03/11/1994 01:35 PM Senate JUD

 SENATOR TAYLOR introduced SB 256 (INCREASE AVIATION FUEL TAX)                 
 sponsored by the Senate Transportation Committee at the request of            
 the Department of Transportation, and invited SENATOR BERT SHARP to           
 review the bill.  SENATOR SHARP noted the committee would be                  
 considering CS for SENATE BILL NO. 256(TRA).                                  
                                                                               
 SENATOR SHARP reviewed some of the history of supporting rural                
 airports through landing fees.  Last session, air carriers were               
 contacted and asked if they would prefer reinstatement of the                 
 landing fees or collection of an equivalent amount of revenue                 
 through another means.  While no firm commitment was made, the                
 general feeling expressed was that an increase in the aviation fuel           
 tax to collect an equivalent amount of revenue would be preferable,           
 since collecting landing fees was expensive and not always                    
 successful.                                                                   
                                                                               
 SENATOR SHARP said the bill would increase aviation and turbine               
 fuel tax in the amount of $.007/gallon, which would generate $1.6             
 million which would be needed to support the airports.                        
                                                                               
 SENATOR LITTLE clarified the amount of the tax, and SENATOR SHARP             
 assured the committee it was not a tax increase.                              
                                                                               
 SENATOR TAYLOR invited HELVI SANDVIC, Deputy Commissioner for the             
 Department of Transportation, to testify.                                     
                                                                               
 Number 153                                                                    
                                                                               
 MS. SANDVIC praised SENATOR SHARP for presenting the issue, and she           
 explained that DOTPF undertook an effort several years ago to help            
 off set the costs of maintenance and operation of their airports.             
 He said an analysis of the airports supported by the general fund             
 and determined the airports receiving certificated air service were           
 most costly due to the mandated federal requirements.  The decision           
 at that time, she explained was to go forth with landing fees                 
 applied to aircraft of 6,000 pound or greater, which are the type             
 of aircraft that require the additional presence of state forces to           
 respond in the event of a crash or with law enforcement response              
 security.                                                                     
                                                                               
 MS. SANDVIC said there was significant opposition to any increase             
 in fees and several alternatives were suggested including the                 
 landing fees, with an increase in fuel tax being the other.  It was           
 decided to go forth with the landing fees; it was challenged in               
 court, and was ruled against them because they had not followed the           
 Administrative Procedures Act for implementing the landing fee that           
 was no longer valid.                                                          
                                                                               
 MS. SANDVIC said the preference, as stated by the air carriers, was           
 to apply a fuel tax increase was the most equitable means of                  
 sharing the cost of maintaining the airports among all aviation               
 users, and she claimed the proposed fuel tax would result in the              
 same amount of revenue that would have been coming into the State             
 had the landing fee proposal gone forward.                                    
                                                                               
 SENATOR LITTLE asked MS. SANDVIC about the consideration from the             
 people in rural areas about the idea of the fuel tax, and she                 
 suggested there were problems in collecting the landing fees.  She            
 asked if the people in rural areas approved of the solution.                  
                                                                               
 MS. SANDVIC explained initially there was opposition to landing               
 fees and difficult to collect, there was a feeling it was                     
 equitable.  She described the objection came from the larger                  
 carriers who felt everyone benefitted from the airport, but it was            
 felt that not everyone was contributing their fair share; whereas,            
 the tax would properly reflect usage because it wold be adjusted              
 according to the level of fuel used.                                          
                                                                               
 Number 196                                                                    
                                                                               
 SENATOR TAYLOR suggested MS. SANDVIC meant to use "gasoline use               
 fee."  He called on GARY MOORE, Planning Director for the Tanana              
 Chief's Conference, who testified OFFNET from Fairbanks.                      
                                                                               
 MR. MOORE asked if there was just an increase aviation tax or did             
 it include motor fuel included in water craft, which is $.05 per              
 gallon.  Is it just aviation tax?                                             
                                                                               
