SJR 31-FEDERAL FUNDING FOR EDUCATION Number 1273 VICE-CHAIR HOLM announced that the next order of business was CS FOR SENATE JOINT RESOLUTION NO. 31(STA), Relating to urging the United States Congress to compensate the State of Alaska for the effect of federal land ownership on the state's ability to fund public education. Number 1289 SENATOR GENE THERRIAULT, Alaska State Legislature, as a member of the House Rules Standing Committee, sponsor of SJR 31, paraphrased the sponsor statement as follows: The legislation stems from a resolution adopted in July of 2002, by the Executive Committee of the Council of State Governments-WEST [CSG-WEST] urging the membership of thirteen states to support and pass joint resolutions expressing how federal land ownership hinders western states' abilities to fund education. Eight members of the Alaska Legislature serve on the Executive Committee: Senators Cowdery, Ogan, Gary Stevens, and myself, and ... Speaker Kott, Representative Coghill, McGuire and Rokeberg .... The [committee substitute (CS)] before you had one change in [the Senate State Affairs Standing Committee], and that was adding another "WHEREAS" paragraph on page 2, line 27, which ties this resolution to the overall efforts of CSG-WEST and the twelve other member states. Since this effort began, all thirteen states have introduced similar resolutions and all but four - California, Washington, Colorado, and Alaska - have passed the resolutions. This initiative is the result of years of research and preparation by legislators of the State of Utah and their legislative staff, who have developed the statistics and dollar amounts you see presented in the resolution. The Western Governors' Association has also endorsed this resolution, which is termed, "APPLE," which stands for Action Plan for Public Land and Education. The western states as group are falling behind in education funding when measured in growth of real per pupil expenditures ... during the period from 1979 - 1998. Eleven of the twelve states with the lowest real growth in pupil expenditures are western states. The growth rate of real per-pupil expenditures in the thirteen western states is less than half - 28 percent versus 57 percent - of that in the 37 other states. SENATOR THERRIAULT noted that that statistic is shown on the first of a group of graphs (included in the committee packet). He continued as follows: On average, enrollment in western states is projected to increase dramatically, while the growth rate in other states is projected to actually decrease. ... That's shown on graphs 2 and 3. Yet, Western states' state and local taxes as a percent of personal income are ... as high or higher than other states, and that's shown on graphs 4 and 5. Number 1439 VICE-CHAIR HOLM stated, "That kind of flies in the face of what we normally hear; we don't pay any taxes on this." SENATOR THERRIAULT answered that's true. He noted that chart 4 shows Alaska at 10.3 percent. He added, "And you can look across the country, you know, we're right in there with all the states." He continued as follows: Western states' commitment to education as a percentage of state budget is equal to that of other states. If you look on charts 6 and 7, you can see the percentage of the overall state budget that goes into education. The problem lies with the federal government and the enormous amount of land it owns in western states. If an imaginary line was drawn from Montana to New Mexico, no state east of that line has more than 14 percent of its land owned by the federal government. No state west of that line has less than 27 percent of their land federally owned, with the exception of Hawaii. Four western states have more than 62% of their land federally owned. Those four states are Alaska, ... Idaho, Nevada, and Utah, and that is displayed on graphs 8 - 11 .... SENATOR THERRIAULT stated that he thinks graph number 9 really shows "that imaginary line and how those western states have a tremendous amount of federal land ownership." He continued paraphrasing the sponsor statement as follows: The two primary ways that federal land ownership impacts the funding of education in western states is through enabling Acts and property taxes. Most enabling Acts for western states, including Alaska, promised to give the state 5 percent of the proceeds from the sale of federal land for the benefit of public education. In 1977 the federal government abandoned its original policy to dispose of public lands, depriving the states of public education funding estimated to be over $14 billion. This resolution does not recommend that federally owned lands be sold, necessarily, only that states be compensated as was promised. States are not allowed to assess property tax on federal lands, impacting western