Legislature(2021 - 2022)ADAMS 519
05/07/2021 09:00 AM House FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| HB104 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | HB 104 | TELECONFERENCED | |
| + | TELECONFERENCED |
HOUSE BILL NO. 104
"An Act relating to vehicle registration and
registration fees; relating to the motor fuel tax; and
providing for an effective date."
9:03:43 AM
REPRESENTATIVE ANDY JOSEPHSON, SPONSOR, thanked the
committee for hearing the bill. He believed the bill was
good and well overdue. He began by providing a historical
picture of the tax that was implemented in 1970. He
discussed that 1970 had been the middle of the Vietnam War
and the U.S. still had 335,000 troops in Vietnam. He
stressed that the tax rate was 51 years old. He shared that
his father had been in the state Senate when the tax had
passed. He noted that the Parks Highway had not existed at
the time, meaning it had been necessary to use the
Richardson Highway to drive from Anchorage to Fairbanks. He
underscored that the state was hurting itself by not
increasing the tax. He explained that it was no longer
possible to maintain the state's roads with existing
revenue. The bill would increase revenue by approximately
$33 million.
Representative Josephson reported that the additional
revenue would not cover all of the maintenance and
operations needs. He added that maintenance and operations
could not be funded directly with federal revenue; the
costs had to be covered by the state exclusively. He
highlighted that doubling the tax meant the state would
come much closer to caring for its roads in a way that
would help commerce in all facets. He relayed that former
Department of Transportation and Public Facilities (DOT)
commissioner Marc Luiken had stated that there would be a
benefit to construction, tourism, fishing, oil and gas,
logistics, shipping of goods and groceries, and all
transportation related activities.
Representative Josephson explained that the bill would
double the annual tax of about $57 for an average car to
around $120. He noted that the more urban the driving, the
less a person would move off of the $57 mean. He remarked
that for Mat-Su, the cost would be closer to an additional
full $57 or more; however, the drivers would benefit during
the commute to Anchorage. He stressed that the tax had lost
85 percent of its spending power since its inception 51
years earlier. He pointed out that DOT was asked to do more
and more with less and less. He elaborated that cars were
traveling three times as many miles as they had in 1970 due
to an increased number of people, cars, and the
construction of the Parks Highway. Additionally, cars could
drive an increased number of miles on less gasoline.
Consequently, there was less tax revenue from the gasoline
tax.
Representative Josephson discussed that some of the extra
mileage had been solved by charging electric vehicles (EV)
and EV hybrids a biennial fee because they were not paying
the same gasoline as others, yet their vehicles impacted
the roads just like a regular combustion engine. He
highlighted that DOT had $264 million in deferred
maintenance. He expounded that the bill would slowly
whittle down the number. He detailed that the bill was
supported by interests in the state that wanted to make the
wheels of the economy turn including the Fairbanks Chamber
of Commerce and the Alaska Trucking Association (ATA). He
noted that ATA wanted to ensure the funds would go to
maintenance and operations, which would largely happen. The
bill was supported by the Alaska General Contractors and
major engineering firms such as DOWL and HDR. He stated
that people saw the tax increase as a need. He believed the
increase was long overdue.
Representative Josephson explained that the bill would also
increase a surcharge by 55 hundredths of a penny to make
the Spill Prevention and Response (SPAR) account more
sustainable. He detailed that the upcoming presentation
would show the account was dropping off. He stressed that
the account needed to be sustainable. He emphasized that
there were 2,400 contaminated sites in Alaska. He
underscored that the morale in the SPAR Division was
suffering. Additionally, the bill would help stop the
closure of maintenance stations like Silver Tip. He noted
there was a press release in late 2018 specifying that the
Silver Tip maintenance station closure was triggered by
lower than expected revenue from motor fuel tax.
9:09:39 AM
Representative Josephson believed that even constituents
who did not want to pay an average of $57 more per year,
would see their safety improved. He believed the bill was
beyond due. He asked his staff to provide a presentation.
NATHANIAL GRABMAN, STAFF, REPRESENTATIVE ANDY JOSEPHSON,
introduced himself. He relayed that the bill was identical
to SB 115 that had passed out of the committee the previous
year. He provided a PowerPoint presentation titled "House
Bill 104 Motor Fuel Tax," dated May 6, 2021 (copy on file).
