Legislature(1995 - 1996)
03/12/1996 08:10 AM STA
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
HOUSE STATE AFFAIRS STANDING COMMITTEE March 12, 1996 8:10 a.m. MEMBERS PRESENT Representative Jeannette James, Chair Representative Scott Ogan, Vice Chair Representative Joe Green Representative Ivan Ivan Representative Brian Porter Representative Caren Robinson Representative Ed Willis MEMBERS ABSENT All members present. COMMITTEE CALENDAR SENATE BILL NO. 266 "An Act relating to the Creamer's Field Goose Classic." - PASSED OUT OF COMMITTEE *HOUSE BILL NO. 438 "An Act relating to the indexing of documents recorded in the state recorder's offices; and providing for an effective date." - PASSED OUT OF COMMITTEE HOUSE BILL NO. 443 "An Act relating to the tax on transfers or consumption of motor fuel, and repealing the exemption from that tax for motor fuel which is at least 10 percent alcohol by volume; and providing for an effective date." - HEARD AND HELD HOUSE BILL NO. 110 "An Act relating to the confidentiality of certain information in motor vehicle records; and providing for an effective date." - SCHEDULED BUT NOT HEARD (* First Public Hearing) PREVIOUS ACTION BILL: SB 266 SHORT TITLE: CREAMER'S FIELD GOOSE CLASSIC SPONSOR(S): SENATOR(S) FRANK,Sharp JRN-DATE JRN-PG ACTION 02/07/96 2325 (S) READ THE FIRST TIME - REFERRAL(S) 02/07/96 2325 (S) STATE AFFAIRS 02/13/96 (S) STA AT 3:30 PM BELTZ ROOM 211 02/13/96 (S) MINUTE(STA) 02/22/96 (S) STA AT 3:30 PM BELTZ ROOM 211 02/22/96 (S) MINUTE(STA) 02/23/96 2513 (S) STA RPT 1DP 2NR 02/23/96 2513 (S) ZERO FISCAL NOTE (REV) 02/26/96 (S) RLS AT 12:45 PM FAHRENKAMP RM 203 02/26/96 (S) MINUTE(RLS) 02/28/96 2568 (S) RULES TO CALENDAR 2/28/96 02/28/96 2572 (S) READ THE SECOND TIME 02/28/96 2573 (S) ADVANCED TO THIRD READING UNAN CONSENT 02/28/96 2573 (S) READ THE THIRD TIME SB 266 02/28/96 2573 (S) PASSED Y16 N2 E2 02/28/96 2573 (S) DUNCAN NOTICE OF RECONSIDERATION 02/29/96 2594 (S) RECON TAKEN UP - IN THIRD READING 02/29/96 2595 (S) RECONSIDERATION FAILED Y10 N5 E5 02/29/96 2595 (S) MOTION TO RESCIND PREVIOUS ACTION 02/29/96 2595 (S) MOTION HELD TO 3/6 CALENDAR 03/06/96 2628 (S) RESCINDED PREVIOUS ACTION Y18 N- E2 03/06/96 2629 (S) PASSED ON RECONSIDERATION Y12 N6 E2 03/06/96 2636 (S) TRANSMITTED TO (H) 03/08/96 3018 (H) READ THE FIRST TIME - REFERRAL(S) 03/08/96 3018 (H) STATE AFFAIRS 03/12/96 (H) STA AT 8:00 AM CAPITOL 102 BILL: HB 438 SHORT TITLE: RECORDING: INDEX DOCUMENTS BY LOCATION SPONSOR(S): REPRESENTATIVE(S) BRICE,Kelly,James JRN-DATE JRN-PG ACTION 01/22/96 2507 (H) READ THE FIRST TIME - REFERRAL(S) 01/22/96 2507 (H) STATE AFFAIRS, RESOURCES 01/31/96 2587 (H) COSPONSOR(S): KELLY 03/12/96 (H) STA AT 8:00 AM CAPITOL 102 BILL: HB 443 SHORT TITLE: INCREASE MOTOR FUEL TAX SPONSOR(S): RULES BY REQUEST OF LONG RANGE FINANCIAL PLAN CMSN JRN-DATE JRN-PG ACTION 01/22/96 2508 (H) READ THE FIRST TIME - REFERRAL(S) 01/22/96 2508 (H) STATE AFFAIRS, JUDICIARY, FINANCE 03/12/96 (H) STA AT 8:00 AM CAPITOL 102 WITNESS REGISTER ALLISON GORDON, Legislative Aide Senator Steve Frank State Capitol, Room 578 Juneau, Alaska 99801-1182 Telephone: (907)465-3709 POSITION STATEMENT: Representing Senator Steve Frank, regarding SB 110. MR. DAVID LAMBERT P.O. Box 71243 Fairbanks, Alaska 99708 Telephone: (907) 454-7304 POSITION STATEMENT: Representing Fairbanks Montessori Association and Friends of Creamer's Field, regarding SB 110. SHARON YOUNG, State Recorder Department of Natural Resources State of Alaska 3601 C Street, Suite 1180 Anchorage, Alaska 99503-5947 Telephone: (907)269-8882 POSITION STATEMENT: Representing Recorder's Office, Department of Natural Resources, regarding HB 438. RICHARD MCMAHON, Chief Land Records Information Department of Natural Resources State of Alaska 3601 C Street, Suite 916 Anchorage, Alaska 99503-5947 Telephone: (907)269-8836 POSITION STATEMENT: Representing Land Records Information Section, Department of Natural Resources, regarding HB 438. SAM S. KITO, III, Legislative Liaison Department of Transportation and Public Facilities State of Alaska 3132 Channel Drive Juneau, Alaska 99801-7898 Telephone: (907)465-3904 POSITION STATEMENT: Representing Department of Transportation and Public Facilities, regarding HB 443. BRAD PIERCE, Senior Policy Analyst Office of Management and Budget State of Alaska P.O. Box 110001-0001 Juneau, Alaska 99811-0001 Telephone: (907)465-4677 POSITION STATEMENT: Representing Office of Management and Budget, regarding HB 443. BOB BARTHOLOMEW, Deputy Director Income & Excise Audit Division Department of Revenue P.O. Box 110420 Juneau, Alaska 99811-0420 Telephone: (907)465-2320 POSITION STATEMENT: Representing Department of Revenue, regarding HB 443. BERNIE SMITH P.O. Box 3369 Kenai, Alaska 99611 Telephone: (907)446-8191 POSITION STATEMENT: Representing