Legislature(2007 - 2008)HOUSE FINANCE 519
08/01/2008 09:00 AM House FINANCE
| Audio | Topic |
|---|---|
| Start | |
| HB4005 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
| = | HB4005 | ||
HOUSE FINANCE COMMITTEE
August 1, 2008
9:19 A.M.
CALL TO ORDER
Co-Chair Meyer called the House Finance Committee meeting to
order at 9:19:29 AM.
MEMBERS PRESENT
Representative Mike Chenault, Co-Chair
Representative Kevin Meyer, Co-Chair
Representative Bill Stoltze, Vice-Chair
Representative Harry Crawford
Representative Richard Foster
Representative Les Gara
Representative Mike Hawker
Representative Reggie Joule
Representative Mike Kelly
Representative Mary Nelson
Representative Bill Thomas Jr.
MEMBERS ABSENT
None
ALSO PRESENT
Representative Andrea Doll; Representative Bryce Edgemon;
Sarah Fisher-Goad, Deputy Director of Operations, Alaska
Industrial Development and Export Authority and Alaska
Energy Authority, Department of Commerce, Community and
Economic Development; Amanda Ryder, Director, Division of
Administrative Services, Department of Commerce, Community
and Economic Development; Clyde (Ed) Sniffen Jr., Assistant
Attorney General, Department of Law; Johanna Bales, Deputy
Director, Tax Division, Department of Revenue; Randall
Ruaro, Special Assistant, Office of the Governor; Randall
Ruaro, Special Assistant, Office of the Governor; Ron
Kreher, Chief of Field Services, Division of Public
Assistance, Department of Health and Social Services;
Suzanne Armstrong, Staff, Representative Kevin Meyer
PRESENT VIA TELECONFERENCE
Meera Kohler, President CEO, Alaska Village Electric
Cooperative; Scott Ruby, Community Development Section
Chief, Division of Community Advocacy, Department of
Commerce, Community and Economic Development,
SUMMARY
HB 4005 An Act amending the power cost equalization
program, repealing the exclusion from eligibility
for power cost equalization for certain power
projects that take their power from hydroelectric
facilities, and amending the definition of
'eligible electric utility' as it applies to the
power cost equalization program and the grant
program for small power projects for utility
improvements; and providing for an effective date.
HB 4005 was HEARD & HELD in Committee for further
consideration.
#HB4005
HOUSE BILL NO. 4005
An Act amending the power cost equalization program,
repealing the exclusion from eligibility for power cost
equalization for certain power projects that take their
power from hydroelectric facilities, and amending the
definition of 'eligible electric utility' as it applies
to the power cost equalization program and the grant
program for small power projects for utility
improvements; and providing for an effective date.
9:20:27 AM
Co-Chair Meyer initiated the discussion about the bulk fuel
revolving loan fund. He invited Sarah Fisher Goad, Deputy
Director of Operations, Alaska Industrial Development and
Export Authority and Alaska Energy Authority, Department of
Commerce, Community and Economic Development to testify and
welcomed Meera Kohler, President CEO, Alaska Village
Electric Cooperative via teleconference. He requested that
all amendments be submitted by the end of the day.
9:23:52 AM
Representative Hawker asked Ms. Kohler about her expressed
need to add $35 million dollars into the Revolving Loan
Fund. His understanding was that Ms. Fisher-Goad thought
that might not be necessary. He asked about gaps in the
state program that might result in compromising the ability
to meet bulk fuel requirements for rural Alaska.
9:25:16 AM
MEERA KOHLER, PRESIDENT CEO, ALASKA VILLAGE ELECTRIC
COOPERATIVE testified via teleconference. She thought that
there was a large demand for increased credit. She had done
some prior brainstorming to figure out the exact monetary
need. She provided the necessary background. The fuel
orders are about 15 percent behind those of last year. She
believed that 100 million gallons of fuel were delivered per
year. She speculated that the orders were behind because the
villages could not afford additional fuel, or that they were
waiting for the price of fuel to drop. The actual demand for
fuel in communities is about 83 million gallons. The average
cost for that fuel is $230 million, with higher costs
anticipated this year. She anticipated the difference to be
$184 million. She did not know how the difference would be
made up.
