HJR 10-CONST. AM: TRANSPORTATION FUND  2:01:30 PM CHAIR EGAN announced HJR 10 to be up for consideration [CSHJR 10(FIN) was before the committee]. REPRESENTATIVE PEGGY WILSON, sponsor of HJR 10, Alaska State Legislature, Juneau, Alaska, said two other bills in the other body make up the concept behind HJR 10. She noted that those bills are sitting in House Finance. She asked to be able to present the entire package concept before drilling down into HJR 10. It would give the committee an idea how the fund could come together if the Constitution were changed to allow it. All methods of transportation in Alaska are very important to everyone in Alaska she started. 2:04:09 PM REPRESENTATIVE P. WILSON said Alaska's transportation system is aging; no major road has been built in this state in 30 years. With population growth comes congestion, especially since that growth is primarily in the Railbelt where the population has tripled, she said. She highlighted that the state ferries are well-maintained but cost a lot to operate and are aging. Alaska has over 250 state- owned airports that need upgrades and major maintenance. Barges can only travel up the rivers during the few warm months to bring the necessary gravel to maintain those unpaved airstrips. The state owns 25 harbors and is in the process of transferring them to municipalities, but the harbors are deteriorating and the municipalities often don't have the money for maintenance. 2:06:35 PM REPRESENTATIVE P. WILSON said our natural resources are not normally on the transportation grid or close to railroads, and access to them is needed in order to diversify the sources of revenue the state receives. 2:06:56 PM She said the state has a backlog of projects in excess of $20 billion, and over $700 million in deferred maintenance. The funding from both the state and federal government is not keeping up with the demand. Rural highway traffic across the U.S. is up 23 percent and continues to grow; vehicle miles traveled is up 35 percent and still growing, too. There is an estimated $65 billion loss due to traffic congestion every year and that loss is passed on to consumers. REPRESENTATIVE P. WILSON said federal fuel taxes are not keeping up with inflation. In Alaska and nationally fuel taxes can't keep up with demand. Revenues for fuel taxes aren't going as far because advances in technology result in cars going further on a gallon of gas. Alaska has not had an increase in motor fuel taxes since 1961, and at 8 cents/gallon it's the lowest in the nation. The next closest is Wyoming at 14 cents/gallon. 2:08:24 PM The new federal transportation funding program, MAP-21, focuses on national highways and safety which are great goals, but Alaska only has four national highways. The state used to have greater flexibility with regard to safety dollars, but now it is limited to roads with notable crash histories, and the national highway system funds are now driven by performance. Since the penalties for non-performance are painful, the state match could have to double or triple. The state may be forced to focus more on just keeping up than modernization and there are a lot of maintenance projects that don't provide new lanes or access, which is what Alaska needs. She said the Council of State Governments said states can expect to see a slowdown in payments from the Federal Highway Trust Fund as early as this summer and by next summer the fund will be empty. REPRESENTATIVE P. WILSON said the dwindling pre-MAP 22 allocations to Alaska make it difficult for DOTPF to fund Alaska highways and communities. To further complicate matters, 14 percent of the 28 percent that is allocated for the non-national highways is divided depending on population: 4.4 percent goes to cities that have more than 200,000 in population (only Anchorage qualifies); 5.4 percent is directed to cities with a population less than 200,000 but more than 5,000. That only reaches Sitka, Ketchikan, Juneau, Fairbanks, Wasilla, Kodiak and Kenai. The remaining 4.2 percent is for all the other roads in the state. A portion is flexible, but unfortunately it is consumed by increased mandatory requirements from the federal government like data collection, bridge inspections, geographic information mapping and other necessities leaving very little for project purposes. REPRESENTATIVE P. WILSON said Alaska has always had a serious problem with financing transportation infrastructure; there is a new transportation funding program in the works, but no one knows what that will mean. There will be no more money in the highway trust fund in 2015 and Alaska needs to bring its aging infrastructure into the 21 Century. 2:13:03 PM She emphasized that to access Alaska's natural resources the state needs to take responsibility for developing a transportation system that depends less on the federal government for Alaska's roads, harbors, airports, and railroads. Alaska needs to start planning for the future and that is not happening now. These problems are not new; they are just compounding, she said. She related that the House Transportation Committee started investigating these funding issues five years ago and for three years they listened to DOTPF, grass roots organizations, and transportation organizations identifying the challenges of all the transportation in this geographically diverse state. The committee flew to remote villages to view transportation systems and subsequently started its quest for a solution. The committee heard from the Alaska Municipal League (AML), the MatSu Borough that contracted an independent study on statewide transportation fiscal issues, and from national experts. The committee rejected fixing the problem by bonding, which would make future generations pay the debt. REPRESENTATIVE P. WILSON explained that the proposal in HJR 10 has three parts: the first establishes the dedicated Alaska transportation taxes and fees as a part of the Transportation Fund that was in existence at statehood. She noted that the Alaska Constitution contained two dedicated funds related to transportation: the Highway Fund and the Water and Harbor Facilities Fund. She said the Alaska Transportation Infrastructure Fund (ATIF) will combine these two funds. It requires a vote of the people to change the Constitution to reinstate