CHAIRMAN PHILLIPS brought SB 88 (CAPITAL PROJECT GRANTS) and SB 89 (APPROP: CAPITAL PROJECT MATCHING GRANTS) before the committee as the next order of business. JACK FARGNOLI, Senior Policy Analyst, Office of Management and Budget, presented a brief recap on the provisions of SB 88, which is a high priority of Governor Hickel. The Governor has proposed in the appropriation bill, SB 89, a total of $67 million for funding, which, under the provisions of the appropriation bill, would be split $65.3 million for municipalities and $1.7 million for unincorporated communities. Under both of those programs, there would be matching grant provisions that are broken down by the sizes of the communities involved, such that each time a grant or part of a grant was drawn from the communities accounts that will be created, the communities would be responsible for putting up a match. The match could be in dollars or it could be in-kind. Mr. Fargnoli said the primary intent in introducing the legislation is to help encourage and maximize the influence of the local communities themselves in the identification and prioritization of their projects. The Governor would propose those projects in their same priority order in his capital budget each year, subject to the total amount of appropriations available, and then transmit those projects as part of his capital budget to the legislature for consideration. A separate provision of the bill provides that if he for any reason departs from the priority order that is identified by local communities themselves, then he would explain in writing to the legislature his reasons for doing so. Mr. Fargnoli reiterated that it is the Governor's sense that this is important both for the process is creates and the attention is gives to local priorities. Mr. Fargnoli related that Shelby Stastny, Director of the Office of Management and Budget, was unable to attend the hearing because he was in a meeting with Governor Hickel. Number 270 SENATOR TAYLOR referred to page 11, lines 3 through 11, which relates to the local share percentage. He said the population in Wrangell is very similar to Barrow and the North Slope Borough. One mill in Wrangell generates about $75,000 total, whereas one mill in the North Slope generates several million. He said the percentile is based merely upon population and totally disregards the tax base of the community and its ability to pay. He then suggested putting this on a mill equivalency basis. JACK FARGNOLI said in the earlier versions of the bill that were in the last two sessions, there was a rather elaborate set of formulas to deal with the fiscal capacity of the different communities just to capture those kinds of differences. The decision was made this year that the desirability of simplifying the bill for purposes of ease of understanding and ease of administration would outweigh those concerns. The bill was changed to a flat three-tiered structure, grouping them by population, knowing that in some cases there would be those kind of discrepancies. He added that Senator Taylor's point was well taken and he had no reason to disagree with it. Number 325 SENATOR HALFORD commented that any time we try to classify by some arbitrary standard, we run the risk of discriminating unfairly. He asked if they had considered using the same match percentage across the state. JACK FARGNOLI acknowledged that they had, and their conversations indicated pretty strongly that then you wouldn't be dealing simply with the polarities between the extreme cases, so they departed from that rather early. SENATOR HALFORD said if he were to support the bill, he thinks equity is a far better way to simplify it. He suggested it should simply say that the match initially is 10 percent and the match at the second tier is 20 percent, and leave the provisions that do provide some kind of cost of living differential and who is eligible for a match in the bill. JACK FARGNOLI responded that he thought they would be willing to make that change. Number 345 CHAIRMAN RANDY PHILLIPS stated that he was considering offering an amendment that would limit the projects for $1 million to a community. It limits that community or the non-organized area, or the organization that is doing it to 10 percent for administrative costs. JACK FARGNOLI said that they wouldn't have a problem with that change. Number 360 SENATOR TAYLOR suggested that within the percentiles that there be some significant readjustments and that it be based on a mill equivalency basis, or perhaps a combination of population and mill equivalency. He also said he was not willing to accept the Department of Community and Regional Affairs' formula. SENATOR HALFORD said that if we're trying to find a real formula that reflects ability to pay, then it has to be mill rate per capita. Number 387 CHAIRMAN RANDY PHILLIPS stated SB 88 and SB 89 would be back before the committee at the Thursday, February 25 meeting. There being no further business to come before the committee, the meeting was adjourned at 9:30 a.m.