CS FOR SENATE BILL NO. 72(FIN) "An Act relating to the community revenue sharing program; and providing for an effective date." Co-Chair Meyer reviewed that the Committee had previously adopted Amendments #1 and #2, and had withdrawn Amendment #3. 1:40:47 PM Co-Chair Chenault MOVED to ADOPT Amendment #3. Page 7, lines 11-13: Delete all material. Insert "assembly approval. If there is more than one qualified entity in an unincorporated community in a borough or unified municipality, one of the entities may receive the entire payment, or the payment may be shared between two or more of the qualified entities, as determined by the assembly. (c) An unincorporated community in a borough or unified municipality is eligible for a community revenue sharing payment only if at least three of the following services are generally available to all residents of the unincorporated community and each of the three services, in any combination, are provided by one of more qualifying incorporated nonprofit entities or a Native village council or are substantially paid for by the residents of the unincorporated community through taxes, charges, or assessments levied or authorized by the borough or unified municipality:" Vice-Chair Stoltze OBJECTED. Co-Chair Chenault pointed out that in previous discussion there had been question about which communities would be eligible for the revenue sharing. The Department of Commerce, Community and Economic Development (DCCED) worked with staff to put together a list of potentially eligible communities. TOM WRIGHT, STAFF, REPRESENTATIVE MIKE CHENAULT, explained the list submitted by DCCED ("The Estimated Potentially Eligible Unincorporated Community List Under Proposed Amendment #3," Copy on File). The 31 communities in bold typeface are already represented and receiving payment from the State under the current revenue-sharing plan. The list also contains 55 communities that may or may not be eligible to receive the revenue. Under the amendment, the borough would determine if the criteria is met. The communities accepted would be eligible for the $20,000 payment. Co-Chair Meyer asked what the total potential cost would be. Mr. Wright answered that if all 55 communities were accepted, the cost would be an additional $1.1 million. He expressed doubt that all the communities would be able to meet the criteria. Co-Chair Chenault explained that the seven criteria used were on page 7 of the bill. The community would have to provide a minimum of three of the seven. He reiterated that the borough would determine if the criteria were met. Vice-Chair Stoltze expressed concerns that some of the smaller communities were analogous to large homeowners associations that would become eligible for funds. He wondered if the intent of revenue sharing would be met in those situations. 1:46:43 PM Representative Hawker thought the list of potential communities was quantifiable. He added that the criteria established in the amendment does not increase the funding mechanism. He thought the amendment would promote the desired outcome of having communities take responsibility for providing public services. He supported the amendment. Co-Chair Chenault listed distinct areas with their own organized governance in his district. Representative Thomas noticed Haines, a community in his district, was on the list. He noted that Haines had a different status as a consolidated borough and believed they would get more than $20,000. BILL ROLFZEN, LOCAL GOVERNMENT SPECIALIST, DEPARTMENT OF COMMERCE, COMMUNITY AND ECONOMIC DEVELOPMENT, explained that the list of unincorporated communities was taken from the U.S. Census Bureau. The communities are not incorporated cities but meet the definition of community. Haines was a city for many years; when it consolidated with the Haines Borough, the city government was dissolved. They are now considered an unincorporated community within the Haines Borough, which would make them eligible for the $20,000. 1:51:08 PM Representative Thomas wondered if by consolidating government, the community lost opportunity for revenue. Mr. Rolfzen replied that the city of Haines would have received a $75,000 base plus the per capita. Once the city dissolved and consolidated with the Borough, eligibility changed to $20,000. However, there were cost savings as a result of streamlining government. Representative Thomas did not think there was savings from unifying. Vice-Chair Stoltze WITHDREW his OBJECTION. There being NO OBJECTION, Amendment #3 was ADOPTED. 1:52:48 PM Co-Chair Meyer MOVED to ADOPT Amendment #4. Page 5, line 7: Delete "$50,000,000", Insert "$60,000,000"; Page 5, line 9: Delete "$150,000,000", Insert "$180,000,000"; Page 5, line 11: Delete $50,000,000, Insert "$60,000,000"; Page 5, line 22: Delete "50,000,000, divided by 50,000,000, plus one, multiplied by 300,000", Insert "$60,000,000, divided by 60,000,000, plus one, multiplied by 384,000"; Page 6, line 3: Delete "fifteenth", Insert "nineteenth" Vice-Chair Stoltze OBJECTED for discussion purposes. Co-Chair Meyer provided a general overview of Amendment #4. The Governor had recommended $75 million for revenue sharing but had only recommended a one-year solution. Senate Bill 72 recommends $50 million each year for three years. If the price of oil stays above $60, 20% of that progressivity amount will be added to the fund. Hopefully, the fund will continue as long as oil prices stay high. Amendment #4 proposes a