Legislature(2011 - 2012)BUTROVICH 205
02/03/2011 01:00 PM Senate TRANSPORTATION
| Audio | Topic |
|---|---|
| Start | |
| SB41 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | SB 41 | TELECONFERENCED | |
SB 41-SUSPENDING MOTOR FUEL TAX
1:01:42 PM
VICE CHAIR THOMAS announced the consideration of SB 41.
1:02:17 PM
MARC LUIKEN, Commissioner, Department of Transportation and
Public Facilities (DOTPF), introduced SB 41 as follows:
Tax suspension is one of the efforts the governor is
putting forward to improve the economic health of
Alaskans. Suspension of the motor fuel tax will
provide immediate tax relief to every citizen in every
community across our state. The actual amount of money
saved will vary depending on the type of fuel
purchased, but most consumers should save up to 8
cents per gallon when fueling their vehicle, boat or
plane.
Many Alaskan communities deal with the highest energy
costs in the nation. Relieving the burden of motor
fuel tax is one step in this administration's effort
to improve Alaskan's daily living expenses. Suspending
the motor fuel tax provides a temporary reduction in
the cost of motor fuel. Efforts are being introduced
to provide long-term solutions to our high energy
costs.
Some may wonder how suspending the motor fuel tax will
impact Alaska's federal funding for transportation. In
fact, a state motor fuel tax has no direct link to
federal dollars. Therefore, suspending the motor fuel
tax will have no impact on Alaska's federal highway or
airport funding. Additionally, Alaskans fund
significantly more for transportation than is
collected in the state and federal fuel tax revenues.
In FY 12, $328.5 million is set aside for the
Department of Transportation and Public Facilities
operating budget, and another $117 million will
supplement the capital budget from general fund
dollars. That's 11.5 times more than is collected in
motor fuel tax.
Federal fuel tax also paid at the pump contributes to
the federal highway trust fund. These funds are then
redistributed back to the states via formulas set
forth in federal bills related to highways and airport
improvement. Those formulas have nothing to do with
whether a state collects a separate motor fuel tax as
there is no federal government requirement for states
to collect a gas tax to support transportation.
Might Congress retaliate against Alaska for suspending
the motor fuel tax? It's unlikely. There are several
examples of states that have suspended their motor
fuel tax just prior to the most recent federal surface
transportation bill. SAFETEA-LU went into effect in
2005. Those states actually saw an increase in their
federal highway aid.
Additionally, some may be concerned about how
suspending the motor fuel tax might impact the
Department of Transportation and Public Facilities'
operating and capital budgets. There may be fear
losing this revenue may equate to a respective
decrement in our budget. Well let me talk about the
capital budget first. Seventy-six percent of our
capital budget comes from federal receipts. I just
addressed that issue. The remaining twenty-four
percent comes from state general funds and other
sources like the international airport system receipts
and bonds, AIDEA dividend funds, and highway working
capital funds for our state equipment fleet.
The general funds in the capital budget come from the
same source that funds 56 percent of our operating
budget - the general fund. And that is what it is - a
general fund. [There is] no direct link to the tax
revenue taken in by the state motor fuel tax and the
Department of Transportation's budget. Therefore, one
cannot make a link between motor tax fuel revenue and
our budget. The suspension of the motor fuel tax in
2008 did not impact DOT's budget then and suspending
it now will not impact our budget in 2012.
Suspension of the motor fuel tax will significantly
impact Alaska's economy. It will certainly benefit
many of our largest industries. Alaska's largest
private employer, the fishing industry, will benefit
significantly from the suspension. United Fishermen of
Alaska indicated that a suspension of the tax in 2008
would likely provide some benefit to thousands of
commercial fishermen statewide. Trucking and aviation
industries and the consumers that buy the goods that
those entities deliver will also profit. In fact,
we've received letters of support from the Alaska Air
Carriers Association indicating economic benefits
suspension of the gas tax would have on hundreds of
our rural commercial air carriers. Additionally,
Alaska Airlines has indicated they will provide a
letter of support for this effort.
