JUNEAU — The Alaska Senate has voted to reduce the state’s subsidy of local government.
On Wednesday morning, the Senate voted 17-3 to approve Senate Bill 210, which halves Alaska’s revenue sharing program and recalculates the formula used to distribute annual payments to communities. As a result, the state’s largest cities will receive millions of dollars less in revenue while the state’s unincorporated towns and villages will see more money.
“We no longer have money that we can share,” said Sen. Anna MacKinnon, R-Anchorage and co-chair of the Senate Finance Committee, as she urged lawmakers’ support.
The bill is part of the Senate plan to reduce the state’s $4.1 billion annual deficit.
The state’s existing revenue sharing fund, established during the 2008 surge in oil prices, was designed to contain $180 million and distribute $60 million per year to towns and cities.
As planned, the Legislature would restock the fund with $60 million per year to replace what was given to communities. If oil prices fell and the $60 million wasn’t available, communities would take a third of the remaining fund each year until the money was exhausted.
The FY16 payment was $57.3 million; the FY17 payment was expected to be $38.2 million, the FY18 payment would be about $25 million, and by FY19, there would be no payment.
The idea was to allow communities time to adjust as the fund distributed less money, but lawmakers heard in testimony that even with years to adjust, the state’s smallest communities couldn’t cope because they lacked the tax base to come up with new revenue.
SB 210 extends the program by keeping the $38.2 million payout in the coming fiscal year, but communities would split a $30 million distribution starting in 2018. Smaller communities would get a larger share of that money. Under the existing formula, Juneau would collect $971,914 from a $30 million payout. Under the new formula, it would get about $288,000 less.
Communities smaller than Seward (population 2,740) would see more money under the new formula than the old one.
Anchorage would see the biggest difference. In a $30 million distribution, it would get $6.5 million under the current formula and $2.3 million under the new one.
“Some communities are receiving more revenue than they were in the old formula,” said Sen. Peter Micciche, R-Soldotna, in a finance committee meeting.
Micciche, who served as mayor of Soldotna (population 4,319) said in committee that he had concerns with the proposal, but he ultimately voted for it on the floor.
Sen. Bill Wielechowski, D-Anchorage, was one of three votes against SB 210.
Reducing state revenue, he said, will lead directly to property tax increases or service cuts as cities cope with less revenue.
To offset the loss, the bill removes a mandatory property tax exemption for the homes of senior citizens and veterans.
By making the exemption optional, communities could offset their lost revenue by raising property taxes on veterans and those older than 65, something that testifiers said is unlikely to happen.
Sen. Dennis Egan, D-Juneau, also voted against the bill.
“It’s always going to be passed down,” he said of the revenue loss. “Guess who pays? Local people. It’s all passed on.”
SB 210 advances to the House for consideration.
Senate makes fun mandatory
In other business Wednesday, the Senate voted 18-2 in favor of SB 200, a bill that requires schools to include 54 minutes of daily physical activity for all students from kindergarten through eighth grade.
Sen. Bill Stoltze, R-Chugiak, and Sen. Charlie Huggins, R-Wasilla, opposed the measure, which was billed as a way to improve juvenile health and was supported by prime sponsor Sen. Mia Costello, R-Anchorage.
The bill goes to the House.
The Senate voted 20-0 in favor of SB 101, a bill allowing the Alaska Department of Natural Resources to sell T-shirts and other merchandise to fund state parks. The other measure receiving unanimous approval Wednesday in the Senate was SB 196, which allows the Power Cost Equalization fund to pay a dividend to the state when its investments excel. The bill also allows the PCE fund - worth nearly $1 billion, according to state figures - to be invested less aggressively.
Both bills will seek House approval.
House works long hours on oil and gas
In the Alaska House, lawmakers worked from 7 p.m. Tuesday to 2:30 a.m. Wednesday to consider 18 amendments to House Bill 247, which cuts the state’s subsidy for oil and gas drilling in Alaska.
Gov. Bill Walker’s original version of HB 247 was intended to cut spending by $400 million and increase revenue by $100 million in fiscal year 2017, but House lawmakers revised the bill, which is now expected to save just $5 million to $30 million in the fiscal year that starts July 1.
Only three amendments were approved from the 18 considered, and none are expected to have a significant fiscal impact on the overall bill.
Two amendments were defeated on 19-19 tie votes, including one from Rep. Paul Seaton, R-Homer, that would have brought the bill’s savings to almost 80 percent of the governor’s figure.
Over the long term, the unmodified bill drafted in the House Finance Committee contains about 40 percent of the governor’s expected savings.
The House was expected to vote on the overall bill sometime after 7 p.m. Wednesday evening. Results were not available by press time but will be updated in Friday’s Empire.
Insurance gets attention
In other business Wednesday, the House approved a trio of measures affecting insurance in the 49th state:
House Bill 234, which requires insurers to cover mental health treatment delivered by telemedicine (video and audio conference), was approved 38-1, Rep. Tammie Wilson, R-North Pole, opposed.
House Bill 372, an omnibus insurance reform proposed by the House Labor and Commerce Committee, was approved by a 36-0 vote with four members absent. HB 372, at 36 pages printed, incorporates a series of minor changes on a variety of insurance programs.
Senate Bill 142, first proposed by Sen. Cathy Giessel, R-Anchorage, requires insurance companies to charge cancer patients the same for intravenous and self-administered cancer-fighting drugs. It was approved 36-1, Wilson opposed and three members absent.
All three bills will return to the Senate, which must agree with the House’s changes on SB 142 and sign off on the House bills.
The House also voted 38-0 to approve Senate Bill 124, which allows the Alaska Commission on Aging to continue operating through 2024.
Rep. Scott Kawasaki, D-Fairbanks, offered an amendment to fight what he said was a plan by the Senate to cut the commission’s staff from four people to two in the coming years. The amendment was defeated 12-26, and the main bill now goes to Gov. Bill Walker for his approval.