Legislature(1999 - 2000)
02/10/2000 01:05 PM House TRA
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* first hearing in first committee of referral
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HJR 5 - DEDICATED HIGHWAY AND HARBOR FUNDS CHAIRMAN HALCRO announced the first order of business as House Joint Resolution 5, Proposing amendments to the Constitution of the State of Alaska creating a highway fund and a harbor fund. Number 0040 REPRESENTATIVE ALAN AUSTERMAN, Alaska State Legislature, came before the committee as sponsor of HJR 5. He introduced the resolution last year hoping that the legislature would take a good look at how to get enough funding to maintain the existing roads and harbors in the state. According to surveys that he has conducted in his district, people are willing to support an increase in the motor fuel tax, if the revenues generated are dedicated to maintenance. In addition, the majority of complaints that senators and representatives get are related to road maintenance. It is, therefore, very appropriate that this issue be taken up along with the Governor's bill to increase the tax as a point of discussion. Number 0192 REPRESENTATIVE JOHN COWDERY asked Representative Austerman what would be the ripple effect in regards to other sources of funding. He cited the tobacco tax as an example. He also asked Representative Austerman whether he thinks that this would circumvent the legislature's powers to appropriate funds. REPRESENTATIVE AUSTERMAN replied the resolution deals strictly with the gas and harbor taxes; it does not deal with any other funding source. In terms of giving up legislative power, it is an issue that the members will have to debate. Number 0333 REPRESENTATIVE ALLEN KEMPLEN asked Representative Austerman whether he has analyzed how many other states dedicate their taxes. REPRESENTATIVE AUSTERMAN replied, "No." The Department of Transportation & Public Facilities is here today; they might have that information. REPRESENTATIVE KEMPLEN asked Representative Austerman whether there is a reason why the ferries are not included in the resolution. REPRESENTATIVE AUSTERMAN replied he personally feels that the marine highway is part of the total road system, but at the time he introduced the resolution, he didn't feel there was enough support to include them. They are not treated as part of the road system, even though they are an extension of it. In addition, the marine highway is the only system where a passenger pays a toll. For example, a person does not pay a toll to drive to Fairbanks, but a person pays a toll to travel to Kodiak; the criteria is different. Number 0495 REPRESENTATIVE KEMPLEN stated, according to his understanding, revenues from the federal gas tax go toward paying for ferry and road improvements. There seems to be a recognition that they are inextricably connected. REPRESENTATIVE KEMPLEN asked Representative Austerman why he did not consider the public transportation systems as an appropriate receiver of these funds. REPRESENTATIVE AUSTERMAN replied he has neither discussed nor considered the public transportation systems; they were never brought up in any of the discussions that he took part in. He explained that while considering the resolution he was looking more at the current condition of the road system in relation to maintenance. REPRESENTATIVE KEMPLEN stated a number of Alaskans who are disabled or who do not have access to their own mode of transportation depend upon the public transportation systems. In his opinion, they have a legitimate claim to the revenues as well. REPRESENTATIVE AUSTERMAN stated, according to his understanding, the public transportation systems are not part of the state; they are part of the municipalities. He reiterated that while considering the resolution he was looking at the state and its responsibilities. REPRESENTATIVE AUSTERMAN further stated, after receiving information from a member of his staff, that at least 23 states dedicate revenues for transportation purposes from either fuel tax, vehicle licensing [fees] and/or vehicle registration [fees]. Number 0695 REPRESENTATIVE KEMPLEN said it would be interesting to know how many of those 23 states take a narrow approach, and how many take a broader approach in terms of the transportation needs for their communities. REPRESENTATIVE AUSTERMAN said he would take a look at that. CHAIRMAN HALCRO stated he believes that governments are exempt from paying the motor fuel tax. For example, the People Mover, a public transportation system in Anchorage, does not pay a tax for gas; therefore, those who drive a car are basically subsidizing the system. Number 0772 REPRESENTATIVE BEVERLY MASEK referred to information contained in the bill packet and pointed out