Tesoro Alaska Petroleum, regarding HB 443. ALBERT W. DICK, Mayor City of Hoonah P.O. Box 360 Hoonah, Alaska 99829 Telephone (907) 945-3664 POSITION STATEMENT: Representing City of Hoonah, regarding HB 443. ALBERT M. SNELLING Samson Tug & Barge P.O. Box 559 Sitka, Alaska 99835 Telephone: (907) 747-8559 POSITION STATEMENT: Testifying on behalf of Samson Tug & Barge, regarding HB 443. FRANK DILLON, Executive Director Alaska Trucking Association 3443 Minnesota Drive Anchorage, Alaska 99503 Telephone: (907)276-1149 POSITION STATEMENT: Testifying on behalf of the Alaska Trucking Association, regarding HB 443. ACTION NARRATIVE TAPE 96-34, SIDE A Number 0015 The House State Affairs Committee was called to order by Chair Jeannette James at 8:05 a.m. Members present at the call to order were Representatives James, Green, Porter, Robinson, and Willis. Members absent were Representatives Ogan and Ivan. SB 266 - CREAMER'S FIELD GOOSE CLASSIC The first order of business to come before the committee was SENATE BILL NO. 266, "An Act relating to the Creamer's Field Goose Classic." Chair James called on Allison Gordon, aide to Senator Steve Frank. Number 0075 ALLISON GORDON, Legislative Aide to Senator Steve Frank, sponsor of SB266, stated SB 266 would amend current law to include the Friends of Creamer's Field among those who are authorized to operate and administer a goose classic. She explained that a goose classic is a game of chance where the participants have the opportunity to win a cash prize for guessing the closest time of arrival of the first goose to Creamer's Field. Currently, within the Fairbanks area, the Fairbanks Montessori Association is the only group that may operate and administer a goose classic. This association has found that with its small volunteer group, they are unable to operate the goose classic. Fairbanks Montessori Association and Friends of Creamer's Field have worked to form a contract in which the two organizations put on the classic together. The proposed legislation would also allow either group to operate the classic separately. She stated the Department of Revenue supports SB 266. Number 0195 CHAIR JAMES called on the next witness, David Lambert, via teleconference from Fairbanks. DAVID LAMBERT stated he was representing Fairbanks Montessori Association and Friends of Creamer's Field. He invited questions from the committee. Number 0228 REPRESENTATIVE BRIAN PORTER moved that SB 266 move from committee with individual recommendations and attached zero fiscal note. Number 0251 REPRESENTATIVE CAREN ROBINSON asked why it was necessary to pass new legislation for each type of classic, rather than simply amending current law to allow the Department of Revenue to approve each classic as appropriate. CHAIR JAMES responded that Representative Robinson should talk to Gary Davis about the issue. Number 0276 CHAIR JAMES announced that SB 266 was passed out of the House State Affairs Committee, with individual recommendations and attached fiscal note. Number 0344 HB 438 - RECORDING: INDEX DOCUMENTS BY LOCATION CHAIR JAMES announced that the next order of business to come before the House State Affairs Committee was HOUSE BILL NO. 438 "An Act relating to the indexing of documents recorded in the state recorder's offices; and providing for an effective date." Chair James called on the bill's sponsor, Representative Tom Brice. REPRESENTATIVE TOM BRICE explained that the mining industry has historically used a cardex system to record information relating to location of land claims. The state has stopped funding this system, which has created an information void. HB 438 would add the word "location" into information required to be maintained by the Recorder's Office in its index system. He invited questions from the committee. Number 0463 SHARON YOUNG, State Recorder, Department of Natural Resources, testified on behalf of the Department of Natural Resources. She stated that the recorder's office has historically maintained only a grantor/grantee index, as mandated by statute. As a courtesy, the office has attempted to maintain a location index, which is not mandated. As a result, location information within the system is incomplete. Within the past year, the recorder's office has attempted to index all locations. Because the volume levels are low, they have been able to do this without additional funding. She explained that mandating the location index would provide a more comprehensive and complete public record, not only for the mining community, but for other individuals who use the system. She invited questions from the committee. Number 0580 CHAIR JAMES asked if Ms. Young wished to testify regarding the fiscal note. MS. YOUNG responded that the fiscal note anticipates a 5 percent annual volume increase, after FY 97. The