HOUSE FINANCE COMMITTEE April 28, 1995 8:30 A.M. TAPE HFC 95-104, Side 2, #000 - end. TAPE HFC 95-105, Side 1, #000 - 424. CALL TO ORDER Co-Chair Mark Hanley called the House Finance Committee meeting to order at 8:55 p.m. PRESENT Co-Chair Hanley Representative Martin Co-Chair Foster Representative Mulder Representative Brown Representative Navarre Representative Grussendorf Representative Parnell Representative Kelly Representative Therriault Representative Kohring ALSO PRESENT Representative Carl Moses; Senator Johnny Ellis; Bob Bartholomew, Director, Income and Excise Audit Division, Department of Revenue; Margot Knuth, Criminal Division, Department of Law; Cheryl Sutton, Staff, Representative Moses. SUMMARY HB 122 An Act authorizing payment of a portion of the motor fuel tax on boats and watercraft as refunds to municipalities; and providing for an effective date. CSHB 122 (FIN) was reported out of Committee with "no recommendation" and with a fiscal impact note by the Department of Revenue. HB 297 An Act relating to fees for a commercial fishing vessel license. HB 297 was reported out of Committee with "no recommendation" and with a fiscal impact note by the Department of Fish and Game. SB 67 An Act relating to the crime of unlawful evasion. 1 SB 67 was reported out of Committee with and with two zero fiscal notes; one by the Department of Administration, dated 3/9/95; one by the Department of Law, dated 3/9/95; and one by the Department of Corrections, dated 3/9/95. $hb122 HOUSE BILL NO. 122 "An Act authorizing payment of a portion of the motor fuel tax on boats and watercraft as refunds to municipalities; and providing for an effective date." REPRESENTATIVE CARL MOSES, SPONSOR provided members with a proposed committee substitute for HB 122, work draft the work draft would increase the marine motor fuel tax from $.05 to $.08 cents. Three cents on each gallon would be shared back to the municipality where the fuel was sold. The revenue generated from the $.05 cent tax would be deposited in to the General Fund. He stressed that the $40.0 thousand dollar administrative cost would be deducted by the portion shared to municipalities. He emphasized that during the last 10 years funding for boats and harbors has declined. He advocated making special concessions to small boats of 64 feet and under. He observed the need for facilities. He stressed that HB 122 would provide a mechanism to maintain or build harbor facilities. He noted in some communities boats have been lifted on to city docks due to the lack of safe moorings. In response to a question by Representative Therriault, Mr. Moses stated that the accounting and collection of $.05 will not be changed. In response to a question by Representative Brown, Representative Moses reiterated that the tax will be shared back to the communities where the tax was collected. Representative Brown noted that new reporting requirements would be imposed on motor fuel sales. BOB BARTHOLOMEW, DEPUTY DIRECTOR, INCOME AND EXCISE AUDIT DIVISION, DEPARTMENT OF REVENUE stated that motor fuel dealers contacted by the Department indicated that they would be able to comply with the additional reporting requirement. He observed that under current law the tax is collected at the wholesale level. The tax is collected on the first sale or transfer within the State. The committee substitute would require that a secondary sale or transfer that changes cities would have to be reported. The person who transported the fuel across city lines would be responsible for reporting. The fuel is only taxed once at 2 the wholesale level. The reporting requirement would allow the Department to track the disposition of fuel use. In response to a question by Representative Kelly, Representative Moses acknowledged that municipalities could impose a motor fuel tax. He emphasized that a statewide tax would prevent competition among municipalities. Representative Navarre expressed concern that the legislation would take away from the State's ability to raise revenues. He emphasized that there are a wide range of opportunities to raise revenues on a local level. Representative Mulder asked if other funding sources exist. Representative Moses noted that the United States Corps of Engineers assist where breakwaters are required. Representative Mulder emphasized that an overall problem in relation to the state's transportation system exists. He suggested that a ballot amendment should be placed to see if voters will adopt a fuel tax increase dedicated to improving roads, airports, and harbors around the state. In response to a question by Representative Therriault, Representative Moses observed that the tax would be deposited in the General Fund. He noted that the Department of Transportation and Public Facilities would like to see the funding dedicated for maintenance or new facility construction. He felt that utilities and landfills should be included. Representative Therriault did not think that municipal dumps should be funded by motor fuel taxes. Representative Moses observed that marine fuel purchased from gas stations would already be paying a tax of $.08 cents on a gallon. Representative Grussendorf observed that the city of Sitka has an enterprise harbor fund to encourage privatization of State harbors. Any money generated from the fishing fleet is used to support the water front. He stressed that the public will support a tax that is used to support local harbor needs. Representative Moses noted the need for small boat facilities. In response to a question by Representative Kelly, Representative Moses noted that CDQ funds have been used to build docks. He noted that CDQ funds do not have to be spent on dock facilities. Representative Grussendorf pointed out that CDQ funds only pertain to Bering Sea communities. They do not have a statewide affect. 