Bottom line, there is no compelling need to collect a
motor fuel tax at this time. While suspension of the
tax will benefit every Alaskan in every community,
while some may gain more than others, it will be
meaningful for all as we put this money back into
Alaskan's pockets.
1:07:43 PM
JOHANNA BALES, Deputy Director, Tax Division, Department of
Revenue (DOR), stated agreement with the commissioner that
Alaska's federal highway dollars are not affected if the tax is
suspended. However, she said, the state is still required to
report to the federal government the amount of gasoline it uses
for highways. The bill includes a requirement that retailers and
distributors must continue to report their sales. This ensures
that there will be no impact on highway funding. Suspension of
the tax will help all Alaskans including Bush communities that
pay a 5 cent tax on fuel used in water craft and off highway use
rather than the 8 cent tax for highway use.
1:08:50 PM
SENATOR HUGGINS commented that his constituents have high
expectations of this new commissioner and he's told them that
he's pleased with the potential he's seen.
1:10:04 PM
ED SNIFFEN, Assistant Attorney General, Civil Division,
Department of Law (DOL), stated that he is responsible for
enforcing Alaska's consumer protection and antitrust statutes
and in that capacity he's conducted a few retail gas pricing
investigations. He informed the committee that when the tax was
suspended in 2008, DOL monitored retail markets in Fairbanks,
Anchorage, and Juneau and they noticed an immediate positive
impact on consumers. Prices generally dropped by 8 cents per
gallon. However, because of market forces it wasn't possible to
monitor whether or not that amount was added back into the price
of fuel over time
MR. SNIFFEN reported that this week DOL talked to four gas
station retailers in Fairbanks and eight in Anchorage regarding
the potential impact of suspending the motor fuel tax, and a
majority indicated that it would result in an immediate 8
cent/gal savings to consumers. He noted that a couple of
independent retailers said that to remain competitive they drop
their fuel prices when signs down the street indicate a price
drop. "We believe that the suspension does have a positive
impact on consumers … and we would encourage support of the
bill," he concluded.
1:12:25 PM
VICE CHAIR THOMAS asked if he gleaned any unexpected information
from those retailers.
MR. SNIFFEN said one retailer commented that if he had paid tax
on the fuel currently in his tank he wouldn't drop the price
until all that fuel had been sold unless he was compelled to do
so to remain competitive. While there may be pockets of
independent retailers who may not be swayed initially, he opined
that in competitive markets they would have to follow suit.
VICE CHAIR THOMAS said that gas prices in Fairbanks are fairly
stable, but his recollection is that when the tax was suspended
in 2008 the reduction in price was short-lived. He observed that
price seems to be a function of competition, but when large
retailers like Safeway and Sam's Club give gas discounts related
to purchases in their grocery stores it does have an impact on
small independent retailers.
VICE CHAIR THOMAS highlighted the following potential savings to
consumers:
· Driving 30,000 miles per year in a vehicle that gets 15 mpg
would result in an annual savings of $160 per year or $13
per month.
· Driving 30,000 miles per year in a vehicle that gets 25 mpg
would result in an annual savings of $96 per year or $8 per
month.
VICE CHAIR THOMAS noted that KABATA has said that the toll for
crossing the bridge would be $5 each way and that would figure
into some driver's calculations.
He asked for an explanation of how the aviation fuel tax flows
into small communities and contributes the operation of small
airports.
1:16:57 PM
SENATOR MENARD joined the meeting.
MS. BALES explained that 60 percent of the revenue the state
collects from aviation fuel tax goes to municipally-owned or
operated airports. This amounts to about $140,000 per year. The
governor has indicated he supports an appropriation from the
general fund to offset that loss in revenue sharing funds due to
suspension of the fuel tax. The appropriation would be based on
the continued mandatory reporting as set forth in the bill.
VICE CHAIR THOMAS asked if there is any other revenue sharing
associated with the motor fuel tax.
MS. BALES answered no; the balance is deposited directly into
the general fund.
VICE CHAIR THOMAS asked for a break-down of the highway,
aviation, and marine tax that's collected.
MS. BALES provided the following information for 2010:
· Highway fuel tax is 8 cents/gal and the state collected
$23.4 million.
