HJR 4-CONST. AM: TRANSPORTATION FUND  1:31:01 PM CHAIR P. WILSON announced that the next order of business would be HOUSE JOINT RESOLUTION NO. 4, Proposing amendments to the Constitution of the State of Alaska creating a transportation infrastructure fund. 1:32:36 PM CHAIR P. WILSON provided the background for the new committee members on previous work the House Transportation Standing Committee conducted last year that provided members with the breadth and depth of problems related to funding transportation projects in Alaska. She explained that this work resulted in the concept of reinstating the dedicated transportation infrastructure. When Alaska became a state, the state constitution specifically stated that dedicated funds are prohibited. However, at the time three dedicated funds were grandfathered in, two of which were dedicated transportation funds: one for land and one for water, she said. She stated and the committee considered suggestions and introduced three bills. 1:34:02 PM CHAIR P. WILSON reported that reinstating a dedicated transportation fund has been attempted four times since the original dedicated transportation fund was eliminated. Currently, the state is significantly behind on its road, facility and harbor maintenance while each year Alaska's oil production is also diminishing. Last year oil production was reduced by seven percent which means less oil revenue to the state. Alaska's revenue sources are not diversified with over 90 percent of its revenue derived from oil, she stated. She explained that the bills currently before the committee represent an effort to plan for Alaska's future. 1:35:31 PM REPRESENTATIVE PRUITT moved to adopt the proposed committee substitute (CS) for HJR 4, labeled 27-LS0197\I, Kane, 2/11/11, as the working document. There being no objection, Version I was before the committee. REPRESENTATIVE GRUENBERG objected for the purpose of discussion. He then removed his objection. 1:36:31 PM REBECCA ROONEY, Staff, Representative Peggy Wilson, on behalf of the sponsor of HJR 4, the House Transportation Committee, presented the changes to the original resolution. She first explained that HJR 4 would place a constitutional amendment before the voters to change Alaska's Constitution to allow for a dedicated fund for capital transportation projects. The proposed committee substitute (CS), Version I, would change the revenue stream to reflect that the federal transportation grant requires any revenue realized from airport leases to be directed to the respective airport in which fees were collected. In FY 10, 87 percent of the state's transportation budget was derived from the federal government. The federal reauthorization has since expired and is current being extended month by month until a new reauthorization is passed by the Congress. She predicted the Federal Highway Trust Fund will be depleted by March 1. She anticipated the new federal transportation funding will emphasize mass transit and "green" transportation. These changes would not favor small population states and overall funding is also likely to be reduced. Alaska will need to shoulder more of its transportation infrastructure, she said. 1:38:09 PM MS. ROONEY explained that the proposed CS for HJR 4 is designed to meet ever growing transportation needs in Alaska. Transportation investment could create a competitive environment designed to attract additional economic development. Last legislature and during the legislative interim, the House Transportation Standing Committee listened to the Department of Transportation & Public Facilities (DOT&PF), grass roots organizations, and transportation companies identify challenges to transportation in our geographically diverse state. The committee flew to villages to view airports, and rode on Alaska's urban highways to view needs for safety, congestion, and deferred maintenance. The committee heard from the Alaska Municipal League (AML), and the Matanuska-Susitna Borough (MSB) also provided an independent study to help identify the fiscal challenges to transportation in Alaska. She offered to provide a copy of the MSB study to members. The National Conference of State Legislatures (NCSL) reported measures other states are taking to address transportation infrastructure budget gaps. She referred to a report in members' packets by Larry Persily, former legislative aide to House Finance Committee Co-Chair Representative Mike Hawker, who prepared an analysis of funding options for the committee's consideration. 