SENATE COMMUNITY & REGIONAL AFFAIRS COMMITTEE February 9, 2000 1:35 p.m. MEMBERS PRESENT Senator Tim Kelly, Chair Senator Jerry Mackie, Vice Chair Senator Jerry Ward Senator Randy Phillips Senator Lyman Hoffman MEMBERS ABSENT All Members Present COMMITTEE CALENDAR SENATE BILL NO. 213 "An Act relating to transportation of members of the Alaska National Guard, the Alaska Naval Militia, and the Alaska State Defense Force by the Alaska marine highway system and the Alaska Railroad; and relating to the Alaska State Defense Force." - MOVED SB 213 OUT OF COMMITTEE SENATE BILL NO. 242 "An Act authorizing appropriation of the proceeds obtained by the state from levy and collection of its ad valorem tax on oil and gas exploration, production, and pipeline property to implement state revenue sharing for the safe communities program; and providing for an effective date." - MOVED SB 242 OUT OF COMMITTEE PREVIOUS SENATE COMMITTEE ACTION SB 213 - No previous Senate action. SB 242 - No previous Senate action. WITNESS REGISTER Ben Grenn Committee Aide to Senator Tim Kelly Alaska State Capitol Juneau, AK 99801 POSITION STATEMENT: Presented SB 213. BG Phil Oates Adjutant General/Commissioner Department of Military & Veterans Affairs P.O. Box 5800 Ft. Richardson, AK 99505 National Guard Armory POSITION STATEMENT: Supports SB 213. Wendy Lindskoog Director of External Affairs Alaska Railroad Corporation P.O. Box 10-7500 Anchorage, AK 99510 POSITION STATEMENT: Supports SB 213. Captain Norm Edwards 3132 Channel Dr. Juneau, AK 99801 POSITION STATEMENT: Supports SB 213 but prosposed an amendment. Kevin Ritchie Alaska Municipal League Conference of Mayors 2172 2nd. Street Juneau, AK 99801 POSITION STATEMENT: No position on SB 242 at this time. Senator Dave Donley Alaska State Capitol Juneau, AK 99801 POSITION STATEMENT: Sponsor of SB 242. BG Tom Westall Commander, Alaska State Defense Force 49th Civil Support Brigade P.O. Box 5800 Ft. Richardson, AK 99505 POSITION STATEMENT: Supports SB 213. ACTION NARRATIVE TAPE 00-, SIDE A Number 001 CHAIRMAN TIM KELLY called the Senate Community & Regional Affairs Committee meeting to order at 1:35 p.m. Present were Senators Ward, Mackie, Phillips, Hoffman, and Tim Kelly, Chair. The first order of business to come before the committee was SB 213. SB 213-TRANSPORTATION OF MEMBERS OF AK NATL GUAR Number 020 MR. BEN GRENN, committee aide to Senator Tim Kelly, sponsor of SB 213, stated SB 213 will permit active members of the Alaska National Guard, the Alaska Naval Militia and the Alaska State Defense Force, when space is available, free transportation on the Alaska Marine Highway and the Alaska Railroad. This free status will be limited to traveling to and from drill, training, or other official militia activities. The purpose of SB 213 is to provide a vehicle to get members of our volunteer defense forces to and from military training. In the present climate of downsizing and defense budget cuts, funding for transportation of members is constricted. As the owner and operator of the passenger railroad and marine highway system, the State of Alaska is in the position to offer transportation for these military personnel who are participating in training to defend our state and freedoms. SB 213 would mandate the railroad and ferry system to provide free transportation, on a space available basis, for the members of the above referenced state defense organizations who are en route to or from drill, training, or other official militia activities. The bill makes a name change from "Alaska State Militia" to "Alaska State Defense Force" in several places in the statute. SB 213 is a simple, straightforward document to assist our volunteer and citizen soldiers to get to their training. GENERAL TOM WESTALL, Commander 49th Civil Support Brigade, stated that he provided the committee with a briefing sheet. In 1983 the Department of Defense (DOD) asked the Adjutant Generals of several states to look at the defense forces to see if they could be brought into the total force structure. The military has been downsizing and the probability of federalizing the National Guard has been very likely. The State Defense Force would be a "stay behind" force and provide military formation for the Governor in the event of the federalization of the National Guard. The defense force provides a force multiplier for the various State agencies during times of disasters and other emergencies. In the services, only declared disasters are recorded, but the force participates more than that. 60 soldiers were furnished for Y2K search and rescue activities and for public service with the military police. Currently the force is structured as a cadre unit. They have brigade headquarters at Ft. Richardson at the armory, a fourth battalion in Anchorage, a second battalion in the Mat-Su valley, a first battalion in Juneau, and a third battalion in Fairbanks. The force also has an aviation detachment and medical detachment with certified State doctors and registered nurses to take care of all medical needs. United States Code Title 32, says that each state can have a National Guard and State Defense Force. The force is also covered by National Guard regulations. AS 26 is the statute the force operates under in the State. That statute shows the force as a militia; that is part of the language that needs to be changed to "State Defense Force." Number 121 CHAIRMAN KELLY asked if the language had already been changed and the legislation is just conforming the language in the statute, or whether SB 213 makes the official change. GENERAL