Legislature(2017 - 2018)HOUSE FINANCE 519
04/05/2017 01:30 PM House FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| Confirmation Hearing: Alaska Mental Health Trust Board of Trustees | |
| HB60 | |
| HB127 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
| + | HB 60 | TELECONFERENCED | |
| + | HB 127 | TELECONFERENCED | |
| + | TELECONFERENCED |
HOUSE BILL NO. 60
"An Act relating to the motor fuel tax; relating to
the disposition of revenue from the motor fuel tax;
relating to a transportation maintenance fund; and
providing for an effective date."
2:44:37 PM
JERRY BURNETT, DEPUTY COMMISSIONER, TREASURY DIVISION,
DEPARTMENT OF REVENUE, introduced the PowerPoint
Presentation: "HB 60 Motor Fuel Tax."
Mr. Burnett began with slide 2: "Motor Fuel Tax Increase":
"An Act relating to the motor fuel tax; relating to
the disposition of revenue from the motor fuel tax;
relating to the transportation maintenance fund; and
providing for an effective date."
Mr. Burnett scrolled to slide 3: "Motor Fuel Tax History":
· Began in 1945
· Tax rates have increased over time, but structure
unchanged
· Last increase: highway 1970, marine 1977,
aviation fuel 1994
· Tax was suspended from Sept. 1, 2008, to Aug. 31, 2009
· In 2015, HB 158 added $0.0095 surcharge on motor fuels
and some other refined fuels
· Intended for spill prevention and response fund
Mr. Burnett offered a historical perspective on the tax. He
relayed that the last motor fuel tax increase was in 1970
when gas was priced at about 30 cents per gallon and the
tax averaged 20 to 25 percent of the cost of a gallon of
gasoline. The budget for the prior Department of Highways
was $9 million paid for via the motor fuel tax. He added
that the entire state budget in 1970 amounted to $319
million in general funds (GF). The tax was a per gallon tax
rather than a percentage tax.
2:47:11 PM
Mr. Burnett turned to slide 4: "Relative Motor Fuel Tax
Rate":
· Alaska's fuel taxes are among lowest in U.S.1
· Highway fuel: lowest and the longest time since
increase
· Jet fuel: 35th out of 50
· Aviation gas: 24th out of 50
· Under this bill, Alaska taxes would be:
· Below national average for highway fuel
· Above national average for jet/aviation fuel
1 Per Institute on Taxation and Economic Policy 2017
No comprehensive data for other states' marine fuel
taxes. However, we believe that in most states the
"marine" rate is the "highway" rate. Therefore, our
"marine" rate is likely also one of the lowest in the
country.
Mr. Burnett reported that many states did not have a
separate marine tax.
Mr. Burnett advanced to slide 5: "Motor Fuel Tax Proposal."
He pointed out that the chart was from the original version
of HB 60. He indicated that the current House
Transportation Committee Substitute (CS) moved the proposed
second increase to July 1, 2019 instead of 2018. The bill
increased the highway tax from .08 cents to .16 cents on
July 1, 2017 and increased to .24 cents July 1, 2019. The
following fuels increased on the same stepped schedule:
· Marine fuel increased from .05 cents to .10 cents
to .15 cents
· Jet fuel increased from .032 cents to .064 cents
to .096 cents
· Aviation gas increased from .047 cents to .094
cents to .141 cents
· "Off-road use" credit increased from .06 cents to
.12 cents to .18 cents
Mr. Burnett detailed that the "Off-road use" credit was
typically used by mining and large construction companies
operating vehicles off of the highways. The credit was
available to users of other off-road vehicles like snow
machines but the Department of Revenue (DOR) received most
of their credit refund applications from large operators.
Co-Chair Foster asked whether the Off-road use credit
applied to both diesel and gasoline. Mr. Burnett replied in
the affirmative.
2:50:26 PM
Mr. Burnett continued to slide 6: "Motor Fuel Tax Impacts
(examples)." He noted that the figures on the chart
represented some examples of the tax burden. He relayed
that the highway tax for someone commuting 25,000 miles a
year getting 15 mpg (miles per gallon) equaling 1,666
gallons per year would currently spend $133.00 per year
($0.08 per gallon tax) and $266.00 per year ($0.16 per
gallon tax) on July 1, 2017 and $399.00 per year ($0.24 per
gallon tax) on July 1, 2019. He continued that the highway
fuel tax for freight estimated at 30,000 pounds (lbs.) of
freight driven 360 miles at 5 mpg totaling 72 gallons
calculated at .02 cents per 100 lbs. was currently $5.76
per trip ($0.08 per gallon tax), $11.52 at $0.04 cents, and
$17.28 at $0.06 cents on the same stepped schedule. The
slide contained examples for marine, jet fuel, and aviation
gas.
