Legislature(1995 - 1996)

03/12/1996 08:10 AM STA

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
             HOUSE STATE AFFAIRS STANDING COMMITTEE                            
                         March 12, 1996                                        
                           8:10 a.m.                                           
 MEMBERS PRESENT                                                               
 Representative Jeannette James, Chair                                         
 Representative Scott Ogan, Vice Chair                                         
 Representative Joe Green                                                      
 Representative Ivan Ivan                                                      
 Representative Brian Porter                                                   
 Representative Caren Robinson                                                 
 Representative Ed Willis                                                      
 MEMBERS ABSENT                                                                
 All members present.                                                          
 COMMITTEE CALENDAR                                                            
 SENATE BILL NO. 266                                                           
 "An Act relating to the Creamer's Field Goose Classic."                       
      - PASSED OUT OF COMMITTEE                                                
 *HOUSE BILL NO. 438                                                           
 "An Act relating to the indexing of documents recorded in the state           
 recorder's offices; and providing for an effective date."                     
      - PASSED OUT OF COMMITTEE                                                
 HOUSE BILL NO. 443                                                            
 "An Act relating to the tax on transfers or consumption of motor              
 fuel, and repealing the exemption from that tax for motor fuel                
 which is at least 10 percent alcohol by volume; and providing for             
 an effective date."                                                           
      - HEARD AND HELD                                                         
 HOUSE BILL NO. 110                                                            
 "An Act relating to the confidentiality of certain information in             
 motor vehicle records; and providing for an effective date."                  
      - SCHEDULED BUT NOT HEARD                                                
 (* First Public Hearing)                                                      
 PREVIOUS ACTION                                                               
 BILL:  SB 266                                                               
 SHORT TITLE: CREAMER'S FIELD GOOSE CLASSIC                                    
 SPONSOR(S): SENATOR(S) FRANK,Sharp                                            
 JRN-DATE      JRN-PG                ACTION                                    
 02/07/96      2325    (S)   READ THE FIRST TIME - REFERRAL(S)                 
 02/07/96      2325    (S)   STATE AFFAIRS                                     
 02/13/96              (S)   STA AT  3:30 PM BELTZ ROOM 211                    
 02/13/96              (S)   MINUTE(STA)                                       
 02/22/96              (S)   STA AT  3:30 PM BELTZ ROOM 211                    
 02/22/96              (S)   MINUTE(STA)                                       
 02/23/96      2513    (S)   STA RPT  1DP 2NR                                  
 02/23/96      2513    (S)   ZERO FISCAL NOTE (REV)                            
 02/26/96              (S)   RLS AT 12:45 PM FAHRENKAMP RM 203                 
 02/26/96              (S)   MINUTE(RLS)                                       
 02/28/96      2568    (S)   RULES TO CALENDAR  2/28/96                        
 02/28/96      2572    (S)   READ THE SECOND TIME                              
 02/28/96      2573    (S)   ADVANCED TO THIRD READING UNAN CONSENT            
 02/28/96      2573    (S)   READ THE THIRD TIME  SB 266                       
 02/28/96      2573    (S)   PASSED Y16 N2 E2                                  
 02/28/96      2573    (S)   DUNCAN  NOTICE OF RECONSIDERATION                 
 02/29/96      2594    (S)   RECON TAKEN UP - IN THIRD READING                 
 02/29/96      2595    (S)   RECONSIDERATION FAILED Y10 N5 E5                  
 02/29/96      2595    (S)   MOTION TO RESCIND PREVIOUS ACTION                 
 02/29/96      2595    (S)   MOTION HELD TO 3/6 CALENDAR                       
 03/06/96      2628    (S)   RESCINDED PREVIOUS ACTION Y18 N- E2               
 03/06/96      2629    (S)   PASSED ON RECONSIDERATION Y12 N6 E2               
 03/06/96      2636    (S)   TRANSMITTED TO (H)                                
 03/08/96      3018    (H)   READ THE FIRST TIME - REFERRAL(S)                 
 03/08/96      3018    (H)   STATE AFFAIRS                                     
 03/12/96              (H)   STA AT  8:00 AM CAPITOL 102                       
 BILL:  HB 438                                                               
 SPONSOR(S): REPRESENTATIVE(S) BRICE,Kelly,James                               
 JRN-DATE      JRN-PG             ACTION                                       
 01/22/96      2507    (H)   READ THE FIRST TIME - REFERRAL(S)                 
 01/22/96      2507    (H)   STATE AFFAIRS, RESOURCES                          
 01/31/96      2587    (H)   COSPONSOR(S): KELLY                               
 03/12/96              (H)   STA AT  8:00 AM CAPITOL 102                       
 BILL:  HB 443                                                               
 SHORT TITLE: INCREASE MOTOR FUEL TAX                                          
 JRN-DATE      JRN-PG             ACTION                                       
 01/22/96      2508    (H)   READ THE FIRST TIME - REFERRAL(S)                 
 01/22/96      2508    (H)   STATE AFFAIRS, JUDICIARY, FINANCE                 
 03/12/96              (H)   STA AT  8:00 AM CAPITOL 102                       
 WITNESS REGISTER                                                              
 ALLISON GORDON, Legislative Aide                                              
 Senator Steve Frank                                                           
 State Capitol, Room 578                                                       
 Juneau, Alaska  99801-1182                                                    
 Telephone:  (907)465-3709                                                     
  POSITION STATEMENT:   Representing Senator Steve Frank, regarding SB
 MR. DAVID LAMBERT                                                             
 P.O. Box 71243                                                                
 Fairbanks, Alaska  99708                                                      
 Telephone:  (907) 454-7304                                                    
  POSITION STATEMENT:   Representing Fairbanks Montessori Association          
 and Friends of Creamer's Field, regarding SB 110.                             