WESTALL stated that SB 213 makes the official change. SENATOR MACKIE asked if the name change was unanimously agreed upon amongst all military units in the State or whether there was any opposition to changing the language. GENERAL WESTALL said the "State Defense Force" is a federal term that Alaska has adopted. Some states prefer "State Guard." Alaska avoided that term to make a clear distinction between the Alaska National Guard and the State Defense Force so it is clear on which unit people are addressing. The characterizations of Defense Force are more appealing than a militia group. They also have their own regulations on commissioning, enlisting, personnel action, training, and logistics; so it is a well regulated force. Number 150 SENATOR MACKIE asked if the Alaska State Defense Force falls under the command of the State's top military officials. GENERAL WESTALL stated the Governor is the Commander in Chief of all military forces within the State of Alaska. General Oates is the senior military officer for the State. CHAIRMAN KELLY asked if there are any full-time employees for the State Defense Force. GENERAL WESTALL said not at this time. The Attorney General decided the provisions to pay the Alaska Defense Force were not clear. SB 213 would be helpful for the Alaska Defense Force, because the units in Juneau have no economic way to come to Anchorage to train. It would be good for morale and cross-training to let them train with a full brigade. Number 185 ADJUTANT GENERAL PHILLIP OATES, Commissioner, Department of Military & Veterans Affairs, stated the Alaska State Defense Force is a magnificent organization of volunteers. These people are not paid to train, they train on their own because they are Alaskan patriots. The only time these individuals are paid is when they are called for active state duty. SB 213 helps these groups come together for training and it lets the group know the State appreciates their service. SB 213 will help the National Guard, because members are in 76 different locations around the State. SB 213 provides transportation on a space available basis, so the impact will be minimal. It will help the force become ready in case an emergency arises. SB 213 has his full support. Number 209 CHAIRMAN KELLY asked if they can be transported by National Guard aircraft. GENERAL OATES said yes, most of the travel is done with the Force's own resources. The only time they pay for travel on State resources is for annual training. This will provide targets of opportunity when it is not essential to train. Once a year, the National Guard has funding to transport for annual training. CHAIRMAN KELLY asked if the State Defense Force members need two weeks of active duty a year. GENERAL OATES replied no, they do not. They have a training cycle, but it is not a mandated cycle like the National Guard. They go to the field for exercise; it is a different structure because they are volunteers. General Oates introduced Major Mancino and Major Young. Number 238 MS. WENDY LINDSKOOG, Director of External Affairs for the Alaska Railroad Corporation, stated that the Alaska Railroad supports SB 213, which provides free transportation for the military on a space available basis. This bill provides another way for the Alaska Railroad to support the State's armed forces. MS. LINDSKOOG cited AS 42.40 and gave some history on the Alaska Railroad Corporation. She said that there would be no financial impact to the railroad, if the space available basis policy is not violated. Military members would not take the place of revenue paying customers. Military travelers have the potential of being bumped on different segments of travel with the railroad. Ms. Lindskoog also gave the committee some background information on the Alaska Railroads rates and different routes. CAPTAIN NORM EDWARDS, Operations Manager of the Alaska Marine Highway System (AMHS), stated the AMHS supports SB 213. Since revenues are always a concern for the AMHS, one concern is that current travel being paid for by federal funds will now be lost to the State of Alaska. Another concern is that free travel not occur on the highest revenue generating runs. Lastly, AMHS is concerned that the new task does not become a burden for the operations of AMHS. AMHS hopes SB 213 will allow operations that are complimentary to what AMHS already performs. The plans to implement the bill will include: defining space available; union contracts go to first come, first serve basis; and providing travel between Alaska ports only. AMHS would like to add language to section 2 of SB 213 that reads "between Alaska ports only" immediately after "AMHS." AMHS wanted to make everyone aware of those issues, but they do support SB 213 along with the Alaska State Defense Force. CHAIRMAN KELLY said he feels confident the AMHS and the Alaska Railroad will work out the concerns mentioned. Chairman Kelly asked General Westall if he could think of a reason someone would need to go to Seattle. GENERAL WESTALL said no. Most of the use will be intermittent and not on a regular basis. Occasionally the AMHS would be used to travel to Haines. SENATOR MACKIE asked if there would be any training outside the State of Alaska. GENERAL WESTALL said no, there would be no training outside the State. CHAIRMAN KELLY said the intent is to operate between Alaska ports only, instead of making a committee substitute for SB 213. CAPTAIN EDWARDS stated he understands the intent, and that is how it will be interpreted. SENATOR MACKIE moved SB 213 out of committee with individual