Representative Guttenberg wanted to make sure the freight
amounts listed on the chart where in addition to the
freight rate and not a tax on the freight. Mr. Burnett
responded in the affirmative.
2:52:43 PM
Mr. Burnett reviewed slide 7: "Disposition of Revenues":
· Creates "Transportation Maintenance Fund" as a new
fund within the General Fund
· Aviation fuel taxes are Designated General Fund
under current law
· HB 60 moves taxes on highway and marine fuel from
Undesignated General Fund to Designated General
Fund for budgeting
· Creates confidence that revenues from motor fuel
will be used to build and maintain transportation
infrastructure
Representative Kawasaki relayed that his question had first
been posed in a Department of Public Safety (DPS)
subcommittee hearing. He explained that DPS wanted to
utilize some funds from the Transportation Maintenance Fund
due to the fact that Troopers "maintained the traffic."
He asked how restrictive the fund would be. He indicated
that the request was granted using GF because he had
reservations about using the fund for the DPS request. Mr.
Burnett responded that the definition was in statute and
allowed use for safety concerns of the nature described.
The DPS request reflected an allowable use, which was why
the appropriation was in the budget. He delineated that the
legislature ultimately determined the use of the fund. He
did not anticipate a problem as long as the money was first
appropriated to the Department of Transportation and Public
Facilities (DOT) and passed through to DPS or flowed the in
the opposite direction.
2:55:17 PM
Representative Kawasaki asked if the funds would be
apportioned based on the type of fuel. Mr. Burnett
explained that proceeds from the aviation gas and jet fuel
taxes had to be used exclusively at airports. The tax was
also used for smaller airports handling smaller turbine
engines. He reminded the committee that a portion of the
revenue was shared with municipalities that owned its own
airport. Representative Kawasaki asked whether proceeds
from the marine fuel tax would be dedicated for the Marine
Highway and if highway tax funds also apply to the Marine
Highway. Mr. Burnett deferred to DOT for the answer.
Representative Wilson asked whether only the aviation fuel
tax was dedicated and only applied to airports. She deduced
that the remaining fuel taxes could be utilized for any
type of state expenditure. She viewed them as two different
taxes. Mr. Burnett clarified that the aviation fuel taxes
had to be used at the airports. The legislation sets out a
designation for how the other revenue from fuel taxes
should be spent but the decision would be up to the
legislature. Representative Wilson wondered why the fuel
tax revenue was not dedicated as matching funds for
Alaska's highways. Mr. Burnett relayed that the structure
of the fund allowed for it to be used as matching funds
under the designation.
2:59:20 PM
Vice-Chair Gara thought there were pros and cons to the
legislation. He noted that a negative was the high price of
fuel in the state. He asked Mr. Burnett to provide his
reason for supporting the legislation as a revenue measure.
Mr. Burnett responded that motor fuel tax was a traditional
method of paying for highway infrastructure in the country.
He suggested that as long as the revenue was spent on its
designated purpose for highway infrastructure citizens tend
to support the tax. He believed the motor fuel tax was a
fair way to spread costs and worked elsewhere in the
country. The legislation was a reasonable proposition at a
reasonable level of taxation. He recognized that fuel was
expensive but the proposed tax amounted to a "very small
portion" of the costs.
3:02:09 PM
Vice-Chair Gara asked why the tax was staggered over two
years. Mr. Burnett replied that he was unaware of all of
the reasons the tax increase was stepped. He knew that the
stepped approach eased in the increase lessening the
immediate impact. In addition, some companies that use
fuel, i.e., trucking companies, set rates in advance and
needed time to adjust for the increase to reset rates.
