HOUSE JOINT RESOLUTION NO. 4 Proposing amendments to the Constitution of the State of Alaska creating a transportation infrastructure fund. 2:23:20 PM Co-Chair Stoltze discussed that Vice-chair Fairclough chaired the subcommittee on HJR 4. Vice-chair Fairclough explained that the committee sent three bills to subcommittee in the prior year. The members held hearings throughout Alaska. The bill received support from residents for the dedication of transportation funds. She explained that subcommittee suggestions were incorporated into a CS that was labeled "finance." Vice-chair Fairclough MOVED to ADOPT a proposed committee substitute for HJR 4, Work Draft 27-LS0197\T (Martin, 3/1/12). Co-Chair Stoltze OBJECTED for discussion. 2:24:57 PM REPRESENTATIVE PEGGY WILSON, SPONSOR, asked her staff to review changes in the CS. REBECCA ROONEY, STAFF, REPRESENTATIVE PEGGY WILSON, explained that the changes to remove details from the constitutional amendment; the removed provisions would be added to the enabling legislation. She noted that the CS updated specific dates within the legislation and changed the pay-out rate. She pointed to page 1, line 14, where the date was changed and updated for the current year. The CS deleted the following language from page 1, lines 14 through 16 and page 2 lines 1 through 2 after the word "from": "any state on fuel used for the propulsion of motor vehicles, aircraft and water craft, less those refunds, credits and collection costs that are provided by law from a registration fee levied for a motor vehicle, not including special registration fees as provided by law. She noted that page 2, line 3 after "funds" deleted "designated by the legislature." Ms. Rooney relayed that on page 2, line 6 after the words "50 percent of the," the following language was removed "state fuel tax, registration and driver's license fees, identification card fees, studded tire taxes and other designated." She continued with page 2, line 2 and line 8 where "6" was replaced with "7." She added that the following language was deleted on page 2, line 10 the following language "designated by law": "For costs related to motor vehicle licensing and registration that are designated by law" was deleted. She noted that page 2, line 5 added a new sentence, "the legislature shall by law determine which fees and funds are transportation related under this section." Co-Chair Stoltze surmised that the changes allowed a dedicated fund similar to the permanent fund and the change would allow direct appropriations or a dedication. The legislature would make the appropriation decisions on how the fund was implemented. Representative Peggy Wilson replied in the affirmative. Vice-chair Fairclough clarified that the 7 percent was an "up-to" amount that would allow flexibility for the legislature to set statute without revisiting the constitution. The change would allow the legislature to set a 4 or 5 percent pay-out rate depending on concurrence of the body. The constitutional amendment allowed the dedication of funds and permitted the legislature the greatest flexibility in management of the fund. 2:29:50 PM Representative Peggy Wilson read a statement that she believed would help answer any questions related to the CS: Like the rest of the country, Alaska is challenged with maintaining, upgrading and creating new transportation infrastructure. I think we all can agree that we have a serious shortfall in funding which could be exacerbated by the new federal reauthorization bill. It is rumored to cut Alaska's federal funding by at least 30%. In 2005 the United States was ranked as number one in the world for our transportation system. Now, just 7 short years later, we are not even in the top 10. As federal funding is diminishing and our infrastructure is aging Alaska needs to shoulder more of the responsibility for its transportation infrastructure. HJR 4 will put a constitutional amendment to the Alaska constitution before voters to re-instate a dedicated fund for Transportation Projects. Historians write that the drafters of the constitution were concerned that dedicated funds would impair future legislatures from responding to evolving public needs. However, the drafters of our Alaska Constitution grandfathered in two dedicated transportation funds. The first was for highways and the second was for water and harbor facilities. They recognized the public need for dependable and efficient transportation and that need has only grown. Testifiers for this bill have agreed that the state needs a reliable revenue stream that doesn't fluctuate from year to year. With a dedicated fund Alaska can implement a transportation plan that is independent of the federal government. In order to implement the Alaska Transportation Infrastructure Fund (ATIF) there are 3 pieces of legislation that need to pass. The first, the bill before you today, is to put this constitutional amendment on the ballot, second is to set up the enabling statutes that direct how the fund will be administered, what revenues will be deposited in the fund, how those revenues may be spent, and what the payout rate will be from the fund. It will also define an entity that will evaluate projects for funding. The third part will be the bill that will fund the corpus of the Alaska Transportation Infrastructure Fund with 1 billion dollars. Today we are hearing HJR 4 the constitutional amendment to re-instate a dedicated transportation fund. There is a CS before the committee today that has 2 substantive changes made. 1) The language has been modified to make the constitutional amendment broad enough so that it will be useful 10 years, 20 years and 100 years from today. We have removed all the details about which funds will be deposited in ATIF, and what projects can be funded with ATIF. These detailed provisions will be in the enabling statutes. In addition to making the constitutional amendment broader so that it will serve into the future, these deletions have made the amendment more clear and concise. 