1:39:21 PM MS. ROONEY concluded that the proposed CS is a culmination of the committee's work and research on transportation funding. She explained that the initiative would allow the state to enjoy cost savings and reduced project time frames by using a state funded mechanism for funding. The proposed fund would move projects from inception to completion more quickly since use of the federal highway fund imposes highly prescriptive and lengthy procedures that must be adhered to for projects. She offered an example, noting state funds were used in building the Elmore Road Extension in Anchorage. Using state funds allowed the project to be completed in less than three years while it would have taken seven to ten years to complete the project using the federal process, she said. She cautioned members that the proposed resolution is not intended to diminish the partnership with the federal government but is designed to complement it. The proposed resolution would provide a dedicated revenue stream to allow for completion of more projects in a shorter time frame. Under the resolution, the Alaska Transportation Infrastructure Fund (ATIF) would grow as the investment returns compounded. The endowment would initially be seeded with $1 billion dollars. In addition to the investment returns of the endowment, taxes, including the motor fuel tax, vehicle regulation fees, studded tire tax, and vehicle rental tax would be deposited into the proposed ATIF. She predicted that the ATIF would initially generate approximately $103 million in the first year and thereafter would increase by $3 million to 3.5 million annually. She referred to a spreadsheet in members' packets, which was developed by the Department of Revenue (DOR) to estimate the potential fund balance that would be available each year for transportation infrastructure. She stated historians previously reported Alaska's constitutional drafters were concerned that dedicated funds could impair future legislatures from responding to evolving public needs. The public need for dependable and efficient transportation hasn't changed since Alaska's Constitution was drafted but the need has grown, she said. 1:41:54 PM MS. ROONEY read an excerpt from a speech Governor Wally Hickel gave nearly 20 years ago, in reference to a dedicated transportation fund: This is not as radical a proposal as it might sound. Over half the states already have the same type of financing arrangement. In fact, Alaska's founding fathers supported this exact mechanism and provided for it at statehood. With a dedicated fund Alaskans will receive more stable service levels. And if new revenues are needed to preserve or improve service, Alaskans will be assured that any new fee will go directly into their transportation system. MS. ROONEY remarked that this excerpt could be presented today just as it was 20 years ago. She read: Alaska needs to take action now. The future of the economic and social well being of Alaska's citizens is critically dependent on a reliable transportation system. This change to the constitution, allowing a dedicated transportation fund is needed to create and maintain a modern reliable transportation system for Alaska. 1:43:06 PM REPRESENTATIVE GRUENBERG, in response to Representative Johnson, indicated that he previously removed his objection to adopting the proposed committee substitute. REPRESENTATIVE GRUENBERG referred to the legal question of whether a dedicated fund could be reinstated once repealed. He recalled an attorney general's opinion addressed that issue by stating it could not be resurrected. He asked whether the attorney general's opinion could be made available. CHAIR P. WILSON agreed to provide the attorney general's opinion. 1:45:29 PM CHAIR P. WILSON, in response to Representative Johnson, noted a disagreement at the time the state increased the motor fuel tax to $.08. She related her understanding the issue at the time the motor fuel tax was increased, that the discussion surrounded whether the dedicated fund could stay in place if the motor fuel tax was increased and subsequently the state deleted the fund. 1:46:22 PM REPRESENTATIVE MUNOZ asked for the proposed annual state contribution that could be used for state DOT&PF projects. MS. ROONEY answered that while she did not have a specific figure the state contributed 13 percent in FY 10. 1:47:00 PM REPRESENTATIVE MUNOZ asked for the rationale for the "up to 50 percent" of the state taxes that would supply the revenue stream. MS. ROONEY responded that the sponsor wanted to grow the fund and allow for expending funds immediately on projects. This mechanism also allows the state to inflation proof the fund. REPRESENTATIVE MUNOZ said it would be helpful to know if 50 percent is sufficient to reach the state's goal. CHAIR P. WILSON commented that the proposed resolution is not designed to replace current transportation funding, but rather to put in place transportation infrastructure to use for deferred maintenance and other projects. She reiterated the proposed ATIF is not meant to replace the state's transportation funding but to recognize that the state is not currently doing enough. [HJR 4 was held over.]