Representative Guttenberg spoke to previous legislative
efforts to deal with highway maintenance. He did not
believe the roughly $80 million generated each year from
the proposed motor fuel tax covered DOT's yearly costs for
maintenance. He thought that some would advocate for
holding spending to the level collected yet, the public
demanded adequate road maintenance. He indicated that the
legislature retained the ability to appropriate the tax
proceeds anywhere in the budget. He asked how the tax
created confidence and support when the tax would not
entirely fund maintenance, new roads, and other
infrastructure needs. He acknowledged that the bill was
only a component of the costs. Mr. Burnett responded that a
team effort was necessary to create a plan that filled in
all of the missing pieces.
3:06:13 PM
Mr. Burnett explained slide 8: "Transportation Committee
Change to the CS":
· Refund for Commercial Fishing Operations
· (2) a watercraft engaged in commercial fishing is
entitled to a motor fuel tax refund of three cents a
gallon if the tax on the motor fuel has been paid;
in this paragraph, "commercial fishing" means the
taking of, fishing for, or possession of fish,
shellfish, or other fishery resources with the
intent of disposing of them for profit or by sale.
Mr. Burnett recounted that the only other modification was
the change of the effective date of the second tax
increase.
Representative Wilson asked about the loss in revenue. She
wondered about the reason for the change on the slide. Mr.
Burnett answered that the change had been proposed by the
House Transportation Committee and came at a cost that was
reflected in the fiscal note. He would address the cost
later in the presentation. Representative Wilson requested
information regarding the cost of passing the refund on to
truckers as well.
Representative Pruitt surmised that the state's
administrative cost would rise with implementation of the
tax. He asked whether the refund provision required
additional employees.
Mr. Burnett answered that one full time equivalent position
was necessary at a cost of approximately $64,500 per year.
Representative Pruitt clarified that the one position was
only related to the refund component of the bill. Mr.
Burnett replied in the affirmative.
Mr. Burnett advanced to slide 9: "Revenue Impact":
· Additional revenue about $40 million first year $80
per year thereafter
· $0.4 million will be shared with municipal-owned
airports
· Remainder: Transportation maintenance fund,
special accounts for road, water transport, and
aviation facilities
· Estimates based on fall 2016 revenue forecast
· Does not account for changes in fuel demand or
stockpiling
Representative Guttenberg referenced slide 9 and asked
about the $0.4 million shared with municipal airports. He
asked for details regarding how the revenue sharing worked.
Mr. Burnett responded that he did not have the accounting
details. He deferred to DOT for a complete answer. He would
follow up to the extent possible.
3:09:58 PM
Mr. Burnett continued to slide 10: "Implementation Cost":
· Dept. of Revenue must update:
· Tax Revenue Management System (TRMS)
· Revenue Online (ROL) which allows a taxpayer to
file a return and apply for a dealer license
online
· Tax return forms
· One-time implementation cost of $50,000 to recreate
tax forms and reprogram and test the tax system to
accommodate the rate changes
· No additional costs to administer the tax program from
tax change
· Transportation Committee amendment will require 1 tax
technician at an annual cost of $64,500 to process tax
refunds
Co-Chair Foster asked whether the off-road tax credit
applied to both diesel and gasoline.
BRANDON S. SPANOS, DEPUTY DIRECTOR, TAX DIVISION,
DEPARTMENT OF REVENUE (via teleconference), explained that
the exemption specific to diesel was a regulation that
allowed federally recognized tribes and municipalities to
purchase diesel tax free for their own use and for resale
to tribal members. He reported that the tax credit
available for gas or diesel was a .06 cents per gallon
refund for off-road use and was not an upfront exemption.
The full tax was paid when purchased.
3:12:26 PM
Representative Pruitt related last year's concern regarding
the impact resulting from the jet fuel increase and removal
of the exemption for international flights. The exemption
was not included in the current version of the legislation.
He recounted that the previous legislature requested that
DOT analyze the cost of imposing landing fees. He thought
that a fee for service model would fund a portion of the
airports' costs that currently were not covered. He queried
why a jet fuel tax was being reconsidered this year versus
landing fees.
