SCRA - 3/22/95 SB 96 UNFUNDED MANDATES ON MUNICIPALITIES    CHAIRMAN TORGERSON called the Senate Community & Regional Affairs Committee meeting to order at 1:37 p.m. He brought SB 96 , sponsored by Senate Kelly, before the committee as the first order of business. Number 010 JOSH FINK, aide to Senator Kelly, explained that just as the U.S. Congress is attempting to address the considerable financial hardships unfunded federal mandates place on state governments, many state legislatures are beginning to address the same financial hardships unfunded state mandates are placing on local governments. At present, 16 states have laws to try to limit or prohibit state government from imposing unfunded mandates on municipalities. Additionally, more than 20 other state legislatures are considering legislation much like SB 96. SB 96 was introduced by Senator Kelly to remedy the problem of unfunded state mandates in Alaska. The legislation is a high priority for the Alaska Municipal League, the Municipality of Anchorage, the Fairbanks North Star Borough, the Alaska Conference of Mayors, and the City of Unalaska, among others. Unfunded mandates cause cash-strapped cities to decrease basic municipal services in order to pay for the unfunded mandates. As these unfunded mandates increase for local governments, aid to municipalities has been cut more than 55 percent. As municipalities and local governments struggle to provide services mandated but not funded by the Legislature, increased property taxes and other local taxes have been used as funding vehicles as well as cuts in other services. Mr. Fink said the principal imperative of this legislation is that the state government should not require municipalities by statute, regulation or administrative action to implement any new programs, service or activity which significantly impacts that municipality's budget unless the legislature is willing to provide funding for that new mandate. SB 96 sets us a mechanism which will go a long way to preventing state government from imposing new mandates without funding them. However, the legislature is, ultimately, constitutionally capable of imposing such mandates if it desires. Number 070 SENATOR TORGERSON directed attention to a proposed committee substitute. SENATOR KELLY moved the adoption of CSSB 96(CRA) as a working document. Hearing no objection, it was so ordered. Number 080 JOSH FINK, in presenting a section-by-section analysis of CSSB 96(CRA), said Section 2 is the crux of the legislation. It adds a new section to Title 24 and provides that a bill enacted after January 1, 1996 that imposes new or increased costs to municipalities is not effective unless funds are appropriated at the time of enactment to fully fund these new or increased costs resulting from the new legislation. Further, unless sufficient funds continue to be appropriated each successive legislative session that the mandate is in effect, the mandate shall be revoked. Exceptions to this are: a bill passed by two-thirds of the members of each house; a mandate requested by the affected municipalities; a bill that affirms existing law as it has been construed by the courts or enacts federal law or regulation; and a bill that creates, eliminates, or changes a criminal offense as defined in Title 11. Number 190 JANET KELLY, Assistant Professor of Political Science & Public Administration at Clemson University in South Carolina, informed the committee she has been studying state mandates to localities for the last 10 years. Professor Kelly has discussed the legislation before the committee at some length with Kevin Ritchie of the Alaska Municipal League, as well as discussing some of the potential pitfalls of other states' experience with a statutory prohibition on unfunded mandates. She added that SB 96 avoids much of that pitfall and she believes it is an excellent bill. Professor Kelly said this sort of legislative attempt at self- limitation is very useful and that it heightens legislative awareness of the fiscal constraints of municipalities, but it also recognizes the state legislature's right and necessity to impose unfunded mandates in the event that there is an emergency, etc., where such a mandate is clearly indicated. Professor Kelly reiterated SB 96 is an excellent bill and she has no difficulties with it. Number 240 SCOTT BRANDT-ERICHSEN, Assistant Municipal Attorney, Municipality of Anchorage, testifying from Anchorage, voiced the municipality's support for CSSB 96(CRA), and stated he was available for questions. SENATOR TORGERSON said a question has come up concerning the exception in Section 2, (d)(2), "mandate requested by the affected municipalities," and asked if this language was too broad. SCOTT BRANDT-ERICHSEN answered that there is procedure which would help in identifying whether a municipality or whether all of the affected municipalities have requested a change. He suggested that section could be worded in a way that would provide a clearer distinction. Number 318 SENATOR KELLY noted that in her testimony, Professor Kelly referred to an "emergency." Professor KELLY said she was referring to a history of other states' experience with similar legislation in which legislatures have been able to, in the event of the emergency, quickly generate the two-thirds majority that they need in each house in order to enact an unfunded mandate. SENATOR KELLY commented that as a state that seems to stagger from natural