Legislature(2003 - 2004)

04/28/2003 02:30 PM FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
HOUSE BILL NO. 156                                                                                                            
                                                                                                                                
     An Act increasing the motor fuel tax and repealing the                                                                     
     special tax rates on blended fuels; and providing for                                                                      
     an effective date.                                                                                                         
                                                                                                                                
Vice-Chair  Meyer MOVED  to  adopt work  draft  #23-GH1118\Q,                                                                   
Kurtz,  4/25/03,  as  the  version of  the  bill  before  the                                                                   
Committee.                                                                                                                      
                                                                                                                                
Representative  Croft OBJECTED.   He asked about  the missing                                                                   
exemptions.   Co-Chair Williams  replied that the  difference                                                                   
represented the tax credits for  the timber industry and fish                                                                   
waste.  Representative  Croft noted that it would  get rid of                                                                   
the  contingent effect  on the  constitutional amendment  for                                                                   
the permanent fund.   Co-Chair Williams advised  that was the                                                                   
Governor's original bill.                                                                                                       
                                                                                                                                
Representative Croft WITHDREW  his OBJECTION.  There being NO                                                                   
further OBJECTION, it was adopted.                                                                                              
                                                                                                                                
ROBYNN WILSON, (TESTIFIED VIA  TELECONFERENCE), DEPARTMENT OF                                                                   
REVENUE,  ANCHORAGE,  offered  to  answer  questions  of  the                                                                   
Committee.                                                                                                                      
                                                                                                                                
                                                                                                                                
LANDA   BAILY,  SPECIAL   ASSISTANT   TO  THE   COMMISSIONER,                                                                   
DEPARTMENT  OF  REVENUE,  noted  that she  had  reviewed  the                                                                   
committee substitute  with Commissioner  Corbus and  that the                                                                   
Department does  support the proposed  bill.  The  bill would                                                                   
levy a twenty-cent  per gallon tax on motor fuel.   She added                                                                   
that  this  bill is  a  significant  part of  the  Governor's                                                                   
package to address the current fiscal gap.                                                                                      
                                                                                                                                
Representative Croft  MOVED to ADOPT Amendment  #1.  Co-Chair                                                                   
Williams OBJECTED.                                                                                                              
                                                                                                                                
Representative Croft  explained that the amendment  would ask                                                                   
that  the State  appropriate the  statutory  amount for  road                                                                   
maintenance   assistance   to   the  municipalities.      The                                                                   
municipalities   have  over  40%   of  the  roads   in  their                                                                   
maintenance  jurisdiction.   Currently,  the  State has  been                                                                   
under-funding the statutory amount  dedicated to roads at 10%                                                                   
funding.  He acknowledged that  Amendment #1 is a complicated                                                                   
amendment.   The  concept  of the  amendment  gives less  for                                                                   
municipal  assistance for  roads than  the statute  requires,                                                                   
reducing the amount of tax collected by that percentage.                                                                        
                                                                                                                                
Representative  Croft  pointed   out  that  this  concern  is                                                                   
usually  addressed  in  the  dedicated  funds  section.    He                                                                   
reiterated  that   the  concept   is  simple,  if   money  is                                                                   
appropriated  in  the  prior   fiscal  year,  the  amount  in                                                                   
statute,  the  full  amount  for  revenue  sharing  and  road                                                                   
maintenance, and  then collected for  full tax.  If  less has                                                                   
been received,  then that would  be the percentage  collected                                                                   
for that tax.                                                                                                                   
                                                                                                                                
Representative Stoltze asked if  these funds would only go to                                                                   
organized governments  or would rural  areas also be  able to                                                                   
collect.   Representative  Croft  responded that  there is  a                                                                   
formula  regarding the  square miles  of roads maintained  by                                                                   
the municipality  in the districts and that  determination is                                                                   
made per road mile.                                                                                                             
                                                                                                                                
