Legislature(1993 - 1994)
03/17/1994 03:00 PM House L&C
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* first hearing in first committee of referral
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+ teleconferenced
= bill was previously heard/scheduled
HOUSE LABOR AND COMMERCE
STANDING COMMITTEE
March 17, 1994
3:00 p.m.
MEMBERS PRESENT
Rep. Bill Hudson, Chairman
Rep. Joe Green, Vice Chair
Rep. Brian Porter
Rep. Bill Williams
Rep. Eldon Mulder
Rep. Joe Sitton
MEMBERS ABSENT
Rep. Jerry Mackie
COMMITTEE CALENDAR
HB 413: "An Act increasing excise taxes on cigarettes,
tobacco products, and alcoholic beverages; and
providing for an effective date."
HEARD AND HELD IN COMMITTEE
HB 509: "An Act relating to the tax on transfers or
consumption of motor fuel, and to the proceeds
from the tax; and providing for an effective
date."
PASSED OUT OF COMMITTEE
WITNESS REGISTER
SHELBY STANSBY, Director
Office of Management and Budget
Office of the Governor
P.O. Box 110020
Juneau, Alaska 99811-0020
465-3568
Position Statement: Supported HB 413 and HB 509
ELMER LINDSTROM, Special Assistant
Department of Health and Social Services
P.O. Box 110601
Juneau, Alaska 99811-0601
465-3030
Position Statement: Supported HB 413
RESA JERREL, Lobbyist
National Federation of Independent Business
9159 Skywood Lane
Juneau, Alaska 99801
789-4278
Position Statement: Opposed HB 413 and HB 509
RICK LAUBER, Lobbyist
Anheuser-Busch Company, Inc.
321 Highland Drive
Juneau, Alaska 99801
586-6366
Position Statement: Opposed HB 413
LENNY GORSUCH, Lobbyist
Miller Brewing Company
213 3rd St., #103
Juneau, Alaska 99801
463-3531
Position Statement: Opposed HB 413
RICK URION, Lobbyist
Alaska Wine & Spirits Wholesaler's Association
P.O. Box 20868
Juneau, Alaska 99802
463-5088
Position Statement: Opposed HB 413
LOREN JONES, Director
Division of Alcoholism and Drug Abuse
Department of Health and Social Services
P.O. Box 110607
Juneau, Alaska 99811-0607
465-2071
Position Statement: Supported HB 413
JOAN DIAMOND
5700 Rabbit Creek Rd.
Anchorage, Alaska 99516
345-6192
Position Statement: Supported HB 413
(Spoke via teleconference)
PETER MCNUMERA, Director
Division of Public Health
Department of Health and Social Services
P.O. Box 110610
Juneau, Alaska 99811-0610
465-3090
Position Statement: Supported HB 413
JIM MURPHY
American Lung Association
555 W. Northern Lights
Anchorage, Alaska 99503
276-5864
Position Statement: Supported HB 413
(Spoke via teleconference)
KATHLEEN DOVE
P.O. Box 74048
Fairbanks, Alaska 99707
458-8000
Position Statement: Supported HB 413
(Spoke via teleconference)
LYNDA ADAMS, Executive Director
Alaskans for Drug Free Youth
2417 Tongass #114
Ketchikan, Alaska 99901
247-2273
Position Statement: Supported HB 413
(Spoke via teleconference)
