Legislature(2003 - 2004)
04/14/2003 01:41 PM House FIN
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* first hearing in first committee of referral
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HOUSE BILL NO. 156
An Act increasing the motor fuel tax and repealing the
special tax rates on blended fuels; and providing for
an effective date.
Co-Chair Williams noted that it was not his intention to
move HB 156 from Committee at this meeting.
WILLIAM CORBUS, COMMISSIONER, DEPARTMENT OF REVENUE, stated
that under the authority of article III, section 18, of the
Alaska Constitution, HB 93 would increase the State's
highway motor fuel tax rate from 8 cents a gallon to 20
cents a gallon and repeal the special rate for gasohol.
Commissioner Corbus noted that in order for Alaska's economy
to grow and diversify, the State must expand and improve the
transportation infrastructure. Alaska must adequately fund
highway construction and maintenance activities. Currently,
Alaska spends nearly $50 million per year in general fund
dollars to match the Federal Highway Capital Program and
nearly $60 million dollars per year on maintenance.
At the current eight cents per gallon, Alaska's highway
motor fuel tax rate is now the lowest in the nation. Even
after the proposed increase, thirty-eight states would have
higher rates, and Alaska's fuel tax would be at the 20-cent
national average. Had the tax rate been indexed for
inflation when it was initiated in 1961, it would be nearly
two and a half times the rate proposed in the bill.
Commissioner Corbus pointed out that under existing law,
revenue from the motor fuel tax used on roads and highways
is deposited in a highway fuel tax account in the general
fund. That fund is available for maintenance and
construction of highway projects and ferries.
HB 156 would delete AS 43.40.010(a)(4) and AS
43.40.010(b)(4), which provide a special tax rate for
blended fuel. Working with industry and private citizens,
Alaska no longer requires the use of oxygenated fuels to
meet air quality standards. However, the U.S. Environmental
Protection Agency requires that the State be able to rapidly
re-impose a requirement for the use of oxy fuels should the
air quality deteriorate. The proposal represents a user-
pays approach to expanding and improving the transportation
infrastructure.
Representative Foster pointed out that since the revenue
would be used for improvements of the roads and highways,
would the village areas be exempt from the motor fuel tax
since there are no roads in those areas. Commissioner
Corbus advised that Department of Transportation & Public
Facilities would need to respond to that concern.
Co-Chair Harris observed that there are a number of modes of
transportation throughout the State such as the Alaska
Marine Highway system and the associated truckers, which an
increase in fuel tax would hit hard. He asked about the
"fairness" of the proposal. Commissioner Corbus could not
responded to those issues.
Vice-Chair Meyer inquired if it were possible that the
proposed legislation could hurt the State's economy. He
noted that the trucking industry currently works on a "thin"
margin. Commissioner Corbus acknowledged that the proposed
legislation would create an increased cost in doing business
for the transportation industry. However, he added that the
consequences of not addressing the current fiscal concerns
are more serious than those costs.
Vice-Chair Meyer asked if the cars now using natural gas
would be exempt. Commissioner Corbus did not know.
Representative Hawker pointed out the Governor's opposition
to the House Transportation version of the bill. He asked
what specific changes were needed to warrant support.
Commissioner Corbus explained that version does not create
the immediate revenues needed by the State. The
transportation version would create no revenue for FY04 and
only a small amount for FY05. He reiterated concerns
regarding the cash flow.
Representative Moses asked if the Administration would
support an increase to sixteen cents a gallon, giving eight
cents per gallon back to the municipalities to maintain
their roads. Commissioner Corbus responded that the
Administration's position is that the State needs enhanced
revenues and lower expenditures. If the State can determine
a way to hold the deficit at a point outlined by the
Governor, then the Administration will be receptive to
changes.
Co-Chair Harris asked if Commissioner Corbus was referring
to the section of the bill which would not take effect
unless a Constitutional amendment was added addressing a
dedicated fund. Commissioner Corbus acknowledged that was
correct.
Co-Chair Harris questioned if the Department had considered
an increase to the marine fuel tax as a revenue source for
assuming the small boat harbors. Commissioner Corbus noted
the emphasis behind HB 156, attempts to pay for highway
maintenance costs. He added that the fuel tax for marine
vessels would be a different consideration.
Co-Chair Harris clarified that the emphasis of the
Administration is to place some money into highway
maintenance, replacing general funds in that category with
other funds. In that situation, it would be a tax increase
and a decrease on the amount of the draw to the
Constitutional Budget Reserve (CBR). Commissioner Corbus
agreed.
Representative Joule understood that the Administration does
not support HB 156 being tied to another constitutional
dedicated fund amendment. He asked if the Administration
would support dedicated funds outside of the bill.
Commissioner Corbus replied that he did not know the
Administration's position regarding that concern. He
offered to find out and get back to Committee members.
ROBYNN WILSON, TAX AUDITOR, DEPARTMENT OF REVENUE, responded
to the question from Representative Foster about the
exemption of the village areas from the tax. She clarified
that for off-road use, the user would be entitled to a
refund. Under present law, the off-road user is entitled to
six cents of the eight cents per gallon; under the proposed
legislation, the user would be entitled to a discounted
price per gallon.
Representative Joule asked about the eligibility process for
the rebate, collecting receipts throughout the year. He
inquired the rebate amount expected to be received for the
twenty-cent gas tax.
Ms. Wilson explained that the purchaser would have to
collect their receipts and submit them as often as was
convenient for them throughout the year. They could file
once a month or yearly; there is no statutory requirement
regarding how often they must file as long as it is that
same one-year period. The proposed version of the bill
offers a refund of eighteen cents per twenty cents paid.
The net effect will be the same as the amount currently
being paid by the user.
