Legislature(2003 - 2004)

03/25/2004 03:35 PM STA

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
           SCR 12-BOROUGH INCORPORATION: UNORG AREAS                                                                        
CHAIR GARY STEVENS  announced SCR 12 to be  up for consideration.                                                               
He  noted  that Senator  Hoffman  was  absent and  asked  Senator                                                               
Wilken whether he would like to join the committee at the table.                                                                
He asked  Senator Wilken to  identify himself and noted  that the                                                               
committee had a hearing on the  bill in October 2003 in Anchorage                                                               
at which time all members were present.                                                                                         
Verbatim transcript:                                                                                                          
SENATOR GARY WILKEN, sponsor: Senator  Stevens and members of the                                                               
committee, thank you  for hearing SCR 12. My name  is Gary Wilken                                                               
and I  have the honor  of representing Fairbanks in  State Senate                                                               
District  E. I  don't  want to  go through  the  whole bill  this                                                               
afternoon, but I  do want to just highlight some  things that you                                                               
have.  Most recently  I just  passed  out an  editorial from  our                                                               
newspaper I  thought was  well done  and I just  gave you  - that                                                               
wasn't in your packet that came  from our office. It just arrived                                                               
on your desk today.                                                                                                             
I'll  perhaps just  highlight for  the moment,  a little  trifold                                                               
that  we  have here  and  walk  through. This  legislation,  this                                                               
resolution is really  quite simple. There are areas  of the state                                                               
that I would  suggest have the capacity to  fund local government                                                               
at  the most  basic level,  that being  supporting your  schools.                                                               
This  legislation,   this  resolution,  simply  asks   the  Local                                                               
Boundary Commission to  go out and look at those  areas that they                                                               
think are  most capable  of doing that  and put  together working                                                               
with the  people over a public  process that is laid  out in this                                                               
plan, how the government would  be shaped in that particular area                                                               
of our state working through  the standards of incorporation. And                                                               
they'd bring that plan back to  the Legislature and we would deny                                                               
it if we didn't think it to be appropriate.                                                                                     
The current law,  it should be understood, stays  in place. Today                                                               
any unorganized  area of  the state can  group together  and work                                                               
with the LBC's  help, form their government and then  bring it to                                                               
the  Legislature and  we  turn  it down.  This  is different.  Of                                                               
course the controversial part is  that this some would suggest is                                                               
mandatory.  I would  suggest that  is correct,  but certainly  it                                                               
doesn't  replace current  law  that allows  folks  to form  their                                                               
governments  as they  wish. This  simply  recognizes that  people                                                               
today get  their schools for  free. And  that I would  think that                                                               
those that  have the capacity  simply recognize that as  the next                                                               
level  of  personal responsibility;  as  the  next level  of  the                                                               
evolution  of local  government in  Alaska and  step up  and fund                                                               
their schools.                                                                                                                  
This little  trifold [Prepared by  Gary Wilken's  office 8/20/03]                                                               
pretty much says it all and I'm  going to just hit a few spots. I                                                               
just remind  this committee  that 83 percent  of Alaska  lives in                                                               
organized  boroughs. They're  going to  be asked  in FY05  to pay                                                               
$171 million  of taxpayer's money -  of their own money  - before                                                               
we get a nickel of  state support. Unorganized Alaska doesn't pay                                                               
a dime  for their schools and  I'm the first to  admit that there                                                               
are areas of  the state that don't have the  capacity to do that.                                                               
And I also suggest - through SCR  12 - that there are areas today                                                               
that have - since we've become  a state - that have become mature                                                               
enough to support their schools. And  I'm asking them to join and                                                               
add  to the  $171 million  as  we look  to drive  dollars to  the                                                               
There's  two items  here in  the  middle trifold.  First is  this                                                               
book, which  you've all seen. I'll  just highlight it. This  is a                                                               
result  of work  of the  Local Boundary  Commission. [Unorganized                                                               
Areas  of  Alaska  that   Meet  Borough  Incorporation  Standards                                                               
February 2003]  This report was  brought to  us a year  ago; it's                                                               
divided into  three sections; the  first section is  the history.                                                               
Clearly they contemplated,  back when our state  was formed, that                                                               
there would  be organized and  unorganized Alaska. And  that when                                                               
areas of the  state became capable of  supporting government they                                                               
would be expected to do so.                                                                                                     
The second section  is what does borough government  bring to the                                                               
populous -  to the area  of the  state - a  region - in  order to                                                               
speak for  a common voice for  the common good of  that area. And                                                               
then the  third part is a  lot of detail about  why they selected                                                               
seven areas of  the state that they thought had  the capacity and                                                               
would  do   an  analysis  as   to  whether  they   could  support                                                               
So that  book is well  done. There are  some that would  snipe at                                                               
the information. It's the best  information available and as this                                                               
marches forward that information will be refined.                                                                               
The  other area  is  this little  box that  is  the standards  of                                                               
incorporation.  Some will  say we're  dumping  big government  on                                                               
them.  I would  suggest  that if  you're able  to  meet those  11                                                               
standards  of incorporation,  there is  a way  to form  a minimal                                                               
level of government  that simply speaks to  schools, platting and                                                               
a method to tax and fund those two mandatory functions.                                                                         
The four areas  that have been chosen by  myself and incorporated                                                               
into  SCR 12  are  shown in  these  four boxes.  I  think just  a                                                               
cursory look  will show you  that they perhaps have  the capacity                                                               
to fund  government, both  in their  wealth, their  annual family                                                               
income, and  the value of  properties that trade within  the area                                                               
in the free market.                                                                                                             
On the back is  a table that shows the four  areas that have been                                                               
selected in SCR  12. As a capacity to fund  government you'll see                                                               
on the right hand side their  assessed value. You'll see that the                                                               
Copper River  Basin is worth about  a half a billion  dollars and                                                               
doesn't pay anything for their schools.                                                                                         
There are nine school districts  with less wealth than the lowest                                                               
area  suggested in  SCR 12  that are  currently supporting  their                                                               
school districts -  including St. Mary's whose worth  a couple of                                                               
years ago -  about $4.6 million. They're  contributing $18,000 of                                                               
their taxpayer's money to support  their schools. I suggest these                                                               
other four have the capacity to do it.                                                                                          
And  lastly is  the  public process  - over  56  weeks of  public                                                               
process.  That with  five areas  or five  places where  folks can                                                               
ring in for public input.                                                                                                       
I think with  that I will conclude.  I did want to  call out over                                                               
the interim we have gone out  and got letters of support. I think                                                               
you have this  sheet. We have formal letters of  support from the                                                               
Kodiak Island Borough,  the Mat-Su Borough, the  City of Cordova,                                                               
Kenai  Peninsula  Borough,  City   of  Kenai,  Ketchikan  Gateway                                                               
Borough, City of  Fairbanks, City of Valdez, City  of North Pole,                                                               
Fairbanks North Star Borough, City  and Borough of Sitka, and the                                                               
State Chamber  of Commerce - formally  in support of SJR  12. And                                                               
then we  also have  formal letters  of support  from the  City of                                                               
North  Pole, the  City  of Seward,  and  the Chugiak/Eagle  River                                                               
Chamber of Commerce.                                                                                                            
With that, Mr. Chairman and members  of the committee, I will let                                                               
others ask  questions and  provide input. This  is simply,  as it                                                               
said  on  the  trifold,  and is  said  throughout  the  sponsor's                                                               
statement -  this simply asks,  "Can you  help?" If you  have the                                                               
capacity, you have  the personal responsibility to  the people of                                                               
the state  to support  your schools.  And if you  can't do  it on                                                               
your  own, then  the state  should be  able to  help you.  And we                                                               
should isolate those  places that can help  support their schools                                                               
and have them  pay their own way and focus  the state's efforts -                                                               
not on helping  those that can, but helping those  that can't. So                                                               
a generation from  now, those areas of the state  that don't have                                                               
