HOUSE BILL NO. 249 "An Act requiring the electronic submission of a tax return or report with the Department of Revenue; relating to the motor fuel tax; and providing for an effective date." 6:19:32 PM JERRY BURNETT, DEPUTY COMMISSIONER, TREASURY DIVISION, DEPARTMENT OF REVENUE, would run through the presentation. It was a simple presentation which he introduced the PowerPoint Presentation: "Motor Fuel Tax: HB 249." Mr. Burnett looked at slide 2: "Motor Fuel Tax Increase." "An Act relating to the motor fuel tax; relating to the duties of the commissioner of revenue; relating to the disposition of revenue from the motor fuel tax; and providing for an effective date." Mr. Burnett slide 3: "Motor Fuel Tax History." Began in 1945 Tax rates have increased over time, but structure unchanged Last increase: highway 1970, marine 1977, aviation fuel 1994 Mr. Burnett advanced to slide 4: "Motor Fuel Tax History (Continued)." Tax was suspended from Sept. 1, 2008, to Aug. 31, 2009 In 2015, HB 158 added $0.0095 surcharge on motor fuels and some other refined fuels Intended for spill prevention and response fund Mr. Burnett turned to slide 5: "Motor Fuel Tax Proposal." He explained that the proposal was to increase the taxes, but to change the off-road use credit of 6 cents of the 8 cents. He stressed that it required electronic filing; and provided an exemption process. Representative Guttenberg referred to the jet fuel. He wondered if an analysis of the international travel. Mr. Burnett responded that most of the jet fuel used for international travel was exempt from state taxation. He stated that the genesis of the large increase was from the Aviation Advisory Committee. There were proposals in the previous year to add landing fees at certain state certificated airports. The committee advised the state to raise the jet fuel tax, rather than increase the landing fees. Co-Chair Thompson assumed the federal government would be exempt. Representative Guttenberg asked who would be paying for jet fuel. Mr. Burnett responded that it would be regional and domestic carriers. 6:24:58 PM Mr. Burnett discussed slide 6: "Relative Motor Fuel Tax Rate." Alaska's fuel taxes are among lowest in U.S.1 Highway fuel: lowest Jet fuel: 35th out of 50 Aviation gas: 24th out of 50 Under this bill, Alaska taxes would be: Below national average (20.17 cents) for highway fuel Above national average for jet/aviation fuel Mr. Burnett moved to slide 7: "Impacts of Tax Proposal." Gas prices at the pump would rise More aviation taxes to fund certificated urban and rural airports Requested by aviation advisory committee as preferable to landing fee increases Mr. Burnett advanced to slide 8: "Revenue Impact." Dept. of Revenue estimates increasing the tax rate will more than double tax collections Additional revenue about $49 million per year $0.2 million will be shared with municipal-owned airports Remainder: general fund and special accounts for road, water transport, and aviation facilities Mr. Burnett turned to slide 9: "Revenue Impact (Continued)": Estimates based on fall 2015 revenue forecast Does not account for changes in fuel demand or stockpiling Mr. Burnett talked about slide 10: "Implementation Cost." Dept. of Revenue must update: Tax Revenue Management System (TRMS) Revenue Online (ROL) which allows a taxpayer to file a return and apply for a dealer license online Tax return forms One-time implementation cost of $50,000 to recreate tax forms and reprogram and test the tax system to accommodate the rate changes No additional costs to administer the tax program Mr. Burnett moved to slide 11: "Motor Fuel Tax-Changes made in Committee Substitute": If average price of ANS crude oil is more than $85 per barrel during the previous year-no change to current tax rates If average price of ANS crude oil is less than $85 per barrel during the previous year-tax rates increase Motor fuel used for commercial fishing remains at 5 cents a gallon Tax increase sunsets after 2 years (July 1, 2018) 6:31:45 PM Vice-Chair Saddler asked what the commercial fishing exemption. Mr. Burnett responded that it was $4.2 million. Vice-Chair Saddler wondered whether the state could take advantage of more federal transportation funding with the increase in fuel taxes. Mr. Burnett responded that the highway taxes go towards the general fund, and the general fund paid the match for federal dollars. He stated that there was no direct linkage, but the state tax and number of gallons were reported. He assumed that the U.S. Congress may wee a linkage when examining the authorization bills for the state. Co-Chair Thompson did not believe that the federal government turned away any money collected from highway dollars. Mr. Burnett explained slide 12: "Closing the Budget Gap." He explained that the motor fuel tax was after changes to oil and gas; and income tax. Co-Chair Thompson thought the state had been collecting about $80 million in fuel tax Mr. Burnett thought the number was closer to $40 million. He stated that the proposal would bring the number closer to $90 million. 6:34:53 PM Representative Wilson wondered if the adjustment had already occurred with the change from collected land fees to collecting the fuel tax. Mr. Burnett replied that there was a recommendation to increase the tax, but it had not yet been increased. Representative Wilson wondered if the taxes would be increased, should the bill fail to pass. Mr. Burnett replied that it would probably require an increase in landing fees. Representative Wilson stressed that there would not be an increase to landing fees. Mr. Burnett indicated she was correct, and that it would be new landing fees. Representative Wilson queried a way to balance to ensure that airports were not paying more than what they were able to utilize, and not pay for someone else's airport. She wondered whether Anchorage and Fairbanks should have a separate rate than other airports. Mr. Burnett deferred to Commissioner Luiken. MARK LUIKEN, COMMISSIONER, DEPARTMENT OF TRANSPORTATION AND PUBLIC FACILITIES, answered that the airports were already covered by the carriers through landing fees, rates, fees, etc. He stated that the tax would impact the carriers across the state. He stated that the board made the recommendation, because they felt it was the fairest way to impact all of the users of the system and distribute the cost the most fairly. He stated that the board did not believe the landing fees was fair, because it would only be levied at certificated airports. Co-Chair Thompson asked how many airports the Department of Transportation and Public Facilities (DOT/PF) maintained. Commissioner Luiken replied that DOT/PF maintained 249 airports in the state. Representative Wilson felt that the legislation was not fair to the Fairbanks airport. Commissioner Luiken stated that the larger airports supported the broader system in the state. Representative Wilson mentioned that the air carriers were not very happy with the legislation. Co-Chair Thompson remarked that he had hard form air carriers also. 6:40:51 PM Representative Pruitt wondered whether FedEx and UPS would pay the tax. Commissioner Luiken understood that for those cargo carriers flying a domestic route the jet fuel tax would apply. Representative Pruitt thought Alaska was putting itself in a sticky position by tripling their taxes, because jobs were at stake. Co-Chair Thompson asked about a comparison. Commissioner Luiken would be happy to supply a cost comparison between Anchorage, Seattle, Portland, and Anchorage. The fact was that Alaska's jet fuel tax was only a portion of fees charged. Mr. Burnett added that he sat on the Alaska Industrial Development and Export Authority (AIDEA) board. 6:47:34 PM Representative Kawasaki wondered how the commercial fishing tax would be remitted. Mr. Burnett responded that as a person pulled up to a station, the state would administer the tax through a rebate. Vice-Chair Saddler supported moving towards a motor fuel tax rather than an airport landing tax. HB 249 was HEARD and HELD in committee for further consideration. Co-Chair Thompson thanked the presenters for being available. He reviewed the agenda for the following day.