· Marine fuel tax is 5 cents/gal and the state received $2
million.
· Aviation fuel tax is 4.7 cents/gal and the state received
$2.9 million in 2010.
· Jet fuel tax is 3.2 cents/gal and the state received about
$337,000.
MS. BALES clarified that the 2010 numbers include two months of
the previous fuel tax suspension. Generally, $30 million is
collected in highway-use tax every year. Responding to a
question she added that every vehicle that is licensed for
highway use is subject to the tax and the tax rates are based on
use, not type of fuel.
1:21:01 PM
SENATOR HUGGINS asked her to state for the record that home-
heating fuel falls into a different category.
MS. BALES confirmed that home-heating fuel is exempt from both
the state and federal tax.
VICE CHAIR THOMAS asked the source of the data she's citing.
MS. BALES replied she is referencing the DOR annual report. She
offered to provide copies to the members.
SENATOR MENARD asked how many other states have suspended the
fuel tax and if they've had to offset the lost revenue with
another form of tax.
MS. BALES replied most states have dedicated highway funds, but
she's aware of two other states that have suspended the tax.
While she has no supporting data, she said she assumes they
would have had to take money from their general fund to offset
the loss in revenue.
SENATOR MENARD asked if the federal government will be reluctant
to send money to Alaska if it suspends the fuel tax.
MS. BALES explained that federal highway funding is in no way
based the motor fuel tax. However, every dealer that sells fuel
and typically collects the fuel tax would still be required to
report monthly to the Department of Revenue (DOR) the amount of
motor fuel that it sold. In turn, DOR reports the total to the
Federal Highway Administration.
1:23:49 PM
SENATOR MENARD questioned how this would be perceived in
Congress.
COMMISSIONER LUIKEN pointed out that the state still pays a
federal motor fuel tax, which goes into the surface
transportation fund and is redistributed to all states. He
reiterated that there is no link between the state fuel tax
that's collected and whether or not the state receives federal
funds for highways.
SENATOR MENARD asked if DOTPF is doing any public awareness to
correct this misperception.
COMMISSIONER LUIKEN replied that's a good idea.
MS. BALES added that everyone that buys fuel in the state pays
the 18.9 cent/gal federal fuel tax. Based on a formula, federal
highways returns money to the state to use for transportation
projects.
VICE CHAIR THOMAS said it'd be helpful to look at the formula if
it's not too complicated.
MS. BALES explained that every state reports the number of
gallons of gasoline for highway use that's sold each month.
Federal funds are allocated based on whatever percentage of the
total the particular state collects. For example, if the Alaska
collects one-fiftieth of the total, the federal government would
allocate to Alaska one-fiftieth of the total highway taxes
collected.
SENATOR MENARD continued to express reservations about the
negative perception this might create.
1:28:58 PM
VICE CHAIR THOMAS said he and at least one in the Alaska
delegation have that same concern. He asked Ms. Bales to repeat
how much tax that was collected in each category.
MS. BALES restated that the 2010 numbers included two months of
the previous tax suspension and provided the following:
· Highway fuel tax collected was $23 million and would have
been approximately $30 million had the tax been collected
for a full 12 months.
· Marine fuel tax collected was $2 million and would have
been approximately $2.5 million had the tax been collected
for a full 12 months.
· Jet fuel tax collected was $3 million and would have been
approximately $3.5 million had the tax been collected for a
full 12 months.
· Aviation fuel tax collected was $337,000.
On average she said DOR collects about $40 million each year
when the tax is in full effect. Addressing the issue of
perception she said she understands the concern, but it's
important to understand that the state will continue to fund
highway projects using general fund money. It's just that it
will come from other sources.
VICE CHAIR THOMAS commented it would come from the oil industry
since that's where 90 percent of the state's revenue comes from.
Finding no further questions, he announced he would hold SB 41
in committee.
1:31:45 PM
There being no further business to come before the committee,
Vice Chair Thomas adjourned the Senate Transportation Standing
Committee meeting at 1:31 p.m.
| Document Name | Date/Time | Subjects |
|---|