Legislature(2017 - 2018)BARNES 124
02/14/2017 01:30 PM House TRANSPORTATION
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| Audio | Topic |
|---|---|
| Start | |
| HB60 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 60 | TELECONFERENCED | |
| + | TELECONFERENCED |
HB 60-MOTOR FUEL TAX; TRANSPORTATION MAINT. FUND
1:33:26 PM
CO-CHAIR WOOL announced that the only order of business would be
HOUSE BILL NO. 60, "An Act relating to the motor fuel tax;
relating to the disposition of revenue from the motor fuel tax;
relating to a transportation maintenance fund; and providing for
an effective date."
1:33:50 PM
BRIAN FECHTER, Policy Analyst, Office of the Director, Office of
Management & Budget, Office of the Governor, presented HB 60 on
behalf of the governor. Mr. Fechter begin his PowerPoint
presentation titled, "Motor Fuel Tax Overview HB 60." He
explained that HB 60 would increase Alaska's current motor fuel
tax by doubling it by fiscal year 2018 (FY 18) and then tripling
it by FY 19. He urged the committee to remember that although
it may seem like a large increase, motor fuel tax for highways
had not been increased since 1970, for water craft since 1977,
and for aviation since 1996. Mr. Fechter declared that had the
state indexed to inflation, the eight cents per gallon highway
tax would actually be 49 cents today. He noted that the bolded
figures on the bottom of slide two show current receipts totally
$40.3 million, once doubled that amount would be $80 million,
and then by FY 19 the state would have $120 million in receipts.
Mr. Fechter affirmed that the receipts will be deposited into a
special designated fund to ensure that the taxpayers and the
public have some assurance that the money being spent at the
pump does indeed get used for transportation infrastructure.
MR. FECHTER moved on to slide six, and discussed examples of
what HB 60 would cost everyday Alaskans. He shared an example
of a Wasilla to Anchorage commuter, who drives 25,000 miles
annually and gets about 25 miles to the gallon. He said that
the aforementioned individual currently pays about $80 a year,
which after the tripling would annually amount to $240. Mr.
Fechter noted that although it is a tax increase, the department
does not see it as overly burdensome. He next addressed jet
fuel by giving an example of an Alaska Airlines' flight from
Juneau, Alaska, to Seattle, Washington, lasting 2 hours and 15
minutes and assuming a Boeing 737 burn rate of 750 gallons per
hour, and stated that the current cost of $54 per flight would
be $162 after the second increase. He pointed out that after
the second increase the cost per passenger would be only $1.37
so the increase passed on to the end user would not be overly
onerous.
MR. FECHTER said that slide four discusses the comparison of
Alaska's fuel tax structure to that of other states. He stated
that Alaska's highway tax is the lowest in the nation and also
that it has remained unchanged the longest. Mr. Fechter noted
that the marine tax has a dotted line because in most states the
highway rate is the marine rate. He said that Alaska is unique
with only a few other states that give a special preferential
rate to marine fuel. He stressed that the special rate is an
important policy consideration given the impact the maritime
industry has on Alaska.
1:36:24 PM
CO-CHAIR WOOL offered his understanding that Alaska's marine
fuel tax rate of five cents is lower than the highway rate of
eight cents and that in most states the two are one and the
same.
MR. FECHTER confirmed Co-Chair Wool's understanding. He said
that there are only a handful of states that offer special "set
asides." He noted that some states only offer a rebate to
commercial fisheries, but Alaska is the only state that across
the board has watercraft fuel at a lower rate than highway fuel.
1:37:16 PM
CO-CHAIR STUTES inquired whether the jet fuel tax ranking of
35th out of 50 states was reflective of before or after the
multiple increase.
Mr. FECHTER answered that 35th is the current ranking.
CO-CHAIR STUTES asked whether Mr. Fechter had anything showing
what the ranking would be after the increases.
