Legislature(2017 - 2018)BARNES 124
01/31/2017 01:30 PM House TRANSPORTATION
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| Audio | Topic |
|---|---|
| Start | |
| HB60 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB 60 | TELECONFERENCED | |
| + | TELECONFERENCED |
HB 60-MOTOR FUEL TAX; TRANSPORTATION MAINT. FUND
1:33:53 PM
CO-CHAIR WOOL announced that the only order of business would be
HOUSE BILL NO. 60, "An Act relating to the motor fuel tax;
relating to the disposition of revenue from the motor fuel tax;
relating to a transportation maintenance fund; and providing for
an effective date."
1:34:30 PM
JERRY BURNETT, Deputy Commissioner, Department of Revenue (DOR),
stated that HB 60 is designed to increase the motor fuel tax and
is an integral part of the governor's budget proposal. Mr.
Burnett began with slide three of his PowerPoint by sharing the
history of Alaska's motor fuel tax. He said that Alaska's motor
fuel tax has been in place in Alaska since 1945. He explained
that although the rates have increased over time, the structure
has remained unchanged. He noted that the last increase in
Alaska's highway fuel tax, which is currently eight cents, was
in 1970. Mr. Burnett reminded the committee that in 1970 the
nationwide average gas price was 36 cents per gallon and the
median Alaskan income was $12,500. He reported that in 1971 the
first year of collections brought in $9.4 million to the state.
To give the committee some perspective, Mr. Burnett disclosed
that at that time Alaska had a state general fund (GF) budget of
about $250 million and a total state budget of $369 million. He
said that the tax now brings in $40 million annually, which is
more like $4 billion in GF when all the motor fuel taxes are
included. He explained that the tax is a per gallon charge and
is not based on a changing value. Mr. Burnett reminisced about
2008, when Sarah Palin was governor; oil prices were extremely
high, and the state temporarily suspended its motor fuel tax
from September 1, 2008 until August 31, 2009. He offered his
estimate that just over $11 billion in oil revenue were brought
in that year. Mr. Burnett reported that in 2015 House Bill 158
added almost a penny surcharge to motor fuel and some other
refined fuels. He added that revenue generated by House Bill
158 was intended for use by the Department of Environmental
Conservation (DEC) for spill prevention and response funding.
1:37:17 PM
MR. BURNETT moved to slide four and stated that Alaska's fuel
tax is currently one of the lowest in the United States. He
referenced the Institute on Taxation and Economic Policy (ITEP)
report, included in the committee packet, for comparison of
motor fuel tax rates in other states. He noted that South
Carolina is the next lowest behind Alaska. He stated that even
with the increases proposed in HB 60, Alaska would still be
below the national average for highway fuel and slightly over
the national average for jet and aviation fuel. Mr. Burnett
revealed that because of a lack of vast coastlines like Alaska
has, many states do not have a separate category for marine fuel
tax. He said that marine fuel usage is most often reflected
within the highway use tax.
1:38:20 PM
CO-CHAIR STUTES inquired about the existence of marine fuel tax
rates in some of the U.S. southern coastal states, such as Texas
and Louisiana, and queried whether the department had that data
for comparison purposes.
MR. BURNETT said that he does not currently have that
information but offered his belief that those states likely have
marine taxes. He said that he would be happy to provide that
information to the committee.
1:39:06 PM
REPRESENTATIVE SULLIVAN-LEONARD inquired as to what the current
per gallon gas prices are in Southcentral and Southeast Alaska.
MR. BURNETT offered his belief that average per gallon prices
are close to $3 in Southeast and in the $2.60 range for
Southcentral. He shared his assumption that $2.89 per gallon is
currently the lowest available price in Juneau and that although
he did not know the exact dollar amount per gallon, that Costco
in Anchorage would probably have the cheapest prices.
REPRESENTATIVE SULLIVAN-LEONARD inquired as to how the
department arrived at the figures listed on slide six.
MR. BURNETT specified that those figures represent just the
motor fuel tax portion of the per-gallon price and not the total
amount paid at the pump.
MR. BURNETT returned to his presentation and brought attention
to slide five, showing both current and proposed prices for the
various types of taxable fuel. He explained that the bottom
box, labeled "Off-road use credit," is in regard to a credit for
fuel bought specifically for use off of the road. Mr. Burnett
specified that that designation usually applies to industrial
users or farmers.
1:41:05 PM
CO-CHAIR WOOL asked whether an owner of a loader could apply for
a credit for the diesel fuel consumed by that piece of
equipment.
MR. BURNETT answered yes. He elaborated that the credit would
still apply whether that loader was used for personal or
industrial use. Mr. Burnett reported that the off-road use
credit of six cents equates to only a two-cent tax to be paid.
