02/15/2011 01:00 PM House TRANSPORTATION

              HJR 4-CONST. AM: TRANSPORTATION FUND                                                                          
                                                                                                                                
1:31:01 PM                                                                                                                    
                                                                                                                                
CHAIR P. WILSON  announced that the next order  of business would                                                               
be  HOUSE JOINT  RESOLUTION NO.  4, Proposing  amendments to  the                                                               
Constitution  of the  State of  Alaska creating  a transportation                                                               
infrastructure fund.                                                                                                            
                                                                                                                                
1:32:36 PM                                                                                                                    
                                                                                                                                
CHAIR P.  WILSON provided  the background  for the  new committee                                                               
members  on  previous  work  the  House  Transportation  Standing                                                               
Committee  conducted last  year  that provided  members with  the                                                               
breadth and  depth of problems related  to funding transportation                                                               
projects in  Alaska.   She explained that  this work  resulted in                                                               
the   concept  of   reinstating   the  dedicated   transportation                                                               
infrastructure.     When  Alaska  became   a  state,   the  state                                                               
constitution  specifically   stated  that  dedicated   funds  are                                                               
prohibited.   However,  at the  time three  dedicated funds  were                                                               
grandfathered  in, two  of  which  were dedicated  transportation                                                               
funds:   one for land  and one for water,  she said.   She stated                                                               
and  the committee  considered suggestions  and introduced  three                                                               
bills.                                                                                                                          
                                                                                                                                
1:34:02 PM                                                                                                                    
                                                                                                                                
CHAIR   P.  WILSON   reported   that   reinstating  a   dedicated                                                               
transportation  fund  has been  attempted  four  times since  the                                                               
original   dedicated   transportation    fund   was   eliminated.                                                               
Currently,  the  state  is  significantly  behind  on  its  road,                                                               
facility  and harbor  maintenance  while each  year Alaska's  oil                                                               
production is  also diminishing.   Last  year oil  production was                                                               
reduced  by seven  percent which  means less  oil revenue  to the                                                               
state.   Alaska's revenue sources  are not diversified  with over                                                               
90 percent  of its  revenue derived  from oil,  she stated.   She                                                               
explained  that   the  bills   currently  before   the  committee                                                               
represent an effort to plan for Alaska's future.                                                                                
                                                                                                                                
1:35:31 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  PRUITT  moved  to adopt  the  proposed  committee                                                               
substitute (CS)  for HJR 4,  labeled 27-LS0197\I,  Kane, 2/11/11,                                                               
as the  working document.   There being  no objection,  Version I                                                               
was before the committee.                                                                                                       
                                                                                                                                
REPRESENTATIVE GRUENBERG objected for  the purpose of discussion.                                                               
He then removed his objection.                                                                                                  
                                                                                                                                
1:36:31 PM                                                                                                                    
                                                                                                                                
REBECCA ROONEY, Staff, Representative  Peggy Wilson, on behalf of                                                               
the  sponsor  of  HJR  4,  the  House  Transportation  Committee,                                                               
presented  the changes  to the  original resolution.   She  first                                                               
explained  that  HJR 4  would  place  a constitutional  amendment                                                               
before the voters to change  Alaska's Constitution to allow for a                                                               
dedicated  fund   for  capital  transportation  projects.     The                                                               
proposed committee  substitute (CS), Version I,  would change the                                                               
revenue stream  to reflect that the  federal transportation grant                                                               
requires any revenue realized from  airport leases to be directed                                                               
to the  respective airport in which  fees were collected.   In FY                                                               
10, 87 percent  of the state's transportation  budget was derived                                                               
from  the federal  government.   The federal  reauthorization has                                                               
since expired and is current  being extended month by month until                                                               
a new reauthorization  is passed by the Congress.   She predicted                                                               
the Federal Highway Trust Fund will  be depleted by March 1.  She                                                               
anticipated   the  new   federal   transportation  funding   will                                                               
emphasize  mass  transit  and   "green"  transportation.    These                                                               
changes  would  not favor  small  population  states and  overall                                                               
funding  is also  likely  to be  reduced.   Alaska  will need  to                                                               
shoulder more of its transportation infrastructure, she said.                                                                   
                                                                                                                                