JOHN   MACKINNON,   DEPUTY   COMMISSIONER,    DEPARTMENT   OF                                                                   
TRANSPORTATION &  PUBLIC FACILITIES, understood  that formula                                                                   
was  handled  by  the  Department   of  Commerce  &  Economic                                                                   
Development.   He  noted that  he had  listened to  testimony                                                                   
given by  Kevin Ritchie, Alaska  Municipal League (AML).   He                                                                   
had  given  a  good explanation  for  funds  added  for  road                                                                   
maintenance.      In   the   original    Intermodal   Surface                                                                   
Transportation Efficiency Act  (ISTEA) crafted in Congress in                                                                   
1991,  Senator  Ted  Stevens   placed  a  provision,  1-18-E,                                                                   
allowing only Alaska  and Puerto Rico to use  federal highway                                                                   
funds for  community roads.   In 1991,  there was  no federal                                                                   
highway  trust fund  dollars and  that changed  to the  State                                                                   
being awarded  $72 million  dollars.   There is a  tremendous                                                                   
amount of highway dollars floating in the municipalities.                                                                       
                                                                                                                                
Mr. MacKinnon reminded members  that the proposed legislation                                                                   
was a measure  to reduce the fiscal  gap.  He added  that the                                                                   
Department of  Transportation &  Public Facilities  sees this                                                                   
as a user fee.                                                                                                                  
                                                                                                                                
Representative Stoltze  noted that the amendment  contained a                                                                   
pro rata  distribution for the  more densely populated  urban                                                                   
areas.  He  questioned the equity of the  issue distribution.                                                                   
Representative  Croft  explained  that  it  would  limit  the                                                                   
amount and if  enough had not been received,  then they would                                                                   
not collect  the full amount  of the  tax.  Nothing  would be                                                                   
changed   regarding   the   distribution   by   road   miles.                                                                   
Representative Stoltze voiced  his concern that the amendment                                                                   
would only benefit downtown Anchorage.                                                                                          
                                                                                                                                
Ms. Bailey  pointed out the  fluctuating amount  indicated in                                                                   
the amendment.   She stated that  the original intent  of the                                                                   
Governor was to address the fiscal  gap and that the proposed                                                                   
legislation was an important piece of that package.                                                                             
                                                                                                                                
A roll call vote was taken on the motion.                                                                                       
                                                                                                                                
IN FAVOR:      Joule, Moses, Croft                                                                                              
OPPOSED:       Meyer, Stolze, Chenault, Foster, Williams                                                                        
                                                                                                                                
Representative Whitaker,  Representative Hawker  and Co-Chair                                                                   
Harris were not present for the vote.                                                                                           
                                                                                                                                
The MOTION FAILED (3-5).                                                                                                        
                                                                                                                                
Representative  Croft  MOVED  to  adopt  Amendment  #2,  #23-                                                                   
GH1118\Q.2, Kurtz, 4/28/03.  (Copy on File).                                                                                    
                                                                                                                                
Co-Chair Williams OBJECTED.                                                                                                     
                                                                                                                                
Representative  Croft  explained   that  Amendment  #2  would                                                                   
attempt  an   alternative  approach.     The  amendment   was                                                                   
recommended by the  AML.  It attempts to put  together a fund                                                                   
that would place a portion of  that money into assistance for                                                                   
the municipalities.                                                                                                             
                                                                                                                                
Ms. Bailey  stated the amendment  seeks to place  a structure                                                                   
in statute that  would be counter to the  Governor's original                                                                   
intent.                                                                                                                         
                                                                                                                                
Representative  Croft argued  that would  depend on  what the                                                                   
Governor's original  intent was.  Representative  Croft noted                                                                   
that if  it were  to go for  maintenance of  a road,  then it                                                                   
would  be more  compatible  with the  Governor's  plan.   The                                                                   
amendment diverts from the general  fund specifically to road                                                                   
maintenance.   He believed that  would be what  most Alaskans                                                                   
would want with the increase.                                                                                                   
                                                                                                                                