recommendations. There being no objection, the motion carried. SB 242-PIPELINE PROP TAX USED FOR REV. SHRING SENATOR DAVE DONLEY, sponsor of SB 242, explained communities statewide are faced with the possibility that the pending property tax limitation initiative may pass this year. The initiative will have drastic effects on what local governments can collect as property taxes and it will reduce the current 30 mill limit to 10 mill the State imposes on communities. SB 242 addresses the impact of the initiative and it would go into effect if the initiative passes. The initiative limits what local governments can collect for property taxes; it has no impact on the existing State oil & gas property tax. The State has a 20 mill cap and a provision allowing it to only collect the difference between 20 mills and what local governments collect. Currently, of $240 million in oil & gas property taxes collected statewide, the State only gets $23 million because the local communities are capturing that money. If the initiative passes, the ability of communities to capture that money would decrease and the State's share would increase. A provision in the initiative allows communities to continue to retire existed bonded debt. Communities can exceed the 10 mill cap for existing debt, but they can't incur additional debt until the mill rate is below 10 mills or less. Next year, the State will receive an extra $5-8 million because the local communities' debt will begin to retire so the State's share will increase. The State may receive $130 million each year in the far future. SB 242 dedicates the money the State will receive from oil & gas property tax to the existing municipal assistance formula. SB 242 will utilize the new revenue the State is receiving to help communities that would be hard hit by the initiative. This is a step to mitigate the impacts. Number 407 CHAIRMAN KELLY asked about the legality of the contingent effective date and whether Senator Donley requested a legal opinion about the language. SENATOR DONLEY said the drafters did not express concern about it. He will request a specific opinion from the drafter on the language. SENATOR MACKIE asked why it will take an initiative. SENATOR DONLEY stated the affect of the initiative, if it passes, is that it will generate additional revenue for the State. If it doesn't pass, the status quo remains, and the local communities will continue to collect the revenue from oil & gas property. SB 242 is not going to hurt existing communities. If they are hurt by the initiative, it will help mitigate the effects by taking the additional money the State would get if the initiative passes and give it to the communities. SENATOR MACKIE asked if SB 242 will try to mitigate an unintended consequence. SENATOR DONLEY stated that it may be an intended consequence if the backers of the initiative think the city should not have that money. The initiative will hit some cities harder than others. SB 242 is not a full fix to that problem. SENATOR MACKIE asked what kind of affect it will have on the North Slope Borough (NSB), Valdez or some other communities. SENATOR DONLEY said those communities will be hit hardest by the 10 mill cap because they are at the 20 mill level and they will no longer be able to capture the value of all property, including oil & gas. Because the NSB has such a high level of bonded debt, the immediate impacts will be delayed until it starts to pay off the debt, then the impact will be very significant. The communities that will be hit hardest by the initiative are the ones that don't have bonded debt and are exempt. The ones that have bonded debt along the pipeline corridor are eventually going to be hit the hardest. Number 445 SENATOR MACKIE asked if the money goes back to where it was collected or whether it will be distributed throughout the municipalities. SENATOR DONLEY stated the revenue from the oil & gas property tax is designated to fund the current municipal formula. It goes out to communities statewide under that formula. SENATOR PHILLIPS asked why the State doesn't just let them have what is requested in the initiative. SENATOR DONLEY said the initiative doesn't address the existing oil & gas property tax. The State doesn't get that money now because local communities are getting it. This is a way to partially mitigate the impacts without creating new local taxes. SENATOR HOFFMAN said SB 242 should be held off to see if the initiative passes and, if the voters implement the tax cap, then the options should be weighed. Number 475 SENATOR DONLEY said that is a point to consider. The State should also see what the affects of inaction are. The State will get additional revenue if the initiative passes, but there would be no plan to mitigate the effects on communities. SENATOR MACKIE asked if this is another way to cut $8 million out of municipal assistance because they have a new revenue source. SENATOR PHILLIPS suggested passing a 10 mill limit and taking the initiative off the ballot so the legislature could write something that is workable. SENATOR DONLEY said SB 242 will not go into effect unless the initiative passes. It would have no impact on any community if it doesn't pass. It is a way of mitigating the effects if it does pass with money the State wouldn't normally get. CHAIRMAN KELLY said if the initiative doesn't pass, it is back to the status quo. If the initiative passes and SB 242 passes, then the additional money that is coming from the pipeline communities would go into a statewide pool to be redistributed through