3:14:21 PM
JOHN BINDER, DEPUTY COMMISSIONER, DEPARTMENT OF
TRANSPORTATION AND PUBLIC FACILITIES, answered that the
department had been tasked to investigate landing fees at
Dead Horse and other certificated airports. He detailed
that certificated airports were generally the larger hub
type airports around the state. Based on landing data from
2013, DOT discerned that landing fees generated
approximately $6 million in revenue. Through discussions
with the aviation community, stakeholders, various aviation
groups, and the Aviation Advisory Board the consensus was
that the least administratively burdensome and most
equitable way to generate additional revenues was to
increase taxes. Representative Pruitt asked the
commissioner to identify the largest competitors to the
Anchorage International Airport. Mr. Binder replied that
the competitors to the Anchorage and Fairbanks
International Airports were related to air cargo carriers
travelling to and from Asia. The competitive airports were
located in Seattle, Vancouver, and Edmonton. Representative
Pruitt asked what the "excess amount of taxes per gallon"
were.
3:17:18 PM
Mr. Binder responded that state taxes were currently
exempted on all international flights. Representative
Pruitt asked what the equivalent fees and taxes were at the
competitor airports. Mr. Binder did not currently have
access to the figures. Representative Pruitt asked how many
people were employed at the Anchorage International
Airport. Mr. Binder responded that employment related to
aviation in the Anchorage area numbered 47 thousand jobs.
Representative Pruitt asked what impact the increase in
fuel taxes would have on the associated jobs. Mr. Binder
reported that DOT did not anticipate an impact on jobs. He
furthered that the repercussions to removing the exemption
for international flight was nearly impossible predict. He
guessed that the reaction could range from negligible to
significant. Representative Pruitt recapped that the
economic impact on jobs from the "increase" "based on the
fact" that Alaska was in completion "with other airports in
the Pacific Northwest" was not really understood. He asked
whether his understanding was correct. Mr. Binder's
clarified that the legislation's impact on domestic
carriers was negligible. He furthered that if a fuel tax
was imposed on the international carriers, DOT anticipated
that the amount of tax would double the cost of a carrier
landings and eliminated Anchorage's competitive edge in the
air cargo market.
Representative Wilson stated that "equitable meant fair."
She asked how much state funding was appropriated to both
airports. Mr. Binder replied that neither airport received
state funding: both were self-sustained through air carrier
and tenant rates and fees. Representative Wilson asked
whether the airports were self-sustained at the current
level of taxes. Mr. Binder responded that the fuel taxes
collected at both airports flowed into the general fund. He
remarked that the funds that sustained both airports were
unrelated to the fuel tax. Representative Wilson clarified
that both airports were self-sustainable without the state
tax revenue. Mr. Binder affirmed her statement. She asked
how much the state funding for other airports amounted to.
Mr. Binder answered that the state spent $40 million per
year on the remaining rural airport system. Representative
Wilson asked how much revenue the other airports generated.
Mr. Binder explained that the rural airports generated
approximately $5 million primarily related to leasing
revenue from land rent and concession fees. Representative
Wilson recounted that the same discussion took place last
year. She wondered why the administration would ask the
international airports to subsidize the rural airport
system even more. She wondered why the state would not
charge landing fees and why the state "put so much stress"
on its international airports in order to subsidize other
airports. Mr. Binder answered that landing fees were always
an option for revenue generation. He reiterated that the
fuel tax was the aviation communities' requested method of
fairly generating state revenue. He indicated that a large
number of passengers and freight from the Anchorage and
Fairbanks airports were using the rural airport system. He
added that a large portion of passengers flying out of the
state used rural carriers to connect through Anchorage or
Fairbanks. He felt that it was reasonable to expect the
larger carriers to help support the airports that provided
them with passengers.
3:25:09 PM
Representative Wilson countered that freight benefited the
communities. She was concerned that the Aviation Advisory
Board was comprised of members from "mostly small
airports." She exemplified the Dead Horse Airport and asked
why the state "would let them off for free." Mr. Binder was
uncertain that the state was "letting airports off for
free." Representative Wilson thought that the Dead Horse
Airport was different than rural airports. She elaborated
that the Dead Horse Airport was commercialized. She asked
why DOT did not believe that the Dead Horse Airport should
be as sustainable as the international airports. Mr. Binder
communicated that DOT desired moving all of the state's
airports towards self-sustainability. He felt that many of
the passengers departing in Dead Horse travelled on to
rural Alaska and felt that landing fees imposed on Dead
Horse still impacted rural Alaska. Representative Wilson
asked for a funding breakdown of each of the state's
airports by revenue generated and state funding received in
the last year.
Co-Chair Foster OPENED Public Testimony.