He began with slide 2 and addressed the motor fuel tax
history. He detailed that the motor fuel tax had started
prior to statehood. The tax had started in 1945 at 1 cent
per gallon and had been increased to 8 cents per gallon in
1970. He elaborated that seven years later, the marine fuel
tax had increased to 5 cents per gallon. The most recent
change had been in 2015 when a $0.0095 per gallon surcharge
had been added on motor fuel intended to maintain the
solvency of the SPAR account.
9:11:29 AM
Mr. Grabman turned to slide 3 and reviewed existing motor
fuel tax rates and the increases that would take place
under the bill. He relayed that the motor fuel and marine
fuel taxes would double, aviation and jet fuel taxes would
remain the same, the refined fuel surcharge would increase
from $0.0095 to $0.015 per gallon, the off-road use refund
would increase from $0.06 to $0.12, and the Commercial
Fisheries Entry Commission (CFEC) permittee refund would
increase from $0.00 to $0.05 for commercial fishing
vessels.
Mr. Grabman moved to slide 4 and addressed how the bill
would impact the average Alaskan driver. He stated that
based on information from the Federal Highway
Administration on average mileage driven and average miles
per gallon, there would be an estimated cost increase [for
consumers] of about $40 per year. He added that the average
increase of $57 per year mentioned by Representative
Josephson was based on data from previous years. He relayed
that the motor fuel tax aimed to charge consumers more for
the upkeep of roads and highways. He stated that with the
advent of increasing numbers of electric vehicles and plug-
in hybrids, the relationship had become somewhat strained.
Mr. Grabman moved to slide 5 and addressed an electric
vehicle registration fee. The bill would increase the
biennial registration fee from $100 to $200 for electric
vehicles and vehicles using alternative fuels not subject
to the tax. Additionally, the bill included a biennial
registration fee increase for plug-in hybrids [from $100 to
$150]. He explained that for gasoline powered vehicles the
bill would cost a user an additional $40 per year. He
elaborated that because electric vehicles did not pay for
motor fuel, the bill would increase the electric vehicle
registration fee by about $50 per year.
9:14:12 AM
Mr. Grabman advanced to slide 6 and gave a comparison to
other states. He reported that Alaska had the lowest tax
rate on highway fuel and marine fuel of any state. He
expounded that under the legislation, Alaska would remain
well below the national average, moving from 50th to 43rd
in highway fuel tax. He added that the state would remain
last in marine fuel taxes.
Representative LeBon asked about the electric vehicle
renewal registration fee on slide 5. He understood the
reason for increasing the fee from $100 to $200 biennially.
He stated that the registration fee went into a designated
account. He asked if the funds were directed to road
maintenance. Alternatively, he asked if it was up to the
legislature to allocate the funds to road maintenance.
Mr. Grabman replied that the increase in collected fees
would go into the Special Highway Fuel Tax Account, which
would be utilized similarly to the motor fuel tax revenue.
Representative Wool asked whether other states had marine
fuel tax exemptions.
Mr. Grabman answered that there were a few states [with
marine fuel tax exemptions] but Alaska was in the minority.
Representative Wool stated that his office had been unable
to find another state with a marine fuel exemption. He was
curious to learn which states had an exemption.
Mr. Grabman would follow up on the question. He moved to a
graph on slide 8 showing the reduction in real value of
Alaska's motor fuel tax from 1970 to 2021. He detailed that
the state's motor fuel tax had been $0.08 per gallon since
1970. He explained that if the tax had increased with the
Consumer Price Index, the average cost of a gallon of gas,
or per capita income in Alaska, the amount would be
multiple times its current rate. He pointed to the static
magenta line on the graph showing the $0.08 per gallon tax
over time. He noted that other lines on the graph showed
what the tax would have looked like if it aligned with the
aforementioned values. He noted that if the tax aligned
with any of the mentioned values it would be over $0.50 per
gallon. He added that the bill would increase the motor
fuel tax from $0.08 to $0.16 per gallon.
Mr. Grabman turned to slide 9 and showed a graph of motor
fuel tax by state. He pointed out that Alaska was currently
at the far left of the chart. He detailed that the blue
portion of the bars represented state excise tax - Alaska's
was $0.08 per gallon - and the orange represented other
taxes and fees such as Alaska's refined fuel surcharge and
local sales taxes. He relayed that under the legislation,
Alaska would move slightly to the right between Colorado
and Washington D.C.; Alaska would still fall far on the
left of the average taxes.