the  capacity  today to  fund  their  schools and  support  their                                                               
schools - through the state's help  over the next 20 years can do                                                               
so.  That's  what this  is  about  and  I  commend this  to  your                                                               
consideration and  [I] am  glad to answer  questions. I  know you                                                               
have people  on line and  also folks  in the audience.  And thank                                                               
you, I look forward to questions.                                                                                               
CHAIR GARY STEVENS: Thank you  Senator Wilken and if I understand                                                               
this -  an area that is  now an unorganized area  -if they should                                                               
happen to  become in  a borough  - they can  choose the  level of                                                               
government they  want. They don't have  to go right into  a full-                                                               
blown borough  government. They make  some choices  through that.                                                               
Is that true?                                                                                                                   
SENATOR WILKEN: Correct,  and you'll remember back  in October we                                                               
had this  table and down the  left hand side is  the 11 different                                                               
ways that 640,000 people have  decided to organize themselves and                                                               
those  are the  options. And  you'll remember  that as  you march                                                               
across, it  shows how many are  there. And the important  thing -                                                               
what you asked - is this  section right here. This is the minimal                                                               
level  of government  in  Alaska that  supports  schools. And  if                                                               
you're asked  to do that -  you're asked to support  your schools                                                               
to the  4-mil requirement  that the rest  of organized  Alaska is                                                               
and that can  be funded in many different  ways. Everybody thinks                                                               
of  property taxes  because  that's the  most  prevalent, but  it                                                               
doesn't have to be property taxes.                                                                                              
It  can be  property taxes,  sales taxes,  income tax,  fish tax,                                                               
severance  tax,  forest  receipts,  name  it.  There's  about  11                                                               
different ways,  but anyway, that's minimal  level of government.                                                               
Now, if you want more government,  then you get to decide at this                                                               
minimal level  whether you want to  march out to this  column and                                                               
pick up  parks and rec and  police and roads and  sewer and ports                                                               
and harbors,  and libraries, police, hospital  health. That's all                                                               
individual  choice, local  choice,  but it  starts  at the  basic                                                               
level of government,  which is schools and planning and  a way to                                                               
support them through some method of taxation.                                                                                   
CHAIR GARY STEVENS: Yes, Senator Cowdery?                                                                                       
SENATOR JOHN COWDERY:  I notice here - Upper  Tanana for instance                                                               
- average income  $47,000 something for. And I think  the low was                                                               
Copper River Basin - 43  [thousand dollars] and then 46 [thousand                                                               
dollars]  for Glacier  Bay and  the  other one  was 47  [thousand                                                               
dollars]. What is the average income in your town?                                                                              
SENATOR  WILKEN:  $51,000. That's  the  average  family income  -                                                               
SENATOR COWDERY: Is  this average income - is  this family income                                                               
so we're comparing apples with apples?                                                                                          
SENATOR WILKEN: Yes, this is apples and apples.                                                                                 
SENATOR COWDERY: And  what about other communities  like that pay                                                               
for  their schools  and you  know, and  hospitals and  police and                                                               
this  and that  and  the roads.  What  - do  you  have any  other                                                               
average incomes for any?                                                                                                        
SENATOR  WILKEN: That  information is  readily available,  I just                                                               
SENATOR COWDERY: Yeah, I just was curious.                                                                                      
CHAIR GARY STEVENS: Thank you Senator Cowdery - Senator Stedman?                                                                
SENATOR BERT  STEDMAN: This resolution  here encourages  this and                                                               
does not  force it. It  encourages the Local  Boundary Commission                                                               
to review that and brings us back recommendations, correct?                                                                     
SENATOR  WILKEN:  No,  it  forces  it. If  they  feel  that  it's                                                               
appropriate  for an  area of  the  state to  take on  a level  of                                                               
government - they bring that  plan. The Local Boundary Commission                                                               
will bring  that to the Legislature  and we will turn  it down as                                                               
existing law.  [Indic.] asks  us to do.  Anytime in  there people                                                               
can raise their hand and say, "Wait  a minute, we think we can do                                                               
this on  our own," and then  they would bring their  plan. But if                                                               
it's  a   local  area   that  doesn't  step   up,  one   to  take                                                               
responsibility, or  to prove that  they don't have  the capacity,                                                               
then it would  come to the Legislature and  the Legislature would                                                               
do it  just as they did  in 1963 under the  Mandatory Borough Act                                                               
that created eight major boroughs in Alaska.                                                                                    
SENATOR  STEDMAN: And  then what  kind of  timeframe would  these                                                               
folks have  to put  in infrastructure  to go  ahead and  begin to                                                               
collect  their  taxes   and  doing  that  stuff.   What  kind  of                                                               
timeframes are we looking at?                                                                                                   
SENATOR WILKEN:  I can only  guess, but I  know that I  think Mr.                                                               
Bockhorst is going to talk to you  today and he would be the best                                                               
one to make a guess at that.  I don't know. The public process or                                                               
the process  shown on  here is  about a year.  They told  me last                                                               
year  that,  and  you  can  verify this,  they  would  be  really                                                               
surprised if  they had -  they'll probably  have one but  no more                                                               
than  two  of  these  active  at one  time.  So  there's  a  long                                                               
timeframe from the time it starts to the time it ends.                                                                          
SENATOR  STEDMAN: This  is a  several year  process, which  would                                                               
give the areas time to adjust to the changes?                                                                                   
SENATOR WILKEN:  Yes, absolutely, and  I think Mr.  Bockhorst can                                                               
help with that  better than I can. And there  are some incentives                                                               
that  come with  it -  some cash  incentives and  some land  that                                                               
becomes deeded to the new government structure.                                                                                 
CHAIR GARY STEVENS:  Mr. Bockhorst is our next speaker  too so he                                                               
may answer  those questions  too -  any other  questions? Senator                                                               
SENATOR  GRETCHEN GUESS:  And since  we heard  it this  summer, I                                                               
think I  asked you this  summer Senator Wilken, but  there's just                                                               
two questions I want to ask you again to make it on record.                                                                     
You talk about  schools and the funding of schools,  which is one                                                               
of  three  of the  mandatory  functions  that  a borough  has  to                                                               
provide - planning and the tax and fund.                                                                                        
Currently  the   Legislature  sits   as  the  assembly   for  the                                                               
unorganized borough. Why do you  choose to go through a mandatory                                                               
process  versus  the  Legislature   evaluating  the  borough  and                                                               
assessing  a comparable  4-mils on  the areas  that it  saw could                                                               
afford it? Why are you kind  of doing the government route versus                                                               
the assembly route?                                                                                                             
SENATOR WILKEN:  Why doesn't  the Legislature  pick one  of these                                                               
areas and do it themselves?                                                                                                     
SENATOR WILKEN:  Well we sit  as the assembly of  the unorganized                                                               
borough so if it's all about  schools, then we have the authority                                                               
right now to make those decisions  as the assembly. That would be                                                               
one for an area. Why are  [we] choosing a mandatory borough route                                                               
versus that route?                                                                                                              
SENATOR WILKEN:  That's been  suggested, but  folks will  say why                                                               
don't you do  what you can do  and assemble and put  a sales tax,                                                               
put a  income tax, put a  sum tax. And that's  really pretty easy                                                               
to do,  the problem is  that is that  what this targets  is those                                                               
areas of the state  that at least - on a cursory  look - have the                                                               
ability to support.  If you just do it globally  - and let's just                                                               
take the  extreme is Wade  Hampton. They don't have  the capacity                                                               
out there  yet to fund their  schools. So we would  ask them that                                                               
really can't  afford it  to be on  the same par  as areas  of the                                                               
state  as set  forth here  that can  certainly afford  it. And  I                                                               
would suggest that at least a  couple of these have wealth far in                                                               
excess of  what Fairbanks has. So  this is more surgical  in that                                                               
it  looks at  those  areas  that look  like  they  have the  best                                                               
capacity to  form government and  leaves those folks  that you're                                                               
really going  to stretch. Leave them  alone for now and  once you                                                               
get  those folks  paying their  fair share,  then there  are more                                                               
resources to put towards the Wade  Hamptons of the state. To help                                                               