FRANCIS YOUNG
537 Tower Rd.
Ketchikan, Alaska 99901
225-3528
Position Statement: Supported HB 413
(Spoke via teleconference)
KATHY STAROSTKA, Executive Director
Sitka Teen Resource Center
P.O. Box 1034
Sitka, Alaska 99835
747-3500
Position Statement: Supported HB 413
(Spoke via teleconference)
BRUCE CAMPBELL, Commissioner
Department of Transportation
P.O. Box 110800
Juneau, Alaska 99811-0800
465-2500
Position Statement: Supported HB 509
PAUL DICK
Division of Income and Excise Audit
Department of Revenue
P.O. Box 110420
Juneau, Alaska 99811-0420
465-3691
Position Statement: Testified on fiscal note for HB 509
MARK HICKEY, Lobbyist
Valdez Creek Mine
211 4th St. #108
Juneau, Alaska 99801
586-2263
Position Statement: Opposed HB 509
PREVIOUS ACTION
BILL: HB 413
SHORT TITLE: INCREASE TOBACCO & ALCOHOL TAXES
SPONSOR(S): RULES BY REQUEST OF THE GOVERNOR
JRN-DATE JRN-PG ACTION
01/28/94 2180 (H) READ THE FIRST TIME/REFERRAL(S)
01/28/94 2180 (H) L&C, STATE AFFAIRS, FINANCE
01/28/94 2180 (H) -ZERO FISCAL NOTE (REV)
1/28/94
01/28/94 2180 (H) GOVERNOR'S TRANSMITTAL LETTER
02/24/94 (H) L&C AT 03:00 PM CAPITOL 17
02/24/94 (H) MINUTE(L&C)
03/17/94 (H) L&C AT 03:00 PM CAPITOL 17
BILL: HB 509
SHORT TITLE: INCREASE MOTOR FUEL TAX
SPONSOR(S): RULES BY REQUEST OF THE GOVERNOR
JRN-DATE JRN-PG ACTION
02/18/94 2458 (H) READ THE FIRST TIME/REFERRAL(S)
02/18/94 2458 (H) L&C, STATE AFFAIRS, FINANCE
02/18/94 2458 (H) -FISCAL NOTE (REV) 2/18/94
02/18/94 2458 (H) -2 ZERO FISCAL NOTES (DEC,DOT)
2/18/94
02/18/94 2458 (H) GOVERNOR'S TRANSMITTAL LETTER
03/03/94 (H) L&C AT 03:00 PM CAPITOL 124
03/17/94 (H) L&C AT 03:00 PM CAPITOL 17
ACTION NARRATIVE
TAPE 94-25, SIDE A
Number 001
CHAIRMAN HUDSON convened the House Labor and Commerce
committee meeting at 3:13 p.m.
HB 413 - INCREASE TOBACCO & ALCOHOL TAXES
Number 040
SHELBY STANSBY, Director, Office of Management and Budget,
Office of the Governor, reviewed HB 413 for the committee.
He explained that while no one likes taxes, they are a part
of the overall plan the Governor is promoting.
MR. STANSBY stated that compared to the rest of the states,
Alaska is near the bottom in the amount of gas taxes it
levies. It is still the intention to use the money
generated by the gas tax for the repair and maintenance of
the roads in the State.
MR. STANSBY commented that the intention behind the alcohol
and tobacco tax is along the same lines. Users will pay the
costs through taxes for the health and treatment programs to
combat drug and alcohol abuse.
MR. STANSBY noted that there is talk that raising revenues
will take the pressure off reducing the budget, but the
amount of revenue raised by the taxes is only about 1/8 the
amount needed. He further noted that the reserves the state
currently has will only last another two or three years at
the current spending pattern.
MR. STANSBY finished by suggesting that the committee pass
the two tax bills on so that the Finance Committee can
consider them in the overall financial plan.
Number 200
CHAIRMAN HUDSON commented that the alcohol and tobacco tax
is estimated at bringing in approximately $15 million and
the motor fuel tax is estimated at raising $82 million.
Number 218
REP. MULDER asked what the Governor's standpoint was on the
constitutional amendment on the dedicated motor fuel tax.
Number 221
MR. STANSBY responded that the Governor supports the
amendment, but whether he's pushing it this year he doesn't
know. He thought Commissioner Campbell could address that.
He added that his intention was to use the taxes to help
close the fiscal gap and use the money to fix roads.
Number 226
REP. MULDER observed that his constituency is much more
inclined to dedicate funds than to be taxed and have it go
directly into the general fund.
Number 231
MR. STANSBY stated that he agrees with that observation, but
felt that the scenario has gotten a lukewarm reception by
the legislature.
Number 234
CHAIRMAN HUDSON noted that HB 509 is not a dedicated tax.
Number 245
ELMER LINDSTROM, Special Assistant, Department of Health and
Social Services, testified in support of HB 413. He stated
that his agency doesn't collect the taxes nor do they have
any direct revenue stream from these taxes. The department
believes HB 413 can stand on its own as a public health
measure and the taxes are a vehicle to provide this.
MR. LINDSTROM stated that history tells us that an increase
in tobacco and alcohol taxes equals a decrease in
consumption, especially among the young.
Number 285
CHAIRMAN HUDSON noted that the backup showed some high
figures regarding state expenditures for substance abuse and
asked Mr. Lindstrom what those expenditures were.
