SENATE BILL NO. 96 "An Act relating to municipal activities or services mandated by state statute." Co-chair Halford invited Josh Fink to join the committee. Mr. Fink testified, "Just as the U.S. Congress is attempting to address the considerable financial hardship unfunded federal mandates placed on state governments, many state legislatures are beginning to address the same financial hardships unfunded state mandates place on local governments. In fact, at present sixteen states currently have laws which either limit or prohibit state government from imposing unfunded mandates on municipalities. Additionally, more than 20 other state legislatures are actively considering such legislation. SB96 is introduced this year to remedy the problem of unfunded state mandates in Alaska. This legislation is a high priority for the Alaska Municipal League, the Municipality of Anchorage, the Fairbanks North Star Borough, and the Alaska Conference of Mayors. Unfunded mandates cause cash-strapped cities to decrease basic municipal services such as public safety, road maintenance, and the local contribution to education to schools, in order to pay for the unfunded mandates which are a much lower priority. Moreover, as the unfunded mandates increase for local governments, aid to municipalities has been cut more than 55%. A good example is the Senior Citizen's Property Tax Exemption which has increased 300% in cost to local governments in the last several years. As municipalities and local governments struggle to provide services mandated, but not funded, by the legislature, increased property and other local taxes have been used as the funding vehicle. The principle imperative of this legislation is that the State government should not require municipalities by statute, appropriation, regulation, or administrative action to implement any program, service, or activity which significantly impacts municipality budgets unless the legislature provides new funding to cover the costs of these mandates. SB 96 sets up a mechanism preventing state government from imposing new unfunded mandates. However, the legislature is ultimately constitutionally capable of imposing such mandates if it desires. Mr. Fink gave a bill analysis, which is attached to the minutes. Senator Zharoff inquired as to the effective date of January 1, 1996. By signing the bill now, he asked if preexisting law is complicated? Mr. Fink responded that there would not be an effect on any mandates that this legislature, this year, would have imposed whether legislation or budgetary. It would become effective the second session of this legislature. Brad Pierce was invited to join the committee. He stated that the governor has no official stand on this bill. He said that the governor has stated on many different occasions that there is no intent to pass off costs to local governments. He said he was asked to come before the committee and speak to general policy considerations. He stated there is a concern that this bill is premature and unnecessary. Other states that have enacted these laws have a much longer history of state and local relations. The handout he provided, entitled, "1991 State and Local Taxes: U.S. Average versus Alaska as Shares of Income of a Family of Four", shows that state and local taxes combined are minor compared to other states. At every family income level the higher tax burden is what municipalities in other states are complaining about. We do not have the same situation in Alaska. He referred to a study done in 1992 indicating that the average household of 2.8 persons in Alaska received $19,600 in state and local services, plus $2600 in PFD's, while paying $2,000 in state and local taxes. He suggested that a realignment of responsibilities is going to have to occur. The administration fully intends to involve municipalities in the realignment. The main concern is that in other states, the intent of this type of legislation is to freeze relations where they are now. He expressed that municipalities have it good in the state of Alaska. That it is the state that pays for a good portion of the schools, maintaining jails, prosecuting criminals, and a vast array of public services that are the province of local governments elsewhere. Such services he listed included social services, environmental protection, health care, etc. This administration will be looking at a long range financial plan, and performance measures of the effectiveness of state programs. He did not endorse the bill. Kevin Richie, Alaska Municipal League, was invited to join the committee. He testified that this bill is very much the same as the federal bill that is relieving the state from unfunded mandates. This is a moral imperative. There are a number of processes in the bill to allow a mutual relationship and understanding. In essence, it is a statement by the legislature saying what the federal government has done for the states. He encouraged the legislature to allow the municipalities to come to the table when discussing mandates. Regarding the need to do this, there are significant costs that can be passed on to the municipalities. He cited an example where the DEC is considering water standards which are considerably higher than those recommended by the federal government. In a municipality such as Anchorage, the potential costs for meeting those additional mandates, which could be passed on by regulation, could be approximately $200 million. The Municipal League sees this as a very important statement. Co-chair Halford brought to the attention of the committee, an Amendment recommended by the sponsor that would repeal the existing provisions that require municipal fiscal notes. Mike Greany, Director, Legislative Finance Division, spoke to the issue of preparing a fiscal note to this bill. He feels there will need to be a fiscal note for the Legislative Finance Division in order to fulfill its requirements. He stated that his office is researching the costs. Co-chair Halford requested that Mr. Greany come back to the committee once he has determined the costs, at that time the amendments will be considered. End, Tape #26, Side 1 Begin, Tape #26, Side 2