disaster to natural disaster, we could probably anticipate some type of an emergency in the next several years, and he suggested adding an exception relating to bills passed in response to a state of emergency as proclaimed by the governor. He also suggested that maybe an approach on (d)(2) "mandate requested by the affected municipalities" could be changed to "mandate officially requested by the Alaska Municipal League" which would be relatively representative of the majority of communities throughout Alaska. SENATOR R. PHILLIPS pointed out that communities drop in and out of the League and there are different reasons that they may oppose a mandate and at what levels they may oppose it at. Number 360 KEVIN RITCHIE, Executive Director, Alaska Municipal League, noted that federal anti-mandates legislation had been signed by President Clinton earlier in the day, and he believes it will have a big effect on state/federal relations, as well as with municipalities. Mr. Ritchie said the Leagues believes that SB 96 is a real strong statement and more of a moral imperative and a discussion point than a law that's going to be enforced by the courts. He said there are ways to get around the bill, but the thing that makes it a moral imperative is the fact that it is written down and agreed to. It is a very strong, very supportable bill. Number 525 SENATOR HOFFMAN asked how many unfunded mandates have been passed on to the municipalities in the last two or three years and their costs. KEVIN RITCHIE responded that the state has been very conscientious in not creating additional statutory mandates, and the League feels the state restraint has been really good as budget pressures increase. He noted that the Legislative Research Agency created a report which includes all of the mandates from state government to local government, but there wasn't a breakdown on what Senator Hoffman was asking. However, probably the poignant example would be the senior citizen property tax. It was a bill that passed years ago, but the decision to underfund it has happened annually. SENATOR KELLY said he would have staff research the last four legislative sessions to see if any legislation that mandates was passed and that falls under the purview of this bill, as well as to look at some of the pieces of legislation that didn't pass. Number 575 SENATOR KELLY moved the following amendments to CSSB 96(CRA) Page 3, line 16: Delete "audit" and insert "finance" Page 3, after line 30: Insert a new paragraph to read as follows: "(1) bill passed in response to a disaster emergency declared by the governor under AS 26.23.020;" Renumber the following paragraphs accordingly. Page 4, line 1: Delete "the affected municipalities" and insert "resolution from the Alaska Municipal League" Hearing no objection, SENATOR TORGERSON stated the amendments were adopted. TAPE 94-5, SIDE B Number 010 KIM METCALFE-HELMAR, Special Assistant, Department of Community & Regional Affairs, stated the department had just received the new committee substitute and has not had an opportunity to take a close look the fiscal impacts of the new language on page 5, which requires the department to prepare an estimate of the increased costs if the adoption, amendment, or repeal of a regulation would require increased costs to municipalities. Also, it is unclear to the department how it would fit in with the findings that would be undertaken by the legislative finance division as outlined in subsection (b) on page 3. Number 035 RANDY WELKER, Legislative Auditor, Legislative Audit Division, said his initial concern with the original committee substitute was in the provision on page 3, line 16 that was just changed in Senator Kelly's amendment from the legislative audit division to the legislative finance division. Mr. Welker related that the zero fiscal note prepared by Legislative Audit was prepared based on the provisions of subsection (c) on page 3, which provides that if a municipality disputes the findings it can petition the audit division for review. He said if we are putting a good faith effort into the legislation, where the findings are well thought out, the only time where a municipality might dispute findings is if a finding is determined to not impact a municipality when, in fact, it clearly does. Number 070 SENATOR R. PHILLIPS voiced his concern on how legislators on the Budget and Audit Committee are going to know what is going on unless there is some of kind of reporting system to the committee itself. RANDY WELKER said there are a lot of requests that the audit division gets for quick turn-around type of things that they can do, and he would consider this in that regard. He added that if it was something that would significantly impact the division, he would then go to the committee and ask for prioritization. However, he thinks the primary emphasis is going to be on the definition of "sufficiently funded" which is outside of the findings and the role that he sees the audit division playing. But he not sure that the bill defines who will make the determination of whether or not a mandate is sufficiently funded. SENATOR Kelly agreed that is a weakness in the bill, and he thinks some work is going to have to be done on that particular section. Number 110 There being no further testimony on CSSB 96(CRA), SENATOR TORGERSON stated the bill would be held over for additional work and would be back before the committee at its next meeting.