Legislature(2019 - 2020)ADAMS 519

03/23/2020 01:30 PM FINANCE

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
-- Recessed to a Call of the Chair --
+ Bills Previously Heard/Scheduled TELECONFERENCED
Moved HCS CSSB 115(FIN) Out of Committee
Moved CSSB 55(2D JUD) Out of Committee
Moved CSSB 172(L&C) Out of Committee
CS FOR SENATE BILL NO. 115(FIN)(efd fld)                                                                                      
     "An Act relating to vehicle registration fees; and                                                                         
     relating to the motor fuel tax."                                                                                           
2:22:07 PM                                                                                                                    
Co-Chair  Foster  MOVED  to  ADOPT  the  proposed  committee                                                                    
substitute (CS)  for CSSB  115(FIN), Work  Draft 31-LS0895\G                                                                    
(Nauman, 3/23/20).                                                                                                              
Co-Chair Johnston OBJECTED for discussion.                                                                                      
ERIN   SHINE,  STAFF,   REPRESENTATIVE  JENNIFER   JOHNSTON,                                                                    
reviewed  the  changes  in  the   CS  (version  G).  The  CS                                                                    
incorporated four  amendments adopted  by the  committee the                                                                    
previous  day. Amendment  2 added  new language  on page  1,                                                                    
lines  4  through  14  and  page  2,  lines  1  through  11.                                                                    
Amendment 4 added  new language on page 2,  lines 15 through                                                                    
17 as follows:                                                                                                                  
     ...the owner of a vehicle powered by alternative fuel                                                                      
     shall pay a special biennial registration fee of                                                                           
Ms. Shine  pointed to page  2, line 20 where  the definition                                                                    
of alternative fuel  had been added by Amendment  4. Page 3,                                                                    
Section  5, lines  19 through  21 incorporated  Amendment 1.                                                                    
The last change  was on page 5, lines 9  and 10 included the                                                                    
effective date  and conforming  changes. The  bill specified                                                                    
"Except as provided  in sec. 10 of this Act,  this Act takes                                                                    
effect  January 1,  2021." Section  10  on line  9 gave  the                                                                    
transition regulations an immediate effective date.                                                                             
2:24:09 PM                                                                                                                    
Co-Chair Johnston  asked the Department of  Revenue (DOR) to                                                                    
review the fiscal note.                                                                                                         
DAN STICKEL,  CHIEF ECONOMIST, ECONOMIC RESEARCH  GROUP, TAX                                                                    
DIVISION, DEPARTMENT  OF REVENUE, relayed that  DOR's fiscal                                                                    
note reflected  the changes  made in  the CS,  primarily the                                                                    
January  1, 2021  effective  date and  the  increase to  the                                                                    
refined fuel  surcharge from $0.95  per gallon to  $1.50 per                                                                    
gallon, which had not been  included in previous versions of                                                                    
the bill.  The note  showed an indeterminate  revenue impact                                                                    
for two  reasons. First,  the department  did not  have data                                                                    
available to estimate the impact  of the allowed refunds for                                                                    
marine  fuel  used by  vessels  for  commercial fishing.  He                                                                    
explained  that  under  the  bill,  any  commercial  fishing                                                                    
marine fuel would  be allowed a refund of  $0.05 per gallon,                                                                    
meaning the  tax would not  be increased on that  portion of                                                                    
marine fuel. Second, it was  unknown how COVID-19 may impact                                                                    
fuel  demand. Based  on the  fall revenue  forecast and  not                                                                    
including  the commercial  fishing impacts,  the bill  would                                                                    
increase revenue  by $16.9 million  in FY 21,  $33.3 million                                                                    
in FY 22,  decreasing to $31 million in FY  26. He clarified                                                                    
the amounts  pertained only to  the motor fuel  tax increase                                                                    
portion.  There  would be  an  additional  increase for  the                                                                    
refined fuel surcharge  component of $1.8 million  in FY 21,                                                                    
$3.5 million in FY 22, decreasing to $3.3 million in FY 26.                                                                     
Co-Chair Johnston WITHDREW her  OBJECTION to the adoption of                                                                    
the  CS.  There  being  NO  further  OBJECTION,  it  was  so                                                                    
Co-Chair  Foster  MOVED  to  REPORT  CSSB  115(FIN)  out  of                                                                    
committee   with   individual    recommendations   and   the                                                                    
accompanying fiscal notes.                                                                                                      
Representative  Sullivan-Leonard OBJECTED.  She opposed  the                                                                    
tax. She stated  there was an incredible  disparity with the                                                                    