that just about every state has some type of motor fuel tax that is dedicated, except Alaska. The information also indicates that this is a complex issue because of federal matching dollars, and because of the fluctuating use(s) of gas. Number 0889 REPRESENTATIVE COWDERY asked Representative Austerman, a member of the House Finance Committee, whether the Administration has requested money for highway and harbor maintenance. REPRESENTATIVE AUSTERMAN replied he does not sit on the Finance subcommittee that handles the Department of Transportation & Public Facilities' budget. He does not know. REPRESENTATIVE COWDERY asked Representative Austerman whether the federal [matching] grants are 100 percent or whether they require state participation. REPRESENTATIVE AUSTERMAN replied, according to his understanding, the state is required to participate to get the majority of the federal matching grants to rebuild roads. He's not sure, however, if federal dollars are used for maintenance. Number 0992 CHAIRMAN HALCRO asked Representative Austerman whether there is anything that would prohibit a municipality from receiving a percentage of the dedicated funds, so that they can maintain their own roads. REPRESENTATIVE AUSTERMAN replied language to that effect would have to be drafted into the resolution, which could make a difference in the outcome of the vote. It certainly could not be changed after the vote. CHAIRMAN HALCRO replied, theoretically, a local municipality that wants to receive a portion of the dedicated funds could be required to adopt a local ordinance guaranteeing that the money goes into their roads, which is similar to what is required under HB 243 that already passed out of this committee. REPRESENTATIVE AUSTERMAN stated there would have to be a requirement for the use of those funds. He has seen legislation for a state sales tax that would allow a portion of the revenues to go back to municipalities. The issue, however, of dedicating a tax and placing that dedication in the constitution needs to be well laid out and thought through before it is engraved [in the constitution]. Number 1160 ANNALEE McCONNEL, Director, Office of Management & Budget, Office of the Governor, came before the committee to testify. The framers of the constitution spent a lot of time on the issue of dedication. They looked at the practices of other states, and decided that the state would probably be better off by not splintering revenue sources. However, at this point in time, many people are concerned that an increase in the tax would not be feasible, if the people do not see an improvement in the roads and harbors. The state is in a situation now where the amount of revenue collected is insufficient to cover all of its needs; therefore, a dedication without an increase would not advance that situation, especially since general funds would need to be used as well. MS. McCONNEL further stated the issue of incorporating local responsibility is worth discussing because municipalities are also struggling with the need for capital improvements. In the case of harbors, the trend has been for the state to transfer ownership, and their ability to sustain them should be part of this conversation, which may include a type of sharing proposal. The same would be true for the transfer of roads. The state should be careful, however, in expanding its responsibilities at this point in time, but the topic is well worth pursuing this session; it can be part of a long-range fiscal plan. Number 1421 REPRESENTATIVE COWDERY asked Ms. McConnel whether the Administration has requested funds for highway and harbor maintenance in next year's budget. MS. McCONNEL replied the Administration requests funds for highway and harbor maintenance every year. She further stated that what is in the current budget is not adequate. REPRESENTATIVE COWDERY asked Ms. McConnel whether it's a high priority for the Administration to request funds. MS. McCONNEL replied a dedication itself rather than an expansion would not provide the wherewithal for additional revenues, which is one of the reasons why the Administration chose to focus on tapping into the federal revenue-stream for construction projects. That can be found in the capital proposal for bonds. REPRESENTATIVE COWDERY asked whether the federal grants always pay 100 percent or whether the state has to "participate" its general fund dollars. MS. McCONNEL replied the state, generally, has to follow the requirements for matching funds. The rule of thumb for road construction projects is 90-10 (90 percent federal and 10 percent state). The rule of thumb for harbor projects is 50-50 (50 percent federal and 50 percent non-federal). The Administration has taken the approach of requiring 25 percent from local governments