revenue sharing statewide. SENATOR MACKIE asked if that will require a constitutional amendment. SENATOR DONLEY stated it is just like issues that suggested to the legislature that this issue should be the source of funding. Number 500 MR. KEVIN RITCHIE, Alaska Municipal League (AML) and Conference of Mayors, stated the tax cap and revenue sharing are key issues for the State. AML has not taken a position on SB 242, it is working with the State assessor and the municipalities to try and gauge the issues. If the tax cap passes, the Municipality of Anchorage will lose $73 million in revenue out of the current $230 million in tax revenue. If the initiative does pass, it will add $125 million to the State's fiscal gap. Those funds need to be found somewhere else for schools, public safety and other services provided by municipalities. When the public understands about the tax cap, the initiative will not pass. CHAIRMAN KELLY asked Mr. Ritchie if he has seen polling data about the initiative passing. MR. RITCHIE replied yes. The polls from Anchorage showed 50 percent opposed, 41 percent in favor, and 9 percent uncommitted on the initiative. A large group of people that it would impact have children and it will hurt education. The pressure would be strong for the State to re-examine all tax exemptions. The public understands that property taxes fund schools, police, and other services. SENATOR PHILLIPS asked who the Municipality was polling. Senator Phillips talked about an initiative in the State of Washington. He stated that the State should just pass legislation limiting the cap at 10 mills, and work with it from there. Number 549 MR. RITCHIE said the municipalities understand that it is a threat to a revenue source and they will take very serious steps. AML is working with different groups who don't like the initiative. One concern is to make everyone aware of the impacts of the initiative. CHAIRMAN KELLY asked if Mr. Ritchie heard about a potential lawsuit questioning the constitutionality of the initiative. MR. RITCHIE said putting it on the ballot and the constitutionality of the initiative are two separate issues. It is possible that lawsuits will be filed if the initiative passes. CHAIRMAN KELLY asked about lawsuits being filed prior to the initiative going on the ballot. MR. RITCHIE replied he is not aware of any. Number 574 SENATOR MACKIE asked what the impacts from the initiative are going to be on the municipalities. MR. RITCHIE stated that Anchorage expects to lose $73 million immediately; the impacts of that are going to be huge. The total bonded debt of municipalities for the entire state amounts to $1.4 billion. The public doesn't realize part of the problem is the assessment cap. TAPE 00-01, SIDE B MR. RITCHIE discussed the impacts to Sitka. No matter how much the value of the property increases, the property tax increase is restricted to two percent. Property value is set at the true market value when the property is sold. This creates a significant disincentive for buying, selling, or building new homes. SENATOR MACKIE asked if there is a constitutional question about that. MR. RITCHIE said it is a Proposition 13, just like California's. It is not in violation of the U.S. Constitution. Number 570 SENATOR MACKIE asked if AML was worried about people coming out of the woodwork to vote because they will be paying less in property taxes. MR. RITCHIE said the public understands what local governments produce. Parallels can be drawn, and the public can see if it loses that funding, it loses libraries, teachers, and police. SENATOR PHILLIPS cited statistics from his district from an annual questionnaire. MR. RITCHIE said AML will work hard to explain the impacts to the public. Mr. Ritchie referred to a survey taken by Senator Pearce. Number 522 SENATOR MACKIE explained if people think they will pay less in property taxes, they will vote for the initiative. CHAIRMAN KELLY asked, with a 10 mill cap, what community will lose revenue that will be shared in different districts. SENATOR DONLEY said different communities lose different amounts depending on the number of years estimated and depending on the existing debt accumulated by communities. It will be disproportionate in the beginning. Eventually the communities with oil & gas properties will lose access to wealth they currently have: NSB, Fairbanks, and Valdez. SB 242 will not hurt those communities if the initiative doesn't pass, it will help them if it does pass because it gives back revenue that they will lose. Number 498 SENATOR MACKIE asked if downsizing municipalities is an option. MR. RITCHIE said currently AML doesn't have a position on that. CHAIRMAN KELLY asked if it is too early for NSB, Fairbanks, and Valdez to oppose the bill. SENATOR DONLEY stated the bill doesn't hurt those communities, it will return money to them they would lose if nothing happens. SENATOR MACKIE asked how the bill returns a portion of the money back to those communities. Number 482 SENATOR DONLEY said this is money the State doesn't have and wouldn't get unless the initiative passes. If the initiative passes, the extra money that would have gone to the communities will go to the State. It seems reasonable to send the money back to the communities. SENATOR HOFFMAN said if the public sees the money returning to the communities, it will be more likely to vote for a tax cap. SENATOR MACKIE moved SB 242 out of committee with individual recommendations. There being no objection, the motion carried. CHAIRMAN KELLY adjourned the meeting at 2:49 p.m.#