proposed funding would be necessary to support that volume level. Number 0656 CHAIR JAMES replied that there were two fiscal notes. The first, regarding the information resource management component, shows a personal services item of $70 thousand in FY 97. The recorder's office Uniform Commercial Code component shows no personal services in FY 97, but begins in FY 98, and continues. She noted the increases appeared to cover only regular merit and step increases, and did not add additional positions. Number 0699 MS. YOUNG concurred. She stated the increases were based on current years' salaries, and assume a 5 percent growth in volume. She noted that a representative of the Information Services section was also present to testify. CHAIR JAMES reiterated her understanding that the information has always been provided as a courtesy by the recorder's office, and not by the Information Services section. Number 0740 MS. YOUNG agreed. She explained that the testimony of the Land Records Information Section would clarify their fiscal note, which addresses a broader scope of integrating the information with other database information within the department. Number 0762 CHAIR JAMES asked if the information would still be kept on a cardex system. MS. YOUNG replied that the recorder's office would continue to index the information as it has in the past. She explained that the information services section would provide an interface with other information. Number 0802 REPRESENTATIVE JOE GREEN asked how the cost increases were calculated. MS. YOUNG replied that the increase was based on average recording volumes. A document increase of about 4,500 substantiates an additional full-time position. She further explained that statewide volume has averaged about 200,000 documents per year, and a 5 percent increase is anticipated. REPRESENTATIVE GREEN then asked why twice as many full-time employees would be required. Number 0891 MS. YOUNG replied she was not sure she understood the question. REPRESENTATIVE GREEN responded that he was looking at positions, on the fiscal note. MS. YOUNG explained that the $70 thousand need in personal services would cover a five percent volume growth, which would represent one full-time and one part-time position. In the next year, a subsequent 5 percent growth would result in a dollar need of $81 thousand. The positions would increase to two full-time. Number 0941 REPRESENTATIVE GREEN then asked about the figures for FY 98 and FY 01. MS. YOUNG explained that the figures are not finite. CHAIR JAMES expressed her opinion that the figures did not calculate correctly. She stated that the fiscal note would be handled by the Finance Committee, but that it was a very important component of the bill. Number 1028 REPRESENTATIVE SCOTT OGAN mentioned that he had noticed no finance committee referral on the bill. CHAIR JAMES replied that there would have to be a finance referral, since there was a fiscal note. Number 1054 REPRESENTATIVE PORTER suggested the Clerk's office should be notified the bill needs a referral to House Finance, and that the House State Affairs Committee has a concern over the validity of the fiscal note. Number 1071 REPRESENTATIVE GREEN noted the bill's passage hinges on the fiscal note. CHAIR JAMES stated she did not want a fiscal note to kill the bill. Number 1110 CHAIR JAMES invited Richard McMahon to testify. RICHARD MCMAHON, Chief, Land Records Information Section, Department of Natural Resources (DNR), stated he had participated in the cardex meetings mentioned earlier. He explained the DNR's proposal would not replace the cardex system. Rather, the objective is to expand the indexing, so that recorded documents can be located by location. The DNR's system contains all mining records, as well as many others. The department also has access to federal records, through the Bureau of Land Management (BLM) system. He stated that the DNR would like to institute an index system using a common key approach. The fiscal note would provide one computer programming position for twelve months, as well as funding to pay for Department of Administration mainframe services. Number 1223 CHAIR JAMES responded she assumed some computer programming would be needed, which was why she had asked the questions of the previous witness. CHAIR JAMES called on the next witness, via teleconference, in Fairbanks. Number 1248 MARY NORDALE stated she would testify in support of HB 438. She explained she was a member of the cardex committee, chaired by Earl Beistline, who had authorized her to speak on his behalf. She emphasized that HB 438 is an extremely important bill for the mining industry, as well as other resource based industries. The cardex system which has always been used is a good one, and works well, but is available