tax, especially in  her region of the  state. She referenced                                                                    
a comment  that people  chose where  they lived.  She agreed                                                                    
and  noted that  people chose  to  live in  rural and  urban                                                                    
areas; however,  at a time  when unemployment  insurance had                                                                    
risen by  500 percent,  residents who  drive would  be taxed                                                                    
more  due to  the  bill. She  did not  believe  it made  any                                                                    
sense.  She  realized the  date  had  changed in  the  bill;                                                                    
however, the  concept of an  increased gasoline tax  did not                                                                    
go unnoticed in her district.                                                                                                   
2:28:02 PM                                                                                                                    
Representative Wool  spoke to his  support for the  bill. He                                                                    
shared that he  had voted on the increase to  the motor fuel                                                                    
tax  several years  earlier that  had added  just under  one                                                                    
penny. He  thought it was  likely the only revenue  bill the                                                                    
legislature  had passed  during his  tenure. He  stated that                                                                    
legislators received  numerous emails  asking why  they were                                                                    
not  looking into  [new] revenues.  He  stressed that  state                                                                    
coffers  were decreasing  by the  minute  and expenses  were                                                                    
increasing. He believed the legislature  needed to look into                                                                    
revenue. He  highlighted it had been  previously stated that                                                                    
the motor fuel  tax had not been raised since  the 1970s. He                                                                    
pointed out that  the pennies increase in  the 1970s equated                                                                    
to about $0.50  currently. He emphasized that  the state had                                                                    
not kept  up with  inflation and had  the lowest  motor fuel                                                                    
tax in the country. He  believed the state would rank number                                                                    
four or  five if the tax  was doubled. He reasoned  that the                                                                    
price of motor  fuel should decrease due to the  drop in oil                                                                    
price, which would  likely result in a net  reduction at the                                                                    
Representative   Wool  noted   that   the  Municipality   of                                                                    
Anchorage  had recently  instituted a  municipal motor  fuel                                                                    
tax; therefore,  half the people  in the state  were already                                                                    
paying an  additional motor  fuel tax.  He knew  that Mat-Su                                                                    
residents  drove to  Anchorage frequently  and he  knew that                                                                    
many of  his constituents lived  in remote areas  like Chena                                                                    
Hot  Springs  and other  areas  that  required driving  many                                                                    
miles to  town and burning  substantial gas. He  thought the                                                                    
tax  increase  was  the  least  the  legislature  could  do,                                                                    
especially  when many  citizens were  asking it  to act.  He                                                                    
thought  the legislature  should  try to  help citizens  and                                                                    
provide solutions.  He supported adding the  small amount of                                                                    
revenue of  $15 million in FY  21 and $30 million  in FY 22.                                                                    
He  noted  that  people  would likely  not  be  driving  and                                                                    
purchasing gas the way they had  in the past. He stated that                                                                    
the change  was a small gesture  towards increasing revenue,                                                                    
though  he  did not  believe  it  was enough.  He  supported                                                                    
looking into  new revenue and  believed the  state's savings                                                                    
would  be rapidly  diminishing. He  thought the  bill was  a                                                                    
step in the right direction.                                                                                                    
2:30:35 PM                                                                                                                    
Representative  Carpenter acknowledged  the  sound logic  of                                                                    
comments  by  Representative  Wool; however,  he  noted  the                                                                    
argument  did not  account for  the cost  of government.  He                                                                    
detailed  that  compared  to other  states  with  a  similar                                                                    
population size  and GDP [gross domestic  product], Alaska's                                                                    
government expense was significantly  higher. He stated that                                                                    
Alaska's cost  of government  was higher  than it  should be                                                                    
based on  its population  and GDP.  He highlighted  that the                                                                    
increased tax  would take $16.9  million out of  the private                                                                    
sector to  help sustain  a government  that was  already too                                                                    
large. He  did not  believe it  made sense,  especially when                                                                    
