CS FOR SENATE BILL NO. 115(FIN)(efd fld) "An Act relating to vehicle registration fees; and relating to the motor fuel tax." 2:22:07 PM Co-Chair Foster MOVED to ADOPT the proposed committee substitute (CS) for CSSB 115(FIN), Work Draft 31-LS0895\G (Nauman, 3/23/20). Co-Chair Johnston OBJECTED for discussion. ERIN SHINE, STAFF, REPRESENTATIVE JENNIFER JOHNSTON, reviewed the changes in the CS (version G). The CS incorporated four amendments adopted by the committee the previous day. Amendment 2 added new language on page 1, lines 4 through 14 and page 2, lines 1 through 11. Amendment 4 added new language on page 2, lines 15 through 17 as follows: ...the owner of a vehicle powered by alternative fuel shall pay a special biennial registration fee of $100... Ms. Shine pointed to page 2, line 20 where the definition of alternative fuel had been added by Amendment 4. Page 3, Section 5, lines 19 through 21 incorporated Amendment 1. The last change was on page 5, lines 9 and 10 included the effective date and conforming changes. The bill specified "Except as provided in sec. 10 of this Act, this Act takes effect January 1, 2021." Section 10 on line 9 gave the transition regulations an immediate effective date. 2:24:09 PM Co-Chair Johnston asked the Department of Revenue (DOR) to review the fiscal note. DAN STICKEL, CHIEF ECONOMIST, ECONOMIC RESEARCH GROUP, TAX DIVISION, DEPARTMENT OF REVENUE, relayed that DOR's fiscal note reflected the changes made in the CS, primarily the January 1, 2021 effective date and the increase to the refined fuel surcharge from $0.95 per gallon to $1.50 per gallon, which had not been included in previous versions of the bill. The note showed an indeterminate revenue impact for two reasons. First, the department did not have data available to estimate the impact of the allowed refunds for marine fuel used by vessels for commercial fishing. He explained that under the bill, any commercial fishing marine fuel would be allowed a refund of $0.05 per gallon, meaning the tax would not be increased on that portion of marine fuel. Second, it was unknown how COVID-19 may impact fuel demand. Based on the fall revenue forecast and not including the commercial fishing impacts, the bill would increase revenue by $16.9 million in FY 21, $33.3 million in FY 22, decreasing to $31 million in FY 26. He clarified the amounts pertained only to the motor fuel tax increase portion. There would be an additional increase for the refined fuel surcharge component of $1.8 million in FY 21, $3.5 million in FY 22, decreasing to $3.3 million in FY 26. Co-Chair Johnston WITHDREW her OBJECTION to the adoption of the CS. There being NO further OBJECTION, it was so ordered. Co-Chair Foster MOVED to REPORT CSSB 115(FIN) out of committee with individual recommendations and the accompanying fiscal notes. Representative Sullivan-Leonard OBJECTED. She opposed the tax. She stated there was an incredible disparity with the tax, especially in her region of the state. She referenced a comment that people chose where they lived. She agreed and noted that people chose to live in rural and urban areas; however, at a time when unemployment insurance had risen by 500 percent, residents who drive would be taxed more due to the bill. She did not believe it made any sense. She realized the date had changed in the bill; however, the concept of an increased gasoline tax did not go unnoticed in her district. 2:28:02 PM Representative Wool spoke to his support for the bill. He shared that he had voted on the increase to the motor fuel tax several years earlier that had added just under one penny. He thought it was likely the only revenue bill the legislature had passed during his tenure. He stated that legislators received numerous emails asking why they were not looking into [new] revenues. He stressed that state coffers were decreasing by the minute and expenses were increasing. He believed the legislature needed to look into revenue. He highlighted it had been previously stated that the motor fuel tax had not been raised since the 1970s. He pointed out that the pennies increase in the 1970s equated to about $0.50 currently. He emphasized that the state had not kept up with inflation and had the lowest motor fuel tax in the country. He believed the state would rank number four or five if the tax was doubled. He reasoned that the price of motor fuel should decrease due to the drop in oil price, which would likely result in a net reduction at the pump. Representative Wool noted that the Municipality of Anchorage had recently instituted a municipal motor fuel tax; therefore, half the people in the state were already paying an additional motor fuel tax. He knew that Mat-Su residents drove to Anchorage frequently and he knew that many of his constituents lived in remote areas like Chena Hot Springs and other areas that required driving many miles to town and burning substantial gas. He thought the tax increase was the least the legislature could do, especially when many citizens were asking it to act. He thought the legislature should try to help citizens and provide solutions. He supported adding the small amount of revenue of $15 million in FY 21 and $30 million in FY 22. He noted that people would likely not be driving and purchasing gas the way they had in the past. He stated that the change was a small gesture towards increasing revenue, though he did not believe it was enough. He supported looking into new revenue and believed the state's savings would be rapidly diminishing. He thought the bill was a step in the right direction. 