only in Fairbanks. People wanting to do research in the system have had to come to Fairbanks. This has been a subject of concern to the mining industry statewide. Ms. Nordale pointed out that, as far as the fiscal note is concerned, the recorder's office does collect fees for documents recorded, and in this way actually generates revenue. Number 1471 REPRESENTATIVE OGAN mentioned the receipts generated by the recorder's office. He asked if there was a way to find out if the receipts would bring in enough revenue to offset the fiscal note. CHAIR JAMES responded that, as the witness explained, the fee for services in the recording office provides more money than the office spends. She explained that the money goes into the general fund, so the money received would not actually offset the fiscal note. Number 1545 REPRESENTATIVE OGAN asked if going to a digital system would result in enough increased revenue to offset the cost of the new system. CHAIR JAMES replied she didn't think there would be fees charged for using the system. The fees are only charged for recording documents. REPRESENTATIVE PORTER commented that the fiscal note from the recorder's office does contain an offset of revenue. However, the fiscal note from information resources management has $90 thousand that is not offset. Therefore, the fiscal impact to the budget would be $90 thousand in FY 97, and an additional ten thousand in other years. CHAIR JAMES asked Ms. Young to respond to the question regarding fees charged for using the information. Number 1635 MS. YOUNG responded that, yes, the fees are generated only by recording of documents. Access to the documents is free. CHAIR JAMES asked if it would be possible for the information to be tallied and available statewide via computer. Number 1692 MR. MCMAHON stated that the index system would be able to identify recorded documents, and provide the book and page records, so that the documents could be accessed in the recorder's office. The proposed system would not provide electronic images of the documents themselves. He explained that in the cardex meetings, one consultant stated that research which would take one to two hours using the cardex system, could take three to five days looking by book and page in the recorder's office. Number 1750 CHAIR JAMES responded that she didn't visualize the system providing electronic images of the documents. She stated that being able to identify an area of the state, and discover the ownership and status of the land, is extremely important to resource development. REPRESENTATIVE OGAN asked if the recorder's office had the authority to charge the public for accessing the information. Number 1810 MR. MCMAHON replied that the authority to institute fee schedules was in place. REPRESENTATIVE GREEN asked if it was correct that receipts currently exceed the cost of running the recorder's office. MS. YOUNG replied, yes, that was true. Number 1866 MS. NORDALE stated the mining community in Fairbanks has always supported fees for recording of required documents. CHAIR JAMES reiterated her belief that the House State Affairs Committee should not be arguing over fiscal notes. She emphasized that she doesn't want to see the bill killed because of the fiscal note. Number 1993 REPRESENTATIVE IVAN IVAN stated he approved of the intent of the bill, but questioned if a statute was actually required. Couldn't the intent be accomplished through administrative measures? CHAIR JAMES responded that funds for this process had been taken out of the budget, because it was not a statutory requirement. She again emphasized the information is a valuable tool for the mining community, and should be available statewide. Therefore, the bill is needed to make collecting of this information a statutory requirement. She stated she wanted to be sure she had enough information to support the issue in the budget process, and she appreciated the information provided. Number 2067 REPRESENTATIVE ED WILLIS made a motion to pass HB 438 with accompanying fiscal note and individual recommendations out of the House State Affairs Committee, with a note regarding the validity of the fiscal note. There being no objection, HB 438 was passed out of the House State Affairs Committee. Number 2075 HB 110 - CONFIDENTIALITY OF MOTOR VEHICLE RECORDS CHAIR JAMES that announced HB 110 would be heard at the next meeting. Number 2121 REPRESENTATIVE OGAN introduced Gate Weaver, a senior at Colony High in the Palmer-Wasilla area, and winner of the Student to Juneau Contest. He explained Mr. Weaver would be his shadow for the next few days. Number 2121 HB 443 - INCREASE MOTOR FUEL TAX CHAIR JAMES announced the next order of business before the House State Affairs Committee was HOUSE BILL NO. 443, "An Act relating to the tax on transfers