She continued that between the state's two managing programs
there are only $13 million dollars available for loans. She
theorized that if more money was available, the demand would
be greater and more of the fuel would be ordered early and
not need to be flown in. She expressed concern with the cut
off dates, because she knew that orders need to be placed by
thst
the 15 of August in order for delivery by the 1 of
October. If the cut off day is missed, then delivery by
barge is no longer an option and the villages will be faced
with flying in fuel. She stated that the Alaska Village
Electric Cooperative (AVEC) would like to borrow money at a
low interest rate. She was concerned about Cordova electric
because they buy fuel on a month to month basis from their
local supplier.
9:29:00 AM
Representative Hawker asked Ms. Fisher-Goad to respond to
Ms. Kohler's assertion that prices have increased and, as a
result, fuel is not being ordered.
SARAH FISHER-GOAD, DEPUTY DIRECTOR OF OPERATIONS, ALASKA
INDUSTRIAL DEVELOPMENT AND EXPORT AUTHORITY AND ALASKA
ENERGY AUTHORITY, DEPARTMENT OF COMMERCE, COMMUNITY AND
ECONOMIC DEVELOPMENT, noted that there are two issues for
the committee to consider:
· The need for credit to purchase fuel, which would
then be paid back by revenues coming into the
community.
· Retailers in the communities sell the fuel for
residential use, which is part of the revenue for
the borrower to pay back.
She did not know how to address the two issues. The bulk
fuel revolving loan program is not there to finance the
entire fuel needs and purchases for an entire community. It
is limited to smaller communities of 2,000 people or less.
The larger communities would not be eligible for the program
as it exists now. One of the issues is a discussion about
fuel needs and how communities are paying for the fuel that
is not being sold in some type of retail process versus what
is needed for credit advancement and for community loans.
Currently, a handful of communities do borrow the maximum
amount. To ability for cooperatives to purchase for multiple
sights was newly established two years ago, although there
haven't been any borrowers under that clause. The limit now
for multiple sights is $1.8 million.
9:32:25 AM
Representative Hawker did not hear any testimony that
indicated that an individual or entity was not able to meet
their fuel requirements. He felt that both testimonies
offered only anecdotal information. He repeated his query
regarding the mentioned inability of a community to be
served. Ms. Fisher-Goad replied that, she would like to
check with their credit department to clarify. She did not
know of specific loan requests except those requests from
AVEC.
9:34:19 AM
Representative Kelly encouraged that the bill be broken down
into three parts. First, his understanding was that under
the current program, there are enough funds available. Ms.
Fisher-Goad replied yes, at the existing amount, but in
conjunction with Mr. Hawker's questions she wanted to
clarify with her credit department. Her agency is
experiencing a "high traffic time".
Representative Kelly's second question was whether the high
cost of fuel encouraged any new "players" to seek help. The
third question was what the cost would be if the interest
rate was separate. He asked if the interest rate were
removed, would Ms. Kohler need the credit enhancement.
Ms. Kohler replied that the board would be approving an
increase in their line of credit from $5 million dollars to
$15 million. She stated that that was not enough for this
year's fuel bill.
Representative Kelly asked if money was needed now for the
current program, because of increased costs of fuel. He
asked "does AVEC need us to let them in the door, and if so,
what is the bill".
9:38:14 AM
Ms. Fisher-Goad thought Representative Kelly's approach
would be helpful. With respect to "new players," her big
concern was potential fuel cooperatives that might come in
and ask for the maximum amount. The $1.8 million would put
a strain on the program as it exists now. She stated that
"that type of borrower hasn't come into the program yet,"
but as soon as they do, it will be a bigger strain on the
program.
Representative Kelly was supportive, because he did not want
to see fuel flown to the remote areas. He favored helping
to guarantee that the credit exists.
Ms. Fisher-Goad addressed that flying the fuel into the
communities, in the past, concerned issues with barge
deliveries and was not a credit issue, but rather logistical
issue. Her understanding was that it has never been a
credit issue.
9:40:41 AM
Representative Joule asked how long it would take to
consolidate the necessary information. Ms. Fisher-Goad
hoped to do this as soon as the committee process breaks.