 SHARON YOUNG, State Recorder                                                  
 Department of Natural Resources                                               
 State of Alaska                                                               
 3601 C Street, Suite 1180                                                     
 Anchorage, Alaska  99503-5947                                                 
 Telephone:  (907)269-8882                                                     
  POSITION STATEMENT:   Representing Recorder's Office, Department of          
 Natural Resources, regarding HB 438.                                          
 RICHARD MCMAHON, Chief                                                        
 Land Records Information                                                      
 Department of Natural Resources                                               
 State of Alaska                                                               
 3601 C Street, Suite 916                                                      
 Anchorage, Alaska  99503-5947                                                 
 Telephone:  (907)269-8836                                                     
  POSITION STATEMENT:   Representing Land Records Information Section,         
 Department of Natural Resources, regarding HB 438.                            
 SAM S. KITO, III, Legislative Liaison                                         
 Department of Transportation and Public Facilities                            
 State of Alaska                                                               
 3132 Channel Drive                                                            
 Juneau, Alaska  99801-7898                                                    
 Telephone:  (907)465-3904                                                     
  POSITION STATEMENT:   Representing Department of Transportation and          
 Public Facilities, regarding HB 443.                                          
 BRAD PIERCE, Senior Policy Analyst                                            
 Office of Management and Budget                                               
 State of Alaska                                                               
 P.O. Box 110001-0001                                                          
 Juneau, Alaska  99811-0001                                                    
 Telephone:  (907)465-4677                                                     
  POSITION STATEMENT:   Representing Office of Management and Budget,          
 regarding HB 443.                                                             
 BOB BARTHOLOMEW, Deputy Director                                              
 Income & Excise Audit Division                                                
 Department of Revenue                                                         
 P.O. Box 110420                                                               
 Juneau, Alaska  99811-0420                                                    
 Telephone:  (907)465-2320                                                     
  POSITION STATEMENT:   Representing Department of Revenue, regarding          
 HB 443.                                                                       
 BERNIE SMITH                                                                  
 P.O. Box 3369                                                                 
 Kenai, Alaska  99611                                                          
 Telephone:  (907)446-8191                                                     
  POSITION STATEMENT:   Representing Tesoro Alaska Petroleum,                  
 regarding HB 443.                                                             
 ALBERT W. DICK, Mayor                                                         
 City of Hoonah                                                                
 P.O. Box 360                                                                  
 Hoonah, Alaska  99829                                                         
 Telephone  (907) 945-3664                                                     
  POSITION STATEMENT:   Representing City of Hoonah, regarding HB 443.         
 ALBERT M. SNELLING                                                            
 Samson Tug & Barge                                                            
 P.O. Box 559                                                                  
 Sitka, Alaska  99835                                                          
 Telephone:  (907) 747-8559                                                    
  POSITION STATEMENT:   Testifying on behalf of Samson Tug & Barge,            
 regarding HB 443.                                                             
 FRANK DILLON, Executive Director                                              
 Alaska Trucking Association                                                   
 3443 Minnesota Drive                                                          
 Anchorage, Alaska  99503                                                      
 Telephone:  (907)276-1149                                                     
  POSITION STATEMENT:   Testifying on behalf of the Alaska Trucking            
 Association, regarding HB 443.                                                
 ACTION NARRATIVE                                                              
 TAPE 96-34, SIDE A                                                            
 Number 0015                                                                   
 The House State Affairs Committee was called to order by Chair                
 Jeannette James at 8:05 a.m.  Members present at the call to order            
 were Representatives James, Green, Porter, Robinson, and Willis.              