1:41:35 PM
REPRESENTATIVE CLAMAN asked for clarification whether the off-
road use credit would apply on a personal-use basis in
communities such as Nome, Kotzebue, and [Utqiagvik] Barrow that
all have high snow machine usage.
MR. BURNETT offered his assumption that although snow machine
fuel usage would be eligible for the credit, it would depend on
the amount used whether it would be worth it to file for credits
on small purchases.
REPRESENTATIVE CLAMAN offered his understanding that the credit
would not be applied directly at the pump but would actually
involve collection of receipts to weigh whether it would be
worth it to turn them in for a refund.
MR. BURNETT said that it is a requirement to apply directly to
DOR for the credit. He explained that is because the tax is
paid at the distributor level, not by the retailer, and not
added on to the price of gas at the filling station.
1:43:16 PM
REPRESENTATIVE NEUMAN surmised that there could be tens of
thousands of snow machine and four-wheeler owners in Alaska who
could apply for the credit. He inquired whether each individual
vehicle would have to be applied for separately or if just once
for the total amount of gas. He also questioned whether the
state would need more employees to deal with the potential
influx of all the credit applicants.
MR. BURNETT indicated that this is not a new credit and that it
is already in statute. He noted that HB 60 proposes to increase
the credit. Mr. Burnett asked Mr. Spanos to give some examples
of previous usage of the credit.
1:44:24 PM
BRANDON SPANOS, Deputy Director, Tax Division, Department of
Revenue (DOR), for clarification, asked whether the question is
how difficult is it to administer a credit refund program for
off-road use?
CO-CHAIR WOOL confirmed that to be correct.
MR. SPANOS reiterated Mr. Burnett's previous answer that the
credit is not new and has been available for some time. He
acknowledged that the credit has primarily been used by mining
companies for heavy machinery used off-road. He said that there
are a few companies who apply for the credit for non-taxable
uses. He explained that most companies can buy heating fuel
"tax-off," but that some do buy it "tax-on" and then file for
the refund. He revealed that it is only occasionally that an
individual applies for the credit for fuel usage from a snow
machine or a lawnmower. He added that the refunds are
insignificant. In regard to a previous comment concerning Bush
communities, he revealed that the department does have an
exemption allowing tribes to purchase fuel tax-off, as long as
the tribe owns the tank. He explained that means anyone in that
community can then purchase fuel for their snow machine or four-
wheeler and not have to pay the tax. He noted that if an
individual purchases fuel for his/her boat from the tribe, then
he/she would have to file a return to pay the tax for the marine
fuel.
1:46:33 PM
CO-CHAIR STUTES asked Mr. Burnett what the increased amounts
would be for July 2017 if the taxes were adjusted simply on the
inflation rate.
MR. BURNETT replied that he had not yet done that calculation.
He stated that the department would be happy to run the
calculations, but there are a number of possibilities of
inflation rates to choose. He offered his belief that the
general consumer price index (CPI) from the 1970s has almost
tripled. He gave further examples of inflation by saying that
wage growth in Alaska has quadrupled and the CPI for urban
consumers has tripled. He said that had the inflation rate been
a percentage of the fuel cost in 1970, the tax would equate to
roughly a 33 percent tax. Mr. Burnett elaborated that a 33
percent tax on $2.50 per gallon fuel would equal well above 24
cents and would be more like one dollar.
1:48:41 PM
CO-CHAIR WOOL offered his understanding that the off-road credit
exists because the motor fuel taxes collected by the department
roll back into services that the state provides for restoration
and maintenance on roads, airports, and ports. He said that
off-road vehicles should not have to pay a tax since
theoretically they do not contribute to the depletion of those
resources. He asked whether there could be a minimum threshold
put in place to help alleviate any congestion that might occur
from the large number of snow machine and four-wheeler users in
the state who might apply for the credit.
MR. BURNETT replied that he was not aware of any such proposal.
He conceded that Mr. Wool's idea doesn't sound unreasonable. He
reiterated what Mr. Wool said about specific designations of the
collected taxes being designated for direct expenditures on
roads, airports, and harbors. He added that historically it has
been that way. He commented that the taxes may have been a
dedicated fund prior to statehood, but after statehood it began
being separately accounted for a long time. Mr. Burnett said
that the motor fuel taxes have always been separately accounted
for, but it existed as an account in the GF. He added that the
only exception is with aviation fuel tax, which is currently a
dedicated fund. Mr. Burnett returned to slide five of his
PowerPoint presentation and reviewed the proposed per gallon tax
price for both the 2017 and 2018 commencement dates.