She hoped she would be able to provide information to the
committee today.
Representative Joule asked if the small independents as well
as the larger utility providers would receive this
information. Ms. Fisher-Goad stated that she will do her
best to acknowledge the borrowers that she has on a regular
basis; as well as exploring any new borrowers. She wanted
to contact a few other agencies and explore their credit
needs.
Representative Joule informed that, in the past, some
communities in his district have run out of fuel because
they didn't have enough money. To fly the fuel, they had to
pay 12 dollars per gallon. He appreciated the turn around
time, because once this session ends, so does the mechanism
to act.
9:43:30 AM
Ms. Kohler interjected that Rural Alaska Fuel Services serve
about 17 or 18 communities with the bridge loan program and
those communities are ordering less fuel for the same
dollars. There is a need for those participating in the
bridge loan program that is not being met.
Representative Hawker asked Ms. Fisher-Goad if the bridge
loan program was under her jurisdiction. Ms. Fisher-Goad
answered that the bridge loan program is a Department of
Commerce and Community and Regional Affairs program. That
program is for borrowers who do not qualify for the bulk
fuel revolving loan program. It is a three year program
where borrowers can build up credit. Representative Hawker
clarified that the program is not under the jurisdiction of
Ms Fisher-Goad, so this point must also be discussed.
9:45:13 AM
Representative Nelson referenced three letters in her packet
addressing energy concerns. One was a resolution from the
city of Napaskiak, stating that their electric coop uses 60
thousand gallons per year. For 2007 that amount cost
$184,000. A purchase order for 2008, for the same 60
thousand gallons is $278,000. The city is very concerned
about how they and their residents will afford these
increased prices. She believed that these letters were not
anecdotal. The AFN had five bullet points which recommended
that the Legislature help to buy down the debt of rural
utilities in order to reduce cost passed on to consumers.
The third letter is from Del Conrad who does administer the
bridge loan program stating that, "given the increased cost,
the bulk fuel loan funds should be increased from $2.7
million to $5 million."
9:47:59 AM
Representative Gara summarized the discussion. He understood
that the cost of diesel will probably go up to nine dollars
per gallon. He stated that the cap on the amount of loan
money available hasn't changed, and with the rising cost of
fuel, there might be a problem in getting fuel shipments to
rural Alaska. He questioned if AVEC was trying to make more
credit available to their members. Ms. Kohler explained that
AVEC purchases the fuel themselves for all of the utilities
for 53 villages, and she was not actively asking for help
there. The potential problems would not surface until
later, and that was her main concern. She wanted to make
sure the state was prepared with a pool of money available
to draw upon, in the event of emergency declarations. The
electricity for AVEC's villages was not in jeopardy, but she
was concerned that the bulk fuel needs for a number of small
villages was.
9:51:04 AM
Representative Gara asked about the fuel delivery issue for
the winter. He suggested that if the problem cannot be
quantified, then give the cooperatives the loan money to buy
the fuel, allowing the loan to be paid back. He asked about
the risk of increasing the cap. Ms. Fisher-Goad responded
that there are a couple issues, regarding Representative
Gara's comments. She explained that while there was a
portion of bulk fuel loan money that was paid back, there
was another portion used for the communities' needs, and a
portion used for the utility. The utility is based upon the
rates charged to the rate payers. With respect to the retail
portion versus communities' needs, there may be some
additional information necessary. She thought that many bulk
fuel loan payments were from other revenue sources. The
concern, therefore, might not be in loan eligibility, but
instead, in the ability to pay back the money within the
year.
Ms. Fisher-Goad mentioned the letter read by Representative
Nelson from the village of Napaskiak, explaining that those
costs will need to be passed on to the rate payers. She
stated that the ability to provide loans to communities is
only one small part of the issue.
Ms. Kohler suggested that a working group be assembled to
discuss the issue, and through comparison, identify the gap
and find solutions to bridge it.
9:55:33 AM
Representative Kelly commented on the lack of time left in
special session to entertain such requests. He speculated
that the discussion was becoming too broad.