 Members absent were Representatives Ogan and Ivan.                            
 SB 266 - CREAMER'S FIELD GOOSE CLASSIC                                      
 The first order of business to come before the committee was SENATE           
 BILL NO. 266, "An Act relating to the Creamer's Field Goose                   
 Classic."  Chair James called on Allison Gordon, aide to Senator              
 Steve Frank.                                                                  
 Number 0075                                                                   
 ALLISON GORDON, Legislative Aide to Senator Steve Frank, sponsor of           
 SB266, stated SB 266 would amend current law to include the Friends           
 of Creamer's Field among those who are authorized to operate and              
 administer a goose classic.  She explained that a goose classic is            
 a game of chance where the participants have the opportunity to win           
 a cash prize for guessing the closest time of arrival of the first            
 goose to Creamer's Field.  Currently, within the Fairbanks area,              
 the Fairbanks Montessori Association is the only group that may               
 operate and administer a goose classic.  This association has found           
 that with its small volunteer group, they are unable to operate the           
 goose classic.  Fairbanks Montessori Association and Friends of               
 Creamer's Field have worked to form a contract in which the two               
 organizations put on the classic together.  The proposed                      
 legislation would also allow either group to operate the classic              
 separately.  She stated the Department of Revenue supports SB 266.            
 Number 0195                                                                   
 CHAIR JAMES called on the next witness, David Lambert, via                    
 teleconference from Fairbanks.                                                
 DAVID LAMBERT stated he was representing Fairbanks Montessori                 
 Association and Friends of Creamer's Field.  He invited questions             
 from the committee.                                                           
 Number 0228                                                                   
 REPRESENTATIVE BRIAN PORTER moved that SB 266 move from committee             
 with individual recommendations and attached zero fiscal note.                
 Number 0251                                                                   
 REPRESENTATIVE CAREN ROBINSON asked why it was necessary to pass              
 new legislation for each type of classic, rather than simply                  
 amending current law to allow the Department of Revenue to approve            
 each classic as appropriate.                                                  
 CHAIR JAMES responded that Representative Robinson should talk to             
 Gary Davis about the issue.                                                   
 Number 0276                                                                   
 CHAIR JAMES announced that SB 266 was passed out of the House State           
 Affairs Committee, with individual recommendations and attached               
 fiscal note.                                                                  
 Number 0344                                                                   
 HB 438 - RECORDING: INDEX DOCUMENTS BY LOCATION                             
 CHAIR JAMES announced that the next order of business to come                 
 before the House State Affairs Committee was HOUSE BILL NO. 438 "An           
 Act relating to the indexing of documents recorded in the state               
 recorder's offices; and providing for an effective date."  Chair              
 James called on the bill's sponsor, Representative Tom Brice.                 
 REPRESENTATIVE TOM BRICE explained that the mining industry has               
 historically used a cardex system to record information relating to           
 location of land claims.  The state has stopped funding this                  
 system, which has created an information void.  HB 438 would add              
 the word "location" into information required to be maintained by             
 the Recorder's Office in its index system.  He invited questions              
 from the committee.                                                           
 Number 0463                                                                   
 SHARON YOUNG, State Recorder, Department of Natural Resources,                
 testified on behalf of the Department of Natural Resources.  She              
 stated that the recorder's office has historically maintained only            
 a grantor/grantee index, as mandated by statute.  As a courtesy,              
 the office has attempted to maintain a location index, which is not           
 mandated.  As a result, location information within the system is             
 incomplete.  Within the past year, the recorder's office has                  
 attempted to index all locations.  Because the volume levels are              
 low, they have been able to do this without additional funding.               
 She explained that mandating the location index would provide a               
 more comprehensive and complete public record, not only for the               
 mining community, but for other individuals who use the system.               
 She invited questions from the committee.                                     
 Number 0580                                                                   
 CHAIR JAMES asked if Ms. Young wished to testify regarding the                
 fiscal note.                                                                  
 MS. YOUNG responded that the fiscal note anticipates a 5 percent              
 annual volume increase, after FY 97.  The proposed funding would be           
 necessary to support that volume level.                                       
 Number 0656                                                                   
 CHAIR JAMES replied that there were two fiscal notes.  The first,             
 regarding the information resource management component, shows a              
 personal services item of $70 thousand in FY 97.  The recorder's              
 office Uniform Commercial Code component shows no personal services           
 in FY 97, but begins in FY 98, and continues.  She noted the                  
 increases appeared to cover only regular merit and step increases,            
 and did not add additional positions.                                         
 Number 0699                                                                   
 MS. YOUNG concurred.  She stated the increases were based on                  
 current years' salaries, and assume a 5 percent growth in volume.             
