Legislature(2015 - 2016)CAPITOL 17
02/06/2016 01:00 PM House TRANSPORTATION
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| Audio | Topic |
|---|---|
| Start | |
| HB249 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 249 | TELECONFERENCED | |
| + | TELECONFERENCED |
HB 249-ELECTRONIC TAX RETURNS & MOTOR FUEL TAX
1:02:30 PM
CO-CHAIR HUGHES announced that the only order of business would
be HOUSE BILL NO. 249 "An Act requiring the electronic
submission of a tax return or report with the Department of
Revenue; relating to the motor fuel tax; and providing for an
effective date."
CO-CHAIR HUGHES noted that public testimony remained open from
the previous meeting.
1:03:57 PM
CO-CHAIR HUGHES directed committee members' attention to 24
written testimonies received by her office since the previous
meeting and noted that 22 of those expressed concern regarding
the proposed legislation. She indicated that any additional
written public testimony would be added to the record.
1:05:07 PM
BETH FREAD stated that she appreciated the opportunity to speak
regarding HB 249, because she works in the real estate industry
and, accordingly, is almost always on the road. She indicated
that she does not necessarily oppose the proposed legislation,
but that she believes the proposed motor fuel taxes should have
caps applied. She expounded that [Alaskans] experienced gas
prices over four dollars per gallon in the previous year. She
explained that high prices resulted in a huge cut to her
revenue. She requested that language be included in the
legislation stipulating that if gas prices climb to a specified
level, the tax would roll back to a lower rate. She opined that
the bill should not be considered until the state budget is cut
and suggested that no new revenue be generated until the budget
had been reduced to between $4.2 and $4.5 billion. She stated
her understanding that [state government] can utilize permanent
fund earnings to help fund government for a period of time, and
she reemphasized her belief that [the state] should reduce
spending prior to "making money from [citizens'] pockets."
Additionally, she expressed doubt regarding the governor's plan
to defund the permanent fund, and she urged the committee to
oppose the plan.
1:07:18 PM
STEVE ST. CLAIR stated that HB 249 would have a negative impact
on all Alaskans, especially those living subsistence lifestyles,
and he explained that rural Alaskans utilize motor fuel,
aviation fuel, and watercraft fuel for survival. He recounted a
conversation with his mother-in-law, an Inupiat woman who was
raised in rural Alaska, during which she explained that all
those fuel types are used by people in the villages. He related
that in Shishmaref, motor fuel is used in ATVs and snow machines
for transportation and hunting, and in some instances motor fuel
is utilized for cooking stoves and lamps. He pointed out that
many communities in Alaska are accessible only by plane and
watercraft, and the cost of basic amenities are very high in
these locations. He stated that many people in rural areas must
travel to Anchorage, for medical appointments, and their
associated airline tickets are primarily paid for by the state.
He noted that many [rural Alaskans] use the medical trips to
Anchorage as an opportunity to purchase basic amenities due to
the price differences. He referenced an example of toilet paper
being cheaper to ship from Anchorage than it is to purchase in
the villages and posited that the proposed motor fuel tax
increases would serve to further increase prices of consumer
goods in the villages. He informed the committee that despite
recent price reductions for fuel in cities, prices remain high
off the road system. He insisted that the proposed tax
increases would be disproportionately burdensome to [Alaskans]
living subsistence lifestyles, which is necessitated by a lack
of jobs in rural Alaska.
MR. ST. CLAIR stated that HB 249 is estimated to generate $40
million for the general fund, which he claimed was "another
monster that needs to be addressed." He held that adding
revenue to the general fun encourages the growth of government,
which he considered counterproductive in a fiscal crisis. He
explained that in 2014 the State of Alaska paid $39.6 million to
rural Alaskans via the Power Cost Equalization Program (PCEP).
He posited that it would be counter intuitive to increase fuel
taxes on the same group of people receiving subsidies for high
fuel costs. He reemphasized his belief that HB 249 was a "bad
bill" and should never leave committee, and stated that taxation
and changes to the permanent fund and permanent fund dividend
should never be considered until government is "right-sized."