them to bring  their level of wealth up over  a generation or two                                                               
so  they can  come over  and  join that  club of  those that  can                                                               
support themselves.  So that's the  concept. It's just -  this is                                                               
obviously more  difficult, but  I think it's  much more  fair and                                                               
much more defensible  that you ask those that can  pay to pay and                                                               
those that can't - how can we help you so some day you can?                                                                     
CHAIR GARY STEVENS: Senator Guess.                                                                                              
SENATOR GUESS: Thank you. But it is  the case that we do - if the                                                               
purpose  is   funding  schools  there   is  the  option   of  the                                                               
Legislature not  even generally - to  actually - since we  sit as                                                               
the assembly  of each unorganized  borough - to actually  do this                                                               
as the  Legislature sitting  as the assembly  versus -  there are                                                               
two different approaches  - two different options  out there that                                                               
we  would leave  Wade  Hampton  out if  you  wanted  to focus  on                                                               
SENATOR WILKEN: We could, we would  then have to. Are you talking                                                               
about going  to a particular area  and doing it or  just doing it                                                               
SENATOR GUESS:  No, I was thinking  we sit - currently  we sit as                                                               
the assembly of the unorganized boroughs.                                                                                       
SENATOR WILKEN:  Are you saying  we would go  to one part  of the                                                               
unorganized - we would do what this is being called out to do?                                                                  
SENATOR GUESS: That is an option; we have that option.                                                                          
SENATOR WILKEN:  The Legislature  doesn't have the  - I  mean the                                                               
Local  Boundary  Commission  is   one  of  five  constitutionally                                                               
mandated commissions.  The founding fathers held  this concept to                                                               
the  level  of the  Board  of  Regent's  Judicial Council  -  the                                                               
redistricting council.  [Indic] have anything to  do with courts.                                                               
They only  called out five  commissions and  this is one  of them                                                               
and so we  fund them and staff  them with the expertise  to go do                                                               
what  they  should  do  and  I'd  be  a  little  nervous  of  the                                                               
Legislature doing this.                                                                                                         
SENATOR  GUESS: I  just want  to make  it clear  for people  that                                                               
there are two  different processes and why you chose  the one you                                                               
did - and I know you've worked hard on it.                                                                                      
Follow up  on Senator  Stedman's question. The  process is  - you                                                               
just said if  the resolution passes it goes to  LBC. Their report                                                               
comes back  and if I remember  my Homer annexation days,  we have                                                               
to   actually    do   another   resolution   to    reject   LBC's                                                               
recommendation. Given  that, and  I guess  I have  two questions.                                                               
One,  there's  the startup  costs  that  you talked  about.  Two,                                                               
there's a loss  of general funds just the way  the property taxes                                                               
go  especially when  you  talk about  the  pipeline corridor  and                                                               
other places. Is  there a reason why that's not  reflected in the                                                               
fiscal note  since there  would be impact  on state  resources if                                                               
the  process went  through given  we wouldn't  have another  bill                                                               
that would have that fiscal note on it?                                                                                         
SENATOR  WILKEN:  If  the  first question  is  and  probably  Mr.                                                               
Bockhorst is  better to  answer it.  I think  it's 300,  200, 100                                                               
over three  years. I haven't  really focused  on why it's  not in                                                               
the fiscal  note. I  would think  that at  least in  the outlying                                                               
years it would  be. It would certainly be in  the resolution that                                                               
came back after something was put together.                                                                                     
In regard  to the ad  valorem tax, that  may not have  to happen.                                                               
Personally,  you think  of course  first of  Delta. I  doubt very                                                               
much whether  Delta given it has  a mine and given  its base with                                                               
the missile defense - I doubt  very much whether Delta would have                                                               
to use the  pipeline as a taxing source. And  you won't know that                                                               
until you get in and actually look  at it. But in the worst case,                                                               
if  Delta did  want to  come  up with  their 4-mils  and use  the                                                               
pipeline then there  would be a 4-mil that would  come out of the                                                               
ad valorem  tax. And presently,  if I remember my  numbers, we're                                                               
getting  about $30  million that's  left on  the table  after the                                                               
North Slope Borough, Anchorage,  Kenai, Fairbanks, Southeast take                                                               
money out.  So there would  be a  fiscal impact there,  but you'd                                                               
have to do the  analysis. Back in '96 when the  LBC took an over-                                                               
the-thumb  look at  Delta Greely  area -  they have  a very  good                                                               
economic base and  may not require them to use  the pipeline. And                                                               
if they  don't, then  they have  no property  tax and  they could                                                               
make their 4-mil requirement off the mine and a sales tax.                                                                      
SENATOR GUESS:  But the state chose  - just so I  understand it -                                                               
they chose  a property tax  then that  would go against  that $30                                                               
million [indisc.]                                                                                                               
SENATOR WILKEN: Whatever they tax  the pipeline, they have to tax                                                               
themselves  and that  tends to  have a  limit on  what you  do to                                                               
SENATOR GUESS: Thank you Mr. Chair, thank you Senator Wilken.                                                                   
CHAIR  GARY STEVENS:  Thank you  Senator Guess.  We'll go  on, we                                                               
have several people to speak  and we'll begin with Dan Bockhorst.                                                               
Senator Wilken, again,  it's sort of crowded -  you're welcome to                                                               
sit here.                                                                                                                       
SENATOR WILKEN: Thank you.                                                                                                      
CHAIR GARY STEVENS: Dan Bockhorst, thank you for being here.                                                                    
DAN BOCKHORST: Thank you Mr.  Chairman, members of the committee,                                                               
for the  record, my name  is Dan Bockhorst.  I serve as  staff to                                                               
the  Local  Boundary  Commission.  Given  the  limited  time  for                                                               
testimony  I did  provide to  the committee  staff this  morning,                                                               
written information  as far as SCR  12 is concerned. I'd  like to                                                               
take just  about three  minutes though to  highlight some  of the                                                               
more fundamental  issues that  I think are  critical in  terms of                                                               
the  Legislature's  debate   over  Senate  Concurrent  Resolution                                                               
number 12.                                                                                                                      
First of  all, our  constitution requires that  all of  Alaska be                                                               
divided into boroughs. Those can  be either organized boroughs or                                                               
unorganized  boroughs. Under  the  constitution, the  Legislature                                                               
has  an obligation  to establish  standards and  procedures under                                                               
which it  would be determined which  of those areas are  going to                                                               
be organized and which are going to be unorganized.                                                                             
The  Legislature also  has a  duty  to define  the functions  and                                                               
powers  of organized  borough government.  If there  is disparate                                                               
treatment  of  Alaskans  in  terms   of  organized  areas  versus                                                               
unorganized  areas,  there  has  to be  a  rational  basis  under                                                               
Alaska's constitution for that disparate treatment.                                                                             
The framers of  our constitution did offer  a rational foundation                                                               
for the  treatment of unorganized  areas versus  organized areas.                                                               
It was  their intention  - their strong  preference -  that areas                                                               
that had the  fiscal and administrative capacity  to organize and                                                               
operate borough  governments -  that those  areas would  in deed,                                                               
organize.  They preferred  a voluntary  approach, but  recognized                                                               
that  absent local  initiative that  the state  could and  should                                                               
take the initiative to promote borough incorporation.                                                                           
The initial state policy regarding  the establishment of boroughs                                                               
was  set  by the  Legislature  in  1961  and  it dealt  with  the                                                               
critical   question   of    organization   by   delegating   that                                                               
responsibility  to  the  local  level.  So  there  was  no  state                                                               
initiative at  that point. And  policy makers that  were involved                                                               
in  the  deliberations  both at  the  legislative  and  executive                                                               
branch  levels  acknowledged  at  the  time  that  the  voluntary                                                               
approach  is not  likely to  be generally  effective in  terms of                                                               
promoting borough formation.                                                                                                    
In  deed,  that  proved  to  be the  case  and  two  years  later                                                               
Representative  John Rader  characterized  the 1961  policy as  a                                                               
failed policy  and he  set about  to incorporate,  by legislative                                                               
mandate,  major  areas  of  Alaska.  He  succeeded  in  creating,                                                               
through  legislative  action,  eight  borough  governments  that,                                                               
today, encompass almost 84 percent of Alaskans.                                                                                 
