SJR 31-FEDERAL FUNDING FOR EDUCATION    CHAIR GARY STEVENS announced SJR 31 to be up for consideration. He asked for a motion to adopt the committee substitute (CS) as the working document. SENATOR JOHN COWDERY made a motion to adopt CSSJR 31 \Q version as the working document. There being no objection, it was so ordered. SENATOR GENE THERRIAULT, sponsor of SJR 31, stated that he would reference a series of charts as he explained the resolution. He read the following into the record: SJR 31 relates 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. This legislation stems from a resolution adopted in July of 2002 by the Executive Committee of the Council of State Governments-WEST urging its membership of thirteen states to support and pass joint resolutions expressing how federal land ownership hinders western states' ability to fund education. The CS adds a whereas paragraph to page 2, lines 27, which ties this resolution to the overall effort of CSG-WEST. Since this effort began, all 13 states have introduced similar resolutions and all but four (CA, WA, CO, AK) have passed them. The resolution is the result of years of research and preparation by the legislators from the State of Utah and their legislative staff who have developed the statistics and dollar amounts you see in this resolution. The Western Governors' Association has also endorsed this resolution, which is termed "APPLE" for Action Plan for Public Land and Education. Western states as a group are falling behind in education funding when measured in growth of real per pupil expenditures during the period of 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 thirty-seven other states [graph 1]. On average, enrollment in western states is projected to increase dramatically while the growth rate in other states is actually projected to decrease (2002-2011 western states 7.1 percent versus 2.6 percent). If you look at graphs 2 & 3 you can see that in the eastern part of the country the actual student populations are projected to decrease while the western states are experiencing growth. Yet, western states' state and local taxes as a percentage of income are as high or higher than other states (1998-1999 western states 11.1 percent versus 10.9 percent). You can see on handout page 4 how we compare to the other states across the nation as far as percentage of personal income that is contributed to education efforts. That's pages 4 & 5. Western states' commitment to education as a percentage of state budget is equal to that of other states. That is spelled out in handout page 6 and page 7. I think it's interesting to note that the State of Alaska shows 20 percent going to education and I think that's because they looked at total expenditures and of course we have inflation proofing of the permanent fund and the dividend itself. [It] all gets counted as spending so that actually suppresses our numbers slightly. The problem lies with the federal government and the enormous amount of land it owns in western states. If an imaginary line were 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 percent of their land federally owned. If you look at handout pages 8, 9, 10 & 11 it graphically shows the difference between the eastern half of the United States and the western half of the United States with regards to the percentage of land that is controlled by the federal government. The primary way 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 five 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, only that states be compensated as 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 states cannot tax federal lands, but the amount of PILT payments coming to the states in 2001 was only abut four percent of the annual property tax revenue lost by western states. This resolution proposes to: create legislative awareness, educate the public, build a western states coalition to petition Congress to compensate adequately the western states in the United 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 this APPLE initiative with a steering committee, which is chaired by Speaker Martin Stevens in the Utah House of Representatives and I, as Senate President, also sit as a member of that steering committee. The steering committee will work like a strategic planning group who will press the case to Congress and the Judiciary. The first meeting of the steering committee will be in the CSG-WEST annual meeting in Anchorage on September 25th of this year. CHAIR GARY STEVENS asked how PILT money comes into the different districts. SENATOR THERRIAULT replied the money that is available to the state is supposed to be considered a payment in lieu of property taxes, but the actual amount that states receive is very small compared to the amount that could be assessed if the land were all privately owned. SENATOR JOHN COWDERY asked if there is a definition of "just compensation." SENATOR THERRIAULT said it would be optimistic to expect $4 billion per year from the federal government, but "I guess just compensation would be as much as we could get." He established that he preferred the broad language to a specific dollar amount. SENATOR GRETCHEN GUESS referred to page 2, line 12 and asked for clarification of the $4 billion amount as it relates to property tax. SENATOR THERRIAULT thought it was the estimated annual impact if property tax could be levied against federal land. SENATOR GUESS asked if that was the federal land the state was supposed to get and didn't. SENATOR THERRIAULT thought it was all the federal land. SENATOR GUESS asked what would happen to impact aid if this were to happen. SENATOR THERRIAULT said this wouldn't necessarily be a lump sum payment. The federal government would likely increase the PILT payments because you can't levy tax on federal land. SENATOR GUESS noted that she didn't have anything in her packet explaining how impact aid is calculated and asked if that information was available. SENATOR THERRIAULT acknowledged that information wasn't in the packets. SENATOR GUESS asked whether there were Alaska specific numbers rather than western state numbers. KENT BRIGGS from Sacramento interjected to say that based on computations of the Utah policy office, Alaska would receive a total of $8 billion. BRIAN ALLRED from Salt Lake City spoke via teleconference to clarify that they would receive one-time revenue of about $5.6 billion or ongoing revenue of approximately $2.25 billion. With regard to an earlier question about property taxes, he explained that the $4 billion was computed with the following assumptions: The 4.1 percent federal land ownership is an average of the non- western states and assumes that the western states have the same percentage of federal land ownership. Then it assumes that the effective tax rate for each state is applied and the land is valued at $525 per acre. Those were the figures used to compute the approximate $4 billion figure on property taxes. SENATOR GUESS admitted to being confused about the argument for the request. She questioned whether it was the 1977 change in federal policy regarding disposal of public lands or were the PILT payments simply not keeping pace. MR. BRIGGS replied it is both. When states entered the union, the Enabling Act promised the new states 5 percent of all lands for public education. But when the Federal Lands Policy Management Act of 1977 was passed, the Organic Act on BLM lands essentially did away with those sales. He asked Mr. Allred to verify that assessment, which he did. He continued to say that PILT money doesn't amount to a great deal and described the payment as acknowledgement and compensation for the burden that public lands place on western states. SENATOR GUESS noted that PILT goes to all states. MR. BRIGGS clarified that PILT goes to all public lands states. SENATOR GUESS asked whether PILT and impact aid were synonymous. MR. BRIGGS told her that when PILT was adopted it was largely a western initiative then asked Mr. Allred to verify. MR. ALLRED didn't hear the question. SENATOR GUESS asked if PILT makes up for military bases and other non-tax land that the federal government has in all states. MR. ALLRED explained that impact aid is compensation for military base lands, "but PILT payments apply to not just military base, but to, as Kent mentioned, payment in lieu of taxes recognizing the burden that federal land ownership places on the states in general, not just with military bases." CHAIR GARY STEVENS asked Senator Therriault to remain in the room in case there were more questions then asked Mr. Briggs and Allred whether they had testimony to present. MR. ALLRED replied he did not have testimony, but he was available to answer questions. MR. BRIGGS replied the information he wanted to impart is that Alaska is critical because it is the home of Senator Ted Stevens. Senator Stevens is Chairman of Appropriations and a member of the Labor and Education Subcommittees. "If we had to pick a person in the United States Senate who is absolutely essential, it would be Senator Stevens." He expressed sincere appreciation for Senator Therriault's support. CHAIR GARY STEVENS confirmed that Alaska is very proud of Senator Ted Stevens. SENATOR COWDERY made a motion to move CSSJR 31(STA) from committee. There being no objection, it was so ordered.