He maintained that the "magic number" is $4.5 [billion] in
unrestricted general fund spending in Fiscal Year 2017 (FY 17)
and opined that any attempt that fails to meet the threshold is
a disingenuous attempt to solve [Alaska's] fiscal problem. He
encouraged the committee to oppose HB 249.
1:10:42 PM
ABBY ST. CLAIR testified in opposition to HB 249. She related
that in Shishmaref, where she was raised, the cost of living is
incredibly high, and warned that an increase in fuel taxes would
result in a corresponding increase in the cost of necessities.
She informed the committee that the current fuel price [in
Shishmaref] is $6.99 per gallon. She explained that [high fuel
prices] make hunting, fishing, and the subsistence lifestyle
passed down by her ancestors more difficult. She requested that
[the legislature] reassess the current budget and find other
means [of balancing the budget] before increasing taxes.
1:11:33 PM
MIKE COONS stated his opposition to HB 249 and noted that
Governor Bill Walker has suggested that [state government]
cannot cut its way to a sustainable budget. He suggested that
the governor's $100 to $200 million in proposed budget cuts
would do very little toward the goal of developing a sustainable
budget. He explained that he opposed the proposition of
utilizing the permanent fund, and he posited that the governor's
proposed state income tax is unfair to people who work because,
like all "progressive tax schemes," low income residents do not
pay the tax but do soak up the majority of Department of Health
and Social Services spending. He indicated that although the
governor's proposed sales tax is fairer, it is
disproportionately visited upon those with low incomes. In
reference to the proposed "sin taxes" on alcohol and tobacco, he
expressed doubt that the increased cost would lead to any
meaningful reduction in usage.
MR. COONS transitioned to a discussion of the proposed
legislation and noted that President Obama had recently proposed
legislation that would create a $10 per barrel oil tax for
alternative energy. He stated that Section 3 of the proposed
legislation raised many questions that would create difficult
accounting circumstances for gas stations. He pointed out that
all tax increases would be between 100 and 175 percent of
current rates. He listed the proposed rate changes described in
Section 3 of the bill and stated that he found them confusing.
He stated his assumption that fuel oil for home heating, which
is diesel, would be included in the tax scheme and suggested
that a heating fuel tax increase would significantly impact
rentals and homeowners. He contended that the "off-road use"
refund outlined in Section 5 of the proposed legislation is
complicated in terms of the logistics of applying for the
refund; he questioned how a gas station could determine the
purpose of the fuel being purchased and how an individual would
be compensated for his/her due refund. He concluded, "This is
not a perfect bill; this is a horrible bill. Get a big backhoe
and burry this bill ten feet under poured concrete."
1:15:04 PM
ED ZASTROW stated that he has lived in the territory and state
of Alaska for over 50 years. He acknowledged that the state is
currently "enjoying a fiscal problem" and requested that if the
proposed tax increase were to be implemented, [the legislature]
consider imposing the tax increase in a "stepped" manner over
the next several years. He pointed out that other taxes are
going to be implemented and "stepping" the motor fuel tax
increases would help [manage the transition].
1:16:33 PM
CLAY MURPHY shared that he is a veteran, a 35-year resident of
the state of Alaska, a retired Alaska Railroad worker, a former
fuel truck driver, and he currently drives busses. He stated
that he had always voted in local, state, and federal elections,
and he opposed the motor fuel tax increases proposed in HB 249
as they would increase the cost of energy in the interior. He
discussed how companies cascade their cost of doing business to
consumers and pointed out that the proposed legislation would
double or even quadruple current motor fuel tax rates but would
not significantly improve the current budget circumstance. He
said he agreed with previous comments suggesting that the state
should make meaningful spending cuts, and he related that the
companies he has worked for in the past all ran their businesses
on revenues; when revenues decreased, the companies were forced
to make meaningful cuts. He noted that he hasn't seen that occur
with Alaska's state government. He said the first action that
state government wants to take in response to the budget
shortfall is to implement resident taxes, which he opined was
the wrong action. He stated that businesses make cuts if their
projected revenues are estimated to be lower. He cited several
business-based examples of how the state could reduce costs,
including: implementation of a hiring freeze, cancellation of
travel reimbursements, restructuring agencies, facility
consolidation, sale of unnecessary buildings and lands, delay of
promotions, parking and potentially disposing of equipment and
vehicles, cancellation of unnecessary services, increased
scrutiny and meaningful reductions at all levels of management,
and implementation of a wage cut with a promise of reinstatement
upon return of revenues.