2:30:35 PM Representative Carpenter acknowledged the sound logic of comments by Representative Wool; however, he noted the argument did not account for the cost of government. He detailed that compared to other states with a similar population size and GDP [gross domestic product], Alaska's government expense was significantly higher. He stated that Alaska's cost of government was higher than it should be based on its population and GDP. He highlighted that the increased tax would take $16.9 million out of the private sector to help sustain a government that was already too large. He did not believe it made sense, especially when considering the fiscal crisis. He guessed that the private sector would be hurting for 12 to 24 months. He underscored that taking $17 million out of the private sector economy was not without consequences. He thought the state could wait to patch potholes another year as opposed to increasing funding. He believed it was wrong to increase taxes on the private sector at present. 2:32:42 PM Co-Chair Johnston believed it was very important for the legislature to increase the tax. She shared that it was not only her constituents who had asked for the increase. She highlighted that the Alaska Trucking Association was asking for and supported the increase. She explained that a maintenance station had closed down between the districts represented by Representative Carpenter, Representative Knopp, and herself. She stressed it was the main thoroughfare for getting food, safety, and supplies to the Kenai Peninsula. She did not know how many committee members had driven the pass on a winter night, but the situation had been catastrophic to the safety and the needs of the Kenai Peninsula. Co-Chair Johnston reported that the road service in her district had been cut dramatically back. She explained that the first two roads classified as a level one priority out of Anchorage were the Seward and Glenn Highways. The level two priority included main thoroughfares in Anchorage owned by the state. She explained that the roads up to her district on the hillside had been poorly maintained, sanded, and plowed due to a lack of resources and there had been multiple accidents including buses. She had heard from people on the Glenn Highway about issues due to lack of sanding and plowing. Co-Chair Johnston explained that because resources had been stretched, the maintenance and operation [office] out of Girdwood was responsible for the highway from Girdwood to Anchorage and for the Seward Highway south. The Kenai office was responsible for the Seward Highway north. She reported that the highway was not being plowed or sanded as could be needed for safety. She stated that the bill was timely, and the implementation date had been postponed until 2021 with the recognition that it was currently an interesting time for all businesses. She supported moving the bill forward. 2:36:04 PM Representative Carpenter stated that the remarks made by Co-Chair Johnston were opinion and not fact. Co-Chair Johnston replied that the remarks were her statement based on what she knew. Representative Knopp had never seen the highway so poorly maintained or shut down as many times as it had been in the current year in his 40 years living on the peninsula. He stated it was a fact that the Department of Transportation and Public Facilities had lost millions of dollars in revenue over the years. He highlighted that the documents showing road maintenance was down did not lie. He stated it was the current reality. He reported that the critical maintenance station had been closed, positions had been lost in Homer and Soldotna, and there was no longer continuance from night shift to day shift. He referenced Representative Wool's statement that the tax had not been increased since the 1970s, which was a long time. He supported the use of the funds for highway maintenance and was hoping improvements would be made. Representative Carpenter communicated that he had driven the roads during the day and night, and he did not believe they were different than in the past. He did not believe it was accurate to say the roads had not been maintained. He stressed that the roads had been maintained but may have seen a delay. He believed that putting sand on a road did not make it safer. He remarked that there were always conditions on roads that required driving at a prudent speed. He stated that sanding or plowing a road did not necessarily make it safer. He did not believe the level of maintenance was responsible for causing accidents or making the road less safe. He countered that the speed of driving made the road less safe in most cases. He thought Co-Chair Johnston had used the word catastrophic. Co-Chair Johnston could not be certain she had used the word catastrophic. 2:39:09 PM AT EASE 2:40:39 PM RECONVENED Representative LeBon shared that the past summer he and Representative Wool had visited the trucking company Sourdough Express based in his district in Fairbanks. He detailed that representatives from the Alaska Trucking Association had been present at the meeting and had communicated that it was a crisis situation. They had been told that the Dalton Highway from Fairbanks to the North Slope was in desperate need of the minimum amount of maintenance. He elaborated that they had visited a repair shop and seen equipment that had been beaten from the condition of the road. He stated it was real money and the roads had to be maintained. He emphasized that the lifeblood to the North Slope was the Dalton Highway. He listened when the Alaska Trucking Association and the primary operator - Sourdough Express - were telling legislators that the monies designated for highway maintenance were critical to their operation. Representative Sullivan-Leonard MAINTAINED her OBJECTION. A roll call vote was taken on the motion. IN FAVOR: Wool, Josephson, Knopp, LeBon, Ortiz, Foster, Johnston OPPOSED: Sullivan-Leonard, Tilton, Carpenter, Merrick The MOTION PASSED (7/4). There being NO further OBJECTION, it was so ordered. CSSB 115(FIN) was REPORTED out of committee with seven "do pass" recommendations, two "do not pass" recommendations, and two "no recommendation" recommendations and with one new indeterminate note from the Department of Revenue, one new zero note from the Department of Transportation and Public Facilities and one previously published fiscal impact note: FN2 (ADM). 2:42:54 PM AT EASE 2:44:04 PM RECONVENED Co-Chair Johnston recessed the meeting to a call of the chair [note: the meeting never reconvened].