HOUSE COMMUNITY AND REGIONAL AFFAIRS STANDING COMMITTEE February 29, 2000 8:11 a.m. MEMBERS PRESENT Representative John Harris, Co-Chairman Representative Carl Morgan, Co-Chairman Representative Andrew Halcro Representative Lisa Murkowski Representative Reggie Joule Representative Albert Kookesh MEMBERS ABSENT Representative Fred Dyson COMMITTEE CALENDAR HOUSE BILL NO. 265 "An Act extending the termination date of the Alaska regional economic assistance program; and providing for an effective date." - MOVED HB 265 OUT OF COMMITTEE PREVIOUS ACTION BILL: HB 265 SHORT TITLE: ALASKA REGIONAL ECONOMIC AID PROGRAM SPONSOR(S): REPRESENTATIVES(S) AUSTERMAN, Morgan Jrn-Date Jrn-Page Action 1/10/00 1889 (H) PREFILE RELEASED 12/30/99 1/10/00 1889 (H) READ THE FIRST TIME - REFERRALS 1/10/00 1889 (H) EDT, CRA 2/09/00 (H) EDT AT 5:00 PM CAPITOL 124 2/09/00 (H) Moved Out of Committee 2/09/00 (H) MINUTE(EDT) 2/18/00 2239 (H) COSPONSOR(S): MORGAN 2/21/00 2250 (H) EDT RPT 5DP 1NR 2/21/00 2250 (H) DP: BARNES, CISSNA, HALCRO, KERTTULA, 2/21/00 2250 (H) PHILLIPS; NR: DYSON 2/21/00 2251 (H) FISCAL NOTE (H.EDT/DCED) 2/21/00 2251 (H) REFERRED TO CRA 2/21/00 2258 (H) FIN REFERRAL ADDED 2/29/00 (H) CRA AT 8:00 AM CAPITOL 124 WITNESS REGISTER REPRESENTATIVE ALAN AUSTERMAN Alaska State Legislature Capitol Building, Room 434 Juneau, Alaska 99801 POSITION STATEMENT: Testified as sponsor of HB 265. FRANK HOMAN, Executive Director Southeast Conference Member, Association of ARDOR Directors 213 Third Street Juneau, Alaska 99801 POSITION STATEMENT: Testified on behalf of all the ARDORs in support of HB 265. CHARLES PARKER Mat-Su Resource Conservation & Development Council 351 West Parks Highway, Suite 100 Wasilla, Alaska 99654 POSITION STATEMENT: Urged support of HB 265. PAT POLAND, Director Division of Municipal & Regional Assistance Department of Community & Economic Development 333 West Fourth Avenue, Suite 220 Anchorage, Alaska 99501-2341 POSITION STATEMENT: Testified in support of the ARDOR program. ACTION NARRATIVE TAPE 00-14, SIDE A Number 0001 CO-CHAIRMAN HARRIS called the House Community and Regional Affairs Standing Committee meeting to order at 8:11 a.m. Members present at the call to order were Representatives Harris, Morgan, Halcro, Murkowski and Joule. Representative Kookesh arrived as the meeting was in progress. Representative Dyson was not in attendance. HB 265-ALASKA REGIONAL ECONOMIC AID PROGRAM CO-CHAIRMAN HARRIS announced that the only order of business before the committee would be HOUSE BILL NO. 265, "An Act extending the termination date of the Alaska regional economic assistance program; and providing for an effective date." Number 0078 REPRESENTATIVE ALAN AUSTERMAN, Alaska State Legislature, sponsor of HB 265, commented that HB 265 is a fairly simple bill that basically extends the life of the Alaska Regional Development Organizations (ARDORs) to July 1, 2003. REPRESENTATIVE MURKOWSKI commented that every "easy" bill that this committee has heard has gone onto another committee where it is no longer an "easy" bill. REPRESENTATIVE AUSTERMAN surmised that HB 265 would receive a referral to the House Finance Committee due to its $650,000 fiscal note. He explained that the funding source is coming from the Alaska Industrial Development and Export Authority (AIDEA). There has been discussion of eliminating that funding. He noted that the House Finance Subcommittee left the ARDORs in the budget; however, he expected discussion on that point by the full House Finance Committee. REPRESENTATIVE AUSTERMAN pointed out that the House Finance Subcommittee basically eliminated the International Trade and Development (program). There are not many economic development tools left in the state's coffer, but ARDOR is one of those. He noted that ARDOR is one of the programs that the House Finance Subcommittee was directed to [eliminate] from the budget, but it did not. Number 0302 REPRESENTATIVE JOULE asked if this money is general fund (GF) money. REPRESENTATIVE AUSTERMAN remarked that it depends upon one's view. Many legislators view anything coming into the state coffers as GF money. He pointed out that this is a dividend that is paid out from AIDEA. It is a matter of perception. Personally, Representative Austerman believes that anything coming into the state coffers should be