Legislature(2015 - 2016)HOUSE FINANCE 519

04/16/2016 08:30 AM House FINANCE

Note: the audio and video recordings are distinct records and are obtained from different sources. As such there may be key differences between the two. The audio recordings are captured by our records offices as the official record of the meeting and will have more accurate timestamps. Use the icons to switch between them.

Download Mp3. <- Right click and save file as

* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
-- Recessed to 7:00 p.m. Today --
Moved HCS CSSB 196(FIN) Out of Committee
Moved HCS CSSB 210(FIN) AM Out of Committee
Scheduled but Not Heard
Scheduled but Not Heard
Scheduled but Not Heard
+ Bills Previously Heard/Scheduled TELECONFERENCED
CS FOR SENATE BILL NO. 210(FIN) am                                                                                            
     "An  Act  relating  to the  community  revenue  sharing                                                                    
     program;  and  changing  the   name  of  the  community                                                                    
     revenue  sharing program  to  the community  assistance                                                                    
9:43:39 AM                                                                                                                    
Co-Chair  Neuman  MOVED  to  ADOPT  the  proposed  committee                                                                    
substitute  for HCS  CSSB 210(FIN),  Work Draft  29-LS1593\N                                                                    
(Shutts,  4/14/16).  There being  NO  OBJECTION,  it was  so                                                                    
PETE ECKLUND,  STAFF, REPRESENTATIVE MARK  NEUMAN, explained                                                                    
that the  only change  to the bill  was the  effective date,                                                                    
which  would leave  the current  revenue sharing  formula in                                                                    
place for  FY 17. He stated  that when the bill  took effect                                                                    
in  FY  18,  $30  million  would be  distributed  as  a  new                                                                    
community  assistance  program,   as  opposed  to  community                                                                    
revenue sharing.  He noted the  document in  member packets,                                                                    
"SB  210: Community  Assistance Payments  FY 18-19"(copy  on                                                                    
9:46:04 AM                                                                                                                    
Representative  Gara  understood  that  the  fund  had  been                                                                    
capitalized so that the annual payout would not disappear.                                                                      
Mr.   Ecklund  responded   that  the   fund  had   not  been                                                                    
capitalized in the FY 17  operating budget, which meant that                                                                    
one-third, or  $38 million,  of the  $115 million,  would be                                                                    
distributed in FY 17 as community revenue sharing.                                                                              
9:46:50 AM                                                                                                                    
Representative Gara queried  the capitalization formula that                                                                    
had been used in the past.                                                                                                      
Mr.  Ecklund  replied  that   current  statute  stated  that                                                                    
whatever  the  balance of  the  fund,  one-third had  to  be                                                                    
distributed until  there was  less than  $60 million  in the                                                                    
fund. He  stressed that under  the current program,  with no                                                                    
further capitalizations, the  last community revenue sharing                                                                    
would be distributed in FY 18.                                                                                                  
9:47:50 AM                                                                                                                    
Representative Gara  asked what was being  use to capitalize                                                                    
the fund in the past.                                                                                                           
Co-Chair Thompson stated that general funds had been used.                                                                      
Mr.  Teal added  that the  capitalization of  the fund  came                                                                    
from progressive oil tax proceeds,  and when oil prices fell                                                                    
and progressivity went away there  was no funding source for                                                                    
the program. He  furthered that if the price of  oil did not                                                                    
increase the  program would  falter until  prices increased;                                                                    
at  the restart  the program  funding  would be  at the  $60                                                                    
million distribution level.                                                                                                     
Representative Gara wondered whether  general funds had been                                                                    
used to capitalize progressivity after ACES.                                                                                    
Mr.  Teal  replied in  the  affirmative.  He clarified  that                                                                    
unrestricted  general funds  had been  used under  ACES, and                                                                    
were still being used, it was  a matter of naming the source                                                                    
of  the revenue.  He  added that  the  named revenue  stream                                                                    
would be well  in access of the funding for  the program and                                                                    
would  not  contain  phase   out  provisions  for  community                                                                    
Representative   Kawasaki  queried   the   version  of   the                                                                    
Community   Assistance   Payments  FY   16-18,   Non-Unified                                                                    
Boroughs by  Community, prepared by the  Legislative Finance                                                                    
9:51:15 AM                                                                                                                    
ALEXI  PAINTER,   ANALYST,  LEGISLATIVE   FINANCE  DIVISION,                                                                    
ALASKA STATE LEGISLATURE, clarified  that the document dated                                                                    
April 15,  2017 included  incorporated boroughs,  which were                                                                    