9:18:07 AM
Mr. Grabman moved to slide 10 and reported that the bill
would increase annual revenue by approximately $30 million
per year. The bill was anticipated to generate around $30
million per year in highway fuels. He reported that marine
fuels would bring in between $5.4 million and $5.7 million,
with some decrease due to the commercial fishing refund.
The refined fuel surcharge would bring in approximately
$3.5 million. Additionally, the change in the alternative
fuel vehicle registration fee would bring in about $87,000
annually, assuming the number of alternative fuel vehicles
remained constant. He noted it appeared the number of
alternative fuel vehicles was increasing over time.
Mr. Grabman addressed the current impact of low rates on
slide 11. He believed the information on the slide came
from one of the bill's fiscal notes. He stated there were
many things additional revenues could be used for. He
highlighted a substantial deferred maintenance backlog at
DOT that a portion of the increased revenues could be used
for.
Mr. Grabman advanced to a chart on slide 12 showing that
without additional revenue, the SPAR fund (used to address
spills around the state) faced insolvency. He explained
that the increase to the refined fuel surcharge from
$0.0095 to $0.015 aimed to prevent insolvency in the
account.
9:19:49 AM
Representative Johnson referenced the marine "carve-out"
provision. She felt like "we give into all of these
complicated things in Alaska" due to the desire to carve
out various things. She observed that people towed their
boats on the highways. She pointed out that spill response
was more expensive for marine spills.
Representative Josephson agreed that cleaning up spills in
the water was more expensive than cleaning up spills on
land. He reported that in 2015 Senator Peter Micciche and
former Representative Cathy Munoz worked together to pass
the first surcharge for SPAR of just under a penny at
$0.0095. He detailed that the resulting revenue had been
slightly under the anticipated amount because
municipalities and electric cooperatives were exempted.
Additionally, there was less throughput, meaning there was
less tax generated. The bill added an extra half cent.
Representative Johnson thought there was an exemption for
marine fuel.
Representative Josephson clarified that the bill contained
an exemption for CFEC vessels (commercial fishing boats).
He explained that at the end of the year, a boat owner
could submit fuel receipts for marine operations and the
state would reimburse them for that amount.
Representative Johnson was trying to get her mind around
another carve-out. She remarked there were commercial
vehicles on the road, and it did not make sense to her to
carve out an exemption for commercial fishing.
Representative Josephson answered that the carve-out had
been in the bill for over a year.
Representative Thompson remarked that he was not totally
understanding the commercial fishing vessel carve out. He
stated that the Alaska Trucking Association was commercial
and was responsible for hauling everything Alaskans ate. He
highlighted that the organization had not asked for an
exemption and had come out in support of the increased tax
in the bill. He did not understand how the fishing vessels
managed to receive a carve-out. He requested more detail on
the reasoning for providing an exemption for one industry.
9:24:04 AM
Representative Josephson replied that ATA did not critique
the exemption for the fishing industry. He detailed that
ATA's criticism rested in wanting to be certain the tax was
used for its industry. He elaborated that ATA was concerned
about DOT using the funds for secondary purposes such as
rights of way, appurtenances, and possibly things like
sidewalks. He explained that ATA wanted the funds to go
solely to maintenance and operations. He reiterated that
ATA had not raised the issue of concern about the
commercial fishing fleet.
Representative LeBon reported that he had a concern about
the exemption the previous year. He asked for verification
that someone operating a sport fishing guiding business was
not entitled to the 5 cent per gallon rebate.
Representative Josephson replied affirmatively.
Representative LeBon stated that it had been his issue the
previous year and it would remain an issue for him going
forward.
9:25:25 AM
Representative Wool thought there was a proposed 10 cent
reduction for marine fuel with an additional 5 cents for
CFEC vessels. He asked if there was a 15 cent combined
exemption on a 16 cent tax.
Mr. Grabman replied in the negative. He clarified that the
tax on marine fuel would increase from 5 cents to 10 cents
per gallon. The potential rebate for CFEC permit holders
would increase from nonexistent to 5 cents per gallon. He
elaborated that the effective rate for marine fuel users
with CFEC permits would remain the same.