Representative Gara stressed time consideration. He wanted
to know the real need in the communities and make sure that
they got fuel, despite any shortcomings of the state
agencies. He hoped that AEA would reach out to the affected
communities to determine a proposal.
Representative Nelson commented that there should have been
a working group already established. She was concerned that
there are a number of villages seeing sky-rocketing prices
in communities that do not have economists or lobbyists at
their disposal. The state should be their advocate. The
state agency that provides these loans should be able to
estimate the need. She opined that loans should be
determined and it ought to be a question that is answered
quickly. The question should be answered today, when the
amendments are due. Co-Chair Meyer agreed that there was
not time for a working group. Representative Gara concurred.
9:59:10 AM
Representative Joule commented on his frustration with the
needs of rural Alaska being addressed inadequately by the
department. Additionally, there is the issue of making sure
that the communities have fuel. He pointed out the number of
school districts left out of the PCE program. Expenses for
the school districts are increasing as well.
Representative Kelly asked what tools the administration has
to address these issues. He asked if there was an emergency
fund or supplemental budget available during the time that
the legislature is out of session. Co-Chair Meyer informed
that the supplemental budget for next March will not make
fuel available for this September.
Representative Hawker agreed that a supplemental next March
will not get the fuel needed this September. He warned that
the issue of bulk fuel was "beyond paramount." He asserted
that the issue has been overlooked. He thought that it rests
with Department of Commerce, Community and Economic
Development.
10:04:45 AM
SCOTT RUBY, COMMUNITY DEVELOPMENT SECTION CHIEF, DIVISION OF
COMMUNITY ADVOCACY, DEPARTMENT OF COMMERCE, COMMUNITY AND
ECONOMIC DEVELOPMENT testified via teleconference, that one
of the programs that the division is in charge of is the
bulk fuel bridge loan program, which provides funding for
communities that cannot finance their fuel through any other
means. Currently, that loan fund is $2.3 million dollars.
He had identified the additional need to be $2.7 million for
this year to fund communities that will not qualify through
other lenders.
Mr. Ruby stated that currently, 16 communities have bridge
loans; several others have contacted our contractor, Rural
Alaska Fuel Services indicating that they may or may not
need a fuel loan from the department. Until the department
has completed applications, they are not really aware of the
funding needs. Some communities are still attempting to get
prices from the fuel companies. He agreed that it is
important to provide financing for communities to purchase
fuel to support the residents and the infrastructure. If
fuel remains so expensive can anyone afford to pay the fuel
provider and repay their loans?
10:08:54 AM
Representative Hawker referenced the $2.7 million dollar
number. He asked if it had been included in the
appropriation bills. Mr. Ruby did not know. Representative
Hawker was speechless. He asked if the department was
operating in crisis mode.
10:10:36 AM
Representative Nelson agreed with Representative Hawker. She
did not think that the $2.7 million had been included in any
of the bills.
Representative Gara asked if the credit limits were high
enough to deal with the 40% increase in the cost of fuel
this winter. He asked Mr. Ruby's opinion about whether those
needed to be changed.
Mr. Ruby agreed that there was a need to expand the credit
limits. It is unlikely that the need would exceed $750,000
per community.
Representative Gara emphasized that there is a time
constraint in solving this problem. He requested that Mr.
Ruby work with others to come up with a policy proposal to
address the issue immediately. Both the head of AEA and the
Commissioner of DCED need to be involved in tackling the
problem. He was frustrated with the lack of action to
address the problem.
10:14:56 AM
Representative Nelson said just because we expand the
program doesn't mean that people will apply for those loans.
Representative Kelly noted that time is running out.
AMANDA RYER, DIRECTOR, DIVISION OF ADMINISTRATIVE SERVICES,
DEPARTMENT OF COMMERCE, COMMUNITY AND ECONOMIC DEVELOPMENT,
observed that the Administration is working on an amendment
for the bridge loan program.
Representative Nelson suggested the Bulk Fuel Revolving Loan
would also need an increase. To receive a Bridge Loan an
applicant must first apply for the Bulk Fuel Revolving Loan
Fund. She maintained that many villages are being
overlooked.