1:51:41 PM
REPRESENTATIVE NEUMAN drew attention to Section 10 that
discusses tax proceeds deposited into a transportation
maintenance fund ("the fund.") He mentioned that in 2016
Governor Bill Walker took $250 thousand for the Snowmobile
Trails Advisory Council (SnowTRAC) fund from dedicated funds -
from fees - and placed it in the GF. He asked whether the
department has ever put any money paid by snow machine and off-
road vehicle fuel sales into snow machine trails.
1:52:31 PM
MARC LUIKEN, Commissioner, Department of Transportation & Public
Facilities (DOT&PF), answered that he did not recall the
aforementioned situation being a fund source for the department,
and therefore it would not be a funded service. He added that
there may be other departments that receive funds for that type
of activity, but that he is certain it is not through the
DOT&PF.
REPRESENTATIVE NEUMAN asked Commissioner Luiken whether DOT&PF
had ever appropriated any funds for trail maintenance for snow
machines or off-road vehicles.
COMMISSIONER LUIKEN answered that DOT&PF has not appropriated
any state funds for trail maintenance, but there are federal
funds that have been apportioned to the state for trails. He
added that the majority of those funds have been spent for trail
marking in Northern Alaska. Commissioner Luiken added that he
is not aware of any fund source in the department for snow
machine trails.
REPRESENTATIVE NEUMAN clarified that he is trying to convey that
funds have been collected from snow machine operators for years,
but none of the fuel tax proceeds have gone into trail
maintenance.
CO-CHAIR WOOL suggested that the preceding issue will arise
later in the discussion. He extended his perception that not
all fuel tax proceeds go into road maintenance because currently
snow machine operators who buy gas can apply for a credit. Co-
Chair Wool noted that he personally knows of four-wheeler
operators, who use roads and areas along the road, and he is
certain that use is not without wear and tear.
1:54:18 PM
REPRESENTATIVE KOPP reiterated Co-Chair Wool's previous
statement that often times recreational vehicle users will drive
100 miles before even using the off-road vehicles. He then
asked whether it would be easier and more consistent with the
bill sponsor's intent if an off-road use credit were set to
apply to anyone in a community that does not have the Division
of Motor Vehicles (DMV) regulation of the road. He clarified
that in communities where the vehicle count is 499 or less the
DMV designates it as an off the state road system [off-highway,
rural] community. Representative Kopp added that in off-highway
communities' recreational vehicles are often the primary mode of
transportation. He asked whether it is the bill sponsor's
intent for the credit to cover individuals in the off-highway
communities or just any recreational vehicle user.
MR. BURNETT stated that it is the intent of the sponsor to
increase fees. He explained that the increases would be
specifically used for direct maintenance expenditures for roads,
highways, public safety, harbors, and airport facilities. He
said that based on his previous statement one could infer
Representative Kopp to be correct.
1:56:19 PM
MR. BURNETT returned to slide six of his PowerPoint presentation
and noted that the example shows how much tax people pay under
the current and the proposed system. Mr. Burnett stated that in
this example he uses a Matanuska-Susitna Valley (Mat-Su)
commuter that drives to Anchorage every day, in a sport utility
vehicle (SUV), and gets an average of 15 miles to the gallon, to
compute an average of 1,600 gallons of fuel used a year. He
explained that currently the user in the example pays about $133
annually in taxes on his/her fuel. Under the proposal that
amount would double in July 2017 to $266, then with the 2018
increment would amount to $399 per year. He noted that would
equal roughly a dollar and change per day for driving to work,
as opposed to currently being under one dollar.
MR. BURNETT said that the next box is an example of freight
cost. He noted that he used figures in the example for hauling
30,000 pounds of freight between Anchorage and Fairbanks, one
way only. He added that trucking industry representatives were
available in the audience for more details. Mr. Burnett
elaborated that for the example, he assumes that all 72 gallons
of fuel are used, and all 30,000 pounds of freight are
transported. He said that means that currently the price would
be 2 cents in tax paid per 100 pounds of freight, with the
ultimate increase amounting to 6 cents per 100 pounds.
MR. BURNETT moved on to discuss the marine fuel example. He
said that he got his rough estimate of 3,000 gallons from a
member of the committee. He continued that currently a marine
fuel user of 3,000 gallons pays $150 in taxes annually, with
that amount rising to $450 by 2018 under the proposed
legislation. Mr. Burnett addressed jet fuel by disclosing
although some companies use millions of gallons a year, he low-
ball estimated a figure of 100,000 gallons for this example. He
said that presently amounts to $3,200 in taxes but would
increase to just under $10,000 by 2018 under the current
proposal.