MR. FECHTER answered that he did not have those numbers at this
time but that he would be happy to report those findings to the
committee at a later date. He directed attention to slide five
and explained that for 31 states, the aviation fuel tax is
actually included in the sales tax. Mr. Fechter illustrated
that if Alaska took that approach, and assuming a three percent
sales tax rate, it would cost users more than what is proposed
under HB 60 and would put the state at about 35th in the nation
for aviation related fuel taxes.
CO-CHAIR STUTES requested a chart of where Alaska would stand
after all increases.
1:38:39 PM
REPRESENTATIVE CLAMAN offered his understanding that Alaska is
currently 35th in the nation for aviation fuel tax, and he asked
for confirmation that Mr. Fechter was saying that even after the
increases Alaska would remain in the same ranking.
MR. FECHTER explained that the chart just shows the special jet
fuel and aviation gasoline tax and doesn't show a holistic view
of all the taxes that land on aviation gasoline and jet fuel.
He clarified that [after the increase in aviation fuel tax]
Alaska would rank [32nd out of the 43 state with fuel tax.]
1:39:24 PM
REPRESENTATIVE EASTMAN queried how the price of gas in Alaska
compares to that of other states.
MR. FECHTER stated that he did not have an exact number, but
Alaska gas prices were "on the high end" compared to other
states.
REPRESENTATIVE EASTMAN offered his assumption that Alaska's
already high gas prices were taken into consideration when
drafting HB 60.
MR. FECHTER confirmed that assumption.
REPRESENTATIVE EASTMAN requested that that information be
provided to the committee.
1:40:01 PM
REPRESENTATIVE KOPP offered his understanding that 31 states
have a sales tax that already applies to fuel.
MR. FECHTER confirmed that is correct.
REPRESENTATIVE KOPP noted that the charts in discussion show the
amount of revenue that each of the states is currently
collecting and are contrasted with what HB 60 proposes. He
elaborated that basically the department is trying to convey
that the fuel increases are not unprecedented.
MR. FECHTER answered that is correct. He added that every
county and municipality down south has different sales tax
rates.
1:41:24 PM
MR. FECHTER continued with his presentation and discussed the
functionality of the designated fund. He recapped that the
department will be putting the receipts of the fund into a new
Alaska Transportation Maintenance Fund to give users assurance
that the money being spent at the pump will only be used on
transportation infrastructure. Mr. Fechter explained that one
of the differences between a designated and a dedicated fund is
that the latter is prohibited under the constitution. He
continued that although receipts cannot be earmarked to bind
future legislatures, by directing the funds to a specific
purpose, designations can be added into statute to act as a
"gentlemen's agreement." Mr. Fechter further noted that despite
each future legislature's choice to either honor or ignore the
designation in statute, of the over 50 designated funds last
year there were only 2 out of 50 funds that were used "off-
designation." He said that over 90 percent of the time the
designations are honored.
CO-CHAIR WOOL requested that Mr. Fechter reveal what those two
off-designation instances were.
MR. FECHTER shared that the vehicle rental tax fund, which has a
designation for tourism marketing and development, was used for
both parks maintenance and highway maintenance; the higher
education fund, which has a designation for education programs,
was used to fund retirement payments.
CO-CHAIR STUTES asked whether any marine fuel tax could be put
into a fund designated for anything marine related, whether that
be ports and harbors or the Alaska Marine Highway System (AMHS).
MR. FECHTER answered yes. He said that when developing the
proposed fuel tax, the department found that there were already
designations written into statute: the highway tax was
designated for highway operations and maintenance; the non-
public highway tax, which is the tax on snow machines, heavy
equipment, et cetera, was to be used on trials and shelters; and
the water craft tax was to be used on water and harbor
facilities. Mr. Fechter said the department did not materially
change any of the three aforementioned designations and thought
that it would be best to leave changes, determining how broad or
how specific the designations should be, up to the legislature.
1:44:04 PM
CO-CHAIR STUTES offered her understanding that the marine fuel
tax was already a designated fund that allocated additional tax
monies to specified projects for water craft in some capacity or
another.