the fund, but it will ensure that all taxes and fees pay for transportation activities. The second part of the proposal is to continue funding transportation as in the past. This is the key to making real progress and improving the transportation infrastructure. This is the one way to slowly chink away at the $20 billion backlog of projects and to have more 100 percent state funded projects. The third solution is to take advantage of both the cost savings and the time savings for state funded projects (projects without federal strings) while providing for growing transportation needs. This fund will move projects from planning to completion much faster and cost less. With state funded projects Alaskans will see the impact of state dollars in communities much sooner and they will cost less. For example, state funds were used in the construction of the Elmore Road Extension in Anchorage, which was completed in three years as opposed to the 7-10 years it would have taken going through the federal process. She said the intention is to provide a dedicated revenue stream that will allow more projects to be completed faster and cheaper in addition to the ongoing state and federal funds. 2:18:36 PM REPRESENTATIVE P. WILSON said the concept of funding ATIF is to endow it with a large initial investment. It will progress while maximizing federal dollars the state gets. She noted that she heard that a federal dollar is worth 75 cents compared to a state dollar. This endowment will be determined after the Constitution has been changed to reinstate the dedicated Transportation Fund. She highlighted that special use fees - vanity license plates, airport lease revenues - have been preserved. She said the plan would be to have the Department of Revenue (DOR) manage ATIF and appropriate it like the Permanent Fund (each year 5 percent of the market value averaged over the previous 5 years) and 5 percent of the profits would be reinvested into the fund and each year there would be funds available for appropriation - plus half of the taxes and fees collected from the previous year). Also coming out of the fund would be the expenses for the Division of Motor Vehicles, the expenses to administer and manage the fund, and costs for the Advisory Council. The fund would be self-sufficient and not require general funds for administration. The appropriations will follow the regular budgetary process and would be approved by both the governor and the legislature. She said the fund needs to be set up and then next year the projects can be prioritized. Her idea is that it could be handled by a two-panel, two-set process. The first step is to prove and decide if the projects are better suited for development using state funds or going through the regular STIP process, effectively deciding if it will be a federalized project or a 100 percent state funding project. The Alaska Transportation Panel (ATP) could be comprised of seven members: four public, the DOTPF commissioner, a STIP board member, and a member from the Alaska Infrastructure Commission (AIC). Members will serve four-year staggered terms; DOTPF would develop a set of guidelines to decide if a project would be best to be federalized or funded through ATIF. 2:22:21 PM REPRESENTATIVE P. WILSON said the intent is to take the politics out of the decision making process for funding projects. When the project has been selected for using ATIF funds it must then be reviewed by the AIC, which would prioritize ATIF selections using DOTPF criteria. This list will need to be completed by the Advisory Commission by October 15 each year and submitted to both the governor and the legislature to make sure the ranked projects get into the capital budget. She explained that ATIF projects are limited to capital transportation and major maintenance projects. The proposed constitutional amendment states that the appropriations from the fund must be used for transportation and related facilities that are designated by law. In the enabling statutes she proposed to constrain the fund to only be used on capital projects and major maintenance. This keeps the funds functioning as an additional revenue stream to what gets appropriated. The difference in the language from the constitutional amendment to the enabling statutes will give future legislators the ability to use the money from this fund for operations only in times of fiscal shortfalls. All the legislature would have to do is make a statute change, which would allow the fund to be used for operations. Further, she explained that anyone could submit a project for consideration: the state, a borough, the unorganized borough, a municipality, a community or a village. She said she envisions submission forms with enough information for the commission to rank the projects. Every project would be considered. The funds available for federalized projects, which are constrained to use the federal processes, could be no more than 20 percent of the fund. This is to incentivize more state-funded projects. REPRESENTATIVE P. WILSON showed a graph of examples and repeated that a statute change could allow the fund to be used for other things. The payout starts at about $83 million the first year and then $131 million the second year and rises to a rate of about $3.3 million in the early years. She reminded the committee that this is $103 million in addition to the existing operating and capital budgets. 2:25:19 PM She projected that putting in $2 billion now will grow to $5 billion in 20 years. That includes 50 percent of the revenue that had been deposited over the 20 years. This is what can be expected if the other two pieces of legislation in the other body pass, she said. 2:26:35 PM REPRESENTATIVE P. WILSON summarized that the ATIF would allow Alaska to plan for its future and get rid of the deferred maintenance list; it would leverage more federal funds and encourage more state projects to be done; and it would decrease dependence on the federal dollars. It would increase property values, employment, and Alaskans would see an increase in real wages. It would reduce the cost of production and noncommercial travel time. ATIF would improve access to the state's resources and reduce the cost of production resulting in an improved quality of life for Alaskans. Alaska has