MR. BURNETT finished explaining slide six by noting the aviation
estimate of 1,000 gallons would represent a typical "weekenders"
fuel usage. In this example, the taxes would go from the
current $47 annually to $141 in 2018. He emphasized that some
users might use less fuel and some more fuel, so the estimates
could be extended in either direction.
CO-CHAIR STUTES inquired about the difference between jet fuel
and aviation gas.
MR. BURNETT explained that jet fuel is very much like diesel
fuel, in that it is a distillate product, which is typically
taxed at a lower rate. He offered his belief that the
aforementioned reasoning is because jet fuel is used in larger
quantities than aviation gas. Mr. Burnett clarified that
aviation gas is most typically used for reciprocating type
engines in smaller planes, whereas the turbo props and jets that
use jet fuel are usually larger aircraft. He noted that there
is a long history behind fuel tax rates.
2:00:59 PM
CO-CHAIR STUTES asked for clarification that typically the
smaller privately-owned planes are the ones that use aviation
fuel and the larger commercial aircraft use jet fuel.
MR. BURNETT explained that many of the commuter and tourism
planes are turboprops and, thus, use aviation gas.
CO-CHAIR STUTES asked whether the determining factor is based on
engine type or seating capacity.
MR. BURNETT answered engine type.
2:01:35 PM
REPRESENTATIVE DRUMMOND inquired whether both commercial
passenger and cargo planes would pay the jet fuel tax.
MR. BURNETT responded that both commercial passenger and cargo
planes would pay the jet fuel tax, but there are exemptions for
foreign flights originating or ending in another country. He
said that Ted Stevens Anchorage International Airport is
primarily a cargo airport and is one of the top 10 largest cargo
airports in the world. He explained that although a fair amount
of the fuel cargo plane use is exempt, the exemption is made up
for through landing fees. Mr. Burnett added that all fees
collected must be used at the airport from which they were
collected.
REPRESENTATIVE DRUMMOND offered her understanding that any taxes
collected on cargo fuel would be used only at the airport where
collected and that it is at the discretion of each airport to
determine whether or not additional revenue is needed beyond
what is collected through landing fees.
MR. BURNETT said that he would not say it in exactly those
words, but one of the balances of having exemptions for cargo
planes is that they pay a lot of other fees and provide for
other economic activity.
2:03:36 PM
CO-CHAIR WOOL asked Mr. Burnett to explain whether the state
decided not to tax cargo freight lines at the airport or is that
dependent on the aircraft's country of origin.
MR. BURNETT offered his understanding that the state exemption
is not specifically for cargo flights, but for flights
originating in a foreign country.
CO-CHAIR WOOL asked whether it is similar to Alaskans not paying
sales tax in another state.
MR. BURNETT answered that it is similar. He repeated that the
exemption isn't cargo flight specific but is based off of a
flight originating from a foreign country. Mr. Burnett added
that although a state exemption is available, aircraft have the
ability to bring in fuel bought elsewhere and use it tax free.
CO-CHAIR WOOL inquired whether it is similar to purchases at a
duty-free shop.
MR. BURNETT answered yes.
2:05:19 PM
COMMISSIONER LUIKEN noted that a significant number of cargo
aircraft originate in the United States. He emphasized that
the country of origin for each specific flight is the
determining factor. He gave examples of a flight that
originated in an international location and an aircraft
departing Anchorage for an international destination and said
that those flights would be exempt from the tax.
REPRESENTATIVE SULLIVAN-LEONARD brought attention back to the
slide discussing highway fuel estimates and asked whether Mr.
Burnett looked at numbers from anywhere else in the state
besides Mat-Su.
MR. BURNETT answered no and stated that he wanted to just use
one example, instead of multiple. He said that the location of
where someone lives -for example, in Anchorage or Juneau -
determines whether he/she might drive less than 10,000 miles;
therefore, he thought the Mat-Su to Anchorage commuter would be
a good example.
REPRESENTATIVE SULLIVAN-LEONARD asked whether Mr. Burnett could
provide the prospective annual cost for the 30,000 Mat-Su
residents that commute daily.
MR. BURNETT answered yes.
REPRESENTATIVE SULLIVAN-LEONARD stated that she had concerns for
her Mat-Su commuter constituents. She pointed out that an
increase in fuel tax will be very burdensome on them.
2:08:54 PM
REPRESENTATIVE CLAMAN asked whether the foreign fuel tax
exemption was only for fuel pumped into planes at Ted Stevens
Anchorage International Airport or Fairbanks International
Airport.
MR. BURNETT answered that is correct.
REPRESENTATIVE CLAMAN offered his understanding that no matter
the company, a plane flying from Anchorage to Hong Kong would
not pay the fuel tax if it fueled up in Anchorage; but if the
very same plane was flying to Seattle and fueled up in
Anchorage, then it would pay the tax, because it would no longer
be traveling internationally.