3 Representative Therriault summarized that the legislation would impose a uniform tax on municipalities to prevent competition. Representative Brown observed that the title would require reporting for all motor fuels. Mr. Bartholomew explained that section 5 on page 3 incorporates current regulation requirements for reporting. He stated that the new reporting requirement for marine motor fuel is on page 5 (d). Representative Navarre pointed out that the committee substitute sets up a mechanism in which any increases in motor fuel tax would include water craft and motor fuel, and be shared back to municipalities at a rate of 37.5 percent. He emphasized that any future increase in motor fuel tax would be accompanied by a demand for some level of allocation to municipalities. He stressed that the areas of greatest sales would benefit most from the shared tax. He observed that there are huge portions of the state's transportation system that are not within areas where the fuel might actually be sold. In response to a question by Co-Chair Foster, Representative Moses clarified that the administrative fee would be taken from the municipalities' portion of the tax. Mr. Bartholomew added that the accompanying Department of Revenue fiscal note would be revised to reflect the net zero impact. Representative Mulder argued that if coastal communities receive a share of marine fuel tax that there will be no incentive for them to approve a ballot measure to increase the motor fuel tax. He spoke in favor of a dedicated motor fuel tax for support of the State's transportation system, administered directly by the State. He emphasized that the only way that a motor fuel tax proposition will be supported is if there is broad base support. He maintained that the big picture must be considered. Representative Moses expressed concern that the federal government will look at the State's highway fund formula and decide that the State is not taxing itself. He emphasized that the State is behind in addressing these problems. He observed that if the tax were instituted by municipalities it would be possible for dealers to escape the tax by the use of barges for fuel sales. Representative Mulder suggested that a constitutional vote needs to be taken. Representative Brown stated that she does not support dedicated funds. She acknowledged that 4 facilities have been allowed to deteriorate. She expressed support for expanding the legislation to include all motor fuels. She observed that there are many interest groups that would have a legitimate reason to argue for their own dedicated fund. She felt that the public would understand that it is necessary to support the transportation infrastructure. She reiterated support for inclusion of other motor fuel taxes. Representative Moses pointed out that there is currently no accounting method to determine where the marine fuel tax is being paid. He estimated that non-residents and residents in his district pay a large portion of the tax. He reiterated the need for maintenance and new harbor facilities in his district. He asserted that his district is 10 to 15 years behind in supporting these needs. Representative Grussendorf spoke in support of providing a funding source for municipalities to address their harbor needs. He observed that there is competition to attract the fishing fleet. He emphasized that a steady revenue stream would allow municipalities to make provisions for the services the fishing fleet needs. He observed that the fishing fleet has a positive effect on a municipality's economy. Representative Grussendorf MOVED to adopt work draft so ordered. Representative Mulder MOVED to adopt an updated Department of Revenue fiscal note to reflect that the administrative cost will be deducted from the share of the tax given to municipalities. In response to a question by Representative Mulder, Representative Moses acknowledged that there is no guarantee that revenues raised as a result of the legislation would be used to fund harbor maintenance or projects. (Tape Change, HFC 95-105, Side 1) Representative Navarre maintained that the State has attempted to meet the growing need for harbor maintenance and facilities. He stressed that the State's contribution for harbor facilities has been adequate given fiscal constraints. He pointed out that municipalities have the ability to raise revenues through harbor and other user fees. He expressed his concern with the erosion of a potential tax base for the State. Representative Brown questioned if language would be 5 included in the front section of the HB 100 to authorize the Department to distribute back the money collected under the statute. Mr. Bartholomew noted that other shared taxes administered by the Department of Revenue are authorized through the front section. Representative Moses stated that the language in HB 122 is almost identical to authorization language in other shared taxes. Representative Grussendorf MOVED to report CSHB 122 (FIN) out of Committee with individual recommendations and with the accompanying fiscal note which reflects that the administrative cost would be deducted from the $.03 cents shared with municipalities. Representative Navarre OBJECTED. A roll call vote was taken on the MOTION to move CSHB 122 (FIN) from committee. IN FAVOR: Grussendorf, Kelly, Kohring, Mulder, Parnell, Therriault, Foster, Hanley OPPOSED: Navarre, Brown Representative Martin was absent from the meeting. The