 She noted that a representative of the Information Services section           
 was also present to testify.                                                  
 CHAIR JAMES reiterated her understanding that the information has             
 always been provided as a courtesy by the recorder's office, and              
 not by the Information Services section.                                      
 Number 0740                                                                   
 MS. YOUNG agreed.  She explained that the testimony of the Land               
 Records Information Section would clarify their fiscal note, which            
 addresses a broader scope of integrating the information with other           
 database information within the department.                                   
 Number 0762                                                                   
 CHAIR JAMES asked if the information would still be kept on a                 
 cardex system.                                                                
 MS. YOUNG replied that the recorder's office would continue to                
 index the information as it has in the past.  She explained that              
 the information services section would provide an interface with              
 other information.                                                            
 Number 0802                                                                   
 REPRESENTATIVE JOE GREEN asked how the cost increases were                    
 MS. YOUNG replied that the increase was based on average recording            
 volumes.  A document increase of about 4,500 substantiates an                 
 additional full-time position.  She further explained that                    
 statewide volume has averaged about 200,000 documents per year, and           
 a 5 percent increase is anticipated.                                          
 REPRESENTATIVE GREEN then asked why twice as many full-time                   
 employees would be required.                                                  
 Number 0891                                                                   
 MS. YOUNG replied she was not sure she understood the question.               
 REPRESENTATIVE GREEN responded that he was looking at positions, on           
 the fiscal note.                                                              
 MS. YOUNG explained that the $70 thousand need in personal services           
 would cover a five percent volume growth, which would represent one           
 full-time and one part-time position.  In the next year, a                    
 subsequent 5 percent growth would result in a dollar need of $81              
 thousand.  The positions would increase to two full-time.                     
 Number 0941                                                                   
 REPRESENTATIVE GREEN then asked about the figures for FY 98 and FY            
 MS. YOUNG explained that the figures are not finite.                          
 CHAIR JAMES expressed her opinion that the figures did not                    
 calculate correctly.  She stated that the fiscal note would be                
 handled by the Finance Committee, but that it was a very important            
 component of the bill.                                                        
 Number 1028                                                                   
 REPRESENTATIVE SCOTT OGAN mentioned that he had noticed no finance            
 committee referral on the bill.                                               
 CHAIR JAMES replied that there would have to be a finance referral,           
 since there was a fiscal note.                                                
 Number 1054                                                                   
 REPRESENTATIVE PORTER suggested the Clerk's office should be                  
 notified the bill needs a referral to House Finance, and that the             
 House State Affairs Committee has a concern over the validity of              
 the fiscal note.                                                              
 Number 1071                                                                   
 REPRESENTATIVE GREEN noted the bill's passage hinges on the fiscal            
 CHAIR JAMES stated she did not want a fiscal note to kill the bill.           
 Number 1110                                                                   
 CHAIR JAMES invited Richard McMahon to testify.                               
 RICHARD MCMAHON, Chief, Land Records Information Section,                     
 Department of Natural Resources (DNR), stated he had participated             
 in the cardex meetings mentioned earlier.  He explained the DNR's             
 proposal would not replace the cardex system.  Rather, the                    
 objective is to expand the indexing, so that recorded documents can           
 be located by location.  The DNR's system contains all mining                 
 records, as well as many others.  The department also has access to           
 federal records, through the Bureau of Land Management (BLM)                  
 system.  He stated that the DNR would like to institute an index              
 system using a common key approach.  The fiscal note would provide            
 one computer programming position for twelve months, as well as               
 funding to pay for Department of Administration mainframe services.           
 Number 1223                                                                   
 CHAIR JAMES responded she assumed some computer programming would             
 be needed, which was why she had asked the questions of the                   
 previous witness.                                                             
 CHAIR JAMES called on the next witness, via teleconference, in                
 Number 1248                                                                   
 MARY NORDALE stated she would testify in support of HB 438.  She              
 explained she was a member of the cardex committee, chaired by Earl           
 Beistline, who had authorized her to speak on his behalf.  She                
 emphasized that HB 438 is an extremely important bill for the                 
 mining industry, as well as other resource based industries.  The             
 cardex system which has always been used is a good one, and works             
 well, but is available only in Fairbanks.  People wanting to do               
 research in the system have had to come to Fairbanks.  This has               
 been a subject of concern to the mining industry statewide.  Ms.              
 Nordale pointed out that, as far as the fiscal note is concerned,             
 the recorder's office does collect fees for documents recorded, and           
 in this way actually generates revenue.                                       
 Number 1471                                                                   
 REPRESENTATIVE OGAN mentioned the receipts generated by the                   
 recorder's office.  He asked if there was a way to find out if the            
 receipts would bring in enough revenue to offset the fiscal note.             