considering the  fiscal crisis. He guessed  that the private                                                                    
sector would be hurting for  12 to 24 months. He underscored                                                                    
that taking  $17 million out  of the private  sector economy                                                                    
was  not without  consequences. He  thought the  state could                                                                    
wait  to   patch  potholes  another   year  as   opposed  to                                                                    
increasing  funding. He  believed it  was wrong  to increase                                                                    
taxes on the private sector at present.                                                                                         
2:32:42 PM                                                                                                                    
Co-Chair  Johnston believed  it was  very important  for the                                                                    
legislature to increase the tax.  She shared that it was not                                                                    
only her  constituents who had  asked for the  increase. She                                                                    
highlighted that the Alaska  Trucking Association was asking                                                                    
for  and  supported  the  increase.  She  explained  that  a                                                                    
maintenance station  had closed  down between  the districts                                                                    
represented  by   Representative  Carpenter,  Representative                                                                    
Knopp,   and  herself.   She  stressed   it  was   the  main                                                                    
thoroughfare for  getting food, safety, and  supplies to the                                                                    
Kenai  Peninsula.  She  did  not  know  how  many  committee                                                                    
members  had driven  the pass  on  a winter  night, but  the                                                                    
situation had been catastrophic to  the safety and the needs                                                                    
of the Kenai Peninsula.                                                                                                         
Co-Chair  Johnston reported  that  the road  service in  her                                                                    
district had been cut dramatically  back. She explained that                                                                    
the first two  roads classified as a level  one priority out                                                                    
of Anchorage were  the Seward and Glenn  Highways. The level                                                                    
two priority included main  thoroughfares in Anchorage owned                                                                    
by  the  state. She  explained  that  the  roads up  to  her                                                                    
district  on  the  hillside   had  been  poorly  maintained,                                                                    
sanded, and plowed due to a  lack of resources and there had                                                                    
been multiple accidents including  buses. She had heard from                                                                    
people  on the  Glenn Highway  about issues  due to  lack of                                                                    
sanding and plowing.                                                                                                            
Co-Chair Johnston explained that  because resources had been                                                                    
stretched,  the maintenance  and operation  [office] out  of                                                                    
Girdwood was  responsible for the  highway from  Girdwood to                                                                    
Anchorage  and  for  the Seward  Highway  south.  The  Kenai                                                                    
office  was responsible  for the  Seward Highway  north. She                                                                    
reported that the highway was  not being plowed or sanded as                                                                    
could be  needed for  safety. She stated  that the  bill was                                                                    
timely,  and  the  implementation date  had  been  postponed                                                                    
until 2021  with the  recognition that  it was  currently an                                                                    
interesting time  for all  businesses. She  supported moving                                                                    
the bill forward.                                                                                                               
2:36:04 PM                                                                                                                    
Representative  Carpenter stated  that the  remarks made  by                                                                    
Co-Chair Johnston were opinion and not fact.                                                                                    
Co-Chair  Johnston   replied  that  the  remarks   were  her                                                                    
statement based on what she knew.                                                                                               
Representative Knopp  had never  seen the highway  so poorly                                                                    
maintained or shut down as many  times as it had been in the                                                                    
current year  in his  40 years living  on the  peninsula. He                                                                    
stated it was  a fact that the  Department of Transportation                                                                    
and  Public  Facilities  had lost  millions  of  dollars  in                                                                    
revenue over  the years. He  highlighted that  the documents                                                                    
showing road maintenance was down  did not lie. He stated it                                                                    
was  the  current reality.  He  reported  that the  critical                                                                    
maintenance  station had  been  closed,  positions had  been                                                                    
lost  in  Homer  and  Soldotna,  and  there  was  no  longer                                                                    
continuance  from night  shift to  day shift.  He referenced                                                                    