and 25 percent from the state. The rules can vary, however, for certain types of federal projects. Number 1624 REPRESENTATIVE COWDERY asked Ms. McConnel whether the 90-10 [split] refers to reconstruction. MS. McCONNEL deferred the question to Dennis Poshard from the Department of Transportation & Public Facilities. She further stated the irony is, the federal government pays nothing for maintenance, so if a state lets a road "go to pot," that road can ultimately be rebuilt. She noted that the federal government has made some changes, but those changes do not go as far as the state would like them to. Number 1680 DENNIS POSHARD, Legislative Liaison/Special Assistant, Office of the Commissioner, Department of Transportation & Public Facilities, came before the committee to answer questions. He explained that a complete reconstruction of an intersection that has a lot of ruts, for example, is eligible for a 90-10 [split]. An overlay to extend the life of the pavement, for example, can also be eligible for a 90-10 split. A small stop-gap measure to repair an intersection, for example, usually falls under the department's budget. As Ms. McConnel mentioned earlier, the federal rules have changed. The state used to put zero federal dollars into maintenance, but TEA-21 [Transportation Equity Act for the 21st Century] and ISTEA [Intermodal Surface Transportation Efficiency Act] have loosened the purse strings so that the state is able to put money into stripping, brush-cutting and overlaying; but the state still cannot use that money for snow removal or patching potholes - basic infrastructure maintenance. Number 1753 CHAIRMAN HALCRO asked Mr. Poshard what are the annual revenues generated from the existing gas tax? MR. POSHARD deferred the question to Larry Meyers from the Department of Revenue. LARRY E. MEYERS, Director, Central Office, Income & Excise Audit Division, Department of Revenue, came before the committee to answer questions. The revenues generated from the motor fuel tax for FY [fiscal year] 1999 were $17.6 million. CHAIRMAN HALCRO asked Mr. Poshard what is the annual maintenance budget for all regions of the state? MR. POSHARD replied $74.5 million. Of that figure, about $19.5 million is for aviation, which equates to about $55 million per year for road maintenance. MS. McCONNEL suggested that Mr. Meyers clarify the revenues generated from the fuel tax in total. MR. MEYERS stated the diesel portion is $7.1 million, which equates to about $24.7 million in total. CHAIRMAN HALCRO asked Ms. McConnel whether it's true that the Founding Fathers grandfathered a few taxes for dedication [in the constitution]. MS. McCONNEL replied yes. However, from a transportation perspective, unless there is an offset, a dedication can create a bind because of the changes in the use(s) of fuel. Number 1926 CHAIRMAN HALCRO asked Ms. McConnel whether there is concern about the public's perception, since the gas tax only generates a fraction of the total maintenance budget. In other words: Is there concern that the public may wonder where the money is going since there would need to be additional appropriations? MS. McCONNEL replied that is part of the concern. The public doesn't spend much time looking at the ins and outs of the budget, but there is no question that at the current level there wouldn't be enough revenues generated to cover the needs in full; additional general funds would have to be appropriated. Number 1965 REPRESENTATIVE KEMPLEN asked, What part of the state do the revenues from the gas tax come from? Is it broken down geographically? MR. MEYERS answered the tax is collected at the wholesale level, and it varies. The Department of Revenue does not track it by location. REPRESENTATIVE KEMPLEN asked, How much of the $55 million for road maintenance is spent in the Anchorage area? MR. POSHARD answered he doesn't have that figure with him. He would provide it later. Number 2029 REPRESENTATIVE COWDERY asked Mr. Poshard whether it's correct to say that most of the Anchorage roads are supported by the municipality. MR. POSHARD replied yes. He pointed out that the Department of Transportation & Public Facilities supports the following roads and highways in the Anchorage area: International Airport, Tudor, O'Malley, Minnesota, Northern Lights, Benson, the Glenn and Seward Highways. MS. McCONNEL stated, even though the [above] quantity is not a lot, it is substantial in terms of snow removal and maintenance. Number 2091 REPRESENTATIVE KEMPLEN stated, in reference to the comments made earlier on public perception, the state needs to get a better handle on how much the people in different areas pay and how much they benefit [from the tax]. MS. McCONNEL stated it's always very difficult to come to a fair