 CHAIR JAMES responded that, as the witness explained, the fee for             
 services in the recording office provides more money than the                 
 office spends.  She explained that the money goes into the general            
 fund, so the money received would not actually offset the fiscal              
 Number 1545                                                                   
 REPRESENTATIVE OGAN asked if going to a digital system would result           
 in enough increased revenue to offset the cost of the new system.             
 CHAIR JAMES replied she didn't think there would be fees charged              
 for using the system.  The fees are only charged for recording                
 REPRESENTATIVE PORTER commented that the fiscal note from the                 
 recorder's office does contain an offset of revenue.  However, the            
 fiscal note from information resources management has $90 thousand            
 that is not offset.  Therefore, the fiscal impact to the budget               
 would be $90 thousand in FY 97, and an additional ten thousand in             
 other years.                                                                  
 CHAIR JAMES asked Ms. Young to respond to the question regarding              
 fees charged for using the information.                                       
 Number 1635                                                                   
 MS. YOUNG responded that, yes, the fees are generated only by                 
 recording of documents.  Access to the documents is free.                     
 CHAIR JAMES asked if it would be possible for the information to be           
 tallied and available statewide via computer.                                 
 Number 1692                                                                   
 MR. MCMAHON stated that the index system would be able to identify            
 recorded documents, and provide the book and page records, so that            
 the documents could be accessed in the recorder's office.  The                
 proposed system would not provide electronic images of the                    
 documents themselves.  He explained that in the cardex meetings,              
 one consultant stated that research which would take one to two               
 hours using the cardex system, could take three to five days                  
 looking by book and page in the recorder's office.                            
 Number 1750                                                                   
 CHAIR JAMES responded that she didn't visualize the system                    
 providing electronic images of the documents.  She stated that                
 being able to identify an area of the state, and discover the                 
 ownership and status of the land, is extremely important to                   
 resource development.                                                         
 REPRESENTATIVE OGAN asked if the recorder's office had the                    
 authority to charge the public for accessing the information.                 
 Number 1810                                                                   
 MR. MCMAHON replied that the authority to institute fee schedules             
 was in place.                                                                 
 REPRESENTATIVE GREEN asked if it was correct that receipts                    
 currently exceed the cost of running the recorder's office.                   
 MS. YOUNG replied, yes, that was true.                                        
 Number 1866                                                                   
 MS. NORDALE stated the mining community in Fairbanks has always               
 supported fees for recording of required documents.                           
 CHAIR JAMES reiterated her belief that the House State Affairs                
 Committee should not be arguing over fiscal notes.  She emphasized            
 that she doesn't want to see the bill killed because of the fiscal            
 Number 1993                                                                   
 REPRESENTATIVE IVAN IVAN stated he approved of the intent of the              
 bill, but questioned if a statute was actually required.  Couldn't            
 the intent be accomplished through administrative measures?                   
 CHAIR JAMES responded that funds for this process had been taken              
 out of the budget, because it was not a statutory requirement.  She           
 again emphasized the information is a valuable tool for the mining            
 community, and should be available statewide.  Therefore, the bill            
 is needed to make collecting of this information a statutory                  
 requirement.  She stated she wanted to be sure she had enough                 
 information to support the issue in the budget process, and she               
 appreciated the information provided.                                         
 Number 2067                                                                   
 REPRESENTATIVE ED WILLIS made a motion to pass HB 438 with                    
 accompanying fiscal note and individual recommendations out of the            
 House State Affairs Committee, with a note regarding the validity             
 of the fiscal note.  There being no objection, HB 438 was passed              
 out of the House State Affairs Committee.                                     
 Number 2075                                                                   
 HB 110 - CONFIDENTIALITY OF MOTOR VEHICLE RECORDS                           
 CHAIR JAMES that announced HB 110 would be heard at the next                  
 Number 2121                                                                   
 REPRESENTATIVE OGAN introduced Gate Weaver, a senior at Colony High           
 in the Palmer-Wasilla area, and winner of the Student to Juneau               
 Contest.  He explained Mr. Weaver would be his shadow for the next            
 few days.                                                                     
 Number 2121                                                                   
 HB 443 - INCREASE MOTOR FUEL TAX                                            
 CHAIR JAMES announced the next order of business before the House             
 State Affairs Committee was HOUSE BILL NO. 443, "An Act relating to           
 the tax on transfers or consumption of motor fuel, and repealing              
 the exemption from that tax for motor fuel which is at least 10               
 percent alcohol by volume; and providing for an effective date."              
 Chair James introduced Sam Kito, III, to present the bill.                    