MR. BURNETT confirmed Representative Claman's understanding.
REPRESENTATIVE CLAMAN shared his belief that not only is there a
state exemption for flights to foreign airports, but it is a
requirement in federal statute.
CO-CHAIR WOOL thanked Representative Claman and Mr. Burnett for
clarifying that point.
2:10:45 PM
REPRESENTATIVE CLAMAN offered his understanding that from both a
federal and a state standpoint, theoretically a fuel tax should
create a "cost user/cost payer analysis." He added that the
intention for the increased fuel tax is to more equitably
reflect the cost of maintaining infrastructure with the cost to
the user, indicative of individual usage. He noted the
importance in having funds available to match with federal
dollars for construction projects.
MR. BURNETT stated that Representative Claman was exactly right.
He added that the whole point of HB 60 is to have users actually
pay for a portion of the cost to maintain transportation
infrastructure.
2:11:52 PM
REPRESENTATIVE DRUMMOND said she would like to know the amount
of taxes charged to cargo and/or passenger jets, refueling at
foreign ports.
REPRESENTATIVE NEUMAN inquired whether FedEx and United Parcel
Service of America, Inc. (UPS) pay fuel taxes.
MR. BURNETT explained that it depends on where a plane is flying
to and from and which plane is being used.
MR. BURNETT continued on with his presentation. He said that
with the exception of aviation fuel tax, all fuel revenue will
go directly into the fund, which is a new fund in the general
fund. He illustrated that aviation fuel tax revenue is
currently kept in other funds required and, under current law
and the Alaska Constitution, is dedicated as needed for
participation in federal programs. Mr. Burnett added that for
budgetary purposes, HB 60 moves the taxes on marine and highway
fuel from the unrestricted general fund (UGF) to the designated
general fund (DGF) for budgetary purposes. He noted that the
purpose of the move from UGF to DGF is to instill confidence in
the public that revenue generated from motor fuel will indeed be
used to build and maintain transportation infrastructure.
2:13:21 PM
MR. BURNETT declared that the potential revenue from the
increase in fuel tax would generate about $40 million the first
year, then $80 million per year thereafter. He mentioned that
once the increase is fully implemented, roughly $400,000 of the
revenue would be shared with municipally owned airports. He
reiterated that aviation fuel tax revenue has to stay within the
system from which it was generated. Mr. Burnett continued that
the remainder of aviation fuel revenue goes into the fund,
special accounts for road, water transport, and aviation
facilities. He explained that the estimates are based off of
the fall 2016 revenue forecast and do account for changes in
fuel demand or stockpiling. He said that although fuel demand
fluctuates for this analysis, the department assumes a fairly
steady fuel demand in Alaska. Mr. Burnett defined stockpiling
as where a retailer knows the price of fuel is going to
increase, so it goes out and fills up the tanks to avoid paying
more in taxes.
CO-CHAIR STUTES inquired about the definition of water
transport. She noted that the majority of harbors in the state
have been turned over to local municipalities. She also
inquired about the qualifications for the special account for
roads that Mr. Burnett previously mentioned.
MR. BURNETT deferred to Commissioner Luiken.
2:15:44 PM
COMMISSIONER LUIKEN said that currently the majority of the
funds will be identified for roads and airports, but there is a
small portion dedicated to the Alaska Marine Highway System
(AMHS).
CO-CHAIR STUTES inquired whether the aforementioned "small
portion" is equivalent to what the marine fuel tax increase
would be.
COMMISSIONER LUIKEN answered that he would have to further
investigate what the expectation is for revenue from the marine
tax before he could answer Co-Chair Stutes's question. He noted
that the money oriented to the Alaska Marine Highway System Fund
is currently $2.5 million.
2:16:51 PM
CO-CHAIR STUTES stated her interest in knowing what the
increased revenue would be, as opposed to what AMHS might expect
to receive.
MR. BURNETT continued with his presentation. He explained that
HB 60 would change the rate on an already existing tax and would
include a onetime implementation cost of $50,000, with no
additional on-going costs.
2:18:07 PM
COMMISSIONER LUIKEN revealed that his presentation would discuss
where the funds would go under the proposed legislation. He
said that the revenue generated by motor fuel tax would be
placed into a transportation maintenance fund which would be
called the Alaska Transportation Maintenance Fund. He noted
that the fund is a DGF, or other fund, and would replace an
equal amount of UGF that would come out of the budget. He said
that roughly $64.8 million of UGF would be replaced with the
earnings from the proposed tax and would go into a designated
fund. Commissioner Luiken stated that $4.5 million of UGF would
be swapped with DGF in the aviation account, for a total of
$69.3 million swapped for the DOT&PF budget. He recalled that
Mr. Burnett mentioned that amount to be roughly $80 million.