A roll call vote  was taken on the motion to  adopt Amendment                                                                   
#2.                                                                                                                             
                                                                                                                                
IN FAVOR:      Moses, Croft, Joule                                                                                              
OPPOSED:       Meyer, Stoltze, Chenault, Foster, Williams                                                                       
                                                                                                                                
Representative Whitaker,  Representative Hawker  and Co-Chair                                                                   
Harris were not present for the vote.                                                                                           
                                                                                                                                
The MOTION FAILED (3-8).                                                                                                        
                                                                                                                                
Co-Chair  Williams  MOVED  to   adopt  Amendment  #3,    #23-                                                                   
GH118\Q.4, Kurtz, 4/28/03.  (Copy on File).                                                                                     
                                                                                                                                
Representative Joule OBJECTED  for the purpose of discussion.                                                                   
                                                                                                                                
KEVIN   JARDELL,   ASSISTANT  COMMISSIONER,   DEPARTMENT   OF                                                                   
ADMINISTRATION, explained Amendment  #3, which is a technical                                                                   
amendment that  identifies how  the State purchases  its fuel                                                                   
from  resale  to  gasoline.     Currently,  when  a  reseller                                                                   
purchases fuel from a wholesaler,  it pays the gas tax to the                                                                   
wholesaler.   When  the State  purchases  from the  reseller,                                                                   
they can  purchase the fuel without  paying the gas  tax.  At                                                                   
that point, the  reseller, under statute, can  recoup the gas                                                                   
tax that it has paid from the  Department of Revenue.  Only a                                                                   
reseller of  fuel can do  that.  One  of the benefits  of the                                                                   
new contract  is that a State  agency that has a high  use of                                                                   
fuel, can  go to any gas  station, purchase that fuel  with a                                                                   
State credit  card and  the reseller does  not have  to worry                                                                   
about going  through the  process of  recouping the  tax from                                                                   
the State.   The credit  card company  pays the reseller  the                                                                   
cost  of the  tax and  the  fuel.   Under  Amendment #3,  the                                                                   
credit card company could go and  recoup the tax it has paid.                                                                   
It would  allow the  full benefit,  use of  credit cards  and                                                                   
expands where the  State can purchase fuel given  the benefit                                                                   
of not paying the tax.                                                                                                          
                                                                                                                                
Representative  Joule asked how  "local government"  would be                                                                   
defined.    Mr.  Jardell  responded   that  local  government                                                                   
agencies would go  through certain levels.   Ms. Wilson added                                                                   
that  the statute  identifies  official use.   The  amendment                                                                   
would not change whether a government  agency could receive a                                                                   
refund or  not.   It does  not change  the tax structure  and                                                                   
would simplify paper work to make it whole.                                                                                     
                                                                                                                                
Representative  Stoltze  asked  at  what  level  would  State                                                                   
government  be defined.   He stated  for the  record that  he                                                                   
would  not  vote  for a  personal  exemption.    Mr.  Jardell                                                                   
responded that  it would only  apply to State business  as it                                                                   
now does.  He reiterated that  it would not apply to personal                                                                   
use.                                                                                                                            
                                                                                                                                
MIKE  BARNHILL,  ASSISTANT ATTORNEY  GENERAL,  DEPARTMENT  OF                                                                   
LAW, advised  that the  amendment would  not change  existing                                                                   
law.  When on  official business and using  fuel, that person                                                                   
would be exempt.                                                                                                                
                                                                                                                                
In  response  to  comments  made   by  Co-Chair  Harris,  Mr.                                                                   
Barnhill pointed  out that  the definition  of motor  fuel in                                                                   
current  statute  excludes  purchases  by  State,  local  and                                                                   
federal government agencies for official use.                                                                                   
                                                                                                                                
Representative Foster  asked if it would affect  diesel fuel.                                                                   
Mr. Barnhill replied that it would.                                                                                             
                                                                                                                                
