HB 156-INCREASE MOTOR FUEL TAX   CO-CHAIR MASEK announced that the first 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." CO-CHAIR MASEK clarified that in a previous meeting, Amendment 1 had passed and Amendment 2 had been withdrawn. Therefore, Amendment 3 [labeled 23-GH1118\A.2, Kurtz, 3/26/03] was before the committee. Amendment 3 read: Page 1, line 1, following "fuel tax": Insert ", relating to the fund into which the  proceeds of the motor fuel tax is paid,"   Page 4, following line 13: Insert new bill sections to read: "* Sec. 3. AS 43.40.010(g) is amended to read: (g) The proceeds of the revenue from the tax on all motor fuels, except as provided in (e), (f), and (j) of this section, shall be paid into a state fund  entitled "highway maintenance revenue fund" and shall  be used [DEPOSITED IN A SPECIAL HIGHWAY FUEL TAX ACCOUNT IN THE STATE GENERAL FUND. THE LEGISLATURE MAY APPROPRIATE FUNDS FROM IT] for expenditure by the Department of Transportation and Public Facilities directly or as matched with available federal-aid highway money for maintenance of highways, construction of highway projects and ferries included in the program provided for in AS 19.10.150, including approaches, appurtenances, and related facilities and acquisition of rights-of-way or easements, and other highway costs including surveys, administration, and related matters. All departments of the state government authorized to spend funds collected from taxes imposed by this chapter shall perform, when feasible, all construction or reconstruction projects by contract after the projects have been advertised for competitive bids, except that, when feasible, arrangements shall be made with political subdivisions to carry out the construction or reconstruction projects. If it is not feasible for the work to be performed by state engineering forces, the commissioner of transportation and public facilities may contract on a professional basis with private engineering firms for road design, bridge design, and services in connection with surveys. If more than one private engineering firm is available for the work the contracts shall be entered into on a negotiated basis.  * Sec. 4. AS 43.40.010(h) is amended to read: (h) All motor fuel tax receipts shall be paid into the highway maintenance revenue fund or into the general fund, as appropriate. If paid into the  general fund, the receipts shall be [AND] distributed to the proper accounts in the general fund. Valid motor fuel tax refund claims shall be paid from the highway maintenance revenue fund or from the related [FUEL] tax account in the general fund, as  appropriate." Renumber the following bill sections accordingly. Page 4, following line 22: Insert new bill sections to read:  "* Sec. 6. AS 43.40.070 is amended to read: Sec. 43.40.070. Refund warrants. Upon approval of a refund claim by the department, a warrant shall be drawn on the highway maintenance revenue fund or  from the related [FUEL] tax account in the general fund, as appropriate, in favor of the applicant in the amount of the claim. * Sec. 7. The uncodified law of the State of Alaska is amended by adding a new section to read: CONTINGENT EFFECT. This Act takes effect only if a constitutional amendment proposed by the Twenty- Third Alaska State Legislature repealing sec. 7, art. IX, Constitution of the State of Alaska, is adopted by the voters under sec. 1, art. XIII, Constitution of the State of Alaska." Renumber the following bill section accordingly. Page 4, line 23: Delete "July 1, 2003" Insert "on the effective date of the constitutional amendment specified in sec. 7 of this Act." Number 0203 ERIC MUSSER, Staff to Representative Beverly Masek, Alaska State Legislature, spoke to the effect of Amendment 3, saying that if a highway maintenance revenue fund was established within the general fund, it would dedicate all of the proceeds of the motor fuel tax to a dedicated fund for the express use of highway road maintenance. Number 0240 MR. MUSSER continued that Section 6 sets up the refund mechanism that pays a refund from the same revenue fund. The biggest impact is in Section 7, in which the current effective date is contingent upon voter approval of a constitutional amendment that allows for dedicated funds. Currently, Article [IX], Section 7, prohibits express dedicated revenue except for those dedications that existed prior to statehood. He said that a separate resolution would be introduced tomorrow and read across [the House floor] that would put the question to the voters, if passed. Number 0392 REPRESENTATIVE KOHRING moved to adopt Amendment 3 [text provided previously]. There being no objection, Amendment 3 was adopted. Number 0420 REPRESENTATIVE KAPSNER offered Conceptual Amendment 4. She referred to Sarah Gilbertson's previous testimony [meeting of 3/18/03] in which it was mentioned that 43 percent of the roads in Alaska are maintained by municipalities. Representative Kapsner said that out of the states that have a motor fuel tax, four states do not share their portion of the tax with municipalities. She said it could be argued that Alaska does share because of municipal assistance and revenue sharing. However, because a dedicated fund [would] exist, she asked if the committee would