representation. For example, a person may buy gas in the Mat-Su Valley and drive to and on roads in another unified borough. There are also differences in expenditures from one part of the state to another in relation to the amount of snow and location. It is going to be nearly impossible to precisely allocate funds so that everybody agrees with that allocation. In terms of a tax increase, the public will have to feel that there is an improvement in how well the roads are maintained. REPRESENTATIVE KEMPLEN commented he wonders how Anchorage residents would feel if their tax dollars were being spent on maintenance for roads in the Interior, for example. Number 2201 CHAIRMAN HALCRO stated that issue creates a divisive attitude. In addition, it's almost impossible to allocate what's generated and to give a commensurate return. The road system has to be looked at in its entirety. REPRESENTATIVE KEMPLEN commented the state of Washington is similar to Alaska in that they have both ferries and roads. He asked whether they have a dedicated fuel tax. MR. POSHARD answered, according to his understanding, the state of Washington dedicates their tax, as well as their vehicle licensing and other types of fees. He's not sure about revenues going into their ferry system; he would look into that. REPRESENTATIVE COWDERY wondered whether the state of Washington's constitution is similar to Alaska's in terms of dedicating funds. He suspects the states that dedicate funds are not prohibited by their constitution. MS. McCONNEL stated there are ways to clearly associate an increase in the motor fuel tax with improved services without going to a dedication. There are funds now that are used in a particular way, but they are not technically dedicated in relation to the constitution; there is a general understanding of how they are to be used. It's not an issue of skirting the constitution; it's an issue of establishing clear legislative policy. The Administration has suggested that an increase in the motor fuel tax go to match federal funds, thereby creating a clear correlation in the minds of the people. Number 2354 CHAIRMAN HALCRO asked Ms. McConnel whether the fees generated from DMV [Division of Motor Vehicles] go back to the Department of Transportation & Public Facilities' budget or whether they stay within the Department of Administration's budget. MS. McCONNEL replied they are part of the general fund. They are part of the general purpose revenues that are part of the unrestricted general fund category. CHAIRMAN HALCRO asked Ms. McConnel, What does DMV generate on a yearly basis? MS. McCONNEL replied about $30 million. CHAIRMAN HALCRO wondered - thinking aloud - whether moving DMV to the Department of Transportation & Public Facilities would help with the costs associated with maintaining the highways. He specifically asked, Why isn't DMV under the Department of Transportation & Public Facilities? MS. McCONNEL answered it's important to factor in the cost to administer DMV, which is about $6 to $8 million. She explained that about three years ago DMV was moved from the Department of Public Safety to the Department of Administration in recognition of the fact that its processing functions are similar to other administrative functions. In other words, a primary function of public safety is not to process licenses. Nevertheless, the revenues associated with DMV could be looked at without moving the division. She thinks it is well placed right now from the standpoint of their operations; it's in a place that is oriented towards technology, which has really paid off in terms of speed and ease of service. Number 2453 REPRESENTATIVE COWDERY commented it seems that the government is in the profit-making business, since DMV takes in around $30 million and it costs $8 million to administer. That could give a person "heartburn," especially since it took so much time [out of one's life] to deal with the old DMV. TAPE 00-8, SIDE B Number 0001 REPRESENTATIVE COWDERY continued. He's not sure that this piece of legislation will get through, given the lateness of this session, but it's important to open the debate. Number 0032 MS. McCONNEL replied it depends on how the needed services are defined. For instance, the costs associated with driving in the state would obviously be broader than the costs of processing the renewal of a license, yet when people think about a fee they don't think about the overall picture. She's pretty sure that nobody would be willing to set a toll for any of the roads to cover the true costs, including the public transportation systems and the Marine Highway System. The public really doesn't have a good appreciation of how expensive these systems are. She also noted that Alaska has lower rates than virtually every