HB 156-INCREASE MOTOR FUEL TAX Number 0444 CO-CHAIR MASEK announced that the next order of business would be HOUSE BILL NO. 156, "An Act increasing the motor fuel tax and repealing the special tax rates on blended fuels; and providing for an effective date." Number 0554 GEORGE LEVASSEUR, Maintenance and Operations Manager, Southcentral District, Northern Region, Department of Transportation and Public Facilities (DOT&PF), noted that he was Acting State Maintenance Engineer, and gave an overview of what is encompassed by the highway user fee. He said that increasing the highway user fee from $.08 to $.20 a gallon would take effect July 1, 2003. The increase from $.08 to $.20 will generate $41 million in additional revenue to the State of Alaska. The total, raised from the highway user fee at $.20 per gallon, will be $70 million annually. Each year, the department spends $60 million in highway maintenance and an additional $50 million in federal match for highway construction; this is a total of $110 million per year. Even after the tax rises to $.20 per gallon, 38 states will have a higher fuel tax than Alaska, when taking into account all state taxes on fuel purchases. Number 0640 MR. LEVASSEUR stated that the national average is $.20 per gallon. The current rate of $.08 was enacted in 1961 when the annual highway maintenance costs were $10 million. If that $.08 was adjusted for inflation, using the Consumer Price Index (CPI), the rate would actually be $.48. The department has a large backlog of deferred highway maintenance projects that have not been addressed due to lack of funding. The projects include jobs such as brush cutting, culver replacement, ditching, and replacing signs. Several years of increased maintenance will be needed to complete these deferred maintenance projects. This is a highway user fee for vehicles used on roads and highways. It is not intended to affect fuel used for snowmobiles, all-terrain vehicles (ATVs), or motorboats. Alaska is no longer required to use oxygenated fuels to meet air quality standards. This bill eliminates the tax benefit that producers and distributors receive on the production and distribution of oxygenated fuels. According to the air quality requirements of EPA, Anchorage and Fairbanks are no longer areas of non-attainment. Number 0748 CO-CHAIR HOLM noted that there was no mention of JP-8 [jet fuel] and recalled that the tax for JP-8 was about $.035. He asked why the fuel for [Boeing] 747s was not being taxed. Number 0798 MR. LEVASSEUR responded that landing fees are applied to the large jets that land in Anchorage, Fairbanks, and Juneau, and there are fuel flowage fees as well. In rural Alaska, increasing the cost of aviation fuel - which is already extremely high - wouldn't generate a lot of money. Landing fees and fuel flowage fees are already being paid at the large airports. He stated that DOT&PF spends about $18 million per year on airport maintenance. CO-CHAIR HOLM asked if the cost of airport maintenance versus the landing fees and other fees could be looked into further. He said that with the tremendous amount of money being put into the Anchorage airport, for example, he was interested in finding out more information on the possibility of lessening the impact to the state. MR. LEVASSEUR said that landing fees were only charged at the international airports. He commented that the Juneau airport is operated by the municipality and the remaining airports do not have landing fees. He said he would provide information on maintenance costs versus the state's collected landing fees and fuel flowage fees to Co-Chair Holm. CO-CHAIR MASEK asked if the increased motor fuel tax would only be at the pumps where gas is obtained for vehicles, thereby not impacting rural areas such as Anvik where fuel is barged or flown in to the area. MR. LEVASSEUR said the tax pertains to highways. Number 0966 REPRESENTATIVE HEINZE asked for further clarification on the types of fuel that would be taxed. MR. LEVASSEUR confirmed that the tax has nothing to do with aviation fuel and does not apply to off-highway vehicles. The current rate of $.02 per gallon for a construction vehicle, for example, will remain the same. CO-CHAIR MASEK asked how the tax would apply to purchases of fuel at a gas station for an outboard motor, four-wheeler, ATV, or lawnmower. MR. LEVASSEUR referred that question to the Department of Revenue. Number 1030 REPRESENTATIVE KAPSNER asked, if a person drove a snow machine to the gas pump in Bethel, whether the receipt could be saved for a refund. She also asked how the tax would apply to a road like the Chief Eddy Hoffman Highway, which is only about six miles of road, or some of the other hubs that don't have highways in or out of the community, but yet are referred to as highways. MR. LEVASSEUR said he would research that question and provide additional information. Number 1088 RONALD GEORGE (ph), Anchorage, testified that he agreed that additional money was necessary because the highways need a lot of work. He expressed concern about U.S. Representative Don Young's reference to increasing the fuel tax to $.33 per gallon. MR. LEVASSEUR said that a federal fuel tax already exists. About $.25 per gallon bought at the pump goes into the Federal Highway Trust Fund. The federal government disburses that money to the states on a formula-based means. That money is used to fund DOT&PF's summer construction program. He said the fuel tax would not be $.32 in addition to what is now being paid, but would be a raise of a few cents. CO-CHAIR HOLM asked if the change from $.08 to $.20 had any bearing on the additional $.25 to $.33 that Representative Don Young was proposing. MR. LEVASSEUR said the state rate was not tied in any way to the federal rate. He said he was not sure what the federal rate increase was going to be. CO-CHAIR MASEK indicated that HB 156 would be held over in committee.