Legislature(2011 - 2012)BUTROVICH 205

03/27/2012 01:00 PM TRANSPORTATION

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01:03:34 PM Start
01:03:48 PM SB41
01:28:52 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Heard & Held
                SB  41-SUSPENDING MOTOR FUEL TAX                                                                            
1:03:48 PM                                                                                                                    
SENATOR KOOKESH announced that the  first order of business would                                                               
be SB 41.                                                                                                                       
MARC LUIKEN, Commissioner, Department  of Transportation & Public                                                               
Facilities, (DOTPF)  introduced SB 41.  He emphasized that  SB 41                                                               
is a  two-year tax suspension, not  a tax repeal. He  pointed out                                                               
that this  tax suspension  is one  of the  many efforts  that the                                                               
governor  has  put forward  to  improve  the economic  health  of                                                               
Alaskans.  Suspension  of  the  motor  fuel  tax  demonstrates  a                                                               
consistent tax  policy from the current  administration. It would                                                               
provide immediate tax relief to  every citizen in every community                                                               
across  the state.  The actual  amount of  money saved  will vary                                                               
depending on the type of  fuel purchased, but most consumers will                                                               
save up to 8 cents per  gallon when fueling their boat, plane, or                                                               
COMMISSIONER LUIKEN  related that  many Alaskan  communities deal                                                               
with  the  highest energy  costs  in  the nation.  Relieving  the                                                               
burden   of  the   motor   fuel   tax  is   one   step  in   this                                                               
administration's  effort   to  improve  Alaskan's   daily  living                                                               
expenses.  With  rising  fuel  prices -  about  $4.26  in  Juneau                                                               
currently  - it  is  important  for every  Alaskan  to enjoy  the                                                               
benefit of this tax suspension.                                                                                                 
COMMISSIONER LUIKEN continued to say  that in 2008 the motor fuel                                                               
tax suspension  showed great success  as fuel prices at  the pump                                                               
dropped  by  8 cents  almost  immediately.  While 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 Alaska's high energy costs.                                                                                        
COMMISSIONER  LUIKEN  explained  that   some  people  wonder  how                                                               
suspending  the  motor  fuel tax  will  impact  Alaska's  federal                                                               
funding  for transportation.  The  state motor  fuel  tax has  no                                                               
direct link to federal dollars.  Historical data shows that those                                                               
states that  have suspended or  lowered their motor fuel  tax saw                                                               
no penalty  to their federal  funding. Therefore,  suspending the                                                               
motor fuel tax should have  no impact on Alaska's federal highway                                                               
or  airport funding.  Federal fuel  tax, also  paid at  the pump,                                                               
contributes to  the federal highway  trust fund. These  funds are                                                               
redistributed  back to  the states  via  a formula  set forth  in                                                               
federal bills related to highways and their improvement.                                                                        
He continued  to say  the surface  transportation bill,  which is                                                               
currently  being debated  in  Congress, as  well  as the  Federal                                                               
Aviation Reauthorization Act, which was  passed and signed by the                                                               
President last  month, have  nothing to do  with whether  a state                                                               
collects  a  separate  motor  fuel   tax.  There  is  no  federal                                                               
requirement  for  states   to  collect  a  gas   tax  to  support                                                               
transportation.  Additionally, Alaskans  fund significantly  more                                                               
for  transportation than  is collected  in state  motor fuel  tax                                                               
revenue  - close  to  10  to 12  times  more.  The average  state                                                               
funding  through  general fund  for  transportation  was over  $3                                                               
million per year  for the last ten  years. If a tax  were to fund                                                               
the transportation  budget, more than  80 cents per  gallon would                                                               
be  needed. Oil  revenues fund  the  state government,  not an  8                                                               
cents per gallon tax.                                                                                                           
1:08:44 PM                                                                                                                    
COMMISSIONER  LUIKEN  referred  to   a  spreadsheet  in  members'                                                               
packets  that   shows  Alaska's  general  fund   contribution  to                                                               
transportation. There  are only four states  that contribute more                                                               
from their  state general funds  for transportation  than Alaska.                                                               
He maintained one  could not link the motor fuel  tax revenue and                                                               
DOTPF's budget. The suspension of the  motor fuel tax in 2008 did                                                               
not impact DOTFP's budget.                                                                                                      
COMMISSIONER LUIKEN emphasized that  suspension of the motor fuel                                                               
tax  will  significantly  impact Alaska's  economy.  Rising  fuel                                                               
prices will  continue and  added fuel costs  will continue  to be                                                               
passed on  to the consumer  by industries who ship  and transport                                                               
goods.  Suspending the  fuel tax  will benefit  many of  Alaska's                                                               
largest   industries.   The   fishing   industry   will   benefit                                                               
significantly from  the suspension  of the tax.  United Fishermen                                                               
of  Alaska indicated  a suspension  of the  gas tax  would likely                                                               
provide benefit  to thousands of commercial  fishermen statewide.                                                               
Trucking and aviation  industries and the consumers  that buy the                                                               
good  those  entities  deliver  will  also  benefit.  Letters  of                                                               
support   have  been   received  by   the  Alaska   Air  Carriers                                                               
Association, Alaska  Airlines, Princess  Lines, and  the National                                                               
Federation of Independent Businesses.                                                                                           
COMMISSIONER LUIKEN  concluded that  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, some may                                                               
gain more than  others, but it will be meaningful  to all as this                                                               
money is put back into Alaskan's pockets.                                                                                       
1:11:21 PM                                                                                                                    
SENATOR MENARD recalled  that under two governors  the motor fuel                                                               