other state in the country; the public is getting off pretty well. Number 0082 REPRESENTATIVE COWDERY asked Ms. McConnel whether the operation costs have declined appropriately, since the workload for DMV has been cut due to out-sourcing. MS. McCONNEL replied there are two ways to look at what happens when there is a significant improvement. One is the ability to do a much better job with the same dollars, which is the case now with DMV. The other is to not do a good job with fewer dollars. At this point, the Administration has not seen a reduction in the overall cost of the program, but they have absorbed a lot of the increases. They have internally financed a lot of those improvements, as well as caught up with the backlog. She called it a productivity improvement using the same dollars. Number 0163 REPRESENTATIVE COWDERY stated he had hoped that streamlining the division would also significantly reduce the costs. MS. McCONNEL replied that could have been possible, if the number of vehicles and drivers had not increased phenomenally. She could provide that information to him. CHAIRMAN HALCRO opened the meeting to public testimony. Number 0248 FRANK DILLON, Executive Vice President, Alaska Trucking Association, testified via teleconference from Anchorage. The association looks at the motor fuel tax as a motor vehicle user fee. Right now, truckers pay about 32 cents per gallon for diesel for both state and federal taxes. The idea of a dedicated fund has a great deal of merit, and the association has supported it for the last decade. The association also feels that the people need to be educated in terms of the real costs for the state's infrastructures; they would be willing to help the legislature and Administration educate them. He cited that the Department of Transportation & Public Facilities spends in excess of $4 million. That figure, divided by the number of vehicles and gallons of gas used in the state, would equate to a tax of 75 cents per gallon. MR. DILLON further commented that the state gets a break because the federal government gives a lot back; however, they don't give that money back without strings attached. It's the inability to dedicate those funds that causes many of the problems in maintaining the state's infrastructures. If that money was simply given back to the state, there would be enough to maintain and improve the roads commensurate with the increase in traffic. The association believes that the resolution has a great deal of merit, and would encourage the committee members to pass it along in order to let the people in the state vote on it. Before ending his testimony, he pointed out that there are more than 40 states who have a dedicated fuel tax fund. They come in a variety of different ways and uses, but they are primarily dedicated as a type of user fund. Number 0351 REPRESENTATIVE COWDERY referred to the 40 states Mr. Dillon mentioned, and asked him whether a dedication violates their constitutions. MR. DILLON replied most states do not have a constitutional prohibition against dedicated funds. CHAIRMAN HALCRO asked Mr. Dillon whether he knows how much the truckers in the state contribute. MR. DILLON replied, of the $7 million, truckers contribute about $6 million. They contribute in excess of $30 million when including the 24 cents per gallon that goes to the federal government. CHAIRMAN HALCRO asked Mr. Dillon whether the association would have a problem with including the Alaska Marine Highway System. MR. DILLON replied the association has struggled with that question before in the past. He said, If you're talking about maintaining the channels they operate in, that's one question. If you're talking about the docking facilities where there's an interface between highway use and the ferry, that's another question. If you're talking strictly about vehicle maintenance, the vehicle being the ferry, I don't think that we would support it coming out of the highway fund. MR. DILLON further stated the marine highway has the viability to set fees in order to cover their costs right now, and there's no question that the state has to recognize the entire transportation system. The association would be willing to discuss ways to distribute the money for its best use, but even if there is an increase in the motor fuel tax and the revenues are dedicated, it is not a panacea for the state's maintenance problems. He is hoping that the Department of Transportation & Public Facilities moves away from the term "deferred maintenance" and moves toward the term "roadway preservation" as a guiding principle. Number 0483 REPRESENTATIVE KEMPLEN asked Mr. Dillon whether he correctly heard him say that the association supports the concept of a user fee. MR. DILLON replied the association not