Representative Wool surmised that sport fishing companies
would pay 10 cents and fishermen paid 5 cents. He had been
unable to find any other states with a marine exemption. He
had supported Representative LeBon's amendment the previous
year on the issue. He noted the off-road use exemption in
the bill. He remarked that off-road users had vocalized
that they did not drive on the roads and therefore should
not be subject to the tax. He countered the argument with
an example on property tax. He provided a scenario where a
person paid property tax but did not have children in
school. He explained that people without children in the
school system still had to pay property tax that benefitted
schools because it was good for the community. He believed
the tax generated by the bill would go to the General Fund
and the same amount would be diverted to DOT. He asked if
it would supplement DOT's budget or replace General Fund
dollars that normally went to DOT.
Representative Josephson answered that the funding may
briefly touch the General Fund in a technical way; however,
the funding would ultimately go to a designated subaccount
to pay for maintenance and operations. The aviation tax
went to aviation purposes and the marine fuel tax revenue
went to harbors. He reported that the state was spending
about $130 million per year on highways maintenance and
operations with $30 million in revenue. The bill would
double the revenue to $60 million. He explained that the
undesignated general fund (UGF) spend would drop, which
would free up UGF to cut government or pay for other needed
services. He pointed out that when the tax had been set,
the average American salary was $9,000. He highlighted that
in the past eight years, 31 states had increased their
motor fuel tax. He suggested the need to act in a mature
fashion and recognize that the existing motor fuel tax was
51 years old.
9:29:42 AM
Representative Wool clarified that he was in full support
of the tax. He remarked that in 1970 the price of gas was
36 cents, and the tax was 8 cents [shown on slide 7]. He
pointed out that 22 percent of the price of fuel had been
tax. He highlighted that currently gas was about $3.00 per
gallon and the tax was 8 cents. He remarked that the
contrast indicated the need for an increase in the tax. He
commented that he did not want to upend the bill, which he
supported. He relayed he had a problem with some of the
exemptions, including the off-road exemption. He understood
that mining companies did not use the roads; however, they
burned gas and produced emissions (unlike electric
vehicles), which he noted was not good in the big picture.
Additionally, the companies made substantial money. He
believed the overall tax rate to the state for fishing and
mining was relatively low. He was not in favor of any of
the exemptions, but he supported the bill.
Representative Edgmon relayed that he had sat through a
hearing on the bill in the House Transportation Committee
two years earlier and therefore had some familiarity with
the topic. He noted that the bill was titled motor fuels
tax, yet it was applied to highway operations and
maintenance. He asked if his understanding was accurate.
Representative Josephson replied affirmatively. He detailed
that the fiscal notes referred to the tax as a motor fuel
tax, as did the sponsor's office and Senator Click Bishop.
He agreed that most of tax revenue would go to highway
maintenance and operations, with exception to the SPAR
assistance.
Representative Edgmon reasoned that motor fuel tax was a
moniker or phrase used to describe the bill. He remarked
that the bill exempted any increases on aviation and jet
fuels. He asked for verification that proceeds from the
bill did not go to airports.
Representative Josephson agreed.
Representative Edgmon stated his understanding that the
bill would double the marine fuel tax, but it would exempt
commercial fishing boats registered with the CFEC. He asked
for verification that benefits from the $30 million
increase in revenue would not necessarily benefit water
bound craft.
Representative Josephson agreed it was the foundational
argument for the exemption.
Representative Edgmon stated that it was possible to argue
that electric vehicles, which were on the rise in Alaska,
should pay their way. While at the same time, he asked
whether the legislature should offer an incentive for
electric vehicles similar to the exemption offered for jet
fuels. He recalled hearing that an increase in jet fuel tax
would mean commensurate downturn in economic activity in
terms of the number of airplanes landing in Anchorage,
Fairbanks, and other airports. He wanted to flag the issue
for the committee to think about moving forward on the
bill.
9:33:33 AM
Representative Carpenter asked who paid the refined fuel
surcharge. He asked if the surcharge was paid at the pump.
Mr. Grabman answered that the surcharge was paid by all
users at the pump.
Representative Carpenter asked for verification that the
off-road use for fuel was not used by DOT on roads. He
asked if the fuel was delivered to a facility and only used
on that specific facility.
Mr. Grabman believed the statement was true, but the [off-
road use] fuel could also be purchased at a typical gas
station for off-road use. For example, a person could apply
for an exemption for a lawnmower at a normal gas station,
but it would require filling out a form. He noted the
situation was fairly atypical.