The 1963 Mandatory Borough Act  contained an important provision,                                                               
which  is  at issue  in  much  of  the debate  regarding  borough                                                               
formation.  It  promised that  no  area  of  the state  that  was                                                               
organized  as  a  borough  would be  penalized  because  of  that                                                               
action. In  other words they  wouldn't be penalized  because they                                                               
formed borough  governments. However, shortly after  that promise                                                               
was made formally in the law,  it has been forgotten and today we                                                               
find  very  significant disadvantages  to  areas  that choose  to                                                               
incorporate. There  are examples  that are  given in  the written                                                               
materials  that I  provided this  morning,  but let  me give  one                                                               
particularly significant one.                                                                                                   
Areas that  are organized as  boroughs today would  have received                                                               
roughly  one-third more  in terms  of state  and federal  aid for                                                               
education  had   those  areas  been   served  by   regional  area                                                               
attendance areas  (REAA) as compared to  borough governments. And                                                               
there are  details in  the materials that  I handed  out. Senator                                                               
Wilken  indicated  today  that  for the  next  fiscal  year  that                                                               
disparity  is going  to amount  to $171  million. In  the current                                                               
fiscal  year it  amounts to  $165 million.  That is  in effect  a                                                               
state  tax  that  is  levied  exclusively  on  organized  borough                                                               
governments  and home  rule  and first  class  cities within  the                                                               
unorganized   borough.  And   again,   we've   heard  that   it's                                                               
escalating.  Since 1997  - between  1997  and 2004  - the  amount                                                               
generated from that tax increased by 34 percent.                                                                                
After the incorporation of mandatory  boroughs in 1963, the state                                                               
has reverted to the 1961  policy where it facilitates or promotes                                                               
borough government only upon local initiative.                                                                                  
Mr. Chairman,  I know  again the  time again  is limited  so that                                                               
concludes the fundamental points that  I wanted to make. If there                                                               
are questions I would be more than happy to address them.                                                                       
CHAIR  GARY  STEVENS: Thank  you  Mr.  Bockhorst. Any  questions?                                                               
Senator Guess.                                                                                                                  
SENATOR GUESS:  Thank you Mr.  Chair. Just two questions  and I'm                                                               
trying  to find  - it's  hard -  between the  notes between  this                                                               
summer and now  - on what you're referring to.  But, has LBC ever                                                               
made  recommendation  to  statute  changes to  actually  have  an                                                               
incentive  to boroughize  versus this  process, which  is putting                                                               
boroughization on areas that may or may not want it?                                                                            
MR. BOCKHORST:  The commission  has done this  for more  than two                                                               
decades.  Since  the 1980's  the  Local  Boundary Commission  has                                                               
perennially  issued recommendations  to  the  Legislature in  its                                                               
annual  report  urging  the  Legislature  to  look  at  promoting                                                               
incentives. The difficulty  is - and of course this  was from the                                                               
very  beginning, and  the constitutional  framers  did express  a                                                               
preference for  voluntary cooperation  and they hoped  that there                                                               
would  be enough  incentive to  encourage people  to incorporate.                                                               
That  simply has  never  been the  case and  in  order to  create                                                               
enough incentives  to allow  or facilitate  borough incorporation                                                               
it would be extremely expensive to the state.                                                                                   
For example you would have to,  among other things, deal with the                                                               
required  local contribution  in support  of schools,  which will                                                               
generate  $171 million  in local  contributions  that reduce  the                                                               
state's cost.  So if  that is  a major  disincentive and  if that                                                               
disincentive  is going  to go  away, it  will cost  the State  of                                                               
Alaska  $171 million  to  eliminate it.  But  the Local  Boundary                                                               
Commission  and  others -  Alaska  Municipal  League -  I'm  sure                                                               
Senator Wilken  and others would prefer  voluntary incorporation.                                                               
But  the  difficulty,  again,  from the  very  beginning  it  was                                                               
recognized in  1961 -  it is just  extremely difficult  to create                                                               
enough incentives to  make it worthwhile yet have  a structure of                                                               
borough government with the duties that it does to operate.                                                                     
SENATOR GUESS:  There are just  two more questions.  I appreciate                                                               
that. One is,  you keep talking about this $170  million, are you                                                               
saying that the foundation formula  would go down $170 million if                                                               
this actually went  through with these four  boroughs? That there                                                               
would be $170 million...                                                                                                        
MR. BOCKHORST: No I'm not saying that at all.                                                                                   
SENATOR GUESS: Okay let's clarify it.                                                                                           
MR. BOCKHORST: What  I'm saying is that - and  the details are in                                                               
the  written material  that I  have provided  earlier today  - on                                                               
page 7                                                                                                                          
SENATOR GUESS: I'm sorry I don't have that.                                                                                     
MR. BOCKHORST: On page 7                                                                                                        
CHAIR  GARY STEVENS:  Okay,  let's  get to  that.  The pages  are                                                               
numbered right?                                                                                                                 
MR.  BOCKHORST: Yes  they are  numbered  at the  upper left  hand                                                               
SENATOR GUESS: [Indisc.]                                                                                                        
CHAIR GARY STEVENS: What page are you referring to then?                                                                        
MR. BOCKHORST:  I'm referring to page  7. So in terms  of the way                                                               
education is  funded in  Alaska, each  district is  determined to                                                               
have  a certain  level of  basic need  depending on  a number  of                                                               
different    factors   -    student   population,    geographical                                                               
consideration, size of  schools - and from that  basic need state                                                               
aid is  determined by subtracting a  required local contribution,                                                               
which is  required only of  organized boroughs and home  rule and                                                               
first class cities.                                                                                                             
Organized boroughs  are required  in the  current fiscal  year to                                                               
contribute almost $156 million.                                                                                                 
SENATOR GUESS: I  don't want to interrupt you,  but I understand.                                                               
That  makes  perfect sense  from  what  you were  saying  before.                                                               
Because the  number I've heard is  about $4 million at  the 4-mil                                                               
rate for these areas would be added to that amount.                                                                             
MR. BOCKHORST: The issue is not  simply the driving this issue on                                                               
the basis of  how much money it would generate  from the State of                                                               
Alaska I don't think. I think  it is analogous - the circumstance                                                               
that we find ourselves today  with regard to education funding is                                                               
analogous to the state Legislature  levying a $171 million tax on                                                               
Alaskans, but saying  we're only going to levy it  on people that                                                               
live in organized boroughs and  home rule and first class cities.                                                               
So  it's a  matter of  equity  as it  was in  the 1963  Mandatory                                                               
Borough  Act. It's  a  matter of  promoting  maximum local  self-                                                               
government as it was in the Mandatory Borough Act.                                                                              
SENATOR  GUESS:  And I  think  I  have  just one  more  question.                                                               
Through  the  Chair,  I  guess   that's  where  we've  agreed  to                                                               
disagree. But it goes  to kind of my pet peeve  and I just wanted                                                               
to see if the  LBC stated - and I talked  to Senator Wilken about                                                               
it - which  is - what about incentives to  provide more services?                                                               
I live  in a  city, which  is also a  borough which  provides the                                                               
police service  for the entire  borough. You take and  the Mat-Su                                                               
Borough or Fairbanks that has  small cities contained with larger                                                               
borough yet  you have  troopers. State  government is  paying for                                                               
the police services outside in  those boroughs even though really                                                               
the cities have expanded into  larger areas. Does the current law                                                               
right now  - does  the LBC  oversight start  to examine  not just                                                               
when should something become a  mandatory borough but when should                                                               
it start  stepping up its services  and when can it  provide more                                                               
services for its people?                                                                                                        
MR. BOCKHORST: I  think those issues are  beyond the jurisdiction                                                               
and scope  of the  Local Boundary  Commission. The  commission is                                                               
concerned  with  establishing  organized  borough  government  to                                                               
create a  structure for  which local decisions  can be  made. And                                                               
those  questions  about whether  the  Mat-Su  Borough -  outlying                                                               
areas  of  the  Mat-Su  Borough should  have  trooper  service  I                                                               