Ms. Ryder observed that $2 million will also be appropriated
from the general fund for the Bulk Fuel Revolving Loan Fund.
10:18:42 AM
Vice-Chair Stoltze expressed confusion regarding the role of
the "energy czar", Mr. Haagenson. He had expected that Mr.
Haagenson would be the "point man" on key energy issues.
Ms. Fisher-Goad recalled that Mr., Haagenson had testified
earlier in the special session. He is the Energy Coordinator
as well as Executive Director of the Alaska Energy Authority
(AEA). He is the appropriate person to address policy
questions. Mr. Haagenson is working to develop a long-term
energy plan.
10:24:11 AM
Vice-Chair Stoltze reiterated concerns that Mr. Haagenson's
presence has not been strong. He asserted that Mr. Haagenson
should have been the person who put together a cohesive
policy.
Representative Gara asked Ms. Ryder if there might be
additional funds to capitalize the bridge and bulk loan
funds. He asked about the cap on the fund. Ms. Ryder
explained the $500 thousand dollar cap on the loans.
Representative Gara voiced frustration with the AEA program.
His complaint was that the AEA is so focused on a long term
plan that they are not addressing day to day issues.
Co-Chair Meyer reminded the committee of the other issues
that would be discussed today.
10:26:57 AM
Representative Hawker understood that the administration
realizes that there are issues that need to be resolved. He
associated himself with the ramblings of Vice-Chair Stoltze.
When the special session commenced, he queried about the
larger issue regarding the entirety of the issues. He wanted
to discuss the policy with Mr. Haagenson, as well. He stated
that it was his understanding that Mr. Haagenson was on
vacation during special session, thereby putting his needs
above those of the state of Alaska. He regarded this action
as "management by crisis." He recommended an oversight
hearing in the state. He recalled the legislature asking
that the energy issues be taken up in the early summer, but
the administration declined. He claimed that the members are
set up with five hours to resolve what has just been
identified as the question. It is not a deliberate process.
He wanted the departments to be aware that the committee
must have their amendments in today by 4:00 pm.
10:30:12 AM
Co-Chair Meyer thought the amendments should be made to the
appropriation bill. He did not know that changing the cap
would fall under this call; he believed that it was a
statutory change. He acknowledged that the process is
frustrating.
Representative Nelson pointed out that the legislators have
had different attitudes regarding the roll that the
administration takes. She acknowledged that it is
frustrating. She asked about the prepaid meters. The cost
would be $80 thousand dollars to purchase the prepaid meters
depending on the size of a village. It is a good tool. The
residents are allowed to prepay their power cost as well as
pay down any debt. A letter from Mr. Haagenson responded
that the request for the prepaid meter does not fit under HB
152. She expressed understanding that the request did not
comport with the requirements in the renewable energy fund.
She asked for a 50/50 match for those communities interested
in the power set meters, which would help bring down usage.
She asked if the department would favor the legislature
funding the power set meters. She feared, for the bulk fuel
component that January will be too late. She added that her
question to the administration regarding the prepaid meters
was as stand alone legislation, not as part of HB 152.
Ms. Fisher-Goad stated that the intention was to clarify
that the request could not be evaluated under the HB 152
process. There have been grants managed for utilities to
provide the meters. She offered to work with Representative
Nelson with respect to which utilities would be looking for
specific grants and what the cost would be.
10:34:55 AM
Representative Nelson commented on the senate package. She
wanted to know which version the administration supports;
each has different variables.
Vice-Chair Stoltze commented that if the bulk fuel issue
does not fit into this call, the legislature should pass the
bill and add another call. He suggested that if an issue is
identified that has serious ramifications, let the
administration know that the legislature wants this call
amended as part of a responsible energy package.
Co-Chair Chenault sought clarification regarding the issue
at hand.
10:37:10 AM
Co-Chair Chenault recalled that the original plan did not
include PCE. He had not seen any bills from the
administration addressing PCE or LIHEAP. The issues have
been brought forth by the legislature. He encouraged that
the ideas be heard. During the budget process, every
department is represented. He warned that issues must be
addressed in a timely manner. The department has been poorly
represented during this special session.