3:28:53 PM
PETER BIBB, JUNEAU PLANT MANAGER, PETRO MARINE SERVICES,
spoke in opposition to the marine fuel increase in the
bill. He indicated that tripling the marine fuel tax would
impose additional negative impacts on the "contracting"
economy and would generate very little revenue. The company
supported a further increase in the proposed highway motor
fuel tax and determined that much more revenue was
generated via a highway tax than a marine tax. He shared
that Petro Marine Services operated 12 marine fuel
terminals in Southeast and Southcentral Alaska. Much of the
company's customer base was comprised of Seattle based
large volume users that were sensitive to fuel prices. He
thought that tripling the marine tax provided the Seattle
based customers an added incentive to further minimize fuel
purchases in Alaska, which was a customary practice. He
thought that the increased marine tax would have an
"adverse financial impact" on Alaskan marine businesses
that could lead to a reduction in marine fuel purchases. As
a result, less marine fuel purchased could reduce local tax
revenues in marine communities that depended on the income.
He reiterated his support for adjusting the highway tax
higher than proposed instead of increasing the marine fuel
tax.
3:32:29 PM
Representative Ortiz asked Mr. Bibb about the services that
Petro Marine provided. He understood that Petro Marine
Services was the main motor fuel providers for retail sales
in Southeast Alaska. Mr. Bibb responded in the negative. He
noted that the market was extremely competitive and was
comprised mainly of three large bulk fuel distributors;
Petro Marine, Crowley, and Delta Western that supplied fuel
"for all sectors."
Representative Thompson asked what the marine fuel tax was
in other places such as Seattle or Portland. Mr. Bibb was
uncertain but believed Seattle did not have a marine fuel
tax.
3:34:20 PM
NICK D'ANDREA, VICE PRESIDENT, PUBLIC AFFAIRS - UPS,
LOUISVILLE, KY (via teleconference), opposed the jet fuel
portion of HB 60. He read a prepared statement of his
testimony:
UPS appreciates our long-standing working relationship
with Alaska, and we are proud to employ more than
1.100 UPSers in the state, including there. No matter
where we operate, we strive to play our part in the
local economy as a responsible corporate citizen. UPS
currently pays $6 million in taxes each year and more
than $7 million in landing fees annually to cover
airport costs incurred at Ted Stevens International
Airport.
Two components of Alaska's proposed motor fuel tax
bill, however, stand to directly impact UPS. While we
support a motor fuel tax increase to fund
infrastructure building and repair, we strongly oppose
the jet fuel tax increase contained in the same bill.
As we see it, the motor fuel tax portion is purely a
user fee. UPS uses all the roads in Alaska and
absolutely believes that we should pay our fair share
for infrastructure. Alaska also currently has one of
the lowest motor fuel tax rates in the nation. It is
obviously difficult to fund 2017 transportation needs
with 1970s funding; for this reason, UPS is supportive
of the motor fuel tax increase.
The jet fuel tax increase, though, is not a user fee.
In fact, it would effectively tax UPS twice.
UPS already pays more than $7 million dollars annually
in aviation user fees in the form of landing fees
incurred at Ted Stevens International Airport. These
fees go directly into the aviation infrastructure
where we operate (Anchorage). In fact, the Alaska
International Airport System is self-sustaining due to
the landing fee paid by its users. This means the
current fuel tax generated is paying for smaller
airports, which UPS does not utilize, and which do not
charge landing fees to sustain their airport. The
proposal to triple the jet fuel tax is asking UPS and
other carriers to subsidize airports we do not use.
We also believe increasing the jet fuel tax could
impact Alaska's role in the cargo industry. Currently,
it is situated perfectly as UPS's gateway to and from
Asia. We have a good relationship with the airport,
and Alaska has always had a fair cost of doing
business. As aircraft continue to evolve, flying
longer ranges with better payload capacity, it is safe
to assume those in the cargo industry will continue to
evaluate the most efficient options for each carrier's
network.
We understand the difficult situation you and other
lawmakers are facing and we appreciate the work you
are doing for your constituents, including our own
UPSers. While we support the motor fuel tax increase.
I hope you understand our concerns to increase the jet
fuel tax. We aren't opposed to paying user fees for
infrastructure we use, but subsidizing other airports
we don't use and who do not levy landing fees is not a
sustainable was to fund Alaska' s aviation
infrastructure.