be in favor of allocating 31 percent of what is garnered in taxes to go back to the municipalities. Number 0520 CO-CHAIR MASEK asked how Conceptual Amendment 4 would change the dynamics of the bill, now that Amendment 3 had been adopted. MR. MUSSER offered his understanding that the Conceptual Amendment would ensure a fair distribution of those maintenance funds to communities that do not have the base. He said he believed that there was no preclusion that would prohibit any of the revenues from being disbursed; there would still be regional operations and management processes through the Department of Transportation & Public Facilities (DOT&PF.) He said the funding mechanism does not distinguish between local or organized municipalities. Number 0594 CO-CHAIR MASEK objected to Conceptual Amendment 4, saying that HB 156 had already gone through considerable changes and that the House Finance Committee would be dealing with the administration of funding. Number 0600 REPRESENTATIVE KAPSNER reiterated, for Representative Fate's benefit, that the committee had passed Amendment 3, which sets up a dedicated fund. She explained that [Conceptual Amendment 4] asks that consideration be given to allocating 31 percent of the dedicated fund to the municipalities because municipalities maintain 43 percent of the roads in the state. CO-CHAIR MASEK reiterated that her objection to the amendment was due to the bill having already been "gone over quite a bit" and also because the issue could be dealt with in the House Finance Committee. Number 0663 CO-CHAIR HOLM said he was curious as to the suggested amount of 31 rather than 43, since 43 percent of the roads are in the municipalities. REPRESENTATIVE KAPSNER replied that the amount was derived from the findings put forth by the Alaska Legislative Digest, indicating that the average amount that was shared, from among the 50 states, was an amount of 31 percent; she said she wanted to go with the average. She added, "We could make an amendment to the amendment to make it more, if you'd like." REPRESENTATIVE FATE asked if there was any present allocation to the communities. REPRESENTATIVE KAPSNER replied that there wasn't, and that Alaska is one of only five states that does not allocate to communities, based on motor fuel tax. Number 0750 JOHN MacKINNON, Deputy Commissioner of Highways & Public Facilities, Office of the Commissioner, Department of Transportation & Public Facilities (DOT&PF), said that he was not speaking for the administration, from DOT&PF's perspective, but wanted to add that Alaska operates differently from the other states. He explained that in Alaska and in Puerto Rico, federal highway funding from the federal motor vehicle fuel tax does get used in communities. He said he believed that almost 43 percent of the total federal allotment is used for community transportation and for Trails and Recreation Access for Alaska (TRAAK) projects. He said the balance is used for Alaska Highway System roads and National Highway System roads. He pointed out that although the contributions don't go towards maintenance on an annual basis for snow removal and road upkeep, the state contributes to local roads in communities to rebuild those roads as part of community construction projects. He said that Alaska has the ability and does contribute a tremendous amount of the share of federal highway funding, relative to other states. REPRESENTATIVE FATE asked if 31 percent or any significant percentage would have an impact on maintenance, which he assumed was the intent. MR. MacKINNON said that as long as the maintenance needs were made up through the general fund rather than the dedicated fund, there would be no impact on DOT&PF, and it might help the municipalities. He said that the department has a need of about $60 million a year just to take care of winter and summer highway maintenance. He said that presently that amount is derived from general fund sources, and as long as the amount was "made up one way or another," the state highways would be maintained. CO-CHAIR MASEK noted that there was $50 million in addition to that amount. REPRESENTATIVE FATE said, regarding the amount required for maintenance, if there were dedicated funds to be added or if something happened so that there was a restriction in general funds, then that dedicated fund could possibly make up part of those maintenance dollars, thereby giving more flexibility to how general fund monies could be spent. Number 0997 CO-CHAIR HOLM offered that if the 31 percent requirement were put in statute, there would be no flexibility. However, without that language in statute, the legislature would have the flexibility to allocate funds, in any combination, to DOT&PF or to the municipalities. CO-CHAIR HOLM asked what amount would be reasonable to consider, given the differing needs and the diversity within the state. He asked if it made sense to specify a given percentage of the motor vehicle tax, and if so, what that number would be. MR. MacKINNON replied that he had the same question, specifically, how to dedicate a portion to the municipalities. He commented that the largest percentage of revenue would be generated from Central Alaska and asked if this meant that most of [the revenue] would