1:38:09 PM                                                                                                                    
                                                                                                                                
MS. ROONEY explained  that the proposed CS for HJR  4 is designed                                                               
to   meet   ever   growing  transportation   needs   in   Alaska.                                                               
Transportation investment could  create a competitive environment                                                               
designed  to  attract  additional  economic  development.    Last                                                               
legislature  and  during  the   legislative  interim,  the  House                                                               
Transportation Standing  Committee listened to the  Department of                                                               
Transportation   &  Public   Facilities  (DOT&PF),   grass  roots                                                               
organizations, and  transportation companies  identify challenges                                                               
to  transportation  in our  geographically  diverse  state.   The                                                               
committee  flew  to  villages  to  view  airports,  and  rode  on                                                               
Alaska's  urban highways  to view  needs for  safety, congestion,                                                               
and deferred  maintenance.  The  committee heard from  the Alaska                                                               
Municipal League  (AML), and the Matanuska-Susitna  Borough (MSB)                                                               
also provided  an independent study  to help identify  the fiscal                                                               
challenges to transportation  in Alaska.  She  offered to provide                                                               
a copy of  the MSB study to members.   The National Conference of                                                               
State  Legislatures (NCSL)  reported  measures  other states  are                                                               
taking  to  address  transportation infrastructure  budget  gaps.                                                               
She referred  to a report  in members' packets by  Larry Persily,                                                               
former  legislative  aide  to House  Finance  Committee  Co-Chair                                                               
Representative Mike  Hawker, who prepared an  analysis of funding                                                               
options for the committee's consideration.                                                                                      
                                                                                                                                
1:39:21 PM                                                                                                                    
                                                                                                                                
MS. ROONEY  concluded that  the proposed CS  is a  culmination of                                                               
the  committee's work  and  research  on transportation  funding.                                                               
She explained that the initiative  would allow the state to enjoy                                                               
cost savings  and reduced  project time frames  by using  a state                                                               
funded  mechanism for  funding.   The  proposed  fund would  move                                                               
projects from inception  to completion more quickly  since use of                                                               
the federal highway fund imposes  highly prescriptive and lengthy                                                               
procedures that must be adhered to  for projects.  She offered an                                                               
example,  noting state  funds were  used in  building the  Elmore                                                               
Road  Extension in  Anchorage.   Using  state  funds allowed  the                                                               
project to be  completed in less than three years  while it would                                                               
have taken seven  to ten years to complete the  project using the                                                               
federal  process,  she said.    She  cautioned members  that  the                                                               
proposed resolution  is not intended to  diminish the partnership                                                               
with the  federal government  but is  designed to  complement it.                                                               
The proposed resolution would provide  a dedicated revenue stream                                                               
to  allow for  completion  of  more projects  in  a shorter  time                                                               
frame.     Under  the   resolution,  the   Alaska  Transportation                                                               
Infrastructure Fund  (ATIF) would grow as  the investment returns                                                               
compounded.   The  endowment would  initially be  seeded with  $1                                                               
billion dollars.   In addition  to the investment returns  of the                                                               
endowment,  taxes,   including  the   motor  fuel   tax,  vehicle                                                               
regulation fees, studded  tire tax, and vehicle  rental tax would                                                               
be  deposited into  the proposed  ATIF.   She predicted  that the                                                               
ATIF would  initially generate approximately $103  million in the                                                               
first year  and thereafter  would increase by  $3 million  to 3.5                                                               
million  annually.   She referred  to a  spreadsheet in  members'                                                               
packets, which was  developed by the Department  of Revenue (DOR)                                                               
to estimate  the potential fund  balance that would  be available                                                               
each  year   for  transportation  infrastructure.     She  stated                                                               
historians previously  reported Alaska's  constitutional drafters                                                               
were  concerned   that  dedicated   funds  could   impair  future                                                               
legislatures  from  responding to  evolving  public  needs.   The                                                               
public need  for dependable  and efficient  transportation hasn't                                                               
changed since Alaska's Constitution was  drafted but the need has                                                               
grown, she said.                                                                                                                
                                                                                                                                