classified as GF money. Representative Austerman also pointed out that the bottom of the fiscal note describes the funding source, which is AIDEA's Enterprise Development Fund. Number 0495 FRANK HOMAN, Executive Director, Southeast Conference; Member, Association of ARDOR Directors, informed the committee that the Southeast Conference is a regional ARDOR member. He announced support of passage of HB 265 for all the ARDORs. This is a program that seems to need a small amount on the state side, while it generates about $3.5 million per year with all 13 ARDORs together. That $3.5 million is generated from other sources to help promote economic development within the various regions of the state. MR. HOMAN referred the committee to the document entitled, "Alaska Regional Development Organizations," included in the bill packet. The document specifies what each ARDOR has been able to accomplish in each region; the last page is a map that illustrates the distribution of the ARDORs through the state. Mr. Homan commented that with the ARDOR program, people within the region come together to discuss where the region wants to go, in regard to economic development. He highlighted that people from the development side to the conservation side come together to promote things that would improve their particular region's situation. In conclusion, Mr. Homan encouraged the committee's support for HB 265. CO-CHAIRMAN HARRIS asked how many ARDORs would go out of business without these funds. MR. HOMAN referred the committee to the annual report. He pointed out that the $47,000 generated for each ARDOR represents almost all of the funding some ARDORs receive, especially in the rural areas where there is not enough local/private business to generate matching funds. Matching funds are required whenever possible. Therefore, Mr. Homan suggested that maybe four or five ARDORs would not survive without this funding. CO-CHAIRMAN HARRIS commented that two of the ARDORs that would not survive without this funding are probably in his district. He noted that two of the directors of the two ARDORs in his region did not travel to the ARDOR meeting due to low funding. MR. HOMAN said the ARDOR meetings are usually by teleconference because there is so little money available for travel, particularly for the newer rural ARDORs. The Anchorage and Southwest Alaska ARDORs are probably the most secure. He informed the committee that in the Southeast Conference, the ARDOR money provides about 50 percent of the operating money. There are a lot of grants that come through the Southeast Conference, but in regards to the actual administrative money the ARDOR provides about half. Therefore, the elimination of the ARDOR funding would significantly reduce the Southeast Conference's ability. Number 0914 REPRESENTATIVE MURKOWSKI asked if there is resistance to the formation of new ARDORs. She assumed that with new ARDORs there would not be more state money, and therefore the same amount of funding would be split between more groups and would result in each receiving less. Is there some competition among the ARDORS in regard to that? MR. HOMAN answered that there could be competition. He confirmed that it is a fixed amount of money. He recalled that two new ARDORs have formed. The department worked with the ARDOR association and determined that the following formula would be followed: divide the amount of dollars by the number of ARDORs. Therefore, the ARDOR association recommended that each ARDOR be treated equally and not compete with each other for the money. [The ARDOR association] realized that the stronger ARDORs could compete more vigorously than the rural ARDORs. Mr. Homan felt that sharing philosophy was a smart decision on their part. MR. HOMAN informed the committee that he knew of one ARDOR that is about to be approved. Therefore, the amount for each ARDOR will be reduced. This discussion will probably have to be revisited again. However, in the past it was a sharing philosophy. Mr. Homan recognized that the other option, which is probably not a good option, is to seek more funding. He said that about $50,000 per year [for each ARDOR] is a workable amount. Number 1165 CHARLES PARKER, Mat-Su Resource Conservation & Development Council, testified via teleconference from the Mat-Su Legislative