3:38:43 PM
Vice-Chair Gara "sincerely" appreciated UPS' presence in
Alaska. He noted that legislators had a duty to represent
the Alaskan citizenry. He calculated that if the business
portion of the motor fuel taxes were removed the tax would
fall on consumers and especially hard on those with lower
income. He believed the tax would become regressive. He
also deduced that the increase in aviation gas prices would
impact UPS operations by less than one percent. Mr.
D'Andrea answered that UPS endorsed highway motor fuel
taxes and viewed them as a "user fee." However, he felt
that asking UPS to subsidize taxes on airports they do not
utilize was unfair. He offered that labor and fuel were
cost drivers and increased jet fuel taxes would
significantly add to its cost drivers.
Representative Pruitt recalled that 489 UPS pilots were
domiciled in Alaska and that the company trained pilots for
flying 747 and MD11 jets in Anchorage. He reported that the
jet models were being phased out for newer models. He
queried whether UPS would train pilots on the more fuel-
efficient, newer models in Anchorage. Mr. D'Andrea
responded that the company had recently purchased 14 747-8
models that were the largest 747's available and had an
option to purchase 14 more. He indicated that UPS could
technically fly directly from Seattle to Asia, resulting in
a "huge hit to the payload." He qualified that Vancouver
and other locations were cheaper in terms of landing fees.
He noted that one company was flying 777's directly to Asia
from Oakland, California. He qualified that increased fuel
taxes "could be catastrophic in Anchorage."
3:44:24 PM
DANA DEBEL, MANAGING DIRECTOR FOR STATE AND LOCAL
GOVERNMENT AFFAIRS, DELTA AIRLINES, LOS ANGELES, CALIFORNIA
(via teleconference), spoke in opposition to the jet fuel
tax in HB 60. She noted that over 100 Delta employees
resided in Alaska. She stated that the threefold increase
placed the state 15th in states' ranked by highest
effective jet fuel tax rate. She informed the committee
that the effective "all in" jet fuel tax rate in Seattle
was 2.4 cents and was 3 cents per gallon in Portland. Delta
currently operated 17 peak day flights to and from Alaska.
Delta served Juneau, Sitka, and Ketchikan during peak
summer travel months and Anchorage and Fairbanks year
around. She indicated that due to the power of Delta's
network and hubs, Alaska was really one stop away from over
600 destinations throughout the world not including partner
airlines. She thought the reach would expand even further.
She believed that Delta was only one of many commercial
carriers with employees in Alaska and cited Federal
Aviation Administration (FAA) statistics that 56 thousand
jobs were located in Alaska; only three states outranked
Alaska in the number of aviation jobs. She related that
Alaska was a "very challenging place" to offer service and
that even though the increase seemed minimal the
repercussions could be significantly impactful on the cost
of operating a flight. She referenced an Office of Budget
and Management (OMB) state study that assigned a per
passenger cost to the increase in the jet fuel tax. She
considered the analysis flawed in many ways. She maintained
that the amount of jet fuel for each flight was variable
depending on a variety of conditions and was not stagnant
for each flight. The flights were not always sold out and
in reality, the load factor in Alaska was approximately 85
percent. She furthered that the airline was the purchaser
of jet fuel and not the consumer. The cost of an airline
ticket was determined on supply and demand and what the
consumer was willing to pay and not a function of the cost
of the inputs. Therefore, Delta could not charge the amount
that covered the cost of operation in Alaska and make a
profit on top of cost recovery. Finally, the analysis was
based on a shorter stage length, flying from Seattle to
Juneau and was not typical. She understood the budgetary
challenges the state was facing but did not support an
increase in jet fuel.
3:52:06 PM
PAUL KENDALL, SELF, ANCHORAGE (via teleconference), spoke
to matters other than HB 60. He discussed his ideas
regarding how to cut the budget. He felt that the
legislature should be more responsive to the public and
strongly disagreed with using any Permanent Fund Dividend
(PFD) money for government services.
3:54:59 PM
Co-Chair Foster CLOSED Public Testimony.
3:55:20 PM
STEVEN HATTER, DEPUTY COMMISSIONER, DEPARTMENT OF
TRANSPORTATION AND PUBLIC FACILITIES, commented that HB 60
offered DOT an opportunity for an improved, stable, and
predictable funding source to "provide necessary
transportation results and services." He believed the tax
provided "a mechanism for clear accountability regarding
what Alaskans were paying for." He introduced the
PowerPoint Presentation.
