HJR 42 - CONST. AM: TRANSPORTATION FUND  2:25:02 PM CHAIR RAMRAS announced that the final order of business would be HOUSE JOINT RESOLUTION NO. 42, Proposing amendments to the Constitution of the State of Alaska creating a transportation infrastructure fund. 2:25:33 PM REPRESENTATIVE HERRON moved to adopt the proposed committee substitute (CS) for HJR 42, Version 26-LS1411/S, Kane, 2/17/10, as the work draft. There being no objection, Version S was before the committee. 2:26:37 PM REPRESENTATIVE PEGGY WILSON, Alaska State Legislature, speaking as chair of the House Transportation Standing Committee, sponsor, explained that passage of HJR 42 would place before the voters a proposed change to Article IX, Section 7, of the Alaska State Constitution in order to allow for a dedicated fund for capital transportation projects. She noted that for fiscal year 2010 (FY 10), 87 percent of Alaska's transportation budget comes from the federal government, and that the current federal reauthorization bill has expired and is only being extended on a month-to-month basis until new federal legislation can be passed. She relayed that she's heard, however, that that new federal reauthorization bill is going to be very unfavorable to those with small populations - like Alaska - because it's going to emphasize mass transit and green transportation. REPRESENTATIVE P. WILSON remarked that with federal funding diminishing, Alaska is going to have to shoulder more responsibility for its transportation infrastructure. Although passage of HJR 42's proposed change to the Alaska State Constitution might impact the Department of Transportation & Public Facilities (DOT&PF), the proposed change is more about meeting all of Alaska's growing transportation needs. Transportation investment creates a competitive environment, attracting additional economic development. She noted that the House Transportation Standing Committee has researched the issues surrounding Alaska's transportation needs and challenges, and has received input from interested parties from across the state as well as information from the National Conference of State Legislatures (NCSL) regarding what other states are doing to address their transportation infrastructure budget gaps. Furthermore, a House Finance Committee member's staff has compiled a list of the many different funding options available to address the fiscal shortfalls resulting from Alaska's long- range transportation plan. 2:28:59 PM REPRESENTATIVE P. WILSON explained that HJR 42 is a culmination of all that research and input, and, if its proposed dedicated fund is added to the Alaska State Constitution by the voters, it would allow Alaska more opportunity to take advantage of the cost- and time-savings of State-funded projects while also addressing the state's growing transportation needs. The proposed dedicated fund would allow Alaska's transportation projects to be completed much faster because, as State-funded projects, they wouldn't have to follow lengthy, expensive, and time-consuming federal procedures; such projects would, however, still have to comply with federal construction standards. House Joint Resolution 42's proposed constitutional change is not intended to diminish the State's partnership with the federal government; instead, it is intended to provide a dedicated revenue stream that will allow more transportation projects to be completed faster and at less cost. REPRESENTATIVE P. WILSON said that the resolution's proposed transportation infrastructure fund would grow as investment returns compound. The goal is to seed the endowment with $1 billion, and it is anticipated that it will then grow by another $65 million the first year as the result of investment returns and motor fuel tax and registration fees, and by another $5 million to $6 million each year thereafter. She noted that members' packets contain graphs created by the Legislative Finance Division illustrating the proposed dedicated fund's balance and the amounts that would be available for appropriations from it each year - from FY 11 through FY 30. REPRESENTATIVE P. WILSON offered her understanding that in one of his speeches, former Governor Hickel indicated support for the Alaska State Constitution being changed to provide for a dedicated transportation fund. She remarked that Alaska needs to take action now; that the future of the economic and social wellbeing of Alaska's citizens is critically dependant on a reliable transportation system; and that HJR 42's proposed change to the Alaska State Constitution, allowing for a dedicated transportation fund, is needed to create and maintain a reliable transportation system for Alaska. She then explained that under Version S, the proposed transportation infrastructure fund would begin receiving revenue from the motor fuel tax and registration fees after of July 1, 2011 - the beginning of FY 12 - and appropriations from that fund would be limited to only those capital projects for transportation and related facilities that are designated by law - in other words, those approved by the legislature. 2:34:11 PM REPRESENTATIVE GRUENBERG, in response to comments, mentioned that although he won't hold the resolution up, he doesn't support it for constitutional reasons, and pointed out that it's difficult to address the resolution's constitutional issues separate from its fiscal issues because the prohibition on dedicated funds outlined in Article IX, Section 7, of the Alaska State Constitution is based on the fiscal policy that the framers imbedded in the Alaska State Constitution. His feeling, he relayed, is summarized in a handout he's provided from the publication, Alaska's Constitution; A Citizen's Guide, as it pertained to Article IX, Section 7. REPRESENTATIVE HERRON asked whether HJR 42 would prevent the governor from suspending Alaska's motor fuel tax. REPRESENTATIVE P. WILSON offered her belief that it would not; instead, the proposed dedicated transportation fund would simply grow more slowly when it wasn't receiving revenue from that tax. REPRESENTATIVE HOLMES said she doesn't see any constitutional problems with HJR 42, expressed favor with Version S's stipulation that appropriations from the proposed dedicated fund could only be for capital projects for transportation and related facilities that are designated by law, but questioned whether the legislature could appropriate monies from the fund for transportation infrastructure maintenance and operational costs. REPRESENTATIVE P. WILSON indicated that the language of the proposed constitutional change might be broad enough to allow for that, though not for the normal operating costs of the DOT&PF. In response to another question, she indicated that several organizations have expressed favor with HJR 42 and its proposed dedicated transportation infrastructure fund. In response to other questions, she explained that any appropriations from the proposed dedicated fund would be limited to State-funded transportation projects. 