Legislature(2015 - 2016)BUTROVICH 205
02/09/2016 01:00 PM Senate TRANSPORTATION
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| Audio | Topic |
|---|---|
| Start | |
| SB132 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | SB 132 | TELECONFERENCED | |
SB 132-ELECTRONIC TAX RETURNS & MOTOR FUEL TAX
1:03:50 PM
CHAIR MICCICHE announced consideration of SB 132 and said that
public testimony will be taken and be left open. He noted that
his office had received letters of both support and opposition
that are posted on BASIS.
SENATOR DUNLEAVY moved to adopt CSSB 132( ), version 29-
GS2912\H, as the working document.
CHAIR MICCICHE objected for purposes of explanation and
discussion.
1:04:50 PM
LYNNE SMITH, staff to Senator Micciche and the Transportation
Committee, Alaska State Legislature, Juneau, Alaska, provided a
summary of CSSB 132(), version \H. She explained that the
committee substitute (CS) removed the electronic submission of a
tax return to the Department of Revenue (DOR) from the bill,
because that issue should be looked at in another committee. It
also has a trigger figure of $85 for an average price for a
barrel of oil during a previous calendar year when the taxes
revert to current rates. There is an addition of two fuel tax
exemptions; one is fuel that is used in an emergency vehicle and
the other is fuel used for student transportation services for
which a school district receives funding under AS 14.09.010.
She said Legislative Legal also made other statutory changes,
which would be addressed next and that the new taxes will sunset
on July 1, 2018.
CHAIR MICCICHE asked for a summary of the bill.
1:06:31 PM
MS. SMITH summarized SB 132 as follows:
Sec. 1 states if the average price per barrel is more than $85
during the previous calendar year, the taxes return to the
current prices for the dealers. Subsec. 2 of this section also
has the tax increase that was proposed in the governor's
original bill.
SENATOR STEDMAN asked why $85 was selected and what revenue is
triggered then. What is the relationship between the tax
increase and the revenue generation?
CHAIR MICCICHE answered that he, Senator Bishop, and Senator
Dunleavy worked on this bill. It's important to explain to
Alaskans that they aren't interested in getting into the tax
business; they were interested in filling a fiscal gap with this
bill. They will likely do other measures to fill the remainder
of the gap, such as repurposing the state's existing financial
assets until the $85 trigger is reached. His thought is that
once that level was attained for an entire fiscal year, the
state would likely be whole as far as funding goes.
He explained the reason for the sunset is similar in that it
will cause the legislature to revalidate the need for that
revenue in two years after the 2018 session.
SENATOR STEDMAN wanted the Department of Revenue (DOR) to answer
the question and provide expectations at $85/barrel. He was
concerned with the credits overall implications to the treasury,
because it's not as clear cut as it appears on the surface.
1:09:40 PM
JERRY BURNETT, Deputy Commissioner, Department of Revenue (DOR),
Juneau, Alaska, said depending on a number of factors - what
happens in this legislative session with the floor and credits -
$85 is above where the minimum tax is triggered. So, at a price
somewhere in the $80 range the state has rapidly increasing
revenues. Whether this is the right price or another price can
be discussed as the bill moves through the process.
SENATOR STEDMAN said he was concerned that $450 million doesn't
do much to run the State of Alaska, and that there is a big
difference between being at the minimum tax of the state's
severance tax and being in the range in which the severance is
actually producing something meaningful to the treasury.
MR. BURNETT answered that he didn't choose the number,
obviously, the chair did. But $85 is where the state starts
experiencing rapidly increasing revenues. But, it is certainly
well below what is required to balance the budget in the current
fiscal system.
CHAIR MICCICHE said his logic for that is that he continues to
expect downward pressure on the budget where possible. These
revenue measures are emergency management and not sustainable
funding in the future. He felt that getting up to a price point
for oil that is too high encourages getting back into an
atmosphere of increasing costs significantly. It may not be a
perfect balance point, but $82 is the point where things shift
to being very positive on production taxes. He allowed the
distance between $82 and $85. It can always be revisited in the
future if it's not the right break point.
MS. SMITH continued with the sectional analysis:
Sec. 2 sunsets sec. 1 of the bill on July 1, 2018.
Sec. 3 is the $85 trigger point for fuel consumed, not by the
fuel dealer. This section also has the governor's original
language about the tax as proposed.
Sec. 4 sunsets Sec. 3.
Sec. 5 adds the two new fuel tax exemptions suggested by
Senator Dunleavy.
SENATOR DUNLEAVY commented that he would have liked to exempt
everyone from the tax, but this is an attempt to mitigate to
some degree the issue especially for non-profits like a school
district and emergency services ambulance, fire, and that sort
of thing.
1:14:41 PM
SENATOR STEDMAN asked if home heating oil is excluded.
CHAIR MICCICHE clarified that none of the other exemptions have
changed except for the two mentioned by Senator Dunleavy.
1:15:09 PM
MS. SMITH continued the sectional analysis:
Secs. 6 & 7 are language that relate to Sec. 5.
Sec. 8 is the refund rate for the off-road use as proposed by
the governor.