be returned to that area. He said that without the dedication, the legislature would have the flexibility of putting revenue where it was needed. Number 1084 REPRESENTATIVE KAPSNER offered that her calculations indicated that having a 20-cent motor fuel tax generates $69 million for the state. From Mr. MacKinnon's comment that the state needs $60 million for road upkeep, she suggested that perhaps 3.3 percent instead of 31 percent could be appropriated because that percentage amount would account for the $9 million leftover. She said that this could be an offering to the municipalities and could be changed later. CO-CHAIR HOLM respectfully suggested that this had no merit, because of there being no justification for it. REPRESENTATIVE KAPSNER responded that she was trying to accommodate the concerns of the municipalities, in light of the 43 percent upkeep of the roads, while also being respectful of DOT&PF's need for $60 million for summer and winter maintenance. She pointed out that the tax generates $69 million, leaving a remainder of $9 million that could possibly go to the municipalities. She explained that $9 million calculates out to be 3.3 percent of what is generated from the tax. MR. MacKINNON commented that as it is presently written, it would be up to the discretion of the legislature to allocate any leftover monies in that dedicated fund to the municipalities. CO-CHAIR MASEK said that the [Matanuska-Susitna] Borough is organized to use property taxes; the borough uses monies that are paid into the road service areas to then maintain the borough's roads. She added that she wasn't sure how this information impacted Conceptual Amendment 4. MR. MacKINNON stated that the allocation would be difficult because there are municipalities and communities that have not only property tax, but sales tax as well, while some areas have neither. He said that those [taxes] go into, among other things, the maintenance of roads. REPRESENTATIVE OGG said he thought the idea had merit. However, in listening to the figures and percentages mentioned during the discussion, he suggested that the issue be considered in the House Finance Committee. He said that attempting to "try to figure out a percentage right here and now, with what limited time that we have, just seems hasty." Number 1255 A roll call vote was taken. Representatives Kohring and Kapsner voted in favor of Conceptual Amendment 4. Representatives Fate, Ogg, Holm, and Masek voted against it. Therefore, Conceptual Amendment 4 failed by a vote of 2-4. Number 1299 CO-CHAIR MASEK asked if there was any further discussion of HB 156. REPRESENTATIVE KOHRING stated that he was opposed to HB 156, although he thought that the amendment which dedicated monies and set up the highway maintenance fund was a step in the right direction. He said he thought emphasis should be placed on reform within the bureaucracy, spending reduction, and government efficiency. He said this bill was one of many tax proposals put forth by the governor that should be put on the back burner until effectiveness and efficiency within the government was first evaluated. He suggested that consideration be given to figuring out ways to contribute to offsetting the deficit in terms of spending reductions, rather than raising taxes. He said that he thought this effort to be premature and therefore he would object to HB 156. Number 1363 REPRESENTATIVE FATE said this bill would impact his district and that he understands that fuel taxes are low, but he wanted it on record that even though he wouldn't hold the legislation from moving forward, he didn't particularly like the 20-cent increase and thought it would be detrimental to people in his district. He said this was an "awfully huge step right from the start, although we do need some revenues," and he suggested that this amount would be too severe for this type of a tax. He said that there should be some kind of an increase, but questioned whether it should be 20 cents. REPRESENTATIVE KAPSNER said she was not in favor of HB 156, not because additional revenue were not needed, but because it puts an unfair burden on rural communities. She stated that communities pay a very high cost; some are paying $4.00 or $4.50 per gallon. She pointed out that when the price of fuel goes up, the communities feel the impact, but when the price goes down, the pumps in the communities do not reflect that change. Furthermore, she said that many of the communities in rural Alaska don't have roads, don't benefit from road construction, and yet will still be paying the tax. She assessed that most people will not access the form [on line] or have it mailed to them. She said she looked at the rebate form and it is fairly complicated; she stated that she would oppose the bill. Number 1459 CO-CHAIR HOLM moved to report HB 156, as amended, out of committee with individual recommendations and the accompanying fiscal notes. Number 1469 REPRESENTATIVE KAPSNER objected. A roll call vote was taken. Representatives Fate, Ogg, Holm, and Masek voted in favor of reporting HB 156, as amended, from committee. Representatives Kohring and Kapsner voted against it. Therefore, CSHB 156(TRA) was reported out of the House Transportation Standing Committee by a vote of 4-2.