tax was repealed.  She inquired if there was any  interest now in                                                               
completely repealing the tax.                                                                                                   
COMMISSIONER LUIKEN replied that he had not heard of that plan.                                                                 
SENATOR MENARD  suggested the possibility  of suspending  the tax                                                               
1:12:50 PM                                                                                                                    
SENATOR  EGAN wondered  how the  commissioner  would address  the                                                               
congressional delegation's  concerns regarding the  suspension of                                                               
the fuel tax.                                                                                                                   
COMMISSIONER LUIKEN stated  that he presented them  with the same                                                               
information he  just presented the committee.  He reiterated that                                                               
only four  states pay more  from their general funds  than Alaska                                                               
does for transportation expenses.  He related that fifteen states                                                               
contribute  no  general  fund   monies  to  their  transportation                                                               
expenses.  He suggested  asking what  those states  are doing  to                                                               
support  transportation  costs.  He  repeated that  there  is  no                                                               
federal requirement  for the state  to have  a motor fuel  tax in                                                               
order to receive federal funding.                                                                                               
1:14:07 PM                                                                                                                    
SENATOR HUGGINS said  he would not have supported an  8 cent fuel                                                               
tax. He suggested using rebates instead of a tax.                                                                               
COMMISSIONER LUIKEN was not familiar with that program.                                                                         
SENATOR HUGGINS said there used to be a rebate program.                                                                         
SENATOR EGAN countered  that since Alaskans don't  pay state tax,                                                               
that 8  cents a  gallon seems  like a good  deal. He  stated that                                                               
driving is a privilege.                                                                                                         
COMMISSIONER   LUIKEN  reiterated   that  there   is  no   direct                                                               
correlation between the 8 cent tax  and the DOTPF budget. The tax                                                               
does not fund the department's  budget, but goes into the general                                                               
fund. If  it were  dedicated, then  one could say  the tax  was a                                                               
good deal.                                                                                                                      
SENATOR EGAN pointed out that  funds are not dedicated in Alaska;                                                               
however, the  intent of the  tax is there.  He said he  was upset                                                               
that the school tax was eliminated,  as was the state income tax,                                                               
and he did not want to eliminate another tax.                                                                                   
COMMISSION LUIKEN noted  that the bill suspends the  tax and does                                                               
not eliminate it.                                                                                                               
1:17:40 PM                                                                                                                    
SENATOR HUGGINS stated he would support repealing the tax.                                                                      
COMMISSION LUIKEN urged the committee to pass SB 41.                                                                            
SENATOR MENARD moved to adopt  Conceptual Amendment 1: on page 1,                                                               
line 7,  delete the year 2011  and insert 2012; also,  on page 1,                                                               
line 7,  delete 2013 and insert  2014. On page 2,  line 5, delete                                                               
2013 and insert 2014.                                                                                                           
Seeing no objection, Conceptual Amendment 1 was adopted.                                                                        
1:19:40 PM                                                                                                                    
PAUL  LANDIS,  President,  CIRI Alaska  Tourism,  Sitka,  Alaska,                                                               
testified in support of SB 41.  He stressed that the bill is good                                                               
for  tourism  and other  industries,  such  as marine  transport,                                                               
aviation, and  highway businesses, that rely  on tourism dollars.                                                               
The  bill  also  helps  tourism  employees  by  decreasing  their                                                               
individual energy costs.                                                                                                        
1:20:50 PM                                                                                                                    
ED  SNIFFEN,  Assistant  Attorney  General,  Department  of  Law,                                                               
Anchorage, Alaska,  testified in  support of SB  41. He  spoke of                                                               
the success  of the gas  tax suspension  in 2008. He  thought the                                                               
impacts  of the  suspension in  Juneau  were delayed,  but had  a                                                               
positive impact, eventually. He referred  to a May 2006 report by                                                               
the  National Bureau  of Economic  Research  that summarized  the                                                               
effectiveness of the tax in Illinois.                                                                                           
1:23:47 PM                                                                                                                    
JOHANNA  BALES,  Deputy  Director, Tax  Division,  Department  of                                                               
Revenue, answered questions  related to SB 41.  She described the                                                               
process of claiming a refund  for gas used for off-road purposes.                                                               
She noted that 8  cents a gallon for highway use  and 5 cents for                                                               
marine use is a big deal for many Alaskans.                                                                                     
SENATOR  MENARD said  she thought  a successful  guiding business                                                               
might apply for a rebate. She gave  an example of how the gas tax                                                               
would be  calculated. She reiterated  her idea to repeal  the gas                                                               
1:26:46 PM                                                                                                                    
COMMISSION LUIKEN agreed  that the people who apply  for a rebate                                                               
consider it  a benefit. He  suggested that suspension is  a first                                                               
SENATOR  HUGGINS said  aviation fuel  is taxed  at 4.7  cents per                                                               
gallon. He  opined that this  issue was a political  football the                                                               
last time it was worked on.                                                                                                     
SENATOR MENARD asked if the tax was 5 cents for marine use.                                                                     
MS. BALES  clarified that the  highway fuel  tax is 8  cents, the                                                               
marine fuel tax  is 5 cents, the aviation fuel  tax is 4.7 cents,                                                               
and the jet fuel tax is 3.2 cents per gallon.                                                                                   
1:28:39 PM                                                                                                                    
SENATOR KOOKESH stated that SB 41 would be held in committee.                                                                   

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