states in an amount over $4 billion annually. The federal government does provide Payment in Lieu of Taxes (PILT) ..., since the states cannot tax the federal lands, but the amount of PILT payments to states in 2001 was only 4 percent of the annual property tax lost by western states .... This resolution proposes ... to create: legislative awareness, public education, and to build the western states' coalition, to petition Congress to compensate the western states. In summary, western states are financially harmed in a significant way by the amount of federal land ownership. The conclusion is that federal land ownership hinders western states' ability to fund public education. CSG-West has formed [the] APPLE Initiative Steering Committee, which is chaired by Speaker Marty Stevens, with the Utah House of Representatives, and I also sit as a member on the ... committee. The ... committee will work like a strategic planning group who will press the case in Congress and with the Judiciary. The first meeting of the ... committee will be held at the CSG-WEST annual meeting ... in Anchorage, in September of this year. SENATOR THERRIAULT offered to answer questions from the committee. He noted that Mr. Briggs was also available to answer technical questions regarding the data that was used to produce the numbers that appear in the resolution and in [the graphs]. Number 1626 REPRESENTATIVE GRUENBERG noted that the premise is that the State of Alaska has a lot of federal land, is not receiving compensation, and needs the money for education. He noted that one remedy is to get compensation. Furthermore, he suggested two other alternatives: to allow the state to tax the federal land, and to give the state some of the federal land so that it can turn it into income-producing assets. He asked Senator Therriault what he thinks about adding those ideas as potential solutions. SENATOR THERRIAULT replied that certainly, as the issue is pressed to Congress, if Congress is not willing or does not have the ability to compensate [the State of Alaska] on a yearly basis, it might consider one of the other remedies. He noted that it would take an Act of Congress to make the land taxable, as well as to distribute the land. SENATOR THERRIAULT, in response to a question from Representative Gruenberg, confirmed that the resolution does not have to be uniform with that of the other states. Number 1736 REPRESENTATIVE SEATON moved to adopt CSSJR 31(STA). VICE-CHAIR HOLM objected for discussion purposes. Number 1804 REPRESENTATIVE GRUENBERG moved to adopt Conceptual Amendment 1 as follows: On page 3, line 3, following "compensation": Insert "or allow the state to tax the land or transfer sufficient land to allow us to properly fund public education" VICE-CHAIR HOLM asked if that wouldn't be incorporated in "just compensation". REPRESENTATIVE GRUENBERG answered, "Not necessarily, because 'just compensation' implies that they pay us for the land; it certainly doesn't imply giving us the land. I don't think it applies allowing us to tax the land." VICE-CHAIR HOLM said there are no "side boards" on "just compensation. REPRESENTATIVE GRUENBERG offered his understanding that the term "compensation" means payment. He indicated that [Conceptual Amendment 1] would "make it clearer." VICE-CHAIR HOLM offered his understanding that "just compensation" includes payment in loan taxes (PILT). REPRESENTATIVE GRUENBERG asked if [the federal government giving the State of Alaska] the land would be included in PILT. Number 1868 REPRESENTATIVE COGHILL said he appreciates [Representative Gruenberg's] thought. Notwithstanding that, he stated, "That is a bigger bite than I think we want to take out of just a mention in this resolution." He added, "Just mentioning it would almost do it some disservice." Number 1882 REPRESENTATIVE GRUENBERG withdrew [Conceptual Amendment 1]. SENATOR THERRIAULT remarked that the federal government can control PILT, but he can't imagine the federal government giving the State of Alaska the power to tax its land. In regard to the transfer of land, he noted that federal land [in Alaska] includes bombing ranges, national parks, and preserves. He stated, "Even suggesting the thought that Denali National Park [and Preserve] might be transferred to state ownership ... - or [the Arctic National Wildlife Refuge (ANWR)] - perhaps brings a lot of criticism, unnecessarily, to the resolution, from people who would support getting PILT ...." VICE-CHAIR HOLM removed his previous objection to adopting CSSJR 31(STA). Number 1926 REPRESENTATIVE SEATON moved to report CSSJR 31(STA) out of committee with individual recommendations and the accompanying fiscal notes. There being no objection, CSSJR 31(STA) was reported out of the House State Affairs Standing Committee.