eligible at  an amount that  was one-nineteenth the  base of                                                                    
the program.  He said  that it had  been requested  that the                                                                    
committee  see all  communities that  received distribution,                                                                    
some of which were unincorporated.                                                                                              
Representative  Kawasaki   understood  that   the  Fairbanks                                                                    
Northstar Borough  would receive  $1.93 million  in addition                                                                    
to  what  Chena Hot  Springs,  Ester,  Ester Dom,  Fox,  and                                                                    
Golstream combined would receive.                                                                                               
Alexi responded in the affirmative.                                                                                             
Vice-Chair Saddler asked  Mr. Painter read the  title of the                                                                    
document he was  referring to, and then to  explain what the                                                                    
document represented.                                                                                                           
9:53:00 AM                                                                                                                    
AT EASE                                                                                                                         
9:55:15 AM                                                                                                                    
Co-Chair  Thompson clarified  that  the title  of the  chart                                                                    
being referred to was "SB  210 Community Assistance Payments                                                                    
FY 18-19."                                                                                                                      
Representative  Kawasaki requested  a  chart that  reflected                                                                    
the percentages side-by-side, year-by-year.                                                                                     
Vice-Chair  Saddler  asked what  the  second  column on  the                                                                    
chart, "SB 210 Distribution: $30 million' represented.                                                                          
Mr. Ecklund  responded that the column  represented the bill                                                                    
before the committee,  with an effective date  of January 1,                                                                    
2017; the  new community assistance program  would come into                                                                    
effect in FY 18.                                                                                                                
9:57:37 AM                                                                                                                    
Representative Gara expressed concerned  about too deep of a                                                                    
cut to revenue sharing program.                                                                                                 
Co-Chair  Thompson purported  that if  action was  not taken                                                                    
now, in two years revenue sharing would be zero.                                                                                
Mr. Ecklund agreed.                                                                                                             
Representative  Gattis  believed  that   the  state  had  no                                                                    
revenue to share to support community assistance.                                                                               
Representative  Kawasaki   stated  that   community  revenue                                                                    
sharing  had been  established to  support communities  that                                                                    
were not  directly involved in  oil and gas  development, or                                                                    
other  resource  development,  to  receive a  share  of  the                                                                    
state's  common  interest  resources. He  expressed  concern                                                                    
that the  City of Fairbanks would  receive public assistance                                                                    
when  the   revenue  sharing  had  been   intended  for  the                                                                    
aforementioned communities.  He contended  that many  of the                                                                    
communities that  participated in revenue sharing  could not                                                                    
institute and income tax, and might  not have a tax base. He                                                                    
added that many of  those communities raised revenue through                                                                    
sales taxes.  He rejected the characterization  that revenue                                                                    
sharing was public assistance  for communities, and believed                                                                    
that the  revenue sharing should continue  even during times                                                                    
of fiscal uncertainty.                                                                                                          
10:01:03 AM                                                                                                                   
Vice-Chair Saddler thought that  those same communities that                                                                    
received  extra petroleum  dollars  through revenue  sharing                                                                    
during positive times  should also be responsible  to pay to                                                                    
make up for any deficit in  revenues during times of low oil                                                                    
Representative  Gara spoke  to  Anchorage's "weirdly  worded                                                                    
tax cap."  He said  that a 67  percent reduction  in revenue                                                                    
sharing would  drive the need  for other sources  of revenue                                                                    
or cuts in Anchorage services equaling $2.7 million.                                                                            
Co-Chair Thompson  wondered whether Representative  Gara was                                                                    
referencing the numbers off of the correct chart.                                                                               
Mr. Ecklund  replied that  he did not  believe so.  He added                                                                    
that  the  chart  he  was  looking  at  reflected  that  the                                                                    
distribution for Anchorage under SB  210, in FY 18, would be                                                                    
