HOUSE COMMUNITY AND REGIONAL AFFAIRS STANDING COMMITTEE April 11, 1996 1:04 p.m. MEMBERS PRESENT Representative Alan Austerman, Co-Chair Representative Ivan Ivan, Co-Chair Representative Jerry Mackie Representative Kim Elton Representative Al Vezey Representative Pete Kott Representative Irene Nicholia MEMBERS ABSENT All members were present. COMMITTEE CALENDAR CS FOR SPONSOR SUBSTITUTE FOR SENATE BILL NO. 20(FIN) "An Act relating to certain programs of state aid to municipalities and recipients in the unorganized borough; and providing for an effective date." - PASSED OUT OF COMMITTEE PREVIOUS ACTION BILL: SB 20 SHORT TITLE: STATE AID TO MUNIS & UNORGANIZED BOROUGH SPONSOR(S): SENATOR(S) TORGERSON, Pearce, Kelly, Zharoff, Taylor JRN-DATE JRN-DATE ACTION 01/06/95 18 (S) PREFILE RELEASED - 1/6/95 01/16/95 19 (S) READ THE FIRST TIME - REFERRAL(S) 01/16/95 19 (S) CRA, FIN 02/15/95 288 (S) SPONSOR SUBSTITUTE INTRODUCED-SAME TITLE 02/15/95 288 (S) CRA, FIN 02/22/95 (S) CRA AT 1:30 PM BUTROVICH ROOM 205 02/22/95 (S) MINUTE(CRA) 02/07/96 (S) CRA AT 1:30 PM BUTROVICH ROOM 205 02/07/96 (S) MINUTE(CRA) 02/14/96 (S) CRA AT 1:30 PM BUTROVICH ROOM 205 02/14/96 (S) MINUTE(CRA) 02/21/96 (S) CRA AT 1:30 PM BUTROVICH ROOM 205 02/21/96 (S) MINUTE(CRA) 03/18/96 2772 (S) CRA RPT CS 4DP 1NR NEW TITLE 03/18/96 2772 (S) FISCAL NOTE TO SSSB & CS (REV) 03/18/96 2772 (S) ZERO FISCAL NOTE TO SSSB & CSHB 394 (DCRA) 03/26/96 (S) FIN AT 9:00 AM SENATE FINANCE 532 03/26/96 2898 (S) FIN RPT CS 4DP 3NR (NEW TITLE) 03/26/96 2898 (S) PREVIOUS FISCAL NOTE (REV) 03/26/96 2898 (S) PREVIOUS ZERO FISCAL NOTE (DCRA) 03/27/96 (S) RLS AT 12:00 PM FAHRENKAMP RM 203 04/01/96 2993 (S) RULES TO CALENDAR 4/1/96 04/01/96 2993 (S) READ THE SECOND TIME 04/01/96 2994 (S) FIN CS ADOPTED UNAN CONSENT 04/01/96 2994 (S) ADVANCED TO THIRD READING UNAN CONSENT 04/01/96 2994 (S) READ THE THIRD TIME CSSSSB 20(FIN) 04/01/96 2994 (S) COSPONSOR(S): ZHAROFF, TAYLOR 04/01/96 2994 (S) PASSED Y20 N- 04/01/96 2994 (S) EFFECTIVE DATE(S) SAME AS PASSAGE 04/01/96 2999 (S) TRANSMITTED TO (H) 04/02/96 3556 (H) READ THE FIRST TIME - REFERRAL(S) 04/02/96 3557 (H) CRA, FINANCE 04/11/96 (H) CRA AT 1:00 PM CAPITOL 124 WITNESS REGISTER DEB DAVIDSON, Legislative Aide to Senator John Torgerson Alaska State Legislature State Capitol Building, Room 427 Juneau, Alaska 99801 Telephone: (907) 465-2828 POSITION STATEMENT: Presented sponsor statement for SB 20. LAMAR COTTEN, Deputy Commissioner Department of Community and Regional Affairs P.O. Box 112100 Juneau, Alaska 99811-2100 Telephone: (907) 465-4700 POSITION STATEMENT: Provided department's position and answered questions regarding SB 20. BILL ROLFZEN State Revenue Sharing Division of Municipal and Regional Assistance Department of Community and Regional Affairs P.O. Box 112100 Juneau, Alaska 99811-2100 Telephone: (907) 465-4750 POSITION STATEMENT: Provided department's position and answered questions regarding SB 20. KEVIN RITCHIE Alaska Municipal League 217 Second Street Juneau, Alaska 99801 Telephone: (907) 586-1325 POSITION STATEMENT: Testified in support of SB 20. DENNIS EGAN, Mayor City and Borough of Juneau 155 South Seward Street Juneau, Alaska 99801 Telephone: (907) 586-5240 POSITION STATEMENT: Testified in support of SB 20. TOM SMITH, Manager/City Clerk City of Palmer 231 West Evergreen Avenue Palmer, Alaska 99645 Telephone: (907) 745-3271 POSITION STATEMENT: Testified in support of SB 20. JOE MURDY, Assembly Member Municipality of Anchorage and President, Alaska Municipal League P.O. Box 196650 Anchorage, Alaska 99519-6650 Telephone: (907) 343-4431 POSITION STATEMENT: Testified in support of SB 20. TIM ROGERS, Legislative Program Coordinator Municipality of Anchorage P.O. Box 196650 Anchorage, Alaska 99519-6650 Telephone: (907) 343-4431 POSITION STATEMENT: Testified on behalf of mayor in support of SB20. ACTION NARRATIVE TAPE 96-19, SIDE A Number 0001 CO-CHAIR ALAN AUSTERMAN called the House Community and Regional Affairs Committee meeting to order at 1:04 p.m. Members present at the call to order were Representatives Austerman, Ivan, Vezey and Elton. Representatives Mackie and Kott arrived at 1:07 p.m.; Representative Nicholia arrived at 1:14 p.m. SB 20 - STATE AID TO MUNIS & UNORGANIZED BOROUGH CO-CHAIR AUSTERMAN brought SB 20 before the committee and invited Deb Davidson to present the bill. Number 0057 DEB DAVIDSON, Legislative Aide to Senator John Torgerson, sponsor of SB 20, introduced the bill. She explained that SB 20 changed the name of the Municipal Assistance Fund to the Safe Communities Fund. It required municipalities that levied taxes to list money received