suspect are  some of the  fundamental policy debates  that occurs                                                               
at  the  state legislative  level.  If  the Legislature  were  to                                                               
withdraw the  support for those  troopers, then that  would force                                                               
residents of  those areas to  contemplate whether they  wanted to                                                               
substitute local  police services  for that, which  some borough,                                                               
many borough  governments or some borough  governments have done.                                                               
And it is being explored in  other areas like the Kenai Peninsula                                                               
Borough  I know  that that  issue is  being discussed  currently.                                                               
About  the   prospect  of  creating  more   or  extending  police                                                               
protection  on a  borough  level throughout  parts  of the  rural                                                               
areas of that borough.                                                                                                          
SENATOR GUESS: Thank you Mr. Chair.                                                                                             
CHAIR  GARY STEVENS:  Thank you  Mr.  Bockhorst, appreciate  your                                                               
comments.  Any further  questions?  Thank you,  the next  person,                                                               
Dick Schultz, former  senator. Senator Schultz, glad  to have you                                                               
with us.                                                                                                                        
End of verbatim testimony                                                                                                     
DICK SCHULTZ  thanked the committee  for allowing him  to testify                                                               
on the bill  and noted that it  had been around for  a long time.                                                               
Although  he  has  the  utmost respect  for  Senator  Wilken,  he                                                               
adamantly disagrees with him with regard to mandatory boroughs.                                                                 
Having lived in rural Alaska for 35  years in an area that has no                                                               
electricity, water,  sewer or  other services  he contends  he is                                                               
able to speak  definitively about what rural Alaska  has and does                                                               
not have.                                                                                                                       
With regard to  the "Can you help?" question  that Senator Wilken                                                               
asks, the answer is yes. They  want to step forward and they want                                                               
to be counted.  However, they believe there is  a better approach                                                               
than the method suggested by the LBC.                                                                                           
Taking  strong exception  to the  data in  the February  2003 LBC                                                               
report, he pointed  out that the information in  the School Board                                                               
Association Report  was far more comprehensive  and accurate than                                                             
the LBC report. He reminded  members that the Legislature sits as                                                             
the borough assembly for unorganized  areas and declared that the                                                               
Constitutional Convention members were  nearly unanimous in their                                                               
agreement  that  election  districts   would  be  considered  the                                                               
boundaries of boroughs.                                                                                                         
He  stressed  that the  opportunity  for  public input  was  very                                                               
limited.  "If you  live in  the Tok  area, you  had from  9:40 to                                                               
9:55. You have  15 minutes. This area is  57,750 square miles....                                                               
Now can  you imagine  Katie John  - 82 years  old -  driving from                                                               
Mentasta to Tok  to testify on this bill? Can  you imagine Nannie                                                               
Adams chartering an airplane out of Tetlin to fly to Tok?"                                                                      
MR. SCHULTZ asserted  that the unorganized areas  are entitled to                                                               
remain unorganized  or to  organize as they  see fit  because the                                                               
first  part of  the constitution  says, "all  political power  is                                                               
inherent in the people..." Giving  that power to the five members                                                               
of the  LBC is the easy  way out, he said.  Furthermore, since 75                                                               
percent  of the  Legislature  is represented  in  the Cook  Inlet                                                               
Basin, Fairbanks,  and the organized  areas, the rural  people in                                                               
the state don't have the ability to defeat this.                                                                                
"Please understand I  also know the process. I know  that I'm not                                                               
going to  be able to  stop this  piece of legislation,"  he said.                                                               
However,  this is  the first  year he  has been  able to  present                                                               
another side to the issue.  After he reviewed the information the                                                               
LBC reported on the Upper  Tanana Basin model borough, he decided                                                               
that if the  information for the other areas  is similarly flawed                                                               
then the  report isn't worth the  paper it's written on.  Some of                                                               
the communities listed  aren't even communities, he  said. Of the                                                               
6,316 reported residents, 3,913 reside  in the 35-mile by 40-mile                                                               
area around  Delta. Of the  other 2,203  people that live  in the                                                               
model borough area, about 74 percent are Athabaskan.                                                                            
In  this  57,750  square  mile proposed  borough,  the  state  is                                                               
already inserting  itself. "You're  having a land  disposal right                                                               
now. Most of the people  from Anchorage, Mat-Su, Fairbanks, etc.,                                                               
are out there  running around on snow machines  disposing of land                                                               
that's free. Pound  your stakes and it's  yours." Someday someone                                                               
is going to  have to provide roads to those  areas, and that will                                                               
be part  of the  borough. Already  there's probably  more private                                                               
land in Tok  than in any other  community of the state.  A lot of                                                               
those  landowners are  your constituents,  he said.  Most of  the                                                               
property owners probably  don't intend to build and  if they have                                                               
to pay property tax they will likely try to sell.                                                                               
     That's one of the things you've  done. I was here and I                                                                    
     was a part  of it. There was a billion  dollars in Rail                                                                    
     Belt energy  and what did we  do with it? We  spent it.                                                                    
     Who  has electricity  today? The  same people  that had                                                                    
     electricity  before we  spent the  billion dollars  are                                                                    
     the  same people  that have  electricity today.  Did it                                                                    
     help  any of  the people  that don't  have electricity?                                                                    
     No,  $40 million  was returned  to you  folks here  the                                                                    
     other day -  they said, 'We don't want  the money.' $40                                                                    
     million would  go a long ways  to put a drop  cord from                                                                    
     Delta to Tok  and over to Glennallen. Let  us have some                                                                    
     of  that   cheaper  electricity.  I  don't   know  what                                                                    
     Anchorage  pays for  electricity  -  6 cents  something                                                                    
     like that? We pay 28 cents per kilowatt.                                                                                   
     Mental  Health Trust  lands -  If we're  forced into  a                                                                    
     borough, we're  entitled to 10  percent of the  land in                                                                    
     the area.  Some of it  is state land, federal  land and                                                                    
     Native land.  So what did  you do with the  state land?                                                                    
     As  your borough  assemblies screwed  up in  Anchorage,                                                                    
     Fairbanks, Mat-Su and disposed  of land - mental health                                                                    
     trust land.  Then the Mental Health  Trust people filed                                                                    
     a lawsuit and  what happened? They won  and we settled.                                                                    
     So what  did we do?  You come  out in rural  Alaska and                                                                    
     you give  the land  away. So  now, the  40, 60,  80 100                                                                    
     acres to drive right along  the highway coming into Tok                                                                    
     for example,  that's Mental Health Trust  Lands - prime                                                                    
     land.  If we  were a  borough,  we would  like to  have                                                                    
     that. If we're going to  be forced into a borough, we'd                                                                    
     like to have  that. So is there a provision  by which -                                                                    
     as we're  forced into a  borough - that the  state when                                                                    
     they  made the  tradeoff is  going to  go back  and buy                                                                    
     this land  from Mental Health  Trust so we can  pick it                                                                    
     up? It's  not a  bad idea  except that  you did  have a                                                                    
     little  provision that  went along  there  and it  said                                                                    
     that the  Mental Health Trust  people have to  sell the                                                                    
     land for 120  percent of its appraised  value. So Delta                                                                    
     is getting  ready to acquire some  land. They're paying                                                                    
     out their nose for it. It was state land.                                                                                  
     Now we've  got a gas  line that is being  proposed that                                                                    
     might come  down through  that area.  All kinds  of tax                                                                    
     incentives. Can the borough tax  this gas line? I don't                                                                    
     think  so. I  think that  some  of the  deals that  are                                                                    
     being cut are  going to eliminate that.  The railroad -                                                                    
     I don't have a clue on that one.                                                                                           
     If  it's pain  and suffering  that  you want  us to  go                                                                    
     through by  having another layer of  government, that's                                                                    
     one thing.  But if education is  what you're interested                                                                    
     in   and  you're   interested   in   allowing  us   the                                                                    
     opportunity to step  forth and say, 'yes we  can make a                                                                    