Information Office (LIO). He noted that the Mat-Su Resource Conservation & Development Council is the ARDOR for the Matanuska-Susitna Borough. He commented that in his past experience with rural Alaska, there is no comparison to the ARDOR program. Mr. Parker noted that he works directly for an ARDOR program. With very little money, the ARDORs have been able to accomplish a great deal both regionally and statewide. Statewide, the ARDORs have managed to leverage over $5 in private and federal money for every $1 invested by the state for local development projects. Although these are substantial figures, they are conservative figures that relate to dollars received directly by the ARDORs to match the state grant. This does not include technical assistance provided on development projects, which can bring in more private and federal funds that are almost impossible to quantify. MR. PARKER informed the committee that in the Mat-Su Valley the ARDOR manages accounts for numerous community organizations, many of which would not have been able to accomplish their goals without the help of the ARDOR program. He noted that the Mat-Su ARDOR has managed accounts that total over $300,000 in the last two years. Therefore, the financial impacts over the long term is very substantial because the ARDORs work to create jobs, reduce unemployment and decrease the burden on public assistance. As the ARDORs improve local economies and increase the quality of life, the communities' dependence on direct state and federal services is reduced. Although the elimination of the ARDOR program may reduce costs for this year and perhaps next year, such action would send the local economies into a downward spiral. Therefore, the cost of government services would be greatly increased within a few years. Mr. Parker pointed out that although many ARDORs such as the Mat-Su ARDOR have long-term plans which include self-sufficiency, many of the ARDORs would not survive without the support of the ARDOR program. In conclusion, Mr. Parker urged the committee's support of HB 265. Number 1371 PAT POLAND, Director, Division of Municipal & Regional Assistance, Department of Community & Economic Development, testified via teleconference from Anchorage. He said that he was available to answer questions. He noted that the division had previously testified in support of the ARDOR program. CO-CHAIRMAN HARRIS announced that public testimony would be closed. Number 1390 REPRESENTATIVE MURKOWSKI moved to report HB 265 out of committee with individual recommendations and the accompanying fiscal notes. CO-CHAIRMAN HARRIS objected for purposes of discussion. REPRESENTATIVE JOULE pointed out that six of the existing programs spoke to the issue of workforce development. In the scheme of the state's overall budget, this is a small amount to pay for economic development. He commented that sometimes the best resources are people. With six of the programs specifically speaking to developing the state's workforce and thus its people, it is a good investment that should continue. CO-CHAIRMAN HARRIS asked if Representative Joule had seen, in his region, active involvement by the ARDORs in workforce development. REPRESENTATIVE JOULE replied yes and noted that it is an ongoing process. He indicated that this seed money [from the ARDOR] opens opportunities. He likened it to the permanent fund dividend program. CO-CHAIRMAN MORGAN disclosed that he is the Vice President of the Interior Rivers Resource Conservation & Development (RC&D), which has submitted an application for an ARDOR. The Interior Rivers RC&D views the ARDOR as being helpful with some travel as well as opening the door to the state system of granting. CO-CHAIRMAN MORGAN informed the committee of the following: The Interior Rivers RC&D area is at twentieth century standards (no Third World conditions) with local control that guides strong economic development while protecting the environment, subsistence resources, and the cultural heritage of all people. CO-CHAIRMAN HARRIS removed his objection. There being no objection, HB 265 was reported out of the House Community and Regional Affairs Standing Committee. ADJOURNMENT There being no further business before the committee, the House Community and Regional Affairs Standing Committee meeting was adjourned at 8:38 a.m.