 SENATOR TAYLOR directed MR. MOORE'S attention to the bill to the              
 language in darker print as the only changes being made, and                  
 explaining the rest of the bill is existing language in law.  He              
 reiterated the only changes were to aviation fuels.                           
                                                                               
 MR. MOORE described the aviation fuel tax increase as impacted on             
 the villages in his region and he reviewed the Interior regions               
 which are accessible only by air or river, where any increase in              
 aviation fuel would be passed on to the customers.  In checking the           
 prices of gasoline, MR. MOORE found the current cost of gasoline in           
 that region is $2.35 per gallon; aviation fuel is $4.18 per gallon;           
 gasoline in Galena is $2.50 per gallon, and aviation fuel is $3.50            
 a gallon, and in Fort Yukon the price of gas is $2.55 and aviation            
 fuel is $2.88 per gallon.                                                     
                                                                               
 MR. MOORE thought it was a substantial amount of money to pay for             
 fuel in the rural areas that are more depressed than the urban                
 areas in Alaska.  He expressed concerns the tax would be passed on            
 to the rural residents, and although he understands DOT's role in             
 maintenance, he could not support the bill.                                   
                                                                               
 Number 240                                                                    
                                                                               
 SENATOR TAYLOR assured MR. MOORE this was not a price increase on             
 the existing price of gasoline, but only on the amount of the flow.           
 He gave an example of an airplane burning 20 gallons an hour,                 
 making an increase of $.14 per hour's flying time.                            
                                                                               
 MR. MOORE asked if there would be a corresponding increase in the             
 fares to the rural areas, and SENATOR TAYLOR explained the $.14               
 would be divided among the fares of the passengers.                           
                                                                               
 MS. SANDVIC responded in describing the public hearing process                
 where the air carriers testified the fuel tax was preferable, since           
 it spreads the burden out amongst more carriers than otherwise.               
                                                                               
 SENATOR SHARP pointed to Section 6 as a blackmail clause to prevent           
 double dipping, and SENATOR TAYLOR referred Section 6 to MR. MOORE            
 which presents the Department of Transportation from charging                 
 landing fees until January 1, 2000.  MR. MOORE said most of his               
 questions had been answered.                                                  
                                                                               
 SENATOR LITTLE questioned SENATOR TAYLOR'S use of "kerosine                   
 burners," and he explained they were jets, which were very                    
 inefficient.                                                                  
                                                                               
 Number 289                                                                    
 SENATOR LITTLE asked MS. SANDVIC for a review of the fiscal note,             
 and she quoted the revenue as $1,725.7 million and would cost                 
 approximately $20.4 thousand to administer.  SENATOR JACKO asked              
 what assurance would there be the $1,725.7 million would be spent             
 on maintenance of rural airports.                                             
                                                                               
 MS. SANDVIC said it would not pay for the entire cost of                      
 maintenance of the airports, and she suggested several ways of                
 dealing with the problem by dedicated funds or a constitutional               
 amendment.                                                                    
                                                                               
 SENATOR DONLEY declared he was not supporting any new taxes until             
 the operating budget was under control, and he blamed the                     
 administration for not proposing reductions in the operating                  
 budget.  His only exception was alcohol and tobacco taxes.                    
                                                                               
 Second, SENATOR DONLEY didn't think this was a fair tax, and he               
 blamed the Department of Transportation for not following the                 
 Administrative Procedures Act for implementing the landing fees               
 regulations.  He said he was voting against the bill.                         
                                                                               
 SENATOR JACKO moved to pass CS FOR SENATE BILL NO. 256(TRA)                   
 (INCREASE AVIATION FUEL TAX) from committee.  SENATOR DONLEY                  
 objected.                                                                     
                                                                               
 SENATOR TAYLOR called for a vote on SENATOR JACKO's move to pass              
 CS FOR SENATE BILL NO. 256(TRA) (INCREASE AVIATION FUEL TAX) from             
 committee.  The roll was taken with the following results:                    
 SENATORS TAYLOR, JACKO, and LITTLE voted "yes," and SENATOR DONLEY            
 voted "nay."  SENATOR TAYLOR stated the bill was moved from                   
 committee.