2:33:50 PM Representative Peggy Wilson continued to read from a statement: The second substantive change is the increase in the maximum payout rate. I believe that the payout rate for today should be in the neighborhood of 4 to 4.5% not 7 %. We do not want to chip away at the corpus of the fund. However, what we don't know is what the payout rate should be in 20 or 30 years. I think it is prudent to give the legislature the flexibility to use the fund and still maintain a small growth rate. 10 years ago it would have not been a bad idea to have the payout rate at 6 or 7%. We had seen the growth rate of investments up around the 10% range consistently. Today's market is not as favorable. Setting the payout rate in statute with a ceiling in the constitution will give the legislature the latitude to manage the fund in future years based on the market of the day while preserving the corpus of the fund. In you packet you have a list of organization who have voiced their support for the Alaska Transportation Infrastructure Fund. It is quite a list and they are the people we can depend on the get this amendment passed by the voters in November of 2012. Alaska needs to take action now. The future of the economic and social well-being of Alaska's citizens is critically dependent on a reliable transportation system. This change to the state constitution, allowing a dedicated transportation fund is needed to create and maintain a modern, reliable transportation system for Alaska. Co-Chair Stoltze WITHDREW his OBJECTION. There being NO further OBJECTION, Work Draft 27-LS0197\T was ADOPTED. Representative Neuman asked who would decide which projects were funded. Representative Peggy Wilson replied that the enabling legislation would determine the body responsible for the decision regarding the funding of projects. Co-Chair Stoltze understood that the default was the legislature and its delineation of responsibility. 2:36:19 PM Representative Gara complimented Representative Wilson on the drafting of a dedicated fund provision. He believed the dedicated funds provision in the Alaska Constitution was a wise decision made initially by the state founders. He recommended prioritized spending in the future. Representative Peggy Wilson commented that the fund did have user fees connected to transportation. Co-Chair Stoltze acknowledged the gravity of constitutional amendments. 2:40:18 PM Representative Doogan agreed that a constitutional amendment was a large step. He believed that Representative Peggy Wilson had done the best job possible. He added that the work of the subcommittee improved the legislation further. He supported the legislation despite his dislike for the permanence of dedicated funds. Co-Chair Thomas referred to the fisherman's fund that was a dedicated fund; it had been amended from $2500 to $10,000. He stated that he would vote to move the bill out of the finance committee. 2:43:42 PM Representative Tammie Wilson appreciated the subcommittee for its work over the prior interim. She imagined that Alaskans might be unaware of the source of transportation funds. She supposed that constituents might be surprised to learn that money gained from gas tax and from the Division of Motor Vehicles went into the general fund, as opposed to being used directly on road construction. She opined that the fund would not be necessary if the funding for infrastructure occurred in the past. She pointed out that state funding was simpler than federal funding to utilize. Representative Guttenberg discussed a constitutional committee called "draft and styling." The committee would use an approved idea and rewrite it in a succinct manner. He explained that HJR 4 was well vetted. He expressed concern that subsequent laws would be written to implement the process established by HJR 4. He supported the passing of the bill from the finance committee. He applauded the sponsor for her work. 2:47:26 PM Vice-chair Fairclough pointed out that the federal government was working on a reauthorization bill. She noted that the new figures appeared to be rising, possibly leading to the elimination of all metropolitan planning organizations in Alaska. She clarified that the current federal legislation retained Alaska's transportation funding formula. Co-Chair Stoltze believed that the federal legislation was a continuing resolution. Vice-chair Fairclough agreed. She commented that an additional piece of federal legislation addressed Alaska's funding formula for transportation. Co-Chair Stoltze pointed out the uncertainty related to federal funding. Representative Edgmon echoed the compliments for Representative Peggy Wilson and her work on the very important legislation. Vice-chair Fairclough clarified that the structure for a dedicated fund was the sole issue in the committee discussion. She did not want the issue to be confused with the figure $1 billion, which was included in a separate piece of legislation. Co-Chair Stoltze explained that HJR 4 would establish a structure that would ensure gradual spending. 2:51:58 PM Representative Joule pointed out that the Constitutional Budget Reserve (CBR) required a three-quarter vote. He wondered whether the bill allowed a mechanism for expenditures on items other than transportation. Representative Peggy Wilson replied that the constitutional amendment did not allow a mechanism for expenditures on items other than transportation. Representative Joule understood and compared the process to that of accessing the Permanent Fund. He pointed out that potential delays might arise due to the stipulations of spending. Representative Gara asked about other dedicated funds. Representative Peggy Wilson replied that other dedicated funds dissolved when the fuel gas tax was raised. Vice-chair Fairclough pointed to fiscal notes and mentioned the first fiscal note from the Office of the Governor for elections in FY 13 for $1,500 to add the resolution to the ballot. She MOVED to strike years FY 14 through FY 18 of the Department of Revenue fiscal note. Co-Chair Stoltze concurred as there had not yet been debate regarding the dedication of funds along with the costs of administering the funds. The fiscal note for DOR was "zeroed out." Vice-chair Fairclough clarified that the fiscal note could be addressed when an appropriation bill was before the committee. Vice-chair Fairclough MOVED to report CSHJR 4(FIN) out of committee with individual recommendations and the accompanying fiscal notes. There being NO OBJECTION, it was so ordered. Co-Chair Stoltze CLOSED public testimony on HJR 4. Representative Joule reminded the committee about public testimony for HJR heard in the prior year. Co-Chair Stoltze agreed. CSHJR 4(FIN) was REPORTED out of committee with a "no recommendation" and with one new fiscal impact note from the Office of the Governor and one new zero note from the House Finance Committee for the Department of Revenue. 3:00:28 PM AT EASE 3:03:38 PM RECONVENED