Commissioner Luiken noted that there is a portion that would go
to the Department of Public Safety (DPS) and the Department of
Commerce and Community and Economic Development (DCCED), but
that he did not have the exact figures at this time.
COMMISSIONER LUIKEN drew attention to two pie charts on slide
three. He said that the one to the right is the management plan
and represents the fund sources for the operating budget. He
read from the chart that 51 percent is "other," 37 percent is
UGF, and roughly 11 percent is DGF. He remarked that the fund
source swap would increase the DGF portion considerably and
would replace the UGF portion of the department's budget.
CO-CHAIR WOOL offered his understanding that the total would
essentially stay the same, but the department would be getting
more from DGS and less from the UGF. He added that the
legislature would be able to allocate less money to DOT&PF to
keep its budget at the same amount.
COMMISSIONER LUIKEN affirmed that is correct.
REPRESENTATIVE NEUMAN noted that there have been extensive talks
from both the governor and the legislature about further
reductions within the operating budget. He inquired whether the
proposal would match cuts from the department's operating
budget.
COMMISSIONER LUIKEN responded that there are reductions in
DOT&PF's operating budget, but he does not have last year's
total at this time. He shared his belief that the $581,260,000
total for the operating budget listed on slide three is roughly
$5 million less than the total budget for the previous year.
REPRESENTATIVE NEUMAN offered his understanding that
Commissioner Luiken's answer to his question was no.
2:21:40 PM
COMMISSIONER LUIKEN returned to his presentation. He said that
the bubble chart on slide three is reflective of the portions of
the fund sources for DOT&PF's 2018 budget. He noted that the
tail of bubbles on the right starting with "CIP receipts"
represents all of the funds that make up the "other" fund
portion of DOT&PF's operating budget. He noted that the blue
bubble showing UGF is the 25 percent portion. Commissioner
Luiken said that the first bubble underneath UGF is
representative of the new designated fund, the fund, and that
the other, the Alaska Marine Highway System Fund, is already in
existence. He added that the two aforementioned bubbles also
reflect the new DGF portion of the budget.
COMMISSIONER LUIKEN announced that slide four shows the
department's reorientation of its focus toward the services
delivered. He explained that the services provided can be
labeled as four core services to: preserve, operate, modernize,
and provide transportation services. Commissioner Luiken added
that other than Modernize Alaska's Transportation
Infrastructure, the state is primarily responsible for funding
the other three services. He declared that he wanted to
primarily focus on two of those services, because that is where
the bulk of "the fund source swap" - the DGF - will actually be
going in order to help offset the cost of providing these
services to Alaskans.
2:23:40 PM
COMMISSIONER LUIKEN stated that slide five shows the definition
of DOT&PF's preserve service. He said that preserve service is
primarily to ensure and sustain the life of Alaska's
transportation infrastructure. Commissioner Luiken listed the
direct services that support the preserve service as: surface
preservation, off-surface preservation, bridge preservation,
vehicle management, and vessel/terminal management. He noted
that slide six shows the entire budget for fiscal year 2017 (FY
17) and is broken down into what was spent from UGF, DGF, and
"other" for what is spent on the preserve services. Commissioner
Luiken said that the department identified what was spent for
each of the direct services.
COMMISSIONER LUIKEN continued on to slide seven and discussed
the next service offered, off-surface preservation. He said
that it primarily includes things like brush cutting, drainage,
and ditching. He noted that the FY 17 amount of $26,225,500
will directly be used to maintain that service. He explained
that the target for the department is shown in the pictures on
the bottom left of the slide. In the event the department isn't
funded correctly, and is not able to deliver that service, the
result is more like what is shown in the right-hand pictures.
Commissioner Luiken said that the other important pieces to note
is the department's measurement of its performance and how well
it is utilizing the funds. He offered his commitment to the
department's holding itself accountable to Alaskans and the
legislature as its investors.
2:25:33 PM
CO-CHAIR WOOL inquired whether federal funding for new
construction would pay for resurfacing or repaving of roads.
COMMISSIONER LUIKEN stated that those services were reflected in
the "other" category of the bar chart. He added that DOT&PF has
worked with federal funding partners to help determine that
certain activities the department does are actually eligible for
federal funds.
2:26:15 PM
COMMISSIONER LUIKEN continued on to slide eight and said that it
shows the second core service provided - the operate service -
which is primarily funded with state funds and includes all of
the things that help the department move people and things
across the system. He listed the direct services that support
the operate service as: illumination; snow and ice removal,
operate certificated airports, striping, signage, signals, and
information transportation services. Commissioner Luiken said
that slide nine shows the operating budget for the operate
services. He shared that the vast majority of funds in the
operate budget is currently UGF, but with the fund source swap
the UGF number will decrease and the DGF amount will increase.