Representative Wool's  statement that  the tax had  not been                                                                    
increased  since  the  1970s,  which was  a  long  time.  He                                                                    
supported the use  of the funds for  highway maintenance and                                                                    
was hoping improvements would be made.                                                                                          
Representative  Carpenter communicated  that  he had  driven                                                                    
the roads during  the day and night, and he  did not believe                                                                    
they were different than in the  past. He did not believe it                                                                    
was accurate  to say the  roads had not been  maintained. He                                                                    
stressed that  the roads  had been  maintained but  may have                                                                    
seen a  delay. He believed that  putting sand on a  road did                                                                    
not  make  it safer.  He  remarked  that there  were  always                                                                    
conditions  on  roads that  required  driving  at a  prudent                                                                    
speed.  He stated  that sanding  or plowing  a road  did not                                                                    
necessarily make it  safer. He did not believe  the level of                                                                    
maintenance was responsible for  causing accidents or making                                                                    
the road less  safe. He countered that the  speed of driving                                                                    
made the road  less safe in most cases.  He thought Co-Chair                                                                    
Johnston had used the word catastrophic.                                                                                        
Co-Chair  Johnston could  not be  certain she  had used  the                                                                    
word catastrophic.                                                                                                              
2:39:09 PM                                                                                                                    
AT EASE                                                                                                                         
2:40:39 PM                                                                                                                    
Representative  LeBon shared  that  the past  summer he  and                                                                    
Representative  Wool   had  visited  the   trucking  company                                                                    
Sourdough  Express based  in his  district in  Fairbanks. He                                                                    
detailed  that  representatives  from  the  Alaska  Trucking                                                                    
Association  had  been  present   at  the  meeting  and  had                                                                    
communicated that it  was a crisis situation.  They had been                                                                    
told that  the Dalton  Highway from  Fairbanks to  the North                                                                    
Slope  was  in  desperate  need of  the  minimum  amount  of                                                                    
maintenance. He  elaborated that  they had visited  a repair                                                                    
shop  and  seen equipment  that  had  been beaten  from  the                                                                    
condition of the  road. He stated it was real  money and the                                                                    
roads  had   to  be  maintained.  He   emphasized  that  the                                                                    
lifeblood  to the  North Slope  was the  Dalton Highway.  He                                                                    
listened  when  the  Alaska  Trucking  Association  and  the                                                                    
primary  operator   -  Sourdough  Express  -   were  telling                                                                    
legislators   that  the   monies   designated  for   highway                                                                    
maintenance were critical to their operation.                                                                                   
Representative Sullivan-Leonard MAINTAINED her OBJECTION.                                                                       
A roll call vote was taken on the motion.                                                                                       
IN FAVOR: Wool,  Josephson,  Knopp,  LeBon,  Ortiz,  Foster,                                                                    
OPPOSED: Sullivan-Leonard, Tilton, Carpenter, Merrick                                                                           
The MOTION PASSED (7/4).                                                                                                        
There being NO further OBJECTION, it was so ordered.                                                                            
CSSB 115(FIN) was  REPORTED out of committee  with seven "do                                                                    
pass"  recommendations, two  "do not  pass" recommendations,                                                                    
and  two "no  recommendation" recommendations  and with  one                                                                    
new indeterminate  note from the Department  of Revenue, one                                                                    
new  zero note  from  the Department  of Transportation  and                                                                    
Public  Facilities  and   one  previously  published  fiscal                                                                    
impact note: FN2 (ADM).                                                                                                         
2:42:54 PM                                                                                                                    
AT EASE                                                                                                                         
2:44:04 PM                                                                                                                    
Co-Chair Johnston recessed the meeting to a call of the                                                                         
chair [note: the meeting never reconvened].                                                                                     

Document Name Date/Time Subjects
SB 115 Public Testimony Rec'd by 032320.pdf HFIN 3/23/2020 1:30:00 PM
SB 115
SB 134 AMHTA Support 3.23.20.pdf HFIN 3/23/2020 1:30:00 PM
SB 134
SB 115 ver. G 3.23.2020.pdf HFIN 3/23/2020 1:30:00 PM
SB 115