MOTION PASSED (8-2). CSHB 122 (FIN) was reported out of Committee with "no recommendation" and with a fiscal impact note by the Department of Revenue. HOUSE BILL NO. 297 "An Act relating to fees for a commercial fishing vessel license." REPRESENTATIVE CARL MOSES, SPONSOR testified in support of HB 297. He stressed that there has been an inequity in the vessel licensing fee. He noted that a 14 foot skiff is charged the same $20 dollar fee as a 300 foot off shore troller. He observed that similar legislation passed both Houses in the previous session, but was vetoed by the Governor. He stated that the previous legislation was amended in the Senate to increase non-resident fees beyond resident fees. The Governor was concerned that litigation involving disparities between resident and non-resident fees could be affected by the legislation. He added that a disparity in resident and non-resident fees could be confusing where residency differs among owners. He observed that the legislation will raise approximately $544.0 thousand dollars. He expressed the intent that the revenues 6 raised by the legislation be used to support the Department of Fish and Game's budget. He emphasized the fairness of charging according to the ability of a vessel to harvest the resource. Co-Chair Hanley acknowledged that he has a boat in the 25 to 50 foot range. He questioned if the Department would have the flexibility to issue two year licenses. CHERYL SUTTON, STAFF, REPRESENTATIVE MOSES clarified that the Department would be able to issue two year licenses at double the cost of a one year licenses. She noted that it is not the intent of the legislation to provide a discount for a two year license. Representative Navarre MOVED to report HB 297 out of Committee with individual recommendations and with the accompanying fiscal note. Representative Therriault OBJECTED for purpose of discussion. He referred to the intent section. He stated that anticipated that the FY 97 House Finance Subcommittee for the Department of Fish and Game will develop a budget for the Department within the constraints of available funding. Representative Therriault WITHDREW his objection. Representative Kohring summarized that funds resulting from the increase in vessel fees will go into the General Fund with the intent that they will be appropriated for fish and game related uses. Representative Moses commented that most of the fees will be received before the January 1, 1995. Representative Grussendorf pointed out that program receipts generated through limited entry permits are deposited into the General Fund. He observed that the request for an investigator by the Limited Entry Commission was denied. He emphasized that there is no guarantee that the money will be used for the Department of Fish and Game. There being NO OBJECTION, HB 297 was reported out of Committee. HB 297 was reported out of Committee with "no recommendation" and with a fiscal impact note by the Department of Fish and Game. SENATE BILL NO. 67 "An Act relating to the crime of unlawful evasion." 7 SENATOR JOHNNY ELLIS, SPONSOR testified in support of SB 67. He observed that Anchorage downtown activists requested the legislation in response to concerns that escapes of misdemeanants from halfway houses were not being taken seriously. He observed that there were 23 walk-aways by misdemeanants in half-way houses in FY 93, 68 in FY 94, and 31 to date in FY 95. He stated that walk aways have gone on to commit drunk driving and drug crimes. He maintained that the current sanction should be consolidated at the higher felony level of up to one year in prison and up to a $5.0 thousand dollar fine. Misdemeanants would have the same deterrent as felons for escaping from a half-way house. He observed that a consensus was achieved by neighborhood activists and operators of the half-way houses. Co-Chair Foster questioned the zero fiscal impact. Senator Ellis emphasized that the intent is to create a deterrent. MARGOT KNUTH, CRIMINAL DIVISION, DEPARTMENT OF LAW stressed that there is no difference in the cost of prosecuting class A or class B misdemeanor cases. She stressed that while there would be no fiscal cost from the legislation there would be a deterrent impact. She emphasized that the legislation simplifies the criminal code and is welcomed by the Department of Law. In response to a question by Co-Chair Foster, Ms. Knuth noted that the typical offender housed in a half-way house is non-violent. Representative Parnell questioned why there would be no increase to the Department of Corrections to reflect the increased jailed time. Ms. Knuth stated that there is an assumption that the actual period of incarceration is not likely to go up. She observed that there would be a longer period of supervision under a suspension of sentence. She acknowledged that there may be some additional time if the suspension is revoked. She added that if the suspended sentence is revoked another offense would be involved. Representative Martin queried if offenders that walk away from a half-way house would have to serve their probation time. Ms. Knuth noted that there will be times when the half-way house constitutes the offender's sentence. Senator Ellis observed a trend toward more serious offenders being placed in halfway houses due to over crowding in correctional facilities. He acknowledged that it is good policy to have a facility from which offenders can be transitioned back into the community. Co-Chair Foster MOVED to report SB 67 out of Committee with individual recommendations and with the accompanying fiscal 8 notes. ADJOURNMENT The meeting adjourned at 10:05 a.m. 9