Commissioner Luiken moved to slide ten and said that the
department spends roughly $74 million annually on snow and ice
removal. He reiterated that the department is measuring its
performance and ability to meet targets. Commissioner Luiken
stressed that snow and ice removal activities are exactly what
the fund will help cover.
2:27:30 PM
REPRESENTATIVE NEUMAN drew attention back to slide nine, showing
the operating budget for operate services, and inquired how much
of the 71 percent of UGF money went toward AMHS and how much to
highways.
COMMISSIONER LUIKEN revealed that the operate core services are
primarily for horizontal systems. He noted that the AMHS budget
is reflected under the provide transportation core service. He
noted that the provide transportation core service is where the
bulk of funds, whether UGF or DGF, reside.
REPRESENTATIVE NEUMAN requested that the department provide
information on how much and which fund sources are funded for
AMHS, airports, and highways.
2:28:32 PM
REPRESENTATIVE DRUMMOND offered her assumption that the $74
million listed for snow and ice removal is for the removal of
snow and ice from roadways as well as from small rural airports.
COMMISSIONER LUIKEN confirmed that is correct.
2:29:09 PM
REPRESENTATIVE KOPP stated that Representative Talerico had
shared with him the comments he had received from his district
on how timely and swiftly the snow and ice removal was this
year.
COMMISSIONER LUIKEN returned to his presentation and noted that
the last slide is a summary pointing out that the proposal is
not an increase in DOT&PF's operating budget but is a swap from
UGF to DGF. He said the swap is reflected through percentages
of the budget that would be funded by UGF or DGF if HB 60
passes.
2:30:10 PM
CO-CHAIR STUTES shared her desire to ask Commissioner Luiken the
same question she had just asked Mr. Neussl in a previous DOT&PF
subcommittee meeting. She shared her knowledge of the existence
of issues surrounding funding as it directly relates to the
scheduling of the AMHS. Co-Chair Stutes inquired whether
Commissioner Luiken believed that it would be to the advantage
of AMHS and to the state if AMHS was forward funded for two
years. She offered her belief that the forward funding would
allow for a solid, dependable schedule to be released by the
department - weather dependent, of course.
COMMISSIONER LUIKEN stated that it is definitely not a benefit
to have uncertainty in a transportation system. He added that
uncertainty creates potential downfall, both for the user and
indirect recipient of those services. Commissioner Luiken
declared that any time certainty, especially regarding funding,
can be inserted into a transportation system, improvement to
services would be seen. He noted that there are potential
impacts to local businesses that either directly or indirectly
benefit from a [reliable] AMHS schedule.
CO-CHAIR STUTES, in regard to her previous question, offered her
understanding that Commissioner Luiken's answer is yes. She
offered further interpretation of his comment to mean that there
could be significant improvement to the dependability of AMHS
and that the increased dependability could potentially equate to
increased revenue generation.
COMMISSIONER LUIKEN confirmed that all to be correct.
2:32:44 PM
REPRESENTATIVE NEUMAN inquired how the rates for the increases
were decided.
MR. BURNETT resolved that the ultimate rate was intended to be
close to the national average for highway fuel, while also
covering a percentage of DOT&PF's costs. Mr. Burnett added that
a 24-cent highway fuel tax rate would put the state just below
the national average. He added that rather than going directly
from 8 to 24 cents, the decision was made to step it from 8 to
24 over a two-year period.
REPRESENTATIVE NEUMAN queried whether the tax increases are
proportionate to the money that is currently going into
management funds. He shared his concern that the proposed
changes might allow for inequitable distributions to the
management funds for highway, aviation, and marine, from FY 17.
Representative Neuman asked whether the department had checked
the numbers to ensure there isn't an unequal distribution.
MR. BURNETT shared his belief that it doesn't work out exactly
proportionately, but in each case the amount of tax generated is
significantly less than the total expenditures in those areas.
REPRESENTATIVE NEUMAN offered his opinion that the reason for
the proposed increase in fuel tax is to supplement the UGF with
generated tax revenue, but the proposed tax increases are not
proportionate to the same amount of money that was previously
allocated.
2:34:59 PM
CO-CHAIR WOOL requested that Mr. Burnett clarify whether under
the current motor fuel tax structure none of the tax revenue is
actually designated to airports, roads, or ports.
MR. BURNETT explained that aviation fuel taxes are 100 percent
dedicated to use on airports due to federal regulations. The
[taxes] function just like a dedicated fund, which is allowable
under the Alaska Constitution for uses required for
participation in federal programs.