Number 300
MR. LINDSTROM replied that the figures Mr. Stansby referred
to were simply the funds appropriated for substance abuse
treatment. The costs of the abuse of alcohol and use of
tobacco show up in all levels of state government.
Number 328
RESA JERREL, National Federation of Independent Business
(NFIB), testified that her group opposes HB 413. She said a
1993 survey of NFIB members found overwhelming support -- 92
percent -- to reduce state government spending before
increasing taxes.
Number 350
REP. WILLIAMS asked Ms. Jerrel if she thought the people who
abuse products should be responsible for paying for the
treatment.
Number 365
MS. JERREL reiterated that the NFIB members uniformly oppose
any new taxes until government spending comes under control.
Number 370
CHAIRMAN HUDSON commented that every time the legislature
comes up with an area to cut spending, out comes advocates
who consider it sacred. Chairman Hudson assumed that the
NFIB is not opposed to taxes forever but not as the first
thing to go to.
Number 388
MS. JERREL responded that the chair was correct in his
assumptions and added that the members of NFIB did have a
priority listing of areas of taxation they would like to see
if raising revenue through taxes is needed.
Number 400
RICK LAUBER, Lobbyist, Anheuser-Busch Company, Inc.,
testified against HB 413. Mr. Lauber presented the
following position paper:
Anheuser-Busch is proud of it's leadership role in promoting
responsible use of its products. Our "know when to say
when" educational advertising campaign has been effective.
We have been strong supporters of the designated driver
campaign. We were the first major brewer to produce a
nonalcoholic malt beverage, O'Douls, and spend millions on
it's promotion as a nonintoxicating alternative to beer.
Anheuser-Busch not only discourages abuse of its products by
adults, but has initiated programs in our schools and
colleges to discourage under-age consumption of all alcohol
and provide alternatives to the use of intoxicating
beverages.
We oppose a tax increase on beer.
In Alaska beer is already taxed, at a rate nearly 50% higher
than the national average. As recently as 1991 the federal
government increased the tax on beer drinkers by 100% from
$9.00 to $18.00 per barrel.
A 50% increase in the tax on beer that this legislation
proposes will not translate to an increase on 50% in taxes
collected. If the federal experience is an indication.
Those opposed to the consumption of any beer will tell you
that is a good thing. Not so. Price increases discourage
the responsible drinker, mostly in the middle and lower
income groups. While studies have shown that beer is not
the beverage of choice of the vast majority of alcoholics,
they have shown that a price increase of this magnitude is
not a deterrent to their abuse. The vast majority of beer
is consumed by responsible users.
As more and more studies confirm the health benefits of the
daily consumption of moderate amounts alcoholic beverages,
it does not seem appropriate to discourage the use of
moderate amounts of beer.
A tax on the wholesale price of beer will be transferred to
the retail purchaser. The ultimate tax payer will be the
beer drinkers of Alaska. We do not object to paying taxes
but feel that the current tax, already far higher than the
average of the nation, combined with the recent increase in
federal taxes of 100%, is a more than adequate tax on the
beer drinkers of Alaska.
Number 455
CHAIRMAN HUDSON asked if there was a tax on the nonalcoholic
beer Anheuser-Busch promotes.
Number 465
MR. LAUBER replied that there was no tax on O'Douls.
Number 479
LENNY GORSUCH, Lobbyist, Miller Brewing Company, testified
against HB 413. Ms. Gorsuch dittoed Mr. Lauber's testimony.
Number 514
REP. WILLIAMS asked for comments on the administration's
view that those who imbibe should help pay the cost to the
state of alcohol abuse.
Number 525
MR. LAUBER stated that if you could design a program that
would make the abusers of anything pay for their own
services the industry would support it. But the vast
majority of users of beer do not abuse the product.
Number 565
RICK URION, Lobbyist, Alaska Wine and Spirits Wholesaler's
Association, testified against HB 413. Mr. Urion stated
that if HB 413 passes Alaska will be the highest by far in
taxing spirits.
MR. URION noted that the Department of Revenue figures in
projecting income from the tax increase did not include the
decrease in consumption that the Department of Health and
Social Services projects.
Number 594
CHAIRMAN HUDSON noted that in 1991 the federal government
increased the tax, which resulted in a decrease in actual
revenue and asked if there was also a resulting decrease in
social costs.