MR. FECHTER explained that there were already the designations
but there was no way to appropriate specifically from the
accounts because they resided in the general fund (GF). He
continued that in practice, the legislature would appropriate
money from the GF, but since far more money is spent than
generated in taxes on transportation assets, it was just assumed
that the money came from the three existing designated accounts
for the purposes listed.
CO-CHAIR STUTES asked about the level of difficulty to put in
statute a designation for motor fuel taxes to go directly into a
designated account for highways and the marine fuel taxes into
an account for waterways or ports and harbor.
MR. FECHTER replied that Co-Chair Stutes' suggestion would be a
very simple fix in the bill. He noted that the bill currently
moves the accounts, keeping the current designations, into the
new Transportation Maintenance Fund. Mr. Fechter offered his
belief that tweaks could be made to the designations that would
allocate generated revenue, for instance, from fuel for
watercrafts to only be used on the AMHS and ports and harbors
facilities. He added that the tweaks could be broadened or
tightened as seen fit.
1:46:10 PM
CO-CHAIR WOOL requested confirmation that the three designations
previously discussed were already existing accounts.
MR. FECHTER acknowledged that is correct.
CO-CHAIR WOOL, in regard to motor fuel taxes for off-road
equipment, offered his understanding that there is no real way
for the department to differentiate, at the place of purchase,
whether that fuel was used for a snow machine or in a generator.
MR. FECHTER explained that in order for users to receive the
off-road motor fuel tax discount of six cents, a report must be
filed with the department showing the specific off-road exempt
use. He added that a return form is the only way for the
department to track the exact usage for the exempt fuel, such as
for a snow machine, a four wheeler, or a generator.
CO-CHAIR WOOL offered his understanding that any remaining
amount that is not rebated would then be determined to be off-
road and would be designated to be used on trails and shelters.
MR. FECHTER confirmed that is the current designation in
statute. He said it is ultimately up to the legislature to
determine exactly what sort of designation should be placed on
the previously mentioned items. He continued on to slide seven,
and repeated what he previously said about the accounts always
being comingled in the GF with no way to appropriate
specifically from them. Mr. Fechter restated that in the past
money was appropriated from the GF and then when expenditures
exceeded collections it was just assumed to come from the
respective accounts. He noted that if HB 60 passes and the
accounts get moved into the Transportation Maintenance Fund,
then they will still be comingled. He explained that the
comingling yields added flexibility for the department. Mr.
Fechter said that the comingling puts pressure on the department
to be frugal with its budget, because money not spent from the
appropriation from this fund will lapse back into the fund to be
available in case of an emergency, a disaster, or a one-time
deferred maintenance need. He brought attention to jet fuel and
aviation gas and said they are not listed as part of the three
accounts that would move into the new fund. He said that is
because jet fuel and aviation gas are already separate, due to
Federal Aviation Administration (FAA) regulations, and that
change was reclassified last session.
MR. FECHTER addressed the table on slide eight, which outlines
the proposed allocations of the funds. He stated that the
allocations are not written in stone and the department will
certainly entertain alternate allocations from the legislature
to reach an equitable allocation of funding. He read from the
table, as follows:
We are putting $9.2 million to airport operations and
maintenance. $62.5 for highway and road maintenance
allocated to the three regions based on the size of
their total budget. There is an appropriation to the
Alaska Bureau of Highway Patrol in the Department of
Public Safety. There are two capitol grants for
transit, one provides transportation services for the
elderly and disabled and the other provides [a] state
match that leverages federal dollars for communities
to purchase and operate bus systems. And we have
three appropriations for marine transportation,
including: the AMHS; a grant to the Inter-Island
Ferry Authority (IFA) that runs the Ketchikan route;
and the Municipal Harbor Facility Grant Fund, which is
a 50/50 matching program that funds harbor repairs.
The top scoring project on this list will cost $5
million and be fully funded in the governor's budget,
and it's for Wrangell, Shoemaker Harbor.