MR. MURPHY stated that if a tax is created, it must sunset at a
certain point. He posited that an existing agency should
perform the work of taxation; no new agencies or personnel
should be allowed, as no increase to government could be
responsibly allowed. He held that businesses will not ask for
increased taxation, but those who work for state agencies and
the University of Alaska will say "we should pay our fair
share." He opined that Alaskan residents already pay their
"fair share." He specified that his federal taxes increase
every year, and his property mill rate is increasing. He
explained that the state receives significant funding, given its
population, from the federal government and the money is from
taxpayers. He recommended that the legislature begin spending
cuts by "trimming the fat" in the Department of Transportation &
Public Facilities (DOTPF) and taking actions such as those
listed previously. He stated that the commissioner of an agency
should have the ability to perform the necessary streamlining
and restructuring or they should be replaced by someone who can.
He acknowledged that the reductions are difficult, but
maintained that strong leadership is necessary at this time. He
stated his opposition for tapping the permanent fund, but said
if it must happen, he would support Senator McGuire's proposed
legislation. He advised the committee that the Anchorage LIO
debacle is an embarrassment to the state, and he compared it to
former Governor Murkowski's jet.
1:21:52 PM
BRIAN MCNEIL stated that Alaska's per gallon [highway] fuel tax
rates are either the lowest or close to the lowest of the 50
states and the average state highway fuel tax rate is
approximately $0.30 per gallon, while the highest rate is $0.50
per gallon. He commented that based on [Alaska's] difficult
topography, large geographic area, inclement weather conditions,
small population, and the associated maintenance requirements,
he does not understand how [Alaska's motor fuel tax rate] is not
higher. He maintained that Alaska is an expensive state, with
regard to transportation for the aforementioned reasons, and he
said he doesn't see a way around it. He affirmed that he does
not like to pay taxes any more than anyone else, but stated his
belief that Alaskans must be reasonable.
1:24:20 PM
JIM SYKES acknowledged the severity of Alaska's fiscal crisis
and stated that a motor fuel tax increase seemed reasonable
under the circumstance. He stated his hope that motor fuel tax
revenues would be applied toward maintenance, as the federal
government will provide significant funding toward road
construction, but very little for maintenance purposes. He
explained that the result of that imbalance is that many roads
have been constructed, but there is less money to maintain them.
He noted that many Bush communities use fuel but do not have
roads to maintain; he emphasized the importance of providing
some level of funding to rural community services if their taxes
are also going to be raised. He stated that it is appropriate
for the tax to be applied by the gallon, specifically due to the
incredibly high cost of fuel in rural communities. He indicated
that upon consideration of revenue options after making budget
cuts, the proposed motor fuel tax increase would be a prudent
choice. He noted that Alaska does not have dedicated funds, and
accordingly he expressed his hope that the revenue generated
from the proposed tax increase would be utilized for a
combination of both road maintenance and community services in
rural communities. He said he was not sure he supported the
bill, but indicated his belief that the proposal was headed in
the right direction because [Alaskan's] must start paying their
own way.
1:26:30 PM
BRIAN SIMPSON emphasized his opposition to the proposed tax
increase. He said Alaska is already a "welfare state" and
expounded that there is little consideration of small business
owners who "actually work for a living." He posited that the
idea of increasing the cost of personal or business
transportation is abhorrent and remarked that the cost of
funding state employees and their associated benefits packages
is a significant financial stressor. He indicated that in
addition to the cost associated with state employees, there are
substantial costs associated with "a big block of people who
just live off of the state." He pointed out that the
administrative costs associated with providing services to rural
areas would increase in relation to the increased transportation
costs that the proposed legislation would cause. He contended
that the best course of action would be to slowly dismantle the
dependency of residents, ween people off of the state, and
encourage people to have "real jobs" and produce things. He
emphasized his belief that this tax proposal is a particularly
bad idea, and he does not see any gain for people who actually
work for a living and contribute to the state. As an aside, he
indicated his opposition to electronic filing and the imposition
of an income tax for the cited reason that income taxes also
punish those who work. He urged the committee, "Dismantle this
welfare state; the writing is on the wall."