Number 610
LOREN JONES, Director, Division of Alcohol and Drug Abuse,
Department of Health and Social Services, testified in
support of HB 413. Mr. Jones stated that he does not know
of any studies that show a correlation between the decrease
in consumption related to the economic costs of abuse.
MR. JONES noted, however, that insurance companies have
looked at the decrease of medical costs after a person has
gone through treatment.
TAPE 94-25, SIDE B
Number 001
MR. JONES further stated that his office conducted an
economic cost study in 1985 that looked at the costs of
services directly related to alcohol abuse. These costs
would include enforcement of drunk driving statutes, number
of DFYS cases of child abuse and neglect by parents who
abuse alcohol, small business losses, and inmates in jails
who committed their offenses while under the influence of
alcohol.
MR. JONES stated he does not believe that the tax would be
disproportionate to the social drinker as it is levied
directly to the volume of alcohol you buy.
Number 111
JOAN DIAMOND testified via teleconference in support of HB
413. Ms. Diamond stated that Alaska has only raised the tax
once since 1960 and has never been adjusted for inflation.
She added that the costs to the public are huge and any
increase in the tax will not only lower consumption but
lower the cost to the public as well.
Number 192
PETER MCNUMERA, Director, Division of Public Health,
Department of Health and Social Services, testified in
support of HB 413. Mr. McNumera stated that he is very
concerned about the impact of alcohol on the youth. He
believes that the increase in taxes will lower the
consumption among youth.
Number 234
JIM MURPHY, American Lung Association, testified via
teleconference in support of HB 413. Mr. Murphy stated that
the legislature has an opportunity now to do two things:
raise some revenue for the state and discourage tobacco use
by Alaskans by passing HB 413.
Number 262
KATHLEEN DOVE testified via teleconference in support of HB
413. She added that she is involved in a prevention program
on alcohol and drug abuse. She stated that she supports HB
413 and its efforts to deter young people from using alcohol
and tobacco.
Number 287
LINDA ADAMS, Executive Director, Alaskans for Drug Free
Youth; Advisory Board on Alcoholism and Drug Abuse; and
Mayors Task Force on Substance Abuse in Ketchikan; testified
via teleconference that all three of these groups are in
support of HB 413.
MS. ADAMS stated that all the studies have shown that our
youth are very price sensitive and that any increase in
taxes translates to a decrease in consumption among our
youth.
MS. ADAMS dittoed the previous supportive testimony.
Number 374
FRANCIS YOUNG testified via teleconference in support of HB
413. She stated that the costs to the public is a big
factor and includes the costs to educate children whose
lives have been impacted by alcohol.
MS. YOUNG stated that users should be willing to pay the tax
which only covers about 17% of the costs incurred because of
abuse.
Number 395
KATHY STAROSTKA, Executive Director, Sitka Teen Resource
Center, stated via teleconference that the center is
overwhelmingly supportive of HB 413. Ms. Starostka stated
young people have the least amount of disposable income so
this increase would impact them the most.
MS. STAROSTKA dittoed the previous supportive testimony.
Number 405
CHAIRMAN HUDSON stated that the committee did not have a
quorum at the table and would not take action at this time.
HB 509 - INCREASE MOTOR FUEL TAX
Number 425
BRUCE CAMPBELL, Commissioner, Department of Transportation,
testified in support HB 509. He commented that Mr.
Stansby's figures of $82 million as the amount of revenue
generated by passage of HB 509 is different than the $109
million figure his agency shows.
COMMISSIONER CAMPBELL stated that the funds generated by HB
509 are not dedicated funds. However, he was supportive of
the language the administration calls "pseudo dedicated
funds" that states that the proceeds of the tax shall be
deposited in a special highway fuel tax account within the
general fund. Commissioner Campbell stated that this type
of language is found in three or four other funds he's
familiar with and the legislature has only appropriated out
of these accounts for the particular purpose they were set
up for.
COMMISSIONER CAMPBELL stated that this type of set-up would
not be truly a dedicated fund in a constitutional sense; at
least it would be in a practical sense. The administration
felt this scenario could work and would save money by not
having to get a constitutional amendment.
COMMISSIONER CAMPBELL added that he believes that a major
raise in the fuel tax is important because the revenue
generated would nearly fund the budget of the Department of
Highways.
