SENATOR TAYLOR introduced SB 256 (INCREASE AVIATION FUEL TAX) sponsored by the Senate Transportation Committee at the request of the Department of Transportation, and invited SENATOR BERT SHARP to review the bill. SENATOR SHARP noted the committee would be considering CS for SENATE BILL NO. 256(TRA). SENATOR SHARP reviewed some of the history of supporting rural airports through landing fees. Last session, air carriers were contacted and asked if they would prefer reinstatement of the landing fees or collection of an equivalent amount of revenue through another means. While no firm commitment was made, the general feeling expressed was that an increase in the aviation fuel tax to collect an equivalent amount of revenue would be preferable, since collecting landing fees was expensive and not always successful. SENATOR SHARP said the bill would increase aviation and turbine fuel tax in the amount of $.007/gallon, which would generate $1.6 million which would be needed to support the airports. SENATOR LITTLE clarified the amount of the tax, and SENATOR SHARP assured the committee it was not a tax increase. SENATOR TAYLOR invited HELVI SANDVIC, Deputy Commissioner for the Department of Transportation, to testify. Number 153 MS. SANDVIC praised SENATOR SHARP for presenting the issue, and she explained that DOTPF undertook an effort several years ago to help off set the costs of maintenance and operation of their airports. He said an analysis of the airports supported by the general fund and determined the airports receiving certificated air service were most costly due to the mandated federal requirements. The decision at that time, she explained was to go forth with landing fees applied to aircraft of 6,000 pound or greater, which are the type of aircraft that require the additional presence of state forces to respond in the event of a crash or with law enforcement response security. MS. SANDVIC said there was significant opposition to any increase in fees and several alternatives were suggested including the landing fees, with an increase in fuel tax being the other. It was decided to go forth with the landing fees; it was challenged in court, and was ruled against them because they had not followed the Administrative Procedures Act for implementing the landing fee that was no longer valid. MS. SANDVIC said the preference, as stated by the air carriers, was to apply a fuel tax increase was the most equitable means of sharing the cost of maintaining the airports among all aviation users, and she claimed the proposed fuel tax would result in the same amount of revenue that would have been coming into the State had the landing fee proposal gone forward. SENATOR LITTLE asked MS. SANDVIC about the consideration from the people in rural areas about the idea of the fuel tax, and she suggested there were problems in collecting the landing fees. She asked if the people in rural areas approved of the solution. MS. SANDVIC explained initially there was opposition to landing fees and difficult to collect, there was a feeling it was equitable. She described the objection came from the larger carriers who felt everyone benefitted from the airport, but it was felt that not everyone was contributing their fair share; whereas, the tax would properly reflect usage because it wold be adjusted according to the level of fuel used. Number 196 SENATOR TAYLOR suggested MS. SANDVIC meant to use "gasoline use fee." He called on GARY MOORE, Planning Director for the Tanana Chief's Conference, who testified OFFNET from Fairbanks. MR. MOORE asked if there was just an increase aviation tax or did it include motor fuel included in water craft, which is $.05 per gallon. Is it just aviation tax? SENATOR TAYLOR directed MR. MOORE'S attention to the bill to the language in darker print as the only changes being made, and explaining the rest of the bill is existing language in law. He reiterated the only changes were to aviation fuels. MR. MOORE described the aviation fuel tax increase as impacted on the villages in his region and he reviewed the Interior regions which are accessible only by air or river, where any increase in aviation fuel would be passed on to the customers. In checking the prices of gasoline, MR. MOORE found the current cost of gasoline in that region is $2.35 per gallon; aviation fuel is $4.18 per gallon; gasoline in Galena is $2.50 per gallon, and aviation fuel is $3.50 a gallon, and in Fort Yukon the price of gas is $2.55 and aviation fuel is $2.88 per gallon. MR. MOORE thought it was a substantial amount of money to pay for fuel in the rural areas that are more depressed than the urban areas in Alaska. He expressed concerns the tax would be passed on to the rural residents, and although he understands DOT's role in maintenance, he could not support the bill. Number 240 SENATOR TAYLOR assured MR. MOORE this was not a price increase on the existing price of gasoline, but only on the amount of the flow. He gave an example of an airplane burning 20 gallons an hour, making an increase of $.14 per hour's flying time. MR. MOORE asked if there would be a corresponding increase in the fares to the rural areas, and SENATOR TAYLOR explained the $.14 would be divided among the fares of the passengers. MS. SANDVIC responded in describing the public hearing process where the air carriers testified the fuel tax was preferable, since it spreads the burden out amongst more carriers than otherwise. SENATOR SHARP pointed to Section 6 as a blackmail clause to prevent double dipping, and SENATOR TAYLOR referred Section 6 to MR. MOORE which presents the Department of Transportation from charging landing fees until January 1, 2000. MR. MOORE said most of his questions had been answered. SENATOR LITTLE questioned SENATOR TAYLOR'S use of "kerosine burners," and he explained they were jets, which were very inefficient. Number 289 SENATOR LITTLE asked MS. SANDVIC for a review of the fiscal note, and she quoted the revenue as $1,725.7 million and would cost approximately $20.4 thousand to administer. SENATOR JACKO asked what assurance would there be the $1,725.7 million would be spent on maintenance of rural airports. MS. SANDVIC said it would not pay for the entire cost of maintenance of the airports, and she suggested several ways of dealing with the problem by dedicated funds or a constitutional amendment. SENATOR DONLEY declared he was not supporting any new taxes until the operating budget was under control, and he blamed the administration for not proposing reductions in the operating budget. His only exception was alcohol and tobacco taxes. Second, SENATOR DONLEY didn't think this was a fair tax, and he blamed the Department of Transportation for not following the Administrative Procedures Act for implementing the landing fees regulations. He said he was voting against the bill. SENATOR JACKO moved to pass CS FOR SENATE BILL NO. 256(TRA) (INCREASE AVIATION FUEL TAX) from committee. SENATOR DONLEY objected. SENATOR TAYLOR called for a vote on SENATOR JACKO's move to pass CS FOR SENATE BILL NO. 256(TRA) (INCREASE AVIATION FUEL TAX) from committee. The roll was taken with the following results: SENATORS TAYLOR, JACKO, and LITTLE voted "yes," and SENATOR DONLEY voted "nay." SENATOR TAYLOR stated the bill was moved from committee.