     contribution, yes  we can pay.'  And we  will, whatever                                                                    
     you come up with. You want  to do a head tax? There's a                                                                    
     bill that's moving  through and it does a  head tax. Up                                                                    
     it, make  it $200 a head.  Don't tax the people  in the                                                                    
     organized   areas.  Tax   only   the   people  in   the                                                                    
     unorganized areas. Not a problem.  Give us a little bit                                                                    
     of equal footing  to be able to take  the argument away                                                                    
     from the  urban people that  in fact are  paying taxes.                                                                    
     Give  us the  opportunity.  We don't  need  a layer  of                                                                    
     Senator  Wilken  may  be the  only  Republican  in  the                                                                    
     United  States   of  America  that  thinks   that  more                                                                    
     government is better.                                                                                                      
     Excluding the  1,200 square miles around  Delta it's 74                                                                    
     percent  Native. I  don't  know  whether Dan  Bockhorst                                                                    
     wrote this and he talks  over there and says the Denali                                                                    
     Borough... What  a bunch  of baloney.  If you  took the                                                                    
     Alaska Gateway  School District and  you just  took the                                                                    
     square  mileage of  it. That's  74  percent Native  and                                                                    
     stick the  Denali Borough in  there it'd  rattle around                                                                    
     like a  baby in a  boxcar. But  if you want  to include                                                                    
     Delta, that's  10 square miles  or 1,200  square miles,                                                                    
     then  so you  bring  -  74 percent  of  the people  are                                                                    
     Native. You turn around and  you want to make a borough                                                                    
     -  include 3,913  white people  - bring  them into  the                                                                    
     picture. One of  the things that is said  here is this:                                                                    
     SCR 12 does not unfairly  target Natives. Well you tell                                                                    
     me, if  you were in  a black  community and you  had 74                                                                    
     percent of  the population that votes  and someone came                                                                    
     in  and did  some gerrymandering  to where  you reduced                                                                    
     this down  into where the  black vote was  reduced down                                                                    
     to 25  percent, which  this would  do. You  think you'd                                                                    
     have a  problem, oh  I think you  would. I  think you'd                                                                    
     have a big  problem. In the Native community  - I don't                                                                    
     have a clue  as to what their argument is  going to be,                                                                    
     but if I got an opportunity,  as a Native, to reside in                                                                    
     an area  and I'm going to  who? Who is going  to sit on                                                                    
     that  borough assembly?  The people  from Metasta  - as                                                                    
     far a 4-mil  tax is concerned, you can't  tax them. You                                                                    
     can't  tax the  785,000 acres  of land  that's over  in                                                                    
     Tetlin. You  can't tax  that. You  can't tax  the Ahtna                                                                    
     and  Doyon  lands  that are  Native  allotments.  As  a                                                                    
     result of that you have  a borough assembly and the hub                                                                    
     of  it  is  in  Delta.  So  who  sits  on  the  borough                                                                    
     assembly? Can  Katie Johns sit  on it, can  Danny Adams                                                                    
     from Tetlin, can  Gary Thomas from Northway  sit on the                                                                    
     board? They  don't contribute anything so  can they sit                                                                    
     on the board? I can because  I live at 91 mile. My land                                                                    
     was  homesteaded  back in  1930  something,  but I'm  a                                                                    
     white  man  and  I  can sit  on  the  borough  assembly                                                                    
     because I'm a contributor.                                                                                                 
     We'll pay a  fair share, but we just don't  feel we can                                                                    
     handle nor do we want another layer of government.                                                                         
     At a meeting in Tok  that about 100 people attended, 90                                                                    
     raised their hand  and said they would  pay. They would                                                                    
     rather  have  it  taken out  of  their  permanent  fund                                                                    
     dividend or  pay an assessment than  have another layer                                                                    
     of government.                                                                                                             
There were no questions directed to Mr. Schultz.                                                                                
TAPE 04-22, SIDE B                                                                                                            
4:22 pm                                                                                                                       
MARVIN   RASMUSSEN  testified   via  teleconference   from  Delta                                                               
Junction in opposition  to the resolution. Because  he heard Fort                                                               
Greeley mentioned,  he wanted to point  out that it might  not be                                                               
there  after  the   election  in  the  fall.   However,  they  do                                                               
contribute to  schools in  their area  through PILT  payments. He                                                               
stressed that  they don't want  another layer of  government. "We                                                               
don't need  it, we  don't want  it, and we  can't afford  it," he                                                               
stated emphatically.                                                                                                            
Jeff Sheen  testified via teleconference  from Delta  Junction in                                                               
opposition to the resolution. He  told Senator Wilken that he was                                                               
at  the State  Chamber of  Commerce meeting  in Anchorage  and he                                                               
remembers that  they made  a statement in  support of  looking at                                                               
what  the LBC  had  to  say about  mandatory  boroughs, but  they                                                               
didn't say they supported the resolution.                                                                                       
He argued  that the size  of the [Upper Tanana]  incorporation is                                                               
too  vast.  This includes  19  communities  with a  very  diverse                                                               
population. He  also took  issue with  the $144,000  average home                                                               
valuation in  the LBC report. He  works for the power  company so                                                               
he visits all  the homes in the area and  his wife and mother-in-                                                               
law are realtors  who work with appraisers. "I  think that number                                                               
is way out of whack and I  don't know how they calculated it," he                                                               
He said he would submit his testimony in writing.                                                                               
JEFF GAVAZZA testified via teleconference  from Tok in opposition                                                               
to  SCR   12.  The  LBC   report  used  inaccurate   U.S.  census                                                               
information. He  said, "This report is  fundamentally flawed with                                                               
the inclusion  of outdated  information, inconsistent  facts, and                                                               
inaccurate  figures along  with  speculation and  guess based  on                                                               
bias by  the staff  of the  DCED." The  commissioner acknowledged                                                               
that the census figures were  inaccurate, but didn't even mention                                                               
that  in the  final report.  Although  the draft  report was  317                                                               
pages  long, the  public was  given just  13 days  to review  and                                                               
CHAIR  GARY STEVENS  asked  Mr. Gavazza  to send  a  copy of  his                                                               
testimony if he had it in writing.                                                                                              
GLEN MARUNDE testified via teleconference  from Tok in opposition                                                               
to  SCR 12.  In  the  November 2000  "Background  on Boroughs  in                                                               
Alaska"  booklet,  LBC staff  member  Dan  Bockhorst wrote  that,                                                               
"Current  law  expressly   provides  that  borough  incorporation                                                               
proposals may only be initiated  by voters." Furthermore, Article                                                               
I, Section  2 of  the state  constitution states,  "All political                                                               
power is inherent  in the people. All  government originates with                                                               
the people,  is founded upon  their will only, and  is instituted                                                               
solely for  the good of the  people as a whole."  This was passed                                                               
by the  Legislature in  1961 and  it still  works well  today, he                                                               
said. The current Legislature shouldn't override that statute.                                                                  
CHAIR  GARY STEVENS  asked  Mr. Marunde  to send  a  copy of  his                                                               
testimony if possible.                                                                                                          
WALTER   COX  testified   via  teleconference   from  Paxson   in                                                               
opposition to SJR 12. He and  his wife live a great distance from                                                               
Delta Junction  and Glennallen  and are  quite certain  that they                                                               
have nothing  to gain from being  part of a future  borough other                                                               
than a tax notice.                                                                                                              
CATHY  WASSERMAN, mayor  of  the City  of  Pelican testified  via                                                               
teleconference to say that she  is a strong proponent of boroughs                                                               
     The way  the state  is going about  it is  probably not                                                                    
     going  to succeed.  I think  in light  of the  economic                                                                    
     vitality or lack  there of in the state  right now, the                                                                    
     state  sales  tax  proposal,   the  ending  of  revenue                                                                    
     sharing and  some of the transfers  of state government                                                                    
     to  local municipalities  is going  to  put a  terrible                                                                    
     strain on areas that now  have to pay for another layer                                                                    
     of government.                                                                                                             
     Right  now  there seem  to  be  no incentives  to  make                                                                    
     people step out  and become a borough on  their own. We                                                                    