1:41:54 PM                                                                                                                    
                                                                                                                                
MS. ROONEY  read an excerpt  from a speech Governor  Wally Hickel                                                               
gave  nearly   20  years  ago,   in  reference  to   a  dedicated                                                               
transportation fund:                                                                                                            
                                                                                                                                
     This is  not as radical  a proposal as it  might sound.                                                                    
     Over  half the  states already  have the  same type  of                                                                    
     financing  arrangement.    In fact,  Alaska's  founding                                                                    
     fathers  supported this  exact  mechanism and  provided                                                                    
     for it  at statehood.   With a dedicated  fund Alaskans                                                                    
     will receive  more stable service  levels.  And  if new                                                                    
     revenues  are needed  to preserve  or improve  service,                                                                    
     Alaskans  will be  assured  that any  new  fee will  go                                                                    
     directly into their transportation system.                                                                                 
                                                                                                                                
MS. ROONEY  remarked that this  excerpt could be  presented today                                                               
just as it was 20 years ago.  She read:                                                                                         
                                                                                                                                
     Alaska needs  to take  action now.   The future  of the                                                                    
     economic and social well being  of Alaska's citizens is                                                                    
     critically  dependent  on   a  reliable  transportation                                                                    
     system.   This change  to the constitution,  allowing a                                                                    
     dedicated transportation  fund is needed to  create and                                                                    
     maintain  a modern  reliable transportation  system for                                                                    
     Alaska.                                                                                                                    
                                                                                                                                
1:43:06 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE GRUENBERG, in  response to Representative Johnson,                                                               
indicated that  he previously removed  his objection  to adopting                                                               
the proposed committee substitute.                                                                                              
                                                                                                                                
REPRESENTATIVE  GRUENBERG  referred  to  the  legal  question  of                                                               
whether a  dedicated fund could  be reinstated once  repealed. He                                                               
recalled an  attorney general's opinion  addressed that  issue by                                                               
stating  it could  not  be  resurrected.   He  asked whether  the                                                               
attorney general's opinion could be made available.                                                                             
                                                                                                                                
CHAIR  P.  WILSON  agreed  to   provide  the  attorney  general's                                                               
opinion.                                                                                                                        
                                                                                                                                
1:45:29 PM                                                                                                                    
                                                                                                                                
CHAIR P. WILSON,  in response to Representative  Johnson, noted a                                                               
disagreement at the  time the state increased the  motor fuel tax                                                               
to $.08.   She related  her understanding  the issue at  the time                                                               
the motor fuel tax was  increased, that the discussion surrounded                                                               
whether the dedicated fund could stay  in place if the motor fuel                                                               
tax was increased and subsequently the state deleted the fund.                                                                  
                                                                                                                                
1:46:22 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  MUNOZ   asked  for  the  proposed   annual  state                                                               
contribution that could be used for state DOT&PF projects.                                                                      
                                                                                                                                
MS.  ROONEY answered  that  while  she did  not  have a  specific                                                               
figure the state contributed 13 percent in FY 10.                                                                               
                                                                                                                                
1:47:00 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE MUNOZ  asked for the  rationale for the "up  to 50                                                               
percent"  of  the  state  taxes that  would  supply  the  revenue                                                               
stream.                                                                                                                         
                                                                                                                                
MS. ROONEY  responded that  the sponsor wanted  to grow  the fund                                                               
and  allow for  expending funds  immediately on  projects.   This                                                               
mechanism also allows the state to inflation proof the fund.                                                                    
                                                                                                                                
REPRESENTATIVE  MUNOZ said  it would  be  helpful to  know if  50                                                               
percent is sufficient to reach the state's goal.                                                                                
                                                                                                                                
CHAIR P.  WILSON commented  that the  proposed resolution  is not                                                               
designed to  replace current  transportation funding,  but rather                                                               
to  put  in  place  transportation   infrastructure  to  use  for                                                               
deferred  maintenance and  other  projects.   She reiterated  the                                                               
proposed ATIF is not meant  to replace the state's transportation                                                               
funding but  to recognize that  the state is not  currently doing                                                               
enough.                                                                                                                         
                                                                                                                                
[HJR 4 was held over.]