In response to  queries by Representative Foster,  Ms. Wilson                                                                   
explained   that   off-road  vehicles   and   big   equipment                                                                   
not  used  in conjunction  with  vehicle  license,  currently                                                                   
amounts to a net $.02 cents.                                                                                                    
                                                                                                                                
Representative  Joule asked  if that  would apply  to the  De                                                                   
Long  transportation system,  also  known as  the Haul  Road.                                                                   
Ms.  Wilson  replied  that  the   off-road  refund  would  be                                                                   
available  if the  vehicle  is  not licensed  to  be used  on                                                                   
public ways.                                                                                                                    
                                                                                                                                
Representative Joule WITHDREW  his OBJECTION to Amendment #3.                                                                   
There being NO further OBJECTION, it was adopted.                                                                               
                                                                                                                                
Representative  Joule  MOVED  to  ADOPT  Amendment  #4,  #23-                                                                   
GH1118\H.2, Kurtz, 4/14/03.  (Copy on File).                                                                                    
                                                                                                                                
Co-Chair Williams OBJECTED.                                                                                                     
                                                                                                                                
Representative Joule  explained the amendment,  which provide                                                                   
for those  areas not connected  to road systems,  continue to                                                                   
pay  at  the   current  rate.    He  emphasized   that  rural                                                                   
communities are already paying "huge" prices for fuel.                                                                          
                                                                                                                                
Ms.  Bailey  inquired the  effect  of  the amendment  on  the                                                                   
revenue derived from tax.  Ms.  Wilson responded that she did                                                                   
not  know  the   numbers  that  would  be  foregone   by  the                                                                   
amendment.   Wholesalers pay  the tax in  the State  and they                                                                   
are not required  to tell where the fuel is sold.   She could                                                                   
not provide that information at this time.                                                                                      
                                                                                                                                
Ms. Bailey  maintained that  given the  fact that Ms.  Wilson                                                                   
was unable to access  the net effect, it would  be better for                                                                   
the Committee  to pass the  bill amended with  only Amendment                                                                   
#3.   She believed that  Amendment #4 would have  detrimental                                                                   
effects on the Governor's long-term plan.                                                                                       
                                                                                                                                
Co-Chair  Williams encouraged  Representative  Joule to  work                                                                   
with the Administration regarding his concern.                                                                                  
                                                                                                                                
A roll call vote was taken on the motion.                                                                                       
                                                                                                                                
IN FAVOR:      Moses, Joule                                                                                                     
OPPOSED:       Stoltze, Chenault, Foster, Meyer, Harris,                                                                        
               Williams                                                                                                         
                                                                                                                                
Representative    Whitaker,    Representative   Hawker    and                                                                   
Representative Croft were not present for the vote.                                                                             
                                                                                                                                
The MOTION FAILED (2-6).                                                                                                        
                                                                                                                                
Representative  Foster commented  that  within his  district,                                                                   
there are  airports instead of  roads.  There are  50 runways                                                                   
that serve the population.  The  Department of Transportation                                                                   
& Public Facilities spends $10  million dollars a year in the                                                                   
Northern Region.  He claimed that  was a good return on their                                                                   
money and that the money on the  gas tax would be helping out                                                                   
those area runways and keeping them open for emergencies.                                                                       
                                                                                                                                
Representative  Foster  supported  the  3% increase  to  keep                                                                   
airports open and roads working.   Village areas do not spend                                                                   
much  on keeping  their  infrastructure  in  tact and  it  is                                                                   
crucial to keep runways open.   He acknowledged that everyone                                                                   
must pay a little to help up with the expenses.                                                                                 
                                                                                                                                
Co-Chair Harris asked Representative Foster how much he paid                                                                    
for fuel in his area.  Representative Foster responded that                                                                     
cost fluctuates between $1.75 and $4.00 dollars per gallon.                                                                     
                                                                                                                                
Co-Chair Williams stated that HB 156 would be HELD in                                                                           
Committee for further consideration.                                                                                            

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