     have  to look  at those  communities that  have stepped                                                                    
     out  and asked  to be  a borough  and have  been turned                                                                    
     Senator Wilken  mentioned that  we can't  get education                                                                    
     for  free. The  Glacier Bay  Borough consists  of about                                                                    
     four  or five  different communities  that are  in that                                                                    
     proposed borough. The population  right now I would say                                                                    
     is about 1,400  and about 64 percent of  those people -                                                                    
     give or take - already  pay for their education because                                                                    
     we're in  a first  class city. That  means that  we now                                                                    
     have a  double layer  of government to  pay for  the 36                                                                    
     percent remainder who do not pay for their schools.                                                                        
     We do support our government  in Pelican and in Hoonah;                                                                    
     we have the majority of  the population. But changes in                                                                    
     our  area  are  happening  so  quickly  and  it's  very                                                                    
     difficult to keep up with  the decreases that are going                                                                    
     on. The information  in the LBC report was  out of date                                                                    
     when it  came out and  is even  more out of  date right                                                                    
     We have  to look at  how we're  going to pay  for these                                                                    
     boroughs: Revenue  sharing - no  it's gone, fish  tax -                                                                    
     in Pelican it's  gone, sales tax - we  already have one                                                                    
     and to pay for another  one would be very difficult and                                                                    
     with  the sales  tax pending  that would  be even  more                                                                    
     difficult. Timber  receipts - those are  probably going                                                                    
     to end at some point or  not stay at the level they are                                                                    
     at,  not  property  tax  -   Hoonah  is  mostly  Native                                                                    
     property and they  would not have to  pay property tax,                                                                    
     tourism tax - we can't  tax because the cruise ships go                                                                    
     on water and  don't land in any place. Income  tax - we                                                                    
     have no  way left  to earn  a living,  capital matching                                                                    
     grants are  gone and the ACMP  - I don't know  where it                                                                    
     We ask  that the state  do one thing, if  they're going                                                                    
     to look  at the schools  they should levy a  school tax                                                                    
     to the  unorganized areas that  are in the  REAAs. They                                                                    
     would  then save  double layers  of government  for the                                                                    
     rest of the people. They  would also save the state the                                                                    
     $300,000 a crack for each  borough that formed and then                                                                    
     the state  and the LBC  and the Legislature  could work                                                                    
     on incentives for the unorganized areas.                                                                                   
DENNY  WEATHERS  testified  via teleconference  from  Cordova  in                                                               
opposition to  SCR 12.  She said, "I  do not live  in one  of the                                                               
four boroughs that have been chosen,  but I can see where this is                                                               
leading."  She   described  the  resolution  as   misleading  and                                                               
outlined  specific  areas  to  which  she  took  exception.  [The                                                               
teleconference  transmission  was  spotty.]  Chair  Gary  Stevens                                                               
advised her that the committee had her written testimony.                                                                       
ED KNOEBEL  testified via teleconference  from Glennallen  to say                                                               
that most of what  he was going to say had  already been said. He                                                               
thought  Mr.   Schultz  did   a  good   job  of   explaining  the                                                               
shortcomings of the resolution.                                                                                                 
4:45 pm                                                                                                                       
PAT DALTON  testified via teleconference  from Delta  Junction to                                                               
say that  he would  appreciate it  if legislators  would consider                                                               
state  law  and  look  at the  constitution  and  Declaration  of                                                               
Independence as well. It's a good  idea to work to resolve fiscal                                                               
problems but  the Legislature  is going about  this in  the wrong                                                               
way.  Forced borough  incorporation  on  the unorganized  borough                                                               
disregards the voice  of the people that are  affected. There are                                                               
better ways to fund schools than this.                                                                                          
ART GRISWOLD testified via teleconference  from Delta Junction to                                                               
say  that  he  has  followed   this  issue  over  the  years.  He                                                               
questioned how  anyone could possibly  consider the  Upper Tanana                                                               
model borough  an economically and socially  compatible area. The                                                               
boundaries of this model borough aren't justified.                                                                              
ROSELYN ISAAC testified  via teleconference from Tok.  She is the                                                               
director of the  Tanana Chiefs' Conference and  was testifying on                                                               
behalf of  the following villages:  Dot Lake, Eagle,  Healy Lake,                                                               
Northway,  Tanacross, Tetlin,  and Tok  Native Association.  They                                                             
all oppose SCR 12.                                                                                                              
She charged that the economic data  used in the February 2003 LBC                                                               
report was  inaccurate and based  on outdated  information. [Tape                                                               
indisc.] Much  of the land in  the Upper Tanana model  borough is                                                               
federal land and the state receives  $50 million per year in PILT                                                               
funds in return for the loss  of potential taxes on federal lands                                                               
and  that money  goes  to local  school  districts. However,  the                                                               
state reduces  their contribution  to the unorganized  areas that                                                               
receive PILT funds.  "Some schools are closing  and will continue                                                               
to close due to lack of funding," she said.                                                                                     
"The model borough having Delta and  Tok together is not going to                                                               
work  simply because  Delta doesn't  want it  [and] neither  does                                                               
Tok.  And  I believe  the  residents  of  both have  stated  this                                                               
publicly and in writing."                                                                                                       
SALLY  YOUNG testified  via teleconference  from Tok.  As a  real                                                               
estate  broker,  she commented  on  the  differences between  the                                                               
Denali Borough and the Upper Tanana model borough.                                                                              
                    Denali Borough           Upper Tanana model                                                                 
Poverty Level:      6.1%                     Up to 60 %                                                                         
Unemployment        8-12%                    Up to 80 %                                                                         
Per Capita Income   $26,251                  As low as $7,371                                                                   
She made the point that  Delta's larger population and higher per                                                               
capita  income increase  the average  of the  Upper Tanana  model                                                               
borough  markedly.  In addition,  the  population  has no  common                                                               
interest. "Delta  is currently a  thriving community...Tok  has a                                                               
seasonal economy  and the villages  also have  seasonal economies                                                               
that are based primarily on firefighting."                                                                                      
She agreed that the Alaska  Gateway School District does get more                                                               
school  funding  per  capita  than  Anchorage  or  Fairbanks  and                                                               
continued to say:                                                                                                               
     There is no  question that our fewer  than 500 students                                                                    
     are funded at a higher  level, so are those students in                                                                    
     Aleutians   East  Borough   who  receive   $11,061  per                                                                    
     student. However, other state  services are paid for by                                                                    
     all  of  us.  At  $2,463  per  capita  for  Fairbanks's                                                                    
     111,700 residents, how many children  in Tok area could                                                                    
     be  provided with  an  education?  For the  differences                                                                    
     between the  grants that  we ask  for and  receive, and                                                                    
     those  of  more  populated  areas   a  huge  amount  of                                                                    
     educational services  could be  provided for  this area                                                                    
     before there is any equity  in funding. The inequity is                                                                    
     on  our side.  The  community grant  figures leave  out                                                                    
     other large areas of state  funding from which we don't                                                                    
     benefit. We  are not on  the electric intertie,  we are                                                                    
     not  on the  railroad system  or the  ferry system.  We                                                                    
     don't have  seawalls or salmon,  we don't  benefit from                                                                    
     the Alaska Seafood Marketing  Institute and very little                                                                    
     from tourism  advertising. We're forgotten  except when                                                                    
     it  comes  to  education  and then  we're  reviled  for                                                                    
     asking for one benefit from the state.                                                                                     
     Forcing us into  becoming a borough when  we don't have                                                                    
     the    financial    wherewithal    to    do    so    is                                                                    
     counterproductive.  Soon we'll  be asking  you for  all                                                                    
     those community  grants and capital grants  and project                                                                    
     monies the  state provides.  Forcing us  to incorporate                                                                    
     will only  increase the cost  of being in  a community.                                                                    