compromise of $60 million, higher than the $50 million recommended by the Senate but less than the Governor's request of $75 million. The total for the three years becomes $180 million. SUZANNE ARMSTRONG, STAFF, REPRESENTATIVE KEVIN MEYER, provided more detail regarding Amendment #4. Page 5, line 22 makes the adjustments to the formula and increases the borough basic payment. The basic payments for the borough will be $384,000; city reserves and unincorporated communities inside boroughs and unincorporated communities outside of boroughs will be based on $384,000 rather than $300,000. Page 6, line 3 changes the factor by which the basic payment for unincorporated communities inside the boroughs will be calculated to one nineteenth instead of one fifteenth to keep payments roughly at the $20,000 level. Co-Chair Meyer added that the level jumps from $320 to $384 because of the floating base. As that amount goes up, so does the base. 1:56:14 PM Vice-Chair Stoltze sought clarification regarding the changes in the numbers. Representative Hawker queried Co-Chair Meyer's statement regarding a "three-year program." Representative Hawker surmised that the bill and the amendment would establish a permanent and durable change of statute that would continue to fund as long as oil prices remained above $60 per barrel. Co-Chair Meyer clarified that the bill intends a three-year minimum, but hoped it would last twenty years or more. He acknowledged the fund was dependent on the price of oil. He pointed out that if the price goes below $60, communities would have time to make adjustments. 1:58:19 PM Representative Kelly did not like the phrase "twenty or thirty years." He said he would not object to the amendments, but voiced his concerns regarding over-spending. Representative Crawford referred to other bills that target the progressivity funding source and wondered what would happen if the Legislature passed two bills targeting the same source. Co-Chair Meyer thought the bill Representative Crawford was referring to would not be considered for a vote of the people for another year. Ms. Armstrong added that Amendment #1 added language to the section dealing with progressivity. The bill would not limit the Legislature's ability to appropriate General Fund money or other revenue sources. Vice-Chair Stoltze WITHDREW his OBJECTION. There being NO further OBJECTION, Amendment #4 was ADOPTED. 2:00:57 PM Representative Kelly restated concerns regarding progressivity and how it would fund revenue sharing. He thought that, allowing for budget growth, the State would not have enough money without using all of the progressivity revenue. He worried that the debate was not addressing the difficulty of sustaining the payments to the municipalities. He stated his intent to vote against the bill. 2:03:26 PM Representative Hawker reiterated his concerns regarding the State's inability to predict future revenue sharing. He was reluctant to go forward with revenue sharing, but said there were two reasons he could move forward with SB 72. First, the self-limiting component in the bill says that if the price or production of oil declines, the program would phase itself out. Second, he thought the State's highest priority should be putting wealth into the communities through revenue sharing. He read the statement of purpose of the Alaska Statehood Act, Section 6, which selected land and the resource wealth "For the purposes of furthering the development of and expansion of communities." Representative Hawker thought the revenue sharing program reflected in SB 72 was exactly what the crafters of statehood wanted. He stated his intention to support the bill. 2:07:02 PM Representative Thomas talked about his experience serving on a borough assembly during a time when revenue sharing was lost. He supports revenue sharing with clear limits, especially related to building infrastructure. He wants debt retirement instead and would like to see limits placed on how the municipalities spend the money. Co-Chair Meyer agreed that it would be interesting to see how communities would use the money. He expressed confidence in the bill and encouraged movement. 2:09:50 PM Representative Hawker acknowledged Representative Carl Moses and thought the Act should be dedicated to him and his "Never give up" legacy. Representative Kelly stated that he supports revenue sharing but wants to control the budget. He thought a policy call would be needed regarding a state tax. 2:12:47 PM Vice-Chair Stoltze MOVED to report HCS for CSSB 72 (FIN) out of Committee with individual recommendations and with new fiscal note by the House Finance Committee for the Department of Commerce, Community and Economic Development, new zero fiscal note by the Department of Administration, and new zero fiscal note by the Department of Natural Resources. AT EASE: 2:13:42 PM RECONVENED: 2:14:07 PM Representative Kelly OBJECTED. A roll call vote was taken on the motion. IN FAVOR: Nelson, Stoltze, Thomas, Crawford, Hawker, Joule, Meyer and Chenault OPPOSED: Kelly Representative Harris and Representative Gara were absent from the vote. The MOTION PASSED (8/1). HCS CSSB 72(FIN) was REPORTED out of Committee with a "do pass" recommendation and with new zero fiscal note by the Department of Natural Resources, new fiscal note by the House Finance Committee for the Department of Commerce, Community and Economic Development, and new zero fiscal note by the Department of Administration.