or consumption of motor fuel, and repealing the exemption from that tax for motor fuel which is at least 10 percent alcohol by volume; and providing for an effective date." Chair James introduced Sam Kito, III, to present the bill. Number 2173 SAM S. KITO, III, Legislative Liaison, Department of Transportation and Public Facilities (DOT), State of Alaska, announced he would read a prepared statement in support of HB 443. Mr. Kito read as follows: "The Department of Transportation and Public Facilities supports HB 443. More specifically, the department supports increase in highway and marine motor fuel taxes, if the taxes will be dedicated to the mode from which the taxes were collected. "House Bill 443 was introduced at the request of the Long Range Financial Planning Commission, as a component of an overall long- range fiscal plan. The bill proposes an increase in the highway motor fuel tax, from the current eight cents per gallon to twenty- two cents per gallon, and an increase in the marine motor fuel tax from the current five cents per gallon to eight cents per gallon. The bill also repeals the exemption currently in place for the use of gasohol. The DOT estimates that even without an increase in motor fuel tax, the lost revenue from the use of gasohol will be in excess of six million dollars for FY 97. "The highway fuel tax increase will provide the department with revenue, which will enable the department to increase maintenance on state-owned roads and highways. An increase in maintenance will extend the life of our roads and highways. This will make federal construction funds available for other important highway projects in the state. "There are other factors which make increasing the motor fuel tax an important issue for this legislature to address. In January, the United States General Accounting Office (GAO) released a report entitled `HIGHWAY FUNDING, Alternatives for Distributing Federal Funds.' The report did not make specific recommendations. However, the GAO did lay out seven alternatives for distribution of the nation's federal highway trust funds. In four of the alternatives, Alaska's overall share goes from $231 million, which we received in FY 95, to approximately $40 million. In only one alternative, Alaska's best case in this report, the state's share goes from $231 million to $89 million. "If Congress decided to adopt even the best GAO alternative, Alaska could stand to lose $191 million federal dollars for construction on our highways in the state. For this reason, the department believes it is prudent to indicate to other states and to congress that we are doing all we can to maintain the transportation system we have, and to show a commitment to maintain our transportation system in the future. Fortunately, at this time, the state has a strong advocate in Senator Stevens, who sits on the Senate Appropriations Committee. But, the potential for losing valuable federal highway funds is still there. Even if we do manage to maintain the current level of funding through the next federal highway spending authorization, we can eventually expect a decline in federal highway funds for Alaska. "The marine fuel tax increase, coupled with a dedicated fund, will provide the department with funding for a harbor transfer program. The program would involve funding capital projects for state owned harbors, to upgrade the facilities to the condition where the department could turn over the facilities to a local municipality. The department estimates that all but about 22 of the facilities currently owned by the state could reasonably be transferred in five years. The proposed program would basically get the state out of the harbor business." Mr. Kito then invited questions. Number 2307 CHAIR JAMES noted for the record that the bill before the committee is the House State Affairs Committee substitute. The original bill did not require a dedicated fund in order for the legislation to take effect. She explained that a constitutional amendment to create a dedicated fund is currently in the finance committee. House Bill 443 would be contingent upon the passage of that constitutional amendment. Number 2344 REPRESENTATIVE PORTER moved that the committee adopt working draft CSHB443 (STA), M-3796. There being no objection, the CS was adopted as the working draft. Number 2358 REPRESENTATIVE WILLIS asked Mr. Kito if the administration had a position on the proposed constitutional amendment. MR. KITO replied that the governor does support a constitutional amendment for transportation purposes. The resolution currently in house finance is generally supported by the governor, with several suggested amendments. Number 2381 REPRESENTATIVE IVAN asked for clarification regarding the meaning of marine motor fuels taxes. He wondered