from the Revenue Sharing for Safe Communities Fund on the "Notice to Taxpayers". It also removed the hold-harmless provision from the base amount account and allowed that amount to be proportionately reduced in the event of future reductions. The minimum entitlement for a community was raised to $40,000. Additionally, the date of payment under the program was changed to July 31, the same date as payment of revenue sharing funds. Thus, communities would receive one payment from both programs, which would assist in their budgeting processes. Ms. Davidson noted that the remainder of the bill was primarily housekeeping measures to reflect the new name. Number 0223 LAMAR COTTEN, Deputy Commissioner, Department of Community and Regional Affairs (DCRA), testified that DCRA supported SB 20. The department liked the elimination of the hold-harmless clause, which meant that for any future cuts to municipal assistance, all communities would receive the same cut. MR. COTTEN voiced DCRA's support for the $40,000 minimum payment, a combination of revenue sharing and municipal assistance for the smaller communities, citing two reasons. First, smaller communities that would qualify for a $40,000 minimum combined entitlement generally had a limited ability to tax locally. Therefore, their general fund budgets contained a disproportionately high percentage of funds from the state through municipal assistance and revenue sharing. Second, it was a good investment in the long term. Mr. Cotten referred to the forecast for future weak fishing seasons and other reductions of government transfer payments. He said smaller communities had a double challenge meeting minimal service needs and were always faced with having restricted property within their communities and other limitations on raising taxes. MR. COTTEN expressed the department's concern about moving the payment date from February 1 to July 31. "It's the Administration's position we'd rather see it closer to November or October," he said. "It's roughly $130,000 each month you move it towards the July 31st date." Other than that, he said, the department liked the bill, which was a product of the communities, the department, and the Alaska Municipal League. Number 0380 CO-CHAIR AUSTERMAN asked if Mr. Cotten thought inclusion of the February date might create a problem with passage of the bill. MR. COTTEN replied he thought it would be a problem, although he did not know how big of a problem. He restated the wish to see it closer to October or November. Number 0400 REPRESENTATIVE PETE KOTT asked what the rationale was for the February 1 date in the original bill. MR. COTTEN deferred to Bill Rolfzen for an answer. Number 0450 BILL ROLFZEN, State Revenue Sharing, Division of Municipal and Regional Assistance, Department of Community and Regional Affairs, responded, "I believe the original municipal assistance payment date was in June for state fiscal year municipalities. Calendar year municipalities receive their payment on February 1. When Title 29 was rewritten, I believe in 1986, they moved the payments so all municipalities receive their payment on February 1." Number 0520 KEVIN RITCHIE, Alaska Municipal League (AML), testified that while the bill sounded simple, 140 municipalities had to agree on it. A tremendous amount of work had gone into the bill, which was carefully balanced. He stated strong support for the bill, saying it was an important move as far as making do with fewer resources on the parts of communities. REPRESENTATIVE KIM ELTON asked Mr. Ritchie about moving the date to October or November. Number 0580 MR. RITCHIE replied, "When I talked about the balancing part, ... considerable additional funds are being moved towards smaller communities. That's about, I believe, $238,000 dollars that larger communities are providing to smaller communities. There [are] 41 smaller communities right now that do not receive $41,000. It's very hard, obviously, for any community to say, `yeah, we have a wonderful new bill and it's going to provide us less resources'. The balancing is created by moving the payment date back to the July period." REPRESENTATIVE ELTON said, "So, that would be $130,000 a month, then. So, if it moved from July 31 to October 31, that would be a loss of $260,000 (indisc.)