Representative Joule asked if the age and/or type of the
vehicle would matter if they were classified as off road
vehicles. Ms. Wilson responded that the age or type of the
vehicle does not matter except that the vehicle must be
licensed to not be used on public ways. She added that in
some of the more remote areas, no requirement exists that
the vehicle be licensed and that absolutely, the off-road
refund would be granted.
Representative Joule questioned if many people had pursued
getting reimbursement on the tax paid. Ms. Wilson replied
that the claims are somewhat "spotty". She added, it is
difficult to quantify because the user can accumulate
receipts for extended periods of time before sending them
in. She did not have specific information.
Co-Chair Williams requested further information regarding
sharing of tax revenue among the municipalities.
JOHN MACKINNON, DEPUTY COMMISSIONER, HIGHWAYS AND PUBLIC
FACILITIES, OFFICE OF THE COMMISSIONER, DEPARTMENT OF
TRANSPORTATION & PUBLIC FACILITIES, pointed out that idea
had been suggested by the Alaska Municipal League (AML),
which he thought would be a policy call of the House and
Senate. Mr. MacKinnon did not believe that the
Administration would support the idea.
Since 1991, when the legislation was passed on a national
level, there were federal highway funds to be used on
municipal roads, an ability granted to Puerto Rico and
Alaska. No other state in the Union was allowed that
option. In 1991, when the program first started, there was
$200 thousand dollars put into the federal highway fund,
federal gas tax for the municipal roads. In 2002, the
amount was over $72 million dollars. Mr. MacKinnon
emphasized that there has been a significant increase of
federal money put into municipal roads.
Representative Croft inquired about the refund for those
Alaskans living rurally. Ms. Wilson explained that there is
a form available on the Department's web site; otherwise,
the Department can mail out the forms upon request. She
pointed out the five cents per gallon marine tax.
Representative Croft understood that the federal highway
money was to be used for construction not maintenance. Mr.
MacKinnon explained that was technically correct, however,
in practice that is not the way it happens. There is a fine
line between what is construction and what are maintenance
costs. Some State programs use federal construction monies.
Co-Chair Harris questioned the "fairness" of the proposed
legislation to the Alaska Marine Highway system and the
trucking industry. Mr. MacKinnon did not believe that the
tax would apply to the marine highway, as he did not think
that the State could tax a State entity and that the
legislation does exempt State and federal agencies from
paying. Mr. MacKinnon understood that there was an
amendment that would apply to the Alaska Railroad.
Co-Chair Harris asked if the Administration was
contemplating an increase to the marine fuel tax in order to
help communities take over the maintenance and operations of
the boat harbors. Mr. MacKinnon advised that at present,
the Administration is not looking at that. The
Administration is considering the longstanding program of
boat harbors, rebuilding and bringing them up to standard
and then transferring the maintenance and operations to the
municipalities.
Representative Stoltze noted that he had questions for the
Department of Education & Early Development regarding pupil
transportation. He commented that the legislation would add
costs to that concern. Representative Stoltze requested
that the Department of Education & Early Development be
present at the next meeting.
Vice-Chair Meyer understood that the Department of Education
& Early Development would be exempt from the legislation.
Representative Stoltze pointed out the number of private
contractors involved with pupil transportation moving.
Vice-Chair Meyer asked if natural gas burning fuel would be
exempt. Mr. MacKinnon believed it would be exempt. He
offered to get back to the Committee regarding that concern.
Ms. Wilson added that there is currently an exemption in the
motor fuel tax law, which exempts liquefied petroleum gas.
Representative Foster commented that the general fund
portion of the Department of Transportation & Public
Facilities budget last year was $97 million dollars. He
asked how much would the eight cents per gallon raise. Mr.
MacKinnon understood that it would raise approximately $28
million dollars.
Representative Stoltze inquired if there was a concept for
"kicking" back to the municipalities and how it would be
determined. Ms. Wilson explained that the manner in which
current statute is written, the tax is collected at the
wholesale level. There would be no recording of where the
fuel was sold retail. If there is municipal sharing, there
would need to be some sort of recording requirement from the
distributors.
KEVIN RITCHIE, ALASKA MUNICIPAL LEAGUE, JUNEAU, stated that
in the Alaska Municipal League (AML) policy statement, AML
supports an increase in motor vehicle registration fees and
motor vehicle fuel taxes as long as:
· Fuel tax and vehicle registration fees are used to
fund State and municipal highway road operation,
maintenance, and improvements; and
· The motor vehicle fuel tax and vehicle registration
fees are shared on an equitable basis between local
and State government based on the proportion of
local vs. State maintained roads.
Representative Joule reiterated his concern for the smaller
village communities, which are already paying a high price
for gas. Mr. Ritchie acknowledged that there are many
people that do not support a gas tax and that AML would like
to work with them. One of the advantages of a gas tax over
a sales tax is that percentage tax penalizes commodities in
different parts of the State. One of the advantages of a
gas tax, is that it is more equitable.
Representative Croft introduced Amendment #1, #23-
GH1118\H.1, Kurtz, 4/14/03. (Copy on File).
Representative Croft stated that the amendment would help to
address concerns voiced by Mr. Ritchie. The amendment would
clarify that if revenue sharing is fully funded, then the
entire amount of the tax could be collected. If less is
send to municipalities, the amount that can be collected
would decrease.
Representative Joule spoke to Amendment #2, #23-GH1118\H.2,
Kurtz, 4/14/03. (Copy on File).
Representative Joule noted that the amendment would exempt
rural areas not connected to the main road system from being
taxed.
Representative Joule questioned if HB 156 had received a
referral to the Ways and Means Committee for discussion and
inclusion in the statewide fiscal plan. Co-Chair Williams
noted that at this time, it had not received that referral.
Co-Chair Williams stated that HB 156 would be HELD in
Committee for further consideration.
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