3:56:19 PM
Mr. Hatter began with slide 2: "Scope":
This briefing addresses the Department of
Transportation & Public Facilities (DOT&PF) operating
budget.
•The funds generated by Alaska's Motor Fuel Tax
that will be placed in the Alaska Transportation
Maintenance Fund (DGF/Other) replace an equal
amount of Unrestricted General Funds (UGF) that
currently fund DOT&PF's operating budget.
•UGF to DGF fund swap: $64.8M
•UGF to Other fund swap (Aviation): $4.5M
•Total fund swap: $69.3M
•The budget components that are recipients of the
fuel tax revenue are the regional Highways &
Aviation components and the Alaska Marine Highway
System.
3:57:04 PM
Mr. Hatter moved to slide 3: "FY2018 Governor's Proposed
Operating Budget All Funding Sources" that graphically
depicted the funding sources. He highlighted that the four
funding sources for the department were color coded
designated on the lower right of the slide. Two pie charts
in the upper right corner compared the total FY 17
management plan to the FY 18 governor's budget. The largest
change in distribution in fund categories was undesignated
general funds (UGF) and designated general funds (DGF). The
new proposed fund accounted for the larger DGF percentage
in FY 18 and provided a direct and clear link for services
from taxes "paid at the pump." The tax revenue would be
used to preserve and operate Alaska's transportation
infrastructure and was similar to a fee for service model.
He continued that the bubble chart on the slide was colored
to depict the funding category and the size of the bubble
was proportionate to the amount of the funding spent.
3:58:31 PM
Mr. Hatter continued to slide 4: "Keep Alaska Moving
through service and infrastructure." He reviewed the four
core services of the department aligned with DOT's mission.
PRESERVE ALASKA'S TRANSPORTATION INFRASTRUCTURE
Off-Surface Preservation
Surface Preservation
Vehicle Management
Bridge Preservation
Vessel/Terminal Preservation
OPERATE ALASKA'S TRANSPORTATION INFRASTRUCTURE
Illumination
Signals
Snow & Ice Removal
Signage
Striping
Operate Certificated Airports
MODERNIZE ALASKA'S TRANSPORTATION INFRASTRUCTURE
Plan Infrastructure
Design/Engineer
Construct
PROVIDE TRANSPORTATION SERVICES
Manage Ferry Reservation System
Operating Ferry Terminals
Operating Ferries on Routes
Retain and Expand Business
Transit
Mr. Hatter emphasized the department's commitment to
accountability. He indicated that the department developed
clear performance metrics to measure its performance and
efficiency when delivering the core services. He emphasized
that as stewards of state funding, measuring performance
resulted in accountability. He reiterated that the tax
revenue would flow primarily to preserve and operate core
services.
3:59:59 PM
Mr. Hatter reviewed slide 5: "Preserve":
Preserve Alaska's Transportation Infrastructure
Preserve extends the life of existing infrastructure -
it is the responsibility of the department to maximize
the lifespan of our transportation infrastructure; to
ensure assets meet federal transportation standards;
and to restore deficiencies in the various structures
upon which the system operates.
Direct Services that support Preserve:
•Surface Preservation
•Off-Surface Preservation
•Bridge Preservation
•Vehicle Management
•Vessel/Terminal Management
Mr. Hatter turned to slide 6: "FY2017 Management Plan:
Operating Budget: Preserve $138.998.5." He detailed that
the slide depicted the current budgeting by the department
and pointed out that UGF decreased and DGF increased under
the provisions in HB 60.
Mr. Hatter advanced to slide 7: "Off-Surface Preservation
$26.255.5." He noted the measures that the department used
to demonstrate accountability in Off-Surface Preservation.
Measures:
1. Percent of System Meeting Service Standards
2. Maintenance Cost/Lane Miles Maintained
Mr. Hatter noted that the slide portrayed photos of
examples of desired and insufficient standards. A pie chart
denoted fund source percentages to the direct services
level and the apportionment to the regions and statewide
agencies. He underlined that the data offered better
clarity about where the funding was spent and
accountability on how effective and efficiently the funds
were spent.