Representative Carpenter did not realize that when he drove
his 4-wheeler that he did not have to pay the tax because
the vehicle was used off-road. He noted that his local gas
station did not advertise a separate price. He would look
into the issue. He referred to the discussion about
commercial fishing, sport fishing, and other businesses
able to pass a tax onto the customer. He remarked that
commercial truck drivers hauled for a certain cost or price
to the customer, and they would pass the cost onto the
customer. He highlighted that commercial fishermen had a
more difficult time passing the cost onto the customer
because they did not control the price of the commodity.
For example, if there was an increase of $100 per catch, it
was very difficult for commercial fishermen to negotiate
with the buyer of the salmon to increase their revenue. He
remarked that the situation was not the same for sport fish
guides who could pass the cost onto the customer. He
reasoned that if the cost were too high the customer would
not use the service. He could see why there may be some
justification for the exemption.
9:36:36 AM
Representative Thompson asked for verification that the
marine fuel tax was currently 5 cents per gallon.
Representative Josephson affirmed by nodding.
Representative Thompson remarked that the bill would
increase the marine fuel from 5 cents per gallon to 10
cents per gallon. He observed that commercial fishing
vessels would get a 5 cent rebate under the bill. He asked
for verification that commercial fishing vessels would only
pay 5 cents per gallon after the refund.
Mr. Grabman replied affirmatively.
Representative Thompson referenced the discussion about
saving UGF money due to the cost of maintaining roads. He
pointed out that ports and harbors maintenance cost had
increased since 1970. He believed that commercial fishing
vessels used the ports and harbors often, but they did not
have to pay for the increased maintenance costs.
9:38:15 AM
Vice-Chair Ortiz asked if there was an analysis on the
impact of the commercial fishermen vessel exemption. He
stated his understanding that commercial fishermen had to
collect fuel receipts for the year report how much they
paid in order to get the fuel refund. He asked how much
revenue would be lost due to the exemption.
Representative Josephson believed the amount was no more
than $1.5 million. He remarked that the information may be
reflected in the fiscal note. He added that the amount was
somewhat indeterminate because the department did not know
who would bother to turn their receipts in. He believed the
figure was somewhere in excess of $1 million.
9:39:41 AM
Vice-Chair Ortiz communicated that he would not let an
amendment to remove the exemption for commercial fishermen
cause him to vote against the bill. He believed the state
needed the revenue. However, he noted Representative
Carpenter's point that commercial fishermen did not have
the power to pass on the fuel tax cost to purchasers. He
added they were talking about slightly over $1 million in
credit given back to commercial fishermen to show the
state's support for the industry. He remarked that recently
the committee had not batted an eye about coming up with
$115 million to continue to pay oil tax credits for one
year. He stressed that the state had paid over $4 billion
in oil tax credits as an exploration incentive for
companies. He stated that much time was spent talking about
the issues, but it was not fathomable to him that they were
seriously considering the issue at hand when the
legislature did not talk about the big picture of how the
state was subsidizing industries.
9:42:13 AM
Representative Rasmussen remarked that Alaska had a revenue
problem. She believed there was fairly broad support from
Alaskans for maintaining roads and highways and building
new roads and highways. She was not certain increasing the
motor fuel tax was the best solution. She was curious to
hear from the involved parties how a toll road or tolls on
some highways would be received. She had met with the
commissioner of DOT two years earlier and he had mentioned
that the Seward Highway between Anchorage and Girdwood saw
about 25,000 average daily vehicles in the summer and about
10,000 in the winter. She considered that a $3.00 toll
would bring in $2.5 million per month in the summer and
almost $1 million per month in the winter. She thought user
fees were appropriate for the services. She understood that
the gas tax was a user fee, but she felt there was
disparity between the $87,000 in revenue that would be
generated by electric vehicles and $3.5 million generated
by motor fuel vehicles. She added that urban areas were not
impacted at the same level as rural areas with the motor
fuel tax increase.
Representative Josephson understood the options existed. He
stated that "it sort of corrects itself." For example, he
agreed that an urban driver would pay less, but he pointed
out that urban drivers put less pressure on the highway
system. He explained that urban drivers caused less demand
for maintenance and operations. He addressed the idea that
the commuter to Wasilla or Girdwood would pay more. He
underscored that the cost would be in the range of $100 per
year [for a commuter]. He believed a toll would be more
expensive [for users] than the tax increase in the bill. He
noted it was hard to find the perfect solution. He remarked
on available data indicating that Mat-Su housing costs were
lower, and its revenue would be lower if residents were not
commuting into Anchorage. He believed it was acceptable to
move from the cheapest state tax to the seventh cheapest
nationwide. He reminded committee members that the tax
would be over 50 cents if it tracked inflation. Whereas
under the legislation, the tax would be 16 cents compared
to the national average of 28 cents. He agreed there were
other ways to achieve the same result, albeit none were
perfect.
