Controversial bills shifting costs to municipalities get first hearing in Senate
The Senate Finance Committee presented a suite of bills Tuesday aimed at reducing state costs by shifting financial responsibility back onto municipalities. One of the bills, Senate Bill 210, cuts the amount allocated under the state’s revenue-sharing program in half, while increasing the minimum amount paid to each city or borough.
Small communities will receive a comparable amount, but larger municipalities, like Anchorage, will bear the brunt of the cut. But it’s another part of that bill that’s more controversial — how the committee plans for communities to make up for the loss of revenue.
A provision in the bill would allow communities to eliminate property-tax exemptions for seniors and disabled veterans as a way for municipalities to raise revenue to cover the cut in revenue sharing and pay increased percentages into the public employees retirement system, known as PERS.
“On the PERS system, we’re trying to use the tax exemption as the bridge in an opportunity for local control on those programs,” said Sen. Anna MacKinnon, co-chair of the committee.
The Alaska Municipal League (AML), representing 164 cities and boroughs statewide, has been asking for more control over tax exemptions, but now says it doesn’t want to be pushed to use it.
“We have backed away from the senior citizens property-tax exemption this year due to the fact that the Legislature already made some cuts to senior benefits. We did not think this was a good year to make an additional one,” said Kathie Wasserman, executive director of AML.
Wasserman said reducing the senior property-tax exemption won’t mitigate costs being shifted to municipalities by the Legislature, and doesn’t know why the Senate Finance Committee thinks it will.
“I think that’s based on an assumption that we would take away many,” Wasserman said. “I don’t know what their numbers are, of the senior citizens property tax exemption, and that has never been the intent by municipalities.”
Ken Helander, advocacy director for the American Association of Retired Persons (AARP) Alaska, said it makes sense that communities should be allowed to capture property tax from high-income seniors. But he said the exemption right now is helping keep many seniors out of costly state-run nursing homes.
“The property tax is the single most burdensome tax for many low-income and older people who live on fixed incomes,” Helander said in a statement Tuesday. “Curtailing property tax relief could make it harder and harder for many to remain in their homes, as well as pay for basic necessities like groceries, life-saving prescriptions, or utility bills.”
The bill only provides a choice for municipalities – one that Wasserman said could be a tough one to make.
The State of Alaska has had municipal revenue sharing since 1969. It has been sharing a portion of oil revenues with cities and boroughs under the current version of the program since 2008.
“I was here at the table when that program was created, or reestablished. That was a time when the State of Alaska was flush with revenue and that’s why it was called the revenue sharing program,” said Sen. Lynn Hoffman. “Today we have very little revenue.”
It’s money communities have come to rely on, although some of those who were in the Legislature at the time of its creation say it wasn’t meant to be a perpetual program.
“My thought was, again, that as oil prices went up we would share in the wealth,” said Senate President Kevin Meyer, who was chair of the House Finance Committee at the time the bill was originally passed. “I don’t think anyone even anticipated oil being as high as it was for as long as it was. I mean it was a good ride, right? Almost 10 years.”
Wasserman said AML was expecting the cut this year.
“We understood we were going to take a cut and we have not made noise about that,” she said.
She said the increased bills to be picked up by municipalities will be harder to accommodate and ultimately be passed on to taxpayers.
In an interview with KTVA Tuesday evening, Anchorage Mayor Ethan Berkowitz called the Senate Finance Committee’s plan “chaos.”
“What now happened is you had a bunch of legislators get in a room together, come up with something and then put it out at the very last minute,” Berkowitz said, adding he’s “counting on wiser heads to prevail, wiser heads to intervene. They’re lashing about, they’re just flailing around, and what they need to do is have a coherent plan. And if you don’t have a coherent plan, it’s just simply going to be expenses that are born by the taxpayers of Anchorage and of other communities across the state.”
Senate Bill 207, another bill in the suite, would increase municipal contributions to the Teachers Retirement System (TRS).
Anchorage School District’s superintendent Ed Graff sent a letter to the Finance Committee asking it to withdraw the bill, along with Senate Bill 208, to eliminate the Alaska Performance Scholarship Program.
“The net impact of these bills is equivalent to place over 200 teachers in our district at risk by next fall — increasing to 300 teachers in four years,” Graff said.
The four bills are interdependent in minimizing impacts to municipalities. The Senate Finance Committee plans to use funds from the scholarship program, to offset increased TRS costs to municipalities, for example. But the committee’s co-chair, Sen. Pete Kelly, told members of the committee Tuesday he doesn’t expect all pieces of the plan to pass.
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