The Alaska House Finance Committee voted Tuesday to cut a proposed $37.5 million appropriation that was to help local governments meet increases in their employee retirement programs over the next two years.
Local municipalities face a 5-percent increase in their obligations to the Public Employee Retirement System in fiscal year 2006, and a 10-percent boost in 2007. Many municipal leaders say that obligation seriously could stress or break their budgets.
Gov. Frank Murkowski included $37.5 million in his proposed operating budget to help those governments pay for the increase in PERS and earmarked windfall oil revenue in the current 2005 state budget to pay the bill.
However, lawmakers have applied nearly all the windfall to the education budget in a supplemental spending plan, leaving no money for the PERS aid, said Finance Co-Chair Rep. Mike Chenault, R-Nikiski.
"We are not saying (PERS aid to cities) is not an issue or that we won't take it up," he said Wednesday. "We are saying it is not '05 money, so we took it out of the budget."
An amendment to the language of House Bill 67, the operating budget bill, deleted PERS funding for political subdivisions. The vote was 7-3.
Rep. Kevin Meyer, R-Anchorage, said there were other sources of that funding, including the Constitutional Budget Reserve, though he said he would hate to dip into the CBR to fund a new program.
"That is what this is a new program," he said.
Like all new programs, he added, there is always a question about sustainability.
"The municipalities will expect it to continue," he said.
Monday, the Senate voted to link $38 million of a $70 million increase in K-12 school funding (the part that would pay for increased costs school district public employee and teacher retirement, or TRS) to successful passage of a PERS-TRS reform package. Meyer, apparently, liked that idea.
"I think the reason they are withholding the PERS increase for K-12 is to get them involved in helping us resolve the PERS-TRS issue," he said. "And I guess I would use the same logic that if we pay the municipalities' PERS-TRS increase, what is the incentive for them to come to the table and help us?"
Rep. Mike Hawker, R-Anchorage, agreed. He said there were other ways to accomplish the goal of easing the burden carried by municipalities. He said he wanted to look closely at other programs, such as the senior-disabled veteran property tax exemption. Though it promised to do so, Hawker said the state has not reimbursed cities for property tax revenue losses to the program for several years.
"Knowing this amendment forces that debate to be taken to a high level of analysis and consideration by this committee, I think this is a good thing," Hawker said.
Rep. Eric Croft, D-Anchorage, said he was "somewhat stunned" by the amendment cutting the aid to municipalities, especially considering, he said, that the Legislature already had eliminated municipal assistance and revenue sharing programs, continues to fail to reimburse local governments for mandated property tax exemptions and was now saddling sister governments with the retirement program problems.
"We did a huge sort of triple whammy hit on municipalities," he said.
Croft defended the governor's original budget proposal that provided at least some assistance for a dramatically identifiable problem.
"Local governments are in trouble, and we should help," he said.
Chenault said Wednesday that there are those in the Legislature who think the public lacks an understanding of the problem. Recent moves regarding PERS-TRS funding could serve to bring that message home and bring about a change in the retirement system programs.
"We have to try to address the problem now," he said.
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