2:43:31 PM BECKY ROONEY, Staff, Representative Peggy Wilson, Alaska State Legislature, in response to questions and comments, explained on behalf of the sponsor, the House Transportation Standing Committee, which is chaired by Representative P. Wilson, that HJR 42 doesn't address any of the other suggestions outlined in the handout titled "Alaska Transportation Finance Study; Final Report", and would not be instituting any new taxes. REPRESENTATIVE P. WILSON again relayed that several organizations have expressed favor with HJR 42 and its proposed dedicated transportation infrastructure fund, and surmised that it's because they know that Alaska's economic development cannot happen without an adequate transportation infrastructure. REPRESENTATIVE HERRON questioned whether anyone has expressed opposition to HJR 42. REPRESENTATIVE P. WILSON said no. In response to another question, she acknowledged that because the language on page 2, lines 3-5, says, "Each year, the legislature may appropriate a percentage of the average market value of the fund as established by law for capital projects for transportation and related facilities that are designated by law", that that percentage, once it's established in statute, could be as high as 50 percent. However, she pointed out, language in another piece of legislation pertaining to this proposed constitutional dedicated fund currently stipulates that it would be 6 percent of a five-year average. REPRESENTATIVE GRUENBERG surmised, then, that the legislature could pass legislation in the future allowing it to empty out this proposed dedicated fund if it felt it needed to. REPRESENTATIVE P. WILSON acknowledged that that is a possibility. REPRESENTATIVE GRUENBERG - with regard to the term "transportation infrastructure fund" - questioned whether under the proposed constitutional change, some of the monies in that fund could be appropriated to "a specialized type of revenue sharing that's used only for municipal roads." REPRESENTATIVE P. WILSON acknowledged that that, too, is a possibility. 2:50:06 PM FRANK RICHARDS, Deputy Commissioner of Highways & Public Facilities, Office of the Commissioner, Department of Transportation & Public Facilities (DOT&PF), in response to a question, indicated that the DOT&PF has no position on HJR 42. REPRESENTATIVE GRUENBERG questioned whether HJR 42's proposed change to the Alaska State Constitution really does provide for a true dedicated fund. 2:53:15 PM BRIAN KANE, Attorney, Legislative Legal Counsel, Legislative Legal and Research Services, Legislative Affairs Agency (LAA), speaking as the drafter, offered that it does in that the proposed constitutional change provides that all of the monies from the fees listed therein and the State's motor fuel tax would go into the proposed transportation infrastructure fund and could then only be spent on a limited number of projects. REPRESENTATIVE P. WILSON added that the funds that could be appropriated under HJR 42 in any given year would be limited. 2:55:13 PM KATHIE WASSERMAN, Executive Director, Alaska Municipal League (AML), noted that the aforementioned handout titled "Alaska Transportation Finance Study; Final Report" was prepared for the AML and illustrates that among other things, the State needs to identify some way to fill the financial gap that will be left as a result of the anticipated decrease in federal funding. She indicated that the AML would be happy to support HJR 42, surmising that other interested organizations would be as well. In conclusion, she relayed that the AML is in full support of HJR 42. REPRESENTATIVE GATTO surmised that the monies from the proposed dedicated fund could be appropriated for Alaska's railroads. REPRESENTATIVE GRUENBERG, referring to the sponsor's statement that the goal is to seed the proposed dedicated fund with $1 billion and add Alaska's motor fuel tax and registration fees to it, questioned whether taking that much in GF funding off the table initially is supported by the AML, given that taking those funds off the table could affect such things as revenue sharing, education funding, and other things for which funding is needed now. MS. WASSERMAN relayed that the AML is aware that there will be some tradeoffs with HJR 42's approach, but is still in favor of it. REPRESENTATIVE GRUENBERG asked Ms. Wasserman what she would propose in order to address any [initial] budget shortfall that results from so seeding the proposed dedicated fund. MS. WASSERMAN relayed that she is unable to answer that question. 2:59:21 PM REPRESENTATIVE GRUENBERG opined that before HJR 42 is passed by the legislature, it will be essential for the legislature to know how local governments intend to make up for any budget shortfall that could result from the proposed constitutional change. He said he could envision that ratification of the proposed constitutional change by the voters could result in there being less money for the capital budget, less money for municipal revenue sharing, and less money for education funding, particularly because $1 billion is a lot of money. Furthermore, he predicted, the proposed constitutional transportation infrastructure fund could be just the first of many dedicated funds to be proposed. REPRESENTATIVE GATTO said, "You might consider that we could bond for infrastructure, and use the dedicated fuel tax funds to pay the bonds?" MS. WASSERMAN acknowledged that the legislature could take such an approach. REPRESENTATIVE GRUENBERG offered his belief that there are various other ways of paying for the state's transportation needs besides adopting HJR 42. CHAIR RAMRAS, after ascertaining that no one else wished to testify, closed public testimony on HJR 42. In response to comments, he relayed that HJR 42 [Version S] would be held over.