 Number 2173                                                                   
 SAM S. KITO, III, Legislative Liaison, Department of Transportation           
 and Public Facilities (DOT), State of Alaska, announced he would              
 read a prepared statement in support of HB 443.  Mr. Kito read as             
 follows:  "The Department of Transportation and Public Facilities             
 supports HB 443.  More specifically, the department supports                  
 increase in highway and marine motor fuel taxes, if the taxes will            
 be dedicated to the mode from which the taxes were collected.                 
 "House Bill 443 was introduced at the request of the Long Range               
 Financial Planning Commission, as a component of an overall long-             
 range fiscal plan.  The bill proposes an increase in the highway              
 motor fuel tax, from the current eight cents per gallon to twenty-            
 two cents per gallon, and an increase in the marine motor fuel tax            
 from the current five cents per gallon to eight cents per gallon.             
 The bill also repeals the exemption currently in place for the use            
 of gasohol.  The DOT estimates that even without an increase in               
 motor fuel tax, the lost revenue from the use of gasohol will be in           
 excess of six million dollars for FY 97.                                      
 "The highway fuel tax increase will provide the department with               
 revenue, which will enable the department to increase maintenance             
 on state-owned roads and highways.  An increase in maintenance will           
 extend the life of our roads and highways.  This will make federal            
 construction funds available for other important highway projects             
 in the state.                                                                 
 "There are other factors which make increasing the motor fuel tax             
 an important issue for this legislature to address.  In January,              
 the United States General Accounting Office (GAO) released a report           
 entitled `HIGHWAY FUNDING, Alternatives for Distributing Federal              
 Funds.'  The report did not make specific recommendations.                    
 However, the GAO did lay out seven alternatives for distribution of           
 the nation's federal highway trust funds.  In four of the                     
 alternatives, Alaska's overall share goes from $231 million, which            
 we received in FY 95, to approximately $40 million.  In only one              
 alternative, Alaska's best case in this report, the state's share             
 goes from $231 million to $89 million.                                        
 "If Congress decided to adopt even the best GAO alternative, Alaska           
 could stand to lose $191 million federal dollars for construction             
 on our highways in the state.  For this reason, the department                
 believes it is prudent to indicate to other states and to congress            
 that we are doing all we can to maintain the transportation system            
 we have, and to show a commitment to maintain our transportation              
 system in the future.  Fortunately, at this time, the state has a             
 strong advocate in Senator Stevens, who sits on the Senate                    
 Appropriations Committee.  But, the potential for losing valuable             
 federal highway funds is still there.  Even if we do manage to                
 maintain the current level of funding through the next federal                
 highway spending authorization, we can eventually expect a decline            
 in federal highway funds for Alaska.                                          
 "The marine fuel tax increase, coupled with a dedicated fund, will            
 provide the department with funding for a harbor transfer program.            
 The program would involve funding capital projects for state owned            
 harbors, to upgrade the facilities to the condition where the                 
 department could turn over the facilities to a local municipality.            
 The department estimates that all but about 22 of the facilities              
 currently owned by the state could reasonably be transferred in               
 five years.  The proposed program would basically get the state out           
 of the harbor business."                                                      
 Mr. Kito then invited questions.                                              
 Number 2307                                                                   
 CHAIR JAMES noted for the record that the bill before the committee           
 is the House State Affairs Committee substitute.  The original bill           
 did not require a dedicated fund in order for the legislation to              
 take effect.  She explained that a constitutional amendment to                
 create a dedicated fund is currently in the finance committee.                
 House Bill 443 would be contingent upon the passage of that                   
 constitutional amendment.                                                     
 Number 2344                                                                   
 REPRESENTATIVE PORTER moved that the committee adopt working draft            
 CSHB443 (STA), M-3796.  There being no objection, the CS was                  
 adopted as the working draft.                                                 
 Number 2358                                                                   
 REPRESENTATIVE WILLIS asked Mr. Kito if the administration had a              
 position on the proposed constitutional amendment.                            
 MR. KITO replied that the governor does support a constitutional              
 amendment for transportation purposes.  The resolution currently in           
 house finance is generally supported by the governor, with several            
 suggested amendments.                                                         
 Number 2381                                                                   
 REPRESENTATIVE IVAN asked for clarification regarding the meaning             
 of marine motor fuels taxes.  He wondered if the tax would apply              
 only to fuels used on navigable waters, or if small river boats               
 would also be affected.                                                       
 MR. KITO responded that the tax would be collected at the                     
 distribution points throughout the state, not at point of sale.  He           
 explained that if the distributor believed that a percentage of the           
 fuel would be used in marine craft, he would file with the                    
 department to pay the fuel tax.  He added that a representative               
 from the Department of Revenue was present to answer questions.               