     There are  those of you  who are single minded  when it                                                                    
     comes to  making us  a borough. I  hope you'll  look at                                                                    
     the true cost of forcing  us to incorporate rather than                                                                    
     taking  the  limited  view of  education  as  the  only                                                                    
ALLEN AVINGER  testified via  teleconference from  Delta Junction                                                               
to oppose  SCR 12 because it  isn't affordable. "We have  a large                                                               
population of  retired and  Slavic people in  this area  that the                                                               
politicians don't even want to  talk about." Taxing the residents                                                               
of the unorganized  areas is acceptable, but  an additional layer                                                               
of government isn't necessary to do so.                                                                                         
RUTH ABBOTT  testified via teleconference from  Delta Junction to                                                               
dispute Senator Wilken's  claim that residents in  her area don't                                                               
support  their school  in  any  way and  aren't  involved in  the                                                               
function of  the school. She  countered, "Senator Wilken  you are                                                               
wrong on all accounts."                                                                                                         
She insisted  that there  is a  misconception about  the economic                                                               
growth  in   the  area.  Construction   and  mining   jobs  don't                                                               
necessarily go  to residents of  the area and they  are temporary                                                               
anyway.  In  addition there  is  a  large population  of  retired                                                               
people and  a number of  immigrants in  the area that  don't have                                                               
high incomes. She  concluded saying, "We are  not retreating from                                                               
society  or   shrinking  from  responsibility,  but   rather  are                                                               
choosing  to  live  in  an  area  that  exchanges  the  so-called                                                               
benefits   of  a   borough  for   fewer   services  and   smaller                                                               
RUSS BOWDRE  testified via teleconference from  Delta Junction in                                                               
opposition to SCR  12 and said that it had  all been said before.                                                               
"We don't want this thing and  I don't think anybody in the state                                                               
does," he emphasized.                                                                                                           
WILLIAM  MILLER   testified  via   teleconference  from   Tok  to                                                               
represent Dot  Lake Village  Council. Saying  that people  in the                                                               
rural areas  don't pay their  fair share isn't accurate  or fair,                                                               
he said. He noted that there  hadn't been one bit of testimony in                                                               
support of mandatory  boroughs. "I know that your  minds are made                                                               
up, but  I'm just hoping that  this one time you'll  take heed of                                                               
what you're  listening to from  the people that actually  live in                                                               
the areas," he said.                                                                                                            
CHAIR GARY STEVENS  asked if there was anyone else  that cared to                                                               
speak on the issue.                                                                                                             
MR.  SCHULTZ asked  the  committee  to request  that  the LBC  to                                                               
review the  figures they  used for  average incomes  and property                                                               
values because the data is way  off for the Alaska Gateway School                                                               
CHAIR GARY STEVENS noted the request.                                                                                           
There being no  other questions, he closed  public testimony then                                                               
asked Senator Guess if she had an amendment to offer.                                                                           
SENATOR GUESS made a motion to adopt amendment 1.                                                                               
SENATOR COWDERY objected.                                                                                                       
SENATOR GUESS said  she made this point at  previous hearings and                                                               
to  the sponsor  and his  staff as  well. The  February 2003  LBC                                                               
report identified seven  model boroughs, but SCR  12 requests the                                                               
LBC consider  just four, leaving out  Wrangell/Petersburg, Prince                                                               
William Sound and Aleutians West model boroughs.                                                                                
Amendment  1 adds  the three  model boroughs  that were  excluded                                                               
from consideration. "If the purpose  of this bill is to establish                                                               
a process  that will not  only be used now  but in the  future to                                                               
evaluate boroughs, then I think  we should go through the process                                                               
and evaluate  all these seven instead  of hand-picking.... around                                                               
a list."                                                                                                                        
The reason given for excluding some  areas is that some areas pay                                                               
for  education, but  "we're talking  about  more than  education.                                                               
We're talking  about mandating government  on the area.  LBC came                                                               
up with seven in their evaluation  and I think we should pass all                                                               
those seven  on in the bill  and that's the reason  for amendment                                                               
CHAIR GARY STEVENS told Senator Wilken  he would be happy to have                                                               
him speak to the amendment.                                                                                                     
SENATOR WILKEN responded:                                                                                                       
     The simple way  to say this is you need  to walk before                                                                    
     you run. This  is a major effort on behalf  of the LBC.                                                                    
     I drew a  very bright line and that bright  line was to                                                                    
     support  to the  people  in these  different areas  for                                                                    
     their schools.  If you  look at  the areas  that aren't                                                                    
     part of  SCR 12: Aleutians  West - 89.6 percent  of the                                                                    
     people  in  that  area  support  their  schools  today.                                                                    
     Prince  William  Sound  - 93.2  percent  support  their                                                                    
     schools, 93.9  [percent] in Wrangell/Petersburg.  So 90                                                                    
     percent or more  in the three areas  that were excluded                                                                    
     support  their schools  and that's  the basic  level of                                                                    
     government here.                                                                                                           
     If you look  at the areas that are embodied  in SCR 12,                                                                    
     Chatham is  52 percent, Glacier Bay  is 58.8 [percent],                                                                    
     Copper River  Basin is zero,  and Upper  Tanana [Basin]                                                                    
     is zero so  I think it's quite clear. This  is a multi-                                                                    
     year effort  and the  issues that  are embodied  in the                                                                    
     effort  to  bring Cordova  and  Valdez  together for  a                                                                    
     borough  are  clearly  different  than  what  is  being                                                                    
     addressed in  SCR 12. SCR 12  revolves around education                                                                    
     and that's  the line that I  drew and I think  the data                                                                    
     supports  the reason  - clearly  supports  it and  this                                                                    
     amendment, while  good intended  brings nothing  to the                                                                    
SENATOR  GUESS respected  Senator  Wilken's comment,  but if  the                                                               
bill is going to be about  education, then the Legislature as the                                                               
assembly that  sits for  the unorganized  borough should  make it                                                               
about education. If it's about setting  up a process to deal with                                                               
setting up  mandatory borough,  then it  should be  about forming                                                               
boroughs. "The amendment provides the  fairness that is needed if                                                               
we're going to have a long-term process."                                                                                       
CHAIR GARY STEVENS called for a roll call vote on amendment 1.                                                                  
Amendment  1 failed  1 to  3 with  Senator Guess  voting yea  and                                                               
Senators Cowdery, Stedman and Chair Gary Stevens voting nay.                                                                    
SENATOR  GUESS made  a motion  to adopt  an indeterminate  fiscal                                                               
note for  SCR 12. She realized  she wasn't going to  find success                                                               
in trying to change the bill given the sponsor's position, but:                                                                 
     It's  more  that  we  as   committee  members  have  an                                                                    
     obligation  to  our body  to  evaluate  whether or  not                                                                    
     bills  are  routed  in the  correct  way.  The  Senator                                                                    
     President  can't  do all  of  that  so I'd  move  State                                                                    
     Affairs  indeterminate fiscal  note  for future  years,                                                                    
     not this year.                                                                                                             
TAPE 04-23, SIDE A                                                                                                            
5:10 pm                                                                                                                       
CHAIR GARY STEVENS noted there were  no comments and called for a                                                               
roll call vote on the indeterminate fiscal note.                                                                                
The  motion failed  1  to 3  with Senator  Guess  voting yea  and                                                               
Senators Stedman, Cowdery and Chair Gary Stevens voting nay.                                                                    
SENATOR GARY STEVENS recognized Senator Cowdery.                                                                                
SENATOR COWDERY made a motion to  move SCR 12 from committee with                                                               
individual recommendations and the zero fiscal note.                                                                            
SENATOR GUESS objected.                                                                                                         
SENATOR GARY  STEVENS called for a  roll call vote on  the motion                                                               
to move the bill from committee.                                                                                                
The  motion passed  3 to  1 with  Senators Cowdery,  Stedman, and                                                               
Chair Gary Stevens  voting yea and Senator Guess  voting nay. SCR                                                               
12 moved from committee.                                                                                                        

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