call was taken on the MOTION to adopt Amendment #4. IN FAVOR: Brown, Martin. OPPOSED: Navarre, Parnell, Therriault, Grussendorf, Kelly, Kohring, Mulder, Hanley, Foster. The MOTION FAILED (2-9). Representative Therriault asked about the minimum base of $40 thousand dollars. He inquired if that amount would include the road money. Mr. Rolfzen replied under the revenue sharing program, after the basic services are calculated for road money, ice road money, etc., and if the municipality did not have at lease $25 thousand dollars times the cost-of-living differential, they would then be brought up to that level. The legislation does not tinker with the revenue sharing program. He explained that after the revenue sharing program is calculated, including the entitlement and the communities money, if the municipality is then not up to $40 thousand dollar level, the Department would add enough funds from the Safe Community Fund to bring that municipality up to $40 thousand dollar level. 5 Representative Therriault questioned the excess dollar amount that communities would receive differing from the current system. Mr. Rolfzen said that amount would be $238 thousand dollars. Co-Chair Hanley asked if everyone would receive the pro-rated percent reduction, this year being 8% percent. Mr. Rolfzen explained, initially, everyone would receive the 8% reduction, although, the minimum title add-on would provide money to the smaller municipalities to bring them up to $40 thousand dollars, so then the total impact would be less than the overall 8% percent. KEVIN RITCHIE, ALASKA MUNICIPAL LEAGUE, ALASKA CONFERENCE OF MAYORS, JUNEAU, commented that the intent was that communities would share future cuts and that all communities would share to some extend. All communities must have a stake in the overall funding for the program. Senator Torgerson added, in future years, all communities would be cut the same. This year, as a result of the transitions and the hold-harmless, some communities will be cut differently. Mr. Rolfzen corrected how future cuts would be addressed. He stated that because of the $40 thousand dollar overall threshold, the smaller communities would receive a percentage of the cut, but not necessarily the prescribed percentage cut. Every year, each municipality would experience the "pain" of a cut as a result of the proration factor, but not to the extend of the recommended percentage. (Tape Change, HFC 96-134, Side 2). Representative Mulder commented that communities like Anchorage and Fairbanks have the ability to generate their own income. The smaller village areas would benefit from the passage of the legislation, which would be good public purpose. He suggested encouraging the villages to create city government to handle their own affairs would be good planning. If in providing financial assistance offers that, Representative Mulder encouraged passage of the legislation. Co-Chair Hanley commented that it was his personal opinion that providing these communities money would not be better for the long range plan of the State. Representative Mulder MOVED to report HCS CS SB 20 (FIN) out of Committee with individual recommendations and with the accompanying fiscal notes. There being NO OBJECTION, it was so ordered. HCS CS SB 20 (FIN) was reported out of Committee with a "no recommendation" and with fiscal notes by the Department of Revenue dated 3/18/96 and the Department of Community and 6 Regional Affairs dated 3/18/96.