9:45:40 AM
Co-Chair Merrick noted the meeting would go no longer than
10:10 a.m.
Representative Johnson highlighted her areas of concern.
She considered an average commuter driving 260 days of the
year from Mat-Su to Anchorage at approximately 40 miles.
She remarked that the number in the example was on the low
end. She amended her example to include two drivers at $200
per year. She addressed the idea of showing support for
workers and suggested including a carve-out for commuters
in addition to commercial fishermen. She did not believe
the cost would be only $100 per person. She added on all of
the driving people did around town as well. She shared that
her family had been commuters for 34 years. She believed
the cost would be closer to $200 per person and $400 for
two people. She stated that funds would be used for water
and harbor facilities, but marine use would be carved out.
She addressed construction and maintenance on highways and
agreed it made sense to put the funds toward that purpose.
She highlighted the expense of trails and shelter
construction. She shared a concern with the truckers. She
stated that oil credits were not germane to the
conversation. She stated that the oil tax credits had been
negotiated by a different group at a different time.
Representative Johnson remarked that the bill impacted
users who were workaday people. She stated that the people
in her district were straight-up and willing to pay for
what they used. She thought it did not appear what her
constituents would be paying for was necessarily what they
would be using.
Representative Josephson answered that funds for the
purchase of the fuel tax by off-road vehicles would be
deposited into trails, shelter construction, and
maintenance. He explained there was a correlation between
the taxes and the use. He paraphrased Representative
Johnson's statement that her constituents were willing to
pay for the cost of doing business. He countered that if
that were true the tax would need to be quadrupled because
then it would mean Alaskans were actually paying for the
maintenance and operations on highways.
Representative Johnson stated they were talking about
working people. She highlighted that the individuals were
also paying federal taxes and federal money was also going
into roads. She remarked that if they were talking about
motorized trails that was one thing. She did not support
carving out groups. She was strongly opposed to the bill
concept and believed it targeted working people.
9:50:17 AM
Representative Josephson replied that no one was
questioning that people were working.
Representative Carpenter did not know who put as little as
9,000 miles per year on their vehicle. He shared that his
family drove 20 or 30 minutes to get to town to buy
groceries. He reasoned that with daily trips far exceeded
10,000 miles per year. He stated that with two family
members 9,000 miles was very easy to do. He stressed that
the legislature had a constitutional requirement to not
dedicate funds. He remarked that the bill would collect
taxes and put them into a fund with the expectation that
the money would be used for a specific purpose. He noted
that while the current legislature could agree to the
proposal, the next legislature may choose to do something
different because the constitution had been set up to avoid
dedicated funds. He thought it was necessary to be very
clear to the public that how the incoming tax revenue was
used would be decided annually. He underscored that funds
could not be dedicated to any particular operations,
maintenance, buildings, or structures and trails.
Representative LeBon thought it was necessary to ask how to
pay for roads in Alaska. He provided examples such as a tax
or reducing the Permanent Fund Dividend. He asked if the 5
cents from commercial fuel sales to commercial fishing
vessels go toward harbor maintenance. He asked to hear from
DOT.
9:53:00 AM
ANDY MILLS, LEGISLATIVE LIAISON, DEPARTMENT OF
TRANSPORTATION AND PUBLIC FACILITIES (via teleconference),
replied that Ben White, the appropriate person to answer
the question, was out on emergency leave. He deferred the
question to a colleague.
DOM PANNONE, ADMINISTRATIVE SERVICES DIRECTOR, DEPARTMENT
OF TRANSPORTATION AND PUBLIC FACILITIES, OFFICE OF
MANAGEMENT AND BUDGET, OFFICE OF THE GOVERNOR (via
teleconference), answered there were three separate
accounts that tax receipts went into. He detailed that DOT
received funds for fuels used on the highways. He did not
have any information on the water fuel tax and harbor
facilities.