Sec. 9 is the sunset of Sec. 8.
Sec. 10 was put in by Legislative Legal for cleanup language.
She asked Ms. Nauman with Legislative Legal to explain those
changes.
1:15:32 PM
EMILY NAUMAN, Legislative Legal Services, Alaska State
Legislature, Juneau, Alaska, explained that Sec. 10 deletes the
current exemptions for motor fuels which appear in the
definition of "motor fuel," which is in direct violation of the
Legislative Drafting Manual. Under the Drafting Manual, a
definition section can only contain just that: a definition. It
cannot contain substantive law. So, in this bill the exemption
for motor fuel language was moved into the body of the
substantive law, which appears in Sec. 4. So, Sec. 4 is exactly
what the law is now with the two exceptions explained by Senator
Dunleavy.
CHAIR MICCICHE clarified that it changes nothing; it just moves
language as a cleanup.
MS. NAUMAN agreed; it just moved some language to the correct
location.
MS. SMITH continued the sectional analysis:
Sec. 11 is the applicability.
Sec. 12 is the transitional language allowing for regulations
to implement the changes.
Sec. 13 is the immediate effective date of Sec. 12.
Sec. 14 is the effective date of July 1, 2018, for Secs. 2, 4,
and 9.
Sec. 15 is the effective date of July 1, 2016, for the rest of
the bill.
CHAIR MICCICHE removed his objection and said that CSSB 132( ),
version \H was before the committee.
1:18:00 PM
SENATOR STEDMAN asked how home heating fuel is handled in this
bill.
MR. BURNETT explained that home heating fuel is not taxed as a
motor fuel. The only tax he is aware of on home heating fuel is
a surcharge of .95 cents per gallon for the Spill Prevention
Response Fund.
SENATOR EGAN asked for an example of a charitable institution in
Sec. 5.
1:18:56 PM
MR. BURNETT answered that is an existing exemption for
charitable organizations that include churches and corporations
that are under 501(c)3 designation in the Federal Tax Code. That
would be certain types of educational entities.
SENATOR EGAN asked if Capital Community Broadcasting and KTOO
would be exempt.
MR. BURNETT answered that it depends on what their exemption
status is and he didn't know how they are organized.
1:20:14 PM
CHAIR MICCICHE opened public testimony. He stated the
Transportation Committee's message so far has been that they are
not in the revenue business, but he also recognizes the
significant fiscal gap. The goal of the bill is to make it only
as needed and not to get in the business of building fund
balance if those funds are not needed to support the government.
If this bill moves forward, he sees it somewhat more of a user
fee than a tax.
FRED STURMAN, representing himself, Kenai, Alaska, opposed SB
132. But if it passes, he wants it sunsetted every year, not
2018. He said the rate needed to be lowered from $85 a barrel,
where it probably won't get to for the next 10 to 15 years to
about $55. He also didn't want any exemptions saying, "If you're
going to pass a bill, all pay." This is a tax and not a user
fee. He was very disappointed that they were considering a tax
without cutting $1 billion out of the budget first. All these
taxes will take non-discretionary funds out of the communities
and it will do nothing but make it worse than the 1980s. One
Soldotna lady told him she was closing her business in April,
and six other people are having moving sales so they can leave
the state.
1:24:37 PM
NANCY HILLSTRAND, owner, Pioneer Alaskan Fisheries and Cold
Point Seafoods, Kachemak Bay, Alaska, supported SB 132. She
agreed that the gap needs to be filled with any kind of revenue
generator that "allows us to stand on our own feet." She didn't
like the hope that everyone always holds out. This is a great
way to fill the gap and she agreed that there should be no
exemptions, because we survived the high cost of fuel and know
that everyone can pitch in.
CHAIR MICCICHE said he would keep public testimony open on SB
132 for the Thursday meeting.
SENATOR STEDMAN said he was still concerned with a trigger price
of $85, because it is related to production, which at best is
projected to be flat to declining into the immediate future. He
wanted to see some DOR projections of $70 to 90 a barrel, so
they could get an idea of how much this quickly accelerating tax
structure will recoup the treasury. He suspected that at $85 to
$87 the issue goes away, and he wanted solid projections run
that actually show that.
CHAIR MICCICHE said since they just received the CS today, he
would hold it and keep public testimony open. [CSSB 132( ),
version /H, was held in committee.]
| Document Name | Date/Time | Subjects |
|---|---|---|
| SB132 Support Letter - AOPA - 2-5-16.pdf |
STRA 2/9/2016 1:00:00 PM |
SB 132 |
| SB132 Support Letter -AGC-2-5-16.pdf |
STRA 2/9/2016 1:00:00 PM |
SB 132 |
| SB132 Opposing Letter - Delta Airlines - 2-9-16.pdf |
STRA 2/9/2016 1:00:00 PM |
SB 132 |
| SB132 -Opposing Letter - UPS 2-8-16.pdf |
STRA 2/9/2016 1:00:00 PM |
SB 132 |
| SB132 CS version H.pdf |
STRA 2/9/2016 1:00:00 PM |
SB 132 |