 Number 2439                                                                   
 BOB BARTHOLOMEW, Assistant Director, Income & Excise Tax Division,            
 Department of Revenue, State of Alaska, announced he would testify            
 on behalf of the department.  He explained he would clarify the               
 content of the fiscal note.  The fiscal note was prepared prior to            
 the CS, and shows revenue in FY 97.  If the bill was amended                  
 according to the CS, to tie the tax increase to a dedicated fund,             
 there would be no new revenues collected in FY 97.  The dedicated             
 fund would go into place in FY 98.  In the first year, increased              
 revenue from raising the highway motor fuel and marine motor fuels            
 taxes, and removing the gasohol exemption, would amount to $59.5              
 TAPE 96-34, SIDE B                                                            
 Number 0000                                                                   
 MR. BARTHOLOMEW further explained the gasohol exemption was passed            
 in the early 1980's, to help expedite potential sale of Delta                 
 barley.  The exemption is still on the books, and results in a loss           
 of revenue.  In FY 95 the state lost $2.4 million in revenue due to           
 the use of gasohol, and the projection for FY 96 is six million.              
 He stated the fiscal note also contains increased operating costs             
 of $80 thousand, which covers one Revenue Auditor III, to be based            
 in Anchorage.  Mr. Bartholomew then invited questions.                        
 Number 0087                                                                   
 CHAIR JAMES reiterated Representative Ivan's question, regarding              
 how the types of fuel would be identified.                                    
 MR. BARTHOLOMEW explained that motor fuel tax is currently paid by            
 a qualified motor fuel dealer, who is normally a wholesaler.  When            
 fuel is sold, the distributor must make a determination concerning            
 the ultimate use of the fuel.  The distributor then files a tax               
 return with the department of revenue.  In some cases, it is                  
 possible that fuel sold to a retail dealer, such as a gas station,            
 may wind up in either car or boat engines, yet would be taxed at              
 the highway rate.  He stated that, as the tax is raised, additional           
 guidelines may have to be provided for such multiple use                      
 Number 0189                                                                   
 REPRESENTATIVE OGAN asked if Mr. Bartholomew could explain section            
 five of the bill.                                                             
 MR. BARTHOLOMEW responded that both the original bill and the CS              
 contain a clause directing the department of revenue to tie the tax           
 to the Consumer Price Index (CPI), and to adjust it every two                 
 REPRESENTATIVE GREEN then asked if the figures would be rounded off           
 each year.                                                                    
 MR. BARTHOLOMEW responded that January, 1997, would be used as the            
 Number 0235                                                                   
 CHAIR JAMES announced that the Mayor of Hoonah would be testifying            
 via teleconference.                                                           
 MAYOR ALBERT W. DICK, City of Hoonah, stated the previous testimony           
 had clarified his concerns.                                                   
 Number 0245                                                                   
 CHAIR JAMES announced that Bernie Smith would be testifying via               
 teleconference, from Kenai.                                                   
 BERNIE SMITH announced he would testify on behalf of Tesoro Alaska            
 Petroleum.  He stated that the increase contained in the CS                   
 amounted to a fourteen cent increase in one year.  When tied in               
 with eliminating the gasohol exemption, the total increase amounts            
 to twenty-two cents per year.  He commented this would put a burden           
 on the public, especially in Anchorage and Fairbanks.  He stated              
 that Tesoro feels the increase is too steep, but would support the            
 constitutional amendment, which would give the voters a chance to             
 decide on the issue.  On the marine motor fuel tax, he stated the             
 current tax already affects in-state refineries.  Processors coming           
 into Alaskan waters will bring their own fuel aboard their vessels,           
 and park outside the state three-mile water limit, rather than pay            
 the cost difference.  He emphasized that adding an additional tax             
 would make it extremely difficult for in-state refineries to                  
 compete with Seattle based vessels.  He stated Tesoro would support           
 the proposed dedicated fund for the current marine motor fuel tax.            
 Mr. Smith then invited questions from the committee.                          
 Number 0384                                                                   
 CHAIR JAMES asked if Tesoro would support phasing in the additional           
 MR. SMITH replied he could not answer the question without                    
 consulting with company officials.  He speculated that the company            
 would probably not object to an increase of five cents per gallon             
 in the first year, provided the revenue went to a dedicated fund.             
 NUMBER 0417                                                                   
 CHAIR JAMES then asked if the difference between the amount paid              
 for fuel in Seattle and Alaska was so great that increasing the tax           
 would actually cause large users to bring in their own fuel.                  