Representative Edgmon remarked that kicking and screaming
legislators were being drawn into a conversation they had
been avoiding for years. He thought the conversation would
intensify in the coming years. He highlighted that taxes
were imperfect in terms of how they impact user groups and
people. He pointed out that someone was treated unfairly
and there were claims that others were not taxed enough. He
highlighted that throughout all of the legislature's
discussion on taxes, one of the core arguments in terms of
broad-based taxes was on the cost of administering the tax
(e.g., sales tax, income tax, and the payroll tax proposed
by former Governor Bill Walker). He believed the advantage
of the motor fuel tax was that its administration was
fairly harmless. He did not believe it was anything akin to
sales or income tax that would require hundreds of new
state employees.
Representative Josephson agreed and remarked that it was
reflected in the fiscal notes.
Representative Wool referenced the $130 million price tag
on road maintenance. He asked about the maintenance number
on ports and harbors.
9:56:05 AM
Representative Josephson deferred the question to DOT.
Mr. Pannone replied that DOT had a harbor grant program
that was funded annually. The department would follow up
with the answer.
Representative Wool asked what percentage of CFEC-licensed
vessels were owned by out-of-state fishermen.
Representative Josephson replied that he did not know.
Representative Wool remarked he had heard that about 30
percent [of the vessels] were from out-of-state and they
accounted for about 50 percent of the catch because the
boats tended to be large and likely bought a lot of fuel.
He remarked on the discussion that fishermen could not
control the price of fish they sell. He highlighted that
miners could not control the price of gold they sold
either. He added that the mining industry paid a
significant amount for electricity, which the industry had
no control over. He stated that the price of oil at the
pump fluctuated frequently. He thought the price had
fluctuated by 70 or 80 cents in the past couple of months.
He asked if there had been any impacts of the 10 cent fuel
tax in Anchorage. He asked whether Anchorage had come to a
screeching halt or if people were upset about the tax.
Representative Josephson believed the question was
rhetorical. He replied in the negative. He reported that
COVID-19 had slowed Anchorage, but he could not imagine
what Representative Wool suggested was true.
Representative Wool referenced Representative Edgmon's
comments about tax and fairness and Representative
Johnson's question about driving and roads. He shared that
he drove often in Fairbanks and driving 100 miles per day
was not uncommon. He believed all consumers would pay at
some point. He thought that when considering the issue of
fairness, it would be necessary to look at other taxes on
industries like fishing and mining in addition to the motor
fuel taxes. He reasoned that the one lever the legislature
had control over was a tax that was already in place. He
pointed out that Alaska's motor fuel tax was the lowest in
the nation and he reasoned that increasing it slightly
would not break the bank. He stated that the proposed 8
cent increase was certainly less than the variation [in
price] in a given week or month. He understood the state
needed revenue. He noted the earlier mention on the idea of
toll roads, but there were not many existing toll roads in
Alaska apart from the road to Whittier. He thought the bill
seemed like an easy method. He reiterated his opposition to
any exemptions and believed all consumers could pay 16
cents. He stated that the increase would bring in needed
revenue, whether it was used on roads, ports, or airports.
He understood there was a federal restriction on aviation
tax. He supported the tax increase but did not support
exemptions.
10:00:42 AM
Representative Josephson agreed that the bill did not touch
aviation taxes. He detailed there was belief that Alaska
was so prominent and successful in the area, particularly
at the Anchorage airport (due to Asia and Europe traffic),
the state did not want to confound or trouble the air
traffic in any way. He referred to Representative Johnson's
mention of federal funds. He stated his understanding that
the state could not use federal dollars on highway
maintenance and operations in the specific component of the
budget. He referenced remarks by Representative Carpenter
and stated it was true that the tax would not go to a
dedicated fund; however, there were scores of designated
funds. He noted there was an element of trust the
legislature and the public expected. He explained that it
was the reason there had not been legislative support for a
proposal by the Department of Law to spend $4 million in
higher education funding on prosecutor housing and
recruitment. He stated that the legislature tried mightily
to honor the purpose of the designated funds, but it was
true that what would happen year-to-year could not be
guaranteed.
Vice-Chair Ortiz clarified that the cost for ports and
harbors was largely the responsibility of local
municipalities. He noted that the state's portion of the
cost was not substantial. He added that fishermen paid
moorage fees that went into ports and harbors.
Co-Chair Merrick apologized to the invited testifiers that
the committee had run out of time. She looked forward to
hearing from testifiers at a future hearing on the bill.
HB 104 was HEARD and HELD in committee for further
consideration.