1:50:21 PM
REPRESENTATIVE DRUMMOND questioned Mr. Fechter about the history
of the IFA and why the state is providing a grant for its
operation.
MR. FECHTER answered that the IFA can run the Ketchikan to
Hollis route less expensively than the AMHS. He said that the
state gives the IFA a small grant annually to subsidize its
operations; the local communities wanted more frequent service
than the AMHS was willing to give. He shared his belief that
over the years the grant amount had tapered down from being
closer to $1 million annually a few years ago.
REPRESENTATIVE DRUMMOND offered her understanding that the IFA
used to operate two vessels, one from the north end of Prince of
Wales (POW) to Wrangell and Petersburg and one from the south
end of the island to Ketchikan; however, only one vessel is
currently in operation and maintains the southern route. She
shared her belief that the northern run couldn't keep passenger
volumes at sustainable levels.
1:52:00 PM
CO-CHAIR STUTES asked Mr. Fechter to clarify whether the state
will no longer be taking 50 percent of the marine fuel tax and
applying it toward highway and road maintence.
MR. FECHTER addressed that slide nine shows that the proposed
allocation takes 6 percent of total collections and diverts it
to marine transportation, and marine fuel tax comprises 12
percent of total collection. He added that it is probably a
fair criticism that the marine community may be getting a little
short changed on this allocation, but this is just the first
proposal, and he is certain that in working with the
legislature, the most equitable distribution of funding can be
found.
CO-CHAIR STUTES requested confirmation that the department is
still taking 50 percent [of marine fuel tax] and applying it to
road and highway.
MR. FECHTER responded that is correct.
1:53:29 PM
REPRESENTATIVE KOPP noted that in reference to a previous slide,
Mr. Fechter had said something that he thinks is very important
for the committee to understand. He asked Mr. Fechter to
clarify that designating this fund allows that unspent money to
be lapsed back into the fund.
MR. FECHTER answered that is correct.
REPRESENTATIVE KOPP remarked that during a previous committee
meeting he had asked about how the department planned and paid
for disasters, such as a road wash out, when those types of
incidences occur almost every year. He said he had also asked
if the newly designated fund would help the department to pay
for incidences without using GF money or reducing the
department's entire operational budget. He noted that he
previously got an indefinite answer but is now asking Mr.
Fechter whether the new fund will give DOT&PF a better avenue to
pay for those incidences.
MR. FECHTER confirmed that is correct. He said there will be
funding left in the motor fuel tax account, provided the
department lapses funding back to the fund, which can then be
available for disasters and one-time emergency situations.
REPRESENTATIVE KOPP shared his opinion that that is a huge
benefit to the department it previously didn't have.
1:55:12 PM
REPRESENTATIVE SULLIVAN-LEONARD offered her understanding that
transit and bus users would not pay into this particular tax,
but that 2 percent would still be appropriated for transit and
bus use.
MR. FECHTER explained that there is an exemption for
municipalities and localities, which typically run bus systems.
He indicated that transportation [taxes] also fund non-profits,
which are fuel tax exempt and the Bureau of Highway Patrol - a
state entity. He stated that this allocation of funding just
represents "a first stab" before legislative input of where the
administration would put the funding from this tax and
absolutely open to working together to find a more equitable
allocation of funding.
REPRESENTATIVE SULLIVAN-LEONARD stated her belief that the big
buses create wear and tear on the road systems, and she opined
that is an important topic for further discussion.
1:56:43 PM
REPRESENTATIVE EASTMAN shared that he sees a giant hole in Mr.
Fechter's presentation, and that is: What is the impact going to
be on Alaskans once this is implemented? He offered his belief
that the proposed tax would put Alaska above Washington in terms
of the cost of gas to users at the pump. He noted that
Washington already has a gas tax that is over 37.6 cents per
gallon. Representative Eastman explained that if Alaska's gas
tax is going to be increased to an amount comparable to that of
California and Hawaii, then he would like to see the department
both own up to that move and explain how it will effect
Alaskans. He added that without that information, he does not
believe it is possible to adequately assess that this tax will
do what the department is intending.