if the tax would apply only to fuels used on navigable waters, or if small river boats would also be affected. MR. KITO responded that the tax would be collected at the distribution points throughout the state, not at point of sale. He explained that if the distributor believed that a percentage of the fuel would be used in marine craft, he would file with the department to pay the fuel tax. He added that a representative from the Department of Revenue was present to answer questions. Number 2439 BOB BARTHOLOMEW, Assistant Director, Income & Excise Tax Division, Department of Revenue, State of Alaska, announced he would testify on behalf of the department. He explained he would clarify the content of the fiscal note. The fiscal note was prepared prior to the CS, and shows revenue in FY 97. If the bill was amended according to the CS, to tie the tax increase to a dedicated fund, there would be no new revenues collected in FY 97. The dedicated fund would go into place in FY 98. In the first year, increased revenue from raising the highway motor fuel and marine motor fuels taxes, and removing the gasohol exemption, would amount to $59.5 million. TAPE 96-34, SIDE B Number 0000 MR. BARTHOLOMEW further explained the gasohol exemption was passed in the early 1980's, to help expedite potential sale of Delta barley. The exemption is still on the books, and results in a loss of revenue. In FY 95 the state lost $2.4 million in revenue due to the use of gasohol, and the projection for FY 96 is six million. He stated the fiscal note also contains increased operating costs of $80 thousand, which covers one Revenue Auditor III, to be based in Anchorage. Mr. Bartholomew then invited questions. Number 0087 CHAIR JAMES reiterated Representative Ivan's question, regarding how the types of fuel would be identified. MR. BARTHOLOMEW explained that motor fuel tax is currently paid by a qualified motor fuel dealer, who is normally a wholesaler. When fuel is sold, the distributor must make a determination concerning the ultimate use of the fuel. The distributor then files a tax return with the department of revenue. In some cases, it is possible that fuel sold to a retail dealer, such as a gas station, may wind up in either car or boat engines, yet would be taxed at the highway rate. He stated that, as the tax is raised, additional guidelines may have to be provided for such multiple use situations. Number 0189 REPRESENTATIVE OGAN asked if Mr. Bartholomew could explain section five of the bill. MR. BARTHOLOMEW responded that both the original bill and the CS contain a clause directing the department of revenue to tie the tax to the Consumer Price Index (CPI), and to adjust it every two years. REPRESENTATIVE GREEN then asked if the figures would be rounded off each year. MR. BARTHOLOMEW responded that January, 1997, would be used as the base. Number 0235 CHAIR JAMES announced that the Mayor of Hoonah would be testifying via teleconference. MAYOR ALBERT W. DICK, City of Hoonah, stated the previous testimony had clarified his concerns. Number 0245 CHAIR JAMES announced that Bernie Smith would be testifying via teleconference, from Kenai. BERNIE SMITH announced he would testify on behalf of Tesoro Alaska Petroleum. He stated that the increase contained in the CS amounted to a fourteen cent increase in one year. When tied in with eliminating the gasohol exemption, the total increase amounts to twenty-two cents per year. He commented this would put a burden on the public, especially in Anchorage and Fairbanks. He stated that Tesoro feels the increase is too steep, but would support the constitutional amendment, which would give the voters a chance to decide on the issue. On the marine motor fuel tax, he stated the current tax already affects in-state refineries. Processors coming into Alaskan waters will bring their own fuel aboard their vessels, and park outside the state three-mile water limit, rather than pay the cost difference. He emphasized that adding an additional tax would make it extremely difficult for in-state refineries to compete with Seattle based vessels. He stated Tesoro would support the proposed dedicated fund for the current marine motor fuel tax. Mr. Smith then invited questions from the committee. Number 0384 CHAIR JAMES asked if Tesoro would support phasing in the additional tax. MR. SMITH replied he could not answer the question without consulting with company officials. He speculated that the company would probably not object to an increase of five cents per gallon in the first year, provided the revenue went to a dedicated fund. NUMBER 0417 CHAIR JAMES then asked if the difference between the amount paid for fuel in Seattle and Alaska was so great that increasing the tax would actually cause large users to bring in their own