$4.473 million.                                                                                                                 
Representative  Gara stated  that he  was referring  to both                                                                    
charts.  He  apologized that  he  had  been looking  at  the                                                                    
numbers for the Mat-Su. He  noted that the current chart did                                                                    
not include historical comparisons.                                                                                             
10:04:03 AM                                                                                                                   
Co-Chair Neuman noted that the price  of oil had been on the                                                                    
rise  when revenue  sharing had  first been  introduced, and                                                                    
the  price for  municipalities to  heat homes  and buildings                                                                    
had increased rapidly.  He said that in the event  of a drop                                                                    
in  oil  prices the  intention  had  been to  ramp-down  the                                                                    
program.  He stated  that many  communities in  rural Alaska                                                                    
would not be able to  survive without revenue sharing, which                                                                    
could end up costing more money  if the state has to step in                                                                    
an  manage   those  communities.   He  explained   that  the                                                                    
legislation would  "lock-in" a community  assistance program                                                                    
that would  help communities plan  their yearly  budgets. He                                                                    
stressed that  the state did  not currently have  any excess                                                                    
revenue, which made it essential  to make adjustments to the                                                                    
program.  He expressed  support for  the current  version of                                                                    
the bill.                                                                                                                       
Co-Chair  Thompson expressed  support for  the current  bill                                                                    
version. He reiterated that without  the legislation, in two                                                                    
years the revenue sharing would  end altogether. He stressed                                                                    
that  the program  supported the  operating budgets  of over                                                                    
100 rural communities in the  state. He lamented that if the                                                                    
program  shut down  the  state would  end  up funding  those                                                                    
budgets, or that the affected communities would shut down.                                                                      
10:08:41 AM                                                                                                                   
Representative  Gara relayed  that he  was not  debating the                                                                    
legislation. He  wondered whether Anchorage would  be forced                                                                    
to raise property  taxes in order to absorb the  cuts to the                                                                    
program by  FY 18.  He thought  that it  would be  useful to                                                                    
know  that the  community revenue  sharing amounts  were for                                                                    
all communities during previous time of low oil prices.                                                                         
10:10:13 AM                                                                                                                   
Co-Chair  Neuman   admitted  that  he  did   not  know  what                                                                    
communities would do. He  disagreed with Representative Gara                                                                    
about needing  the information concerning what  had happened                                                                    
in the past in order to move the bill.                                                                                          
10:10:45 AM                                                                                                                   
Representative Edgmon favored the approach  of the bill.  He                                                                    
did not  believe that the  distribution was equal  for every                                                                    
community involved,  but noted that the  legislation had the                                                                    
support of the Alaska Municipal League.                                                                                         
Co-Chair  Thompson expressed  the  desire to  move the  bill                                                                    
from committee.                                                                                                                 
Vice-Chair Saddler reviewed the fiscal note.                                                                                    
10:12:08 AM                                                                                                                   
Co-Chair Neuman  MOVED to  REPORT HCS  CSSB 210(FIN)  out of                                                                    
committee   with   individual    recommendations   and   the                                                                    
accompanying fiscal notes. There  being NO OBJECTION, it was                                                                    
so ordered.                                                                                                                     
HCS CSSB 210(FIN)  was REPORTED out of committee  with a "do                                                                    
pass" recommendation and  with one new fiscal  note from the                                                                    
House  Finance Committee  for Fund  Cap; and  one previously                                                                    
published zero fiscal note: FN1 (SFC for CED).                                                                                  
10:12:34 AM                                                                                                                   
6:54:17 PM                                                                                                                    

Document Name Date/Time Subjects
SB 196 CS WORKDRAFT HFIN vT.pdf HFIN 4/16/2016 8:30:00 AM
SB 196
CS SB 210 HFIN WORKDRAFT vN.pdf HFIN 4/16/2016 8:30:00 AM
SB 210
4 14 16 SB 210 to status quo FY18-19.pdf HFIN 4/16/2016 8:30:00 AM
SB 210
Copy of 4 15 16 PCE Endowment Analysis of SB 196 for CS.pdf HFIN 4/16/2016 8:30:00 AM
SB 196
PAGE 2 of 4 15 16 PCE Endowment Analysis of SB 196 for CS.pdf HFIN 4/16/2016 8:30:00 AM
SB 196
SB 210 HCS FIN NEW FN FUND CAP.pdf HFIN 4/16/2016 8:30:00 AM
SB 210
4-14-16 SB210 Letter to House Finance w-attach.pdf HFIN 4/16/2016 8:30:00 AM
SB 210
SB 196 HCS WORKDRAFT FIN vR.pdf HFIN 4/16/2016 8:30:00 AM
SB 196