COMMISSIONER CAMPBELL explained to the committee that the
State of Alaska is considered a recipient state; the state
receives $600.00 for every dollar the state pays in federal
fuel and excise taxes. He added that Alaska is the highest
state in the union in the disproportionate ratio. The donor
states are joining together to change the way the federal
monies are proportioned. Alaska would lose in this
scenario. Commissioner Campbell noted that one of the
things he hears during meetings with other transportation
and highway officials is that Alaska is the biggest
recipient of federal aid and has one of the lowest gas
taxes.
COMMISSIONER CAMPBELL concluded by saying that this is going
to be an issue our congressional delegation will have to
deal with.
Number 496
RESA JERREL, Lobbyist, National Federation of Independent
Business, testified against HB 509. She reiterated her
earlier testimony regarding HB 413 and the NFIB's position
that they want the state government spending under control
before any taxes are passed.
Number 500
PAUL DICK, Department of Revenue, testified that the fiscal
note the Department of Revenue offered was $82.2 million,
using the current level of consumption.
Number 521
REP. PORTER asked if the department looked back to 1983 when
the last tax increase took place to see what happened.
MR. DICK responded that he did not.
CHAIRMAN HUDSON asked what the average Alaskan's cost
increase would be if HB 509 passed.
Number 545
REP. MULDER asked if Mr. Dick had any idea why there was a
discrepancy between figures of the Departments of
Transportation and Revenue. He also asked what the total
revenue would be if the tax were doubled and not tripled.
Number 550
MR. DICK replied that he had not had a chance to look at
DOT's figures, but would get together with them to figure
out the differences. Mr. Dick stated that doubling the
current tax rate would result in revenues of approximately
$40 million.
Number 556
MARK HICKEY, Valdez Creek Mine, testified against HB 509.
Mr. Hickey stated that the mine is located 70 miles on the
Denali Highway about 70 miles east of Cantwell. He stated
that four years ago they reached an agreement with the
Department of Transportation to share the cost of winter
maintenance of the road.
MR. HICKEY stated that the mine is not opposed to a doubling
of the tax, but not a triple increase. They would also like
to see the tax be dedicated to highway maintenance.
MR. HICKEY noted a side effect of the proposal that is
troubling for the mine and that is called the off-highway
tax. Currently Alaskans pay an off-highway tax of eight
cents per gallon and receive a rebate of six cents. He said
HB 509 eliminates the rebate and actually raises the off-
highway tax to 17 cents. This would be a 3% increase in the
cost of doing business for the mine.
MR. HICKEY proposed a solution that would eliminate the
increased tax on off-highway usage.
TAPE 94-26, SIDE A
Number 001
CHAIRMAN HUDSON stated that he was leaning towards
supporting the increased gas tax, but not as high as the
administration is asking for. He added that he liked the
language in the bill that doesn't dedicate the funds but
strongly favors appropriation towards highway facilities.
Number 061
REP. PORTER declared a conflict of interest due to the fact
that he ran a company that provided security for the mine
Mr. Hickey is representing and is still a consultant for
that company.
CHAIRMAN HUDSON stated that the committee recognizes that
and does not believe it is in conflict.
CHAIRMAN HUDSON asked for comments from the committee
regarding passage of HB 509.
Number 075
REP. MULDER stated that his constituents want the funds to
be dedicated to highway maintenance and not to go into the
general fund. He added that he could live with the proposal
of an increase to 17 cents as long as it was dedicated.
Number 113
REP. WILLIAMS stated he didn't have any comment at this
time.
Number 116
REP. SITTON stated that he did not want to see any tax
measures until the budget situation was figured out.
Number 120
REP. PORTER stated that he thinks it's appropriated to move
these bills in order to give the Finance Committee all the
tools required to make their decisions.
Number 138
CHAIRMAN HUDSON stated that he believes the legislature will
make some significant reductions in the budget this year and
he believes the tax bills should go forward to give the
legislature all the tools necessary. However, he does not
want to see the gas tax be tripled as this bill calls for.
Number 179
REP. MULDER moved Amendment 1 to HB 509 to reflect a 17 cent
increase as opposed to a 25 cent increase. No objections
were heard; it was so ordered.
Number 198
REP. SITTON moved Amendment 2 to HB 509 on page 2, line 21,
adding a new section increasing the refund on the tax for
non-highway use.
Number 220
REP. PORTER moved CSHB 509(L&C) with adjusted fiscal note
and individual recommendations. No objections were heard;
it was so ordered.
Number 230
CHAIRMAN HUDSON adjourned the meeting at 4:52 p.m.
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