CO-CHAIR WOOL offered his understanding that motor fuel taxes,
at 8 cents a gallon since 1971, have gone into the GF where
DOT&PF can then access those funds.
MR. BURNETT interjected to note that each of those taxes is
currently being separately accounted for within the GF. He
added that it is important to understand that although the funds
get money directly, it can be accounted for how much of the
expenditures that would have been paid for by that tax. Mr.
Burnett explained that during his tenure with the department the
marine fuel taxes, which go into a special fund, have always
been used for those specific purposes. He said that there is
already a connection but "this makes that connection tighter and
takes it out of ... the unrestricted general fund for budgetary
purposes."
CO-CHAIR WOOL, in regard to Representative Neuman, offered his
understanding that Mr. Burnett was trying to convey that
although there is currently a connection, the connection isn't
proportionate. He continued that it has just historically been
that way and that the numbers were determined at different times
and using different metrics. He noted that a tax rate of eight
cents in 1971 remaining stagnant at eight cents in 2013
obviously is not reflective of the current cost to the state to
maintain its road systems.
MR. BURNETT pointed out that in 1971 the highway motor fuel
taxes in the Department of Highway budget were $9.4 million and
$9.8 million in UGF.
2:37:32 PM
REPRESENTATIVE NEUMAN described a discrepancy in the sectional
analysis in bullet points two and three. The former calls for
changes in the per gallon tax rate for dealers; the latter calls
for a change in the tax rate for users. He inquired why the tax
rate increase for dealers is different from the one for users.
MR. BURNETT answered that the taxes are paid at the distributer
level and that the users simply pay the retail cost of the fuel.
He noted that there may be an error in the sectional analysis or
possibly in the way it is being interpreted.
CO-CHAIR WOOL offered his understanding that the retailer is not
collecting or paying out taxes and that all of the taxing takes
place at the wholesale level.
REPRESENTATIVE NEUMAN requested clarification of the sectional
analysis.
CO-CHAIR WOOL ensured Representative Neuman that he would have
the department follow up on that question.
2:39:19 PM
REPRESENTATIVE KOPP provided his insight that HB 60 would, for
the first time, "create the fund."
MR. BURNETT said that for purposes of highway motor fuels, HB 60
would create a fund outside of the UGF, but still within the GF,
that is designated for use for this purpose. He added that
there is currently an existing account within the UGF that
identifies the revenues from the motor fuel taxes. In response
to Representative Kopp's question, Mr. Burnett stated that the
answer is yes.
REPRESENTATIVE KOPP, in response to Representative Neuman's
proportionality question, asked whether creating the fund would
make it easier to track the money for statistical data gathering
purposes.
MR. BURNETT responded yes. He said that HB 60 would make it
easier to track and easier to identify certain monies within the
budget. He added that DOT&PF's budget would otherwise look like
all UGF, even though it was paid out of a highway maintenance
account within the GF. Mr. Burnett noted that HB 60 would
specify fuel tax revenue as a different fund source in budgetary
documents.
2:41:13 PM
REPRESENTATIVE NEUMAN pointed out that sections two and three of
the bill contains different numbers.
CO-CHAIR WOOL said that the committee would seek clarification
on that discrepancy.
2:41:34 PM
CO-CHAIR WOOL announced that HB 60 would be held over.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB60 ver A 1.18.17.PDF |
HTRA 1/31/2017 1:30:00 PM |
HB 60 |
| HB60 Sponsor Statement 1.17.17.pdf |
HTRA 1/31/2017 1:30:00 PM |
HB 60 |
| HB60 Fiscal Note REV 1.18.17.PDF |
HTRA 1/31/2017 1:30:00 PM |
HB 60 |
| HB60 Fiscal Note DOT 1.18.17.PDF |
HTRA 1/31/2017 1:30:00 PM |
HB 60 |
| HB60 Supporting Document - ITEP Report AK Motor Fuel 1.25.17.pdf |
HTRA 1/31/2017 1:30:00 PM |
HB 60 |
| HB60 Supporting Document - Aviation Advisory Board Resolution.pdf |
HTRA 1/31/2017 1:30:00 PM |
HB 60 |
| HB60 Sectional Analysis ver A 1.30.17.pdf |
HTRA 1/31/2017 1:30:00 PM |
HB 60 |
| HB60 Supporting Document - DOR Presentation 1.31.17.pdf |
HTRA 1/31/2017 1:30:00 PM |
HB 60 |
| HB60 Supporting Document - Motor Fuel Tax Briefing DOT 1.31.17.pdf |
HTRA 1/31/2017 1:30:00 PM |
HB 60 |