fuel. MR. SMITH replied that this was already occurring. He reiterated this made it extremely difficult for in-state refineries to compete. CHAIR JAMES responded that the oil industry needs to do a better job of explaining to the public why the price of fuel is so high in the state of Alaska. She then announced the committee would hear testimony from Sitka, via teleconference. Number 0487 ALBERT M. SNELLING, an employee of Samson Tug & Barge, explained the company is a line haul freight company operating out of Sitka, with a terminal in Seattle. They haul cargo to Valdez, Kodiak, Sand Point, King Cove, Dutch Harbor, and Adak. He stated that, with the proposed tax increases, the company's total fuel costs for 1996 would exceed one million dollars. He added that the increased fuel costs would result in higher prices to the consumer for items brought into the state, such as groceries. He stated he favored cutting government spending and privatization of some government functions, rather than increasing taxes on industry. CHAIR JAMES announced the committee would hear testimony from Anchorage, via teleconference. FRANK DILLON, Executive Director, Alaska Trucking Association, announced he would testify on behalf of the trucking association. He explained that diesel fuel is the life blood of the trucking industry, and that fuel is 12 to 15 percent of the total cost of a trucking operation. He stated he was pleased to see the committee substitute for HB 443, because of the dedicated fund provision. He further stated he would confine his remarks only to the highway fuel tax. He stated the association has two problems with the current committee substitute. One is the rate of taxation; the association does not believe the rate is justified. Second, the association objects to indexing the price increase to the CPI. He explained the association does advocate a dedicated fund for highway fuel tax revenues. Mr. Dillon then invited questions from the committee. He added that he concurred with Mr. Snelling's testimony, and that the fuel increase would definitely be passed along to consumers. Number 0775 CHAIR JAMES announced the committee would hear testimony from Brad Pierce, Office of Management and Budget. BRAD PIERCE, Senior Policy Analyst, Office of Management and Budget Office of the Governor (State of Alaska,) stated he was on the staff of the Long Range Financial Planning Commission, which had proposed the current bill. He explained that revenues from the bill figured prominently in the commission's long range plan for the state. The commission definitely felt the increase from the increased fuel tax should be tied to a dedicated fund. He further explained the commission's reason for indexing the rate increase to the Consumer Price Index (CPI). The current motor fuel tax rate has not been increased since 1961, which made it the lowest rate in the nation. Tying the rate increase to the CPI would keep the tax in line with the national average. Number 0862 REPRESENTATIVE CAREN ROBINSON asked if twenty-four cents per gallon was the national average. MR. PIERCE replied that the national average is twenty-two cents per gallon. Number 00873 CHAIR JAMES commented that Alaska's base price for fuel is much higher than other places, which makes the tax more problematic. She commended the work of the Long Range Financial Planning Commission, but stated the state needs to determine what level of spending can be sustained over the long term. Not only do we have the lowest rate of tax on gasoline, we also have no income or sales taxes. We continue to receive permanent fund dividends. She emphasized that people need to decide how much state spending they are willing to support. While cutting the budget may have a devastating effect on the economy, imposing new taxes on businesses may have an even more devastating effect. She stated the state needs to be cautious in imposing new taxes, but it must be done in smaller steps. She further stated she did not agree with tying increases to the CPI. Number 1007 CHAIR JAMES announced the committee would not be taking action on HB 443 today. She asked if there were further questions or comments. Number 1015 REPRESENTATIVE PORTER asked what was the effect of section six. CHAIR JAMES replied that it repealed the exemption on gasohol. Number 1032 REPRESENTATIVE OGAN stated that he agreed with Chair James regarding tying the tax increase to the CPI. He asked if it was the appropriate time to move an amendment. Number 1061 CHAIR JAMES responded that an amendment would be considered at the next meeting. REPRESENTATIVE OGAN applauded the concept of allowing the people to vote on the issue, through a constitutional amendment. ADJOURNMENT Number 1118 CHAIR JAMES adjourned the House State Affairs Committee meeting at 9:18 a.m.