1:32:43 PM
REPRESENTATIVE NAGEAK stated that the proposed tax increases are
disproportionately aimed at people who can't afford to pay them,
particularly people in rural Alaska. He explained that most
good jobs available in rural Alaska require skilled laborers,
and many rural residents don't have those skillsets; therefore,
most available jobs are filled by shift workers who live on the
road system. He stated that there are both organized and
unorganized boroughs in the state, as is constitutionally
mandated, and boroughs have a duty to step up and find ways to
raise revenues in their communities. He indicated that his
borough has taken the initiative [since establishment] to build
infrastructure in the village, including power plants, health
clinics, and runways. He related that his borough took
advantage when opportunity presented itself in the form of tax
revenues from the oil industry.
REPRESENTATIVE NAGEAK suggested that people should be less
concerned about state spending and more concerned about their
own boroughs, and he recommended that local governments take the
initiative to [solve their fiscal problems]. He said many
people call for cuts [to state spending], but none of them want
to cut services that affect them. He expressed the need for
honest discussion regarding [the fiscal crisis] and noted that
[Alaska] is in [a fiscal circumstance] where a bucket of chicken
is more expensive than a barrel of oil. He remarked that
[Alaska's economy] is near "the bottom of the barrel" and
accordingly all [Alaskans] must "give and take." He stated that
[solving the budget crisis] will be difficult, but it must be
done. He stated that the governor's proposals are in front of
[the legislature] and that the conversations had begun. He
encouraged Alaskan residents to call in and share their ideas
with the legislature regarding solutions for the fiscal problem,
and he acknowledged that [the legislature] can't be afraid to
make tough decisions.
1:39:03 PM
CO-CHAIR HUGHES commented to clarify that funds collected under
HB 249 would not be reflective of a user fee, in that there
would not be a requirement that the revenue be used specifically
toward transportation infrastructure, with the exception of a
requirement that taxes on aviation fuel are used to fund
airports. She further clarified that all fuel tax revenues are
deposited into the general fund. She noted that despite being
one of the states with the lowest fuel tax rates in the nation,
Alaska still has one of the highest cost per gallon of fuel.
She mentioned a federal proposal being considered by the current
administration, which, if it were to pass, would increase the
price per gallon of gasoline by $0.25.
1:40:25 PM
REPRESENTATIVE ORTIZ thanked everyone who testified for sharing
their views on Alaska's fiscal situation. He stated that
government, by the people, for the people is not just an idea;
it can be a reality. He complimented testifiers for taking the
time to share comments and making it more of a reality. He
commented, regarding the governor's proposal in general, that
the governor did come up with a plan knowing that some of his
tax proposals would be unpopular, even with himself. He
expressed his appreciation for the governor's demonstrated
leadership in formulating a plan for the legislature "to pick
apart and criticize." He added that although the legislature has
unpopular options to choose from, the alternative is
significantly more budget cuts. In response to the criticism
that the governor's proposed $100 million budget cut is not
large enough, he reminded that in the previous session, with the
governor's leadership, the legislature cut approximately $450
million from the operating budget and $400 million from the
capital budget. He contended that the proposed cuts for this
session cannot be considered outside the context of cuts from
the previous session, and he noted that those cuts will mean
significant reductions in services that are important to people.
1:43:05 PM
CO-CHAIR HUGHES thanked the participants.
[HB 249 was held over.]
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB 249 Opposing Documents - Emails from Public 2-6-2016.pdf |
HTRA 2/6/2016 1:00:00 PM |
HB 249 |
| HB 249 Supporting Documents - Letter from Aircraft Owners and Pilots Association.pdf |
HTRA 2/6/2016 1:00:00 PM |
HB 249 |
| HB 249 Supporting Documents - Letter from Alaska Airmen Association.pdf |
HTRA 2/6/2016 1:00:00 PM |
HB 249 |
| HB 249 Supporting Documents - Letter from Associate General Contractors of Alaska.pdf |
HTRA 2/6/2016 1:00:00 PM |
HB 249 |