only supports the concept but pays about $6,500 per year for each tractor-trailer to run on the highways. The association is by far the largest contributor to the highway system based on registrations. REPRESENTATIVE KEMPLEN asked Mr. Dillon whether the association would support a user fee for roads predominately used by the trucking industry. He cited the Dalton Highway as an example. MR. DILLON replied no. The association believes in collecting fees to support the system [as a whole]. Number 0548 OLIVER HOLMES testified via teleconference from Kodiak in support of HJR 5. He is representing himself as a driver and as a vessel operator/owner. The marine fuel tax was originally a dedicated fund. It was only taken out of that classification when an attorney general determined that raising the rate would not keep it as a pre-statehood dedicated fund. He supports users paying for services in general, and it's reasonable to think that targeted taxes might be siphoned off by the legislature to delay imposing general fund taxes that are needed. He would not support raising the fuel taxes - both marine and motor - unless there is some guarantee that the [revenues] would go into a dedicated fund. Number 0612 NICK SZABO testified via teleconference from Kodiak. He supports the concept of users paying for infrastructure that they utilize, but it doesn't necessarily have to be in the form of a constitutional amendment. Most people would be receptive to a system that gives local governments the ability to use the revenues from the taxes that are generated locally. It's not necessary to nit-pick about whether revenues generated in Wasilla were used in Anchorage; it evens out in the end. Number 0712 KEVIN RITCHIE, Executive Director, Alaska Municipal League, came before the committee to testify. It's nice to see the Administration and legislature working together on this issue because solving a lot of small problems essentially leads to solving big problems. The municipalities would like to be part of the discussion, the system, and the solution as well. As Representative Austerman stated earlier, many people would not support an increase in the tax for general purposes, but many would support an increase for specific uses - the maintenance of roads. The people want to know how the government is going to spend the money that they provide. He cited the Municipality of Anchorage just passed a bond issue to build schools because the public wanted to use the money for that particular purpose. He also cited the City of Wrangell changed their charter to increase their property tax from 10 mill to 12 mill for the specific purpose of that money going to schools. In conclusion, he stated the league would be happy to work with the legislature and Administration on this issue. They are able to speak to their communities in relation to an appropriate rate, once there is an agreement in how it would be used. Number 0841 CHAIRMAN HALCRO asked Mr. Ritchie whether the issue of sharing the fuel tax has been an ongoing discussion with his communities. MR. RITCHIE replied yes. It's part of the league's policy statement. He also noted that the incentive for municipalities to accept more road maintenance should probably be part of the discussion. A number of years ago the state shared $2,500 per mile of road, if a municipality accepted maintenance for it. That figure is now between $200 and $300, which is not very much of an incentive. CHAIRMAN HALCRO pointed out that part of his mill rate goes to a road service area. He asked Mr. Ritchie whether any of his communities have expressed a willingness to take over some of the state maintained roads. MR. RITCHIE replied yes. The league's policy statement indicates that the members support a negotiated transfer of responsibility between the state and municipalities, which has been the case for a few harbors. CHAIRMAN HALCRO closed the meeting to public testimony. REPRESENTATIVE KEMPLEN stated it appears there are commutative related questions that need to be resolved. The committee ought to address those questions as a matter of public policy. CHAIRMAN HALCRO stated there definitely is concern. The resolution doesn't specify provisions for the Marine Highway System, which might cause problems of support in Southeast Alaska. At the same time, he's not sure there would be support in Southcentral Alaska because they view the Marine Highway System as something that should be self-supporting. He suggested sitting down with the sponsor to consider some of the issues discussed today. Otherwise, there would be major hurdles to overcome, if the resolution does not benefit and apply to everybody. [HJR 5 WAS HELD IN COMMITTEE FOR FURTHER CONSIDERATION]
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