 MR. SMITH replied that this was already occurring.  He reiterated             
 this made it extremely difficult for in-state refineries to                   
 CHAIR JAMES responded that the oil industry needs to do a better              
 job of explaining to the public why the price of fuel is so high in           
 the state of Alaska.  She then announced the committee would hear             
 testimony from Sitka, via teleconference.                                     
 Number 0487                                                                   
 ALBERT M. SNELLING, an employee of Samson Tug & Barge, explained              
 the company is a line haul freight company operating out of Sitka,            
 with a terminal in Seattle.  They haul cargo to Valdez, Kodiak,               
 Sand Point, King Cove, Dutch Harbor, and Adak.  He stated that,               
 with the proposed tax increases, the company's total fuel costs for           
 1996 would exceed one million dollars.  He added that the increased           
 fuel costs would result in higher prices to the consumer for items            
 brought into the state, such as groceries.  He stated he favored              
 cutting government spending and privatization of some government              
 functions, rather than increasing taxes on industry.                          
 CHAIR JAMES announced the committee would hear testimony from                 
 Anchorage, via teleconference.                                                
 FRANK DILLON, Executive Director, Alaska Trucking Association,                
 announced he would testify on behalf of the trucking association.             
 He explained that diesel fuel is the life blood of the trucking               
 industry, and that fuel is 12 to 15 percent of the total cost of a            
 trucking operation.  He stated he was pleased to see the committee            
 substitute for HB 443, because of the dedicated fund provision.  He           
 further stated he would confine his remarks only to the highway               
 fuel tax.  He stated the association has two problems with the                
 current committee substitute.  One is the rate of taxation; the               
 association does not believe the rate is justified.  Second, the              
 association objects to indexing the price increase to the CPI.  He            
 explained the association does advocate a dedicated fund for                  
 highway fuel tax revenues.  Mr. Dillon then invited questions from            
 the committee.  He added that he concurred with Mr. Snelling's                
 testimony, and that the fuel increase would definitely be passed              
 along to consumers.                                                           
 Number 0775                                                                   
 CHAIR JAMES announced the committee would hear testimony from Brad            
 Pierce, Office of Management and Budget.                                      
 BRAD PIERCE, Senior Policy Analyst, Office of Management and Budget           
 Office of the Governor (State of Alaska,) stated he was on the                
 staff of the Long Range Financial Planning Commission, which had              
 proposed the current bill.  He explained that revenues from the               
 bill figured prominently in the commission's long range plan for              
 the state.  The commission definitely felt the increase from the              
 increased fuel tax should be tied to a dedicated fund.  He further            
 explained the commission's reason for indexing the rate increase to           
 the Consumer Price Index (CPI).  The current motor fuel tax rate              
 has not been increased since 1961, which made it the lowest rate in           
 the nation.  Tying the rate increase to the CPI would keep the tax            
 in line with the national average.                                            
 Number 0862                                                                   
 REPRESENTATIVE CAREN ROBINSON asked if twenty-four cents per gallon           
 was the national average.                                                     
 MR. PIERCE replied that the national average is twenty-two cents              
 per gallon.                                                                   
 Number 00873                                                                  
 CHAIR JAMES commented that Alaska's base price for fuel is much               
 higher than other places, which makes the tax more problematic.               
 She commended the work of the Long Range Financial Planning                   
 Commission, but stated the state needs to determine what level of             
 spending can be sustained over the long term.  Not only do we have            
 the lowest rate of tax on gasoline, we also have no income or sales           
 taxes.  We continue to receive permanent fund dividends.  She                 
 emphasized that people need to decide how much state spending they            
 are willing to support.  While cutting the budget may have a                  
 devastating effect on the economy, imposing new taxes on businesses           
 may have an even more devastating effect.  She stated the state               
 needs to be cautious in imposing new taxes, but it must be done in            
 smaller steps.  She further stated she did not agree with tying               
 increases to the CPI.                                                         
 Number 1007                                                                   
 CHAIR JAMES announced the committee would not be taking action on             
 HB 443 today.  She asked if there were further questions or                   
 Number 1015                                                                   
 REPRESENTATIVE PORTER asked what was the effect of section six.               
 CHAIR JAMES replied that it repealed the exemption on gasohol.                
 Number 1032                                                                   
 REPRESENTATIVE OGAN stated that he agreed with Chair James                    
 regarding tying the tax increase to the CPI.  He asked if it was              
 the appropriate time to move an amendment.                                    
 Number 1061                                                                   
 CHAIR JAMES responded that an amendment would be considered at the            
 next meeting.                                                                 
 REPRESENTATIVE OGAN applauded the concept of allowing the people to           
 vote on the issue, through a constitutional amendment.                        
 Number 1118                                                                   
 CHAIR JAMES adjourned the House State Affairs Committee meeting at            
 9:18 a.m.                                                                     

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