4:02:31 PM
Mr. Hatter scrolled to slide 8: "Operate":
Operate Alaska's Transportation Infrastructure
Operate allows movement on existing infrastructure -
it is the responsibility of the department to insure
our transportation system functions smoothly; that
streets and runways are free of snow and ice; that
lighting, signage and signals are all operational;
that roads are swept and striping is visible. Airports
are operated for the safe movement of people and
cargo.
Direct Services that support Operate:
•Illumination
•Snow & Ice Removal
•Operate Certificated Airports
•Striping
•Signage
•Signals
•Information Transportation Services
Mr. Hatter explained slide 9: "FY2017 Management Plan:
Operating Budget: Operate $105.292.8." He pointed to how
the funds flowed in the FY 17 management plan under the
category and noted the large UGF bar that would shorten
with increased DGF with implementation of the tax plan.
Mr. Hatter advanced to slide 10: "Snow and Ice Removal." He
noted the measures that lead to the desired standards of
safety after a weather event:
Measures:
1. Average Time per event to Achieve performance target
for each priority level
2. Average equipment and labor costs per event/lane
mile
Mr. Hatter remarked that the slide also contained a pie
chart showing the funding percentages broken down to the
direct service level and apportionment to the regions and
statewide agencies. He repeated his previous comments
regarding the measures leading to clarity and
accountability. He scrolled to slide 11: "Comparison of
Fund Category Distribution: FY2018 Governor's Proposed vs.
FY2017." that depicted the same pie charts on slide 3. He
reiterated that the motor fuel tax which created the Alaska
Transportation Maintenance Fund was an opportunity to
decrease UGF via increased DGF and clearly linked core
direct services and performance and was also a mechanism
for accountability.
4:05:44 PM
Representative Ortiz referenced slide 6, regarding the
operating budget spend. He wondered what percentage of the
72 percent "Other" fund category was federal funds. Mr.
Hatter responded that he did not have the exact numbers.
Representative Ortiz asked Mr. Hatter for an estimate. Mr.
Hatter offered to provide the information later.
Representative Wilson pointed to slide 11 and noted that
the pie chart depicted the amount of overall federal
funding. She wondered what the "Other" funding was
comprised of. Mr. Hatter cited slide 3 and pointed to the
breakdown of the "Other" funding category in the dark green
bubbles. He pointed to "CIP Receipts" and explained that
represented the authority to spend federal dollars by
allowing the charge of personal expenses to capital
projects. He mentioned the International Airport Revenue
Fund was a self-contained fund for the international
airports. The Highway Equipment and Working Capital fund
was appropriated for the state equipment fleet. He
mentioned that the remaining other funds in the smaller
bubbles represented "quite a bit" of other funding.
Representative Wilson inquired what percentage of Marine
Highway System Funds were GF and whether the Maine Highway
"paid for itself." Mr. Hatter offered to provide the exact
percentage breakdown. He remembered that the rate charges
and fees contributed to a "relatively small amount of the
total costs."
4:09:41 PM
Representative Wilson asked when the rates were last
increased. Mr. Hatter answered that the rates had been
increased over the last two years and he would follow up by
providing a rate schedule and timing of the rate increases.
Vice-Chair Gara expressed frustration with the department.
He believed that the department attempted to obstruct
information he had requested and was never "responsive" to
his concerns. He identified $20 million in maintenance and
operation of the Dalton Highway and asked DOT whether the
state could impose a toll designed for the end users. He
reported receiving a negative answer with a 30 year old
Attorney General opinion attached. He researched and
discovered that a toll was possible on all users except
Alyeska. He believed the department was stuck in the status
quo and he had to do much of his own research after asking
questions to the department in the past. He queried why the
department was not charging landing fees at the Dead Horse
Airport and received an answer that "side stepped" the
question regarding charges for property use that covered
airport costs but did not address landing fees. He felt
"side stepped" by the department on both issues. He felt
that the issues represented $20 million DOT should not
need. He requested real answers from the department.
4:13:42 PM
Mr. Hatter responded that his message was received and he
would take the request back to the commissioner. Vice-Chair
Gara wanted proactive help from DOT when answering his
questions. He referred to the question Representative
Wilson had asked about the Dead Horse Airport and the
testifier answered with a reference to rural users. Vice-
Chair Gara thought that the Dead Horse Airport was almost
exclusively used by industry. Deputy Commissioner Hatter
agreed with Vice-Chair Gara.
HB 60 was HEARD and HELD in committee for further
consideration.