MR. FECHTER said the department could provide the requested
information.
CO-CHAIR WOOL shared his opinion that the conversation about gas
prices in Alaska verses that of other states is probably beyond
the scope of this committee and hearing. He added that how
Alaska sets its gas prices or how the private market sets gas
prices is an important conversation for another time.
MR. FECHTER returned to his presentation, to the final slide,
and stated that the number one priority is for the increased tax
to reduce the deficit, no matter how the funds are allocated.
He reviewed that there are four separate accounts, and it is up
to the legislature to determine how the designation should be
written and what should be funded from the proceeds of the tax.
1:59:15 PM
REPRESENTATIVE SULLIVAN-LEONARD asked whether Alaska currently
has a designated fund mechanism.
MR. FECHTER answered that there was a designation written into
law, but it could never be implemented, because the designation
lived as a subaccount of the GF. He added that although the
legislature can appropriate funds from the GF, it is not easy
because of the many subaccounts.
REPRESENTATIVE SULLIVAN-LEONARD inquired whether companies like
Tesoro Corporation are paying some sort of a fuel tax and, if
so, where that money goes.
MR. FECHTER responded that the close to one-cent tax is paid at
the distributer level and is a separate tax. He explained that
the proposed taxes would be paid at the actual point of
delivery.
2:00:35 PM
CO-CHAIR STUTES inquired whether she was correct in thinking
that the department doesn't have a preference as to how the
funds are designated, because wherever the funds go, they will
just replace UGF funds.
MR. FECHTER answered that's correct. He stated that as long as
the governor's priorities are funded in the final budget, the
department does not really care how the funds get allocated.
2:01:17 PM
CO-CHAIR WOOL, in follow-up to Representative Stutes' question,
asked whether any of the total revenues, for any of the funds,
are in excess of what is needed for each of the components and
would roll into surplus.
MR. FECHTER explained that the department spends far more in UGF
than would be generated, even after the tax is tripled.
CO-CHAIR WOOL, in follow-up to Representative Kopp's question
about excess money for a rainy day, offered his understanding
that in none of the revenues, if dispersed to the separate
funds, does the department foresee any left over. He added that
in order to see any surplus, the department would have to bring
in UGF money just to get it up to its operating level. He
inquired whether avalanche or catastrophe money would come from
somewhere else.
2:02:55 PM
MR. FECHTER explained that the argument he was trying to
previously make is that if the department is frugal with its
budget and lapses money back to the fund, then it would be
available for future use. He said that currently if the
entirety of the budget is not spent, then it lapses back to the
GF and is much more challenging to appropriate for a one-time
use. He noted that if it lapses to a designated fund, then it
is much more palatable to appropriate money from that source.
CO-CHAIR WOOL asked whether left over money combined with UGF
money could, at the end of the year, be lapsed back into one of
the designated funds.
MR. FECHTER answered yes.
2:03:40 PM
REPRESENTATIVE EASTMAN requested information on how much the
department lapses back annually.
MR. FECHTER replied that that information is extremely variable
and offered his educated guess that statewide, all departments,
would be roughly $50 million in UGF for FY 16.
REPRESENTATIVE EASTMAN requested that Mr. Fechter provide that
information from the past five years to the committee.
CO-CHAIR WOOL announced that the committee will request a
committee substitute be drafted for HB 60.
2:05:21 PM
CO-CHAIR WOOL announced that HB 60 would be held over.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB60 DOTPF Response 2.13.17.pdf |
HTRA 2/14/2017 1:30:00 PM |
HB 60 |
| HB60 OMB Presentation 2.14.17 REVISED.pdf |
HTRA 2/14/2017 1:30:00 PM |
HB 60 |
| HB60 OMB Revision to House Transportation Question 2.14.17.pdf |
HTRA 2/14/2017 1:30:00 PM |
HB 60 |