10:39:44 AM
Representative Gara noted the electrical portion of the bill
involving a credit to each utility of five cents per kWh.
He had received concerns that those who rent might not
receive any benefit. He asked if the intent language could
help to pass the saving to the renters.
Ms. Fisher-Goad responded that they would need to inquire
from utilities on how to categorize single meter and multi-
family housing. The nickel credit for the non PCE eligible
communities is targeted to residential. She wanted to speak
with the Alaska Housing Finance Corporation (AHFC) first.
She asked Representative Kelly to add any available
information.
10:42:46 AM
Representative Gara responded that it made sense to give the
benefits to everyone in some form of "rough justice."
Representative Kelly pointed out that a single meter on a
multi-unit building is categorized as commercial and would
not qualify for the rebate.
Co-Chair Meyer moved the agenda along to the motor vehicle
tax and how it would be implemented. How would the eight
cent tax savings be passed on to the consumer?
10:45:14 AM
Representative Gara was concerned that much of the tax would
not be passed along to the consumers. His concern was that
the refineries would not pass the savings on to the
consumers.
CLYDE (ED) SNIFFEN JR., ASSISTANT ATTORNEY GENERAL,
DEPARTMENT OF LAW, explained that the tax is paid by the
retailer, as part of the bill paid to the refiner. The
opportunity to refrain from passing on the savings lies with
the retailer and not the refiner.
10:48:53 AM
JOHANNA BALES, DEPUTY DIRECTOR, TAX DIVISION, DEPARTMENT OF
REVENUE, affirmed that Mr. Sniffen was correct. She
explained how the fuel tax is passed along to the consumer.
The concern is with the retail level because the tax is not
separately identified on any receipt for the consumer. The
refineries can set own their prices.
Co-Chair Meyer asked Mr. Sniffen about his ideas concerning
the gas tax benefit reaching the consumers with the help of
an amendment. Mr. Sniffen was working to ensure that the
eight cent tax makes it onto the gas pump. He planned to
introduce an amendment later in the day. The first amendment
included several different concepts. It required an
affidavit by the retail gas station that they had posted the
tax amount at the pump. The amendment would also include the
authority to audit to determine whether or not those costs
have been passed on to consumers. The last component of the
amendment would allow a retail gasoline station owner to
post a sign on their premises or on the pump informing that
they have made a pledge to pass on this savings to the
consumers. This would also increase public awareness that
the tax had been suspended, and promote competition to make
sure the savings were passed along.
10:53:33 AM
Representative Hawker said that Ms. Bales is exactly correct
about how the tax works. What is not mechanical is
establishing the rate making process at the gas pump. There
is nothing in this legislation to stop the wholesaler from
raising their prices to compensate for the eight cent tax
disappearing. Merchants who are higher on the supply chain
will all have the opportunity to take advantage of the lower
price to increase their own profits. Experience in other
states shows an inefficiency factor of 20 to 40 percent.
This could be a form of corporate welfare. It would be more
efficient to come up with other ways to directly provide
relief.
10:58:08 AM
Mr. Sniffen agreed that we need to rely on market forces to
regulate prices, because it is too difficult for government
to do that. He understood and appreciated all of
Representative Hawker's concerns.
RANDALL RUARO, SPECIAL ASSISTANT, OFFICE OF THE GOVERNOR,
said there is a middle ground that the amendment will
attempt to achieve between sole reliance on market forces
and complete regulation to ensure that the savings will pass
through. If there is a retailer or distributor who doesn't
pass the savings through, they will lose business.
Co-Chair Meyer agreed that the competition in the urban
areas will mean that the market forces will be effective.
11:00:49 AM
Representative Gara expressed that where
there is a competitive market, the savings will pass
through. The best way to help may be to add the money to the
electricity rebate. This is a way to ensure that the money
gets to the consumers and is not taxable. People in non-
state housing may not receive the benefits if the landlords
don't pass the savings along. There is no way to make the
gas station owners pass the savings to the consumers. There
is no way for them to know what the mathematical formula is
for passing the savings along.
11:04:52 AM
Co-Chair Meyer suggested that there are other benefits to
the eight cent suspension that have not been brought up. One
possible benefit might be for the public transit system and
the prices that are charged.