." MR. RITCHIE concurred. He explained that resources were allocated to communities two ways: 1) through the $40,000 minimum or 2) by getting rid of the hold-harmless provision. Number 0679 DENNIS EGAN, Mayor, City and Borough of Juneau (CBJ), stated he was also a board member for the Alaska Municipal League (AML), the subcommittee chairman for the AML legislative committee, a member of the Alaska Conference of Mayors, and, because of his position as mayor, a CBJ assembly member. "All those groups that I just named are in unanimous support of Senate Bill 20," he said. MAYOR EGAN thanked Senator Torgerson, a former assembly member from the Kenai area and former president of AML, for recognizing the seriousness of the problem faced by local municipalities, especially the smaller ones. "One of the most important facets of Senate Bill 20 is that small communities get their minimum entitlement up to $40,000," Mayor Egan said. "As you know, many communities in the state of Alaska are dissolving. What that will do to the state of Alaska is create another level of bureaucracy because somebody is going to have to take care of the ... smaller bush communities, especially, throughout the state of Alaska. And, in fact, more money is going to be expended providing services to those communities when they dissolve." MAYOR EGAN stated SB 20 would end serious cuts to municipal assistance and state shared revenue that communities had experienced since 1986, by combining those programs into the Safe Communities program. He noted that SB 20 was bipartisan and said it improved equity, especially for the future. He had been involved with the AML since 1989. "We're usually divisive," he said. "It's not that way on Senate Bill 20. And some of the major communities and medium-sized communities in the state of Alaska are taking a hit because of the upping of the minimum entitlement to $40,000. We don't have any problem with that, because I think everybody in the state of Alaska is out for the best of the communities in the state of Alaska and we would appreciate your support of Senate Bill 20." Number 0879 TOM SMITH, Manager/City Clerk, City of Palmer, testified via teleconference that the City of Palmer, a member of the AML, endorsed SB 20, a performance-based program that would reward communities that provided basic services to their citizens. Number 0979 JOE MURDY, Assembly Member, Municipality of Anchorage, and President, Alaska Municipal League, testified via teleconference in support of SB 20. He stated it was a fair bill for all communities involved. He believed the early funding date was key to the legislation. Number 1036 TIM ROGERS, Legislative Program Coordinator, Municipality of Anchorage, testified via teleconference on behalf of Mayor Rick Mystrom. "As president of the Alaska Conference of Mayors, Mayor Mystrom urges your support of this important legislation," Mr. Rogers said. "It accomplishes several things for us. It clearly defines services supported by the program. It ties funding more directly to priority public services and provides more flexibility to municipalities while increasing the minimum entitlement to smaller communities without increasing the total allocation of the program." Mr. Rogers noted the unified support by municipalities, a result of the AML and Conference of Mayors working on the bill with Senator Torgerson for at least a year and a half. CO-CHAIR AUSTERMAN asked if there was further testimony and closed the public hearing. He expressed support for the bill and acknowledged the Administration's concern about the payment date. He suggested that although the state might lose some money in interest, if the communities were half-way responsible, they would "pick it up on the other end, with the communities getting some interest out of it." Number 1145 REPRESENTATIVE KOTT expressed support for the general concept. However, he said, "I think it ought to be made clear for the record that by adjusting the date to correspond with the fiscal year, we are drawing from the general fund and allowing the communities to draw from that money the interest that generally would be accumulated in the state's general fund. So, it will mean fewer general fund dollars available." He noted the Governor had an 8percent reduction in his budget that this would certainly mitigate. "But I fear that at some point in the future, we may have to revisit the issue as we start again to address the idea of decentralizing, down to the local communities, responsibility for government," he concluded, suggesting that might result in cuts to the program in general. Number 1209 REPRESENTATIVE JERRY MACKIE moved that CSSSSB 20(FIN) move from committee with individual recommendations and accompanying fiscal notes. There being no objection, it was so ordered. ADJOURNMENT There being no further business to conduct, CO-CHAIR AUSTERMAN adjourned the House Community and Regional Affairs Committee at 1:23 p.m.