JERRY BURNETT, DIRECTOR, DIVISION OF ADMINISTRATIVE
SERVICES, DEPARTMENT OF REVENUE, noted that public
transportation is not charged the tax.
Co-Chair Meyer explained that he had been in communication
with the trucking industry. Apparently, they intend to pass
the savings on as part of the cost that they charge for
shipping goods, which will ultimately affect the consumer.
Mr. Burnett described anecdotal evidence that a tax
suspension does benefit the consumer by referencing a time
in the 1990s when aviation fuel tax was suspended in Alaska,
and the plan was successful.
11:06:59 AM
Vice-Chair Stoltze believed that even the small businesses
without local competition would want to pass savings on to
the consumer. The penalties will not accomplish much. He
recommended reducing the tax and allowing the market to
work.
RANDALL RUARO, SPECIAL ASSISTANT, OFFICE OF THE GOVERNOR,
noted there are key sectors that contribute greatly as
taxpayers. Many Alaskans purchasing fuel will benefit from a
tax suspension. Building contractors who purchase fuel to
build highways will benefit from a gas tax suspension. There
are unseen benefits to suspending the gas tax that benefit
specific segments of the economy.
11:09:40 AM
Representative Crawford commented that if there is a
reliance on markets then those markets will not allow the
retailers to charge more than what it can bear. The only
guarantee that the money will go to those paying the tax,
would be to issue a tax rebate. Otherwise, if the tax is
reduced, the eight cents will get engulfed in the market
stream. He asserted that a rebate would be the only way to
ensure that the people who pay the tax receive the benefit.
Mr. Ruaro affirmed that a savings pass through could not be
guaranteed. There is the market effect addressed earlier by
Mr. Sniffen.
Representative Crawford thought we would see similar prices
at various service stations. The fuel stations, in his
experience, choose a price that the market will bear on any
particular day. Co-Chair Meyer noticed subtle differences
among retailer's prices. Representative Crawford clarified
that he did not mention Costco which has a different pricing
structure. All the other fuel stations choose the same
price. Co-Chair Meyer pointed out that the consumer will go
to the lowest priced station. He believed that the savings
will be passed on.
11:13:31 AM
Representative Hawker echoed concerns with achieving the
goal of the proposed gas tax suspension. He indicated that
rural Alaska has been hit with high utility costs; South
Central is different and has been impacted by the cost of
gas. He thought that was the unresolved challenge of the
package before the committee. All citizens should benefit
from the wealth of the state. The legislature must address
the inflating costs of motor fuel. He reiterated his concern
with the eight cent tax suspension plan's lack of
efficiency.
11:17:27 AM
Representative Nelson requested the finance committee
address the utility needs of rural school districts. The
issue is for future contemplation, but she wanted to
introduce the issue, as it was brought to her attention
recently. A request for actual energy costs for FY09
included heating oil costs, electricity costs, and sewer and
water costs. A projection of estimated costs for each school
district, and a comparison of costs to see if supplemental
needs might be there for the legislature to address. She
wanted to bring this forward on behalf of the rural school
districts and their exorbitant costs.
Representative Hawker pointed out that, commencing in
January, legislation was passed convening a commission to
evaluate a solution to the district cost factor. The energy
cost is a specific issue that will be addressed by the task
force to address the long term issue of disproportionate
energy cost to rural schools.
11:20:03 AM
Representative Gara commented on the proposed flat payment.
His concern was that if a person received a one thousand
dollar check once, they might expect it again. Some suggest
that the increasing permanent fund dividend (PFD) will
minimize those expectations. Instead of issuing a separate
payment, the additional amount could be added to the PFD,
because it is accepted that the amount can change from year
to year.
Representative Thomas commented on motor fuel tax. The
Alaska Truckers Association (ATA) has complained about the
cost of moving freight around the state. He has not heard
support for the eight cent tax suspension from that group.
He opined that businesses should not be exempt from PCE.
Those savings will go immediately back to the consumers.
Co-Chair Meyer commented that it would also be hard to
determine whether the business would pass the savings on to
the consumer. Representative Thomas responded that a shrewd
consumer, one that is searching for the best price, would
know if the business is passing on the savings.
11:24:32 AM
Co-Chair Chenault stated that is not only the energy rebate
that might generate questions as to why it is not received
each year, but also the three gallon ceiling on the home
heating fuel when that program is no longer in effect. Each
of the programs will end up being long-term. Anything
enacted today, will be subject to reversal.
11:26:26 AM
Representative Joule agreed that there is some cause for
concern, however, the weatherization program as created by
the legislature, with the rebate could drive and reduce some
of the costs. There is the risk that there might be an
expectation, however, it is also important that the
legislature take credit for the good things that they do.
The legislature will take a considerable amount of time
dealing with long term issues. He was less concerned that
some of the programs would continue to be implemented than
he was in the widespread interest in renewable and
alternative plans for energy. He cautioned over reaction of
the high costs of long term plans. Alaska has the
opportunity to look into renewable and alternative energy to
proactively guide the state without fearing the cost.
11:30:15 AM
Co-Chair Meyer commented on the version of the "omnibus
bill" put forward by the Senate. He liked the Low Income
Home Energy Assistance Program (LIHEAP) because it helps the
low income people. The senate is proposing that the state
pay for any amount over three dollars per gallon. He did not
agree with the proposal, as it would encourage the seller to
mark up the prices knowing that the state will pick up
anything over three dollars. The committee had opted to bump
up the amount received.
RON KREHER, CHIEF OF FIELD SERVICES, DIVISION OF PUBLIC
ASSIATANCE, DEPARTMENT OF HEALTH AND SOCIAL SERVICES,
referenced the heating assistance program and stated that
the greatest challenge was addressing the growing cost of
fuel for heating homes. Under the LIHEAP program alone, many
needs to assist with heating costs were not met. Raising the
income limits would not have been his first choice because
of the challenge of meeting the needs of the lowest income
families. Two thirds of those served now by LIHEAP are less
than 100 percent of poverty. If the opportunity to serve
families at 225 percent of the poverty level will also
benefit low income working families, then the effort is
laudable and one he is interested in implementing.
11:35:08 AM
Representative Gara asked for the comparative cost between
the fuel proposals on the senate side versus the cost of the
proposal at hand. Co-Chair Meyer understood that was
approximately $200 million dollars. Mr. Kreher stated that
the amount would be about $20 million dollars to implement
the provisions in the house bill. Co-Chair Meyer corrected
that the total was $40 million.
Representative Gara thought that the two components were
each $75 million dollars. He wondered if an additional $20
million would be enough to extend the program. Mr. Kreher
explained that as income limits are increased, households
receive less money.
Representative Gara asked if the money added by the state
was only for those above the federal limit. Mr. Kreher
answered that the requested funding would serve the entire
population from 0 percent of income up to 225 percent.
Representative Gara liked LIHEAP because he believed that it
was fair because it applies to all communities.
11:38:33 AM
Co-Chair Meyer recounted the point system. Mr. Kreher stated
that the heating assistance program is driven by a series of
points. The urban areas tend to get fewer of these
community heating cost points. The points are derived by
climactic conditions and heating degree days, etc.
Representative Hawker reported at previous meeting that the
final benefit for Anchorage was too low. The report was
incorrect and as a result was rerun to come to the proper
amount.
Representative Gara requested the correct number. Mr. Kreher
explained that the report dropped off the first four digits
of the number, and the correct number was indeed over one
million dollars as opposed to forty four thousand dollars.
11:43:38 AM
SUZANNE ARMSTRONG, STAFF, REPRESENTATIVE KEVIN MEYER,
discussed the changes made by the Senate Finance Committee.
The major change is in the calculated floor for the PCE
portion of the bill. The senate has calculated the floor at
a lower amount.
Representative Gara asked the fiscal note of the two bodies.
Co-Chair Meyer assured that raising the ceiling and lowering
the floor would create a higher fiscal note. Ms. Armstrong
notified that Mr. Teal was preparing a comparison.
11:45:13 AM
HB 4005 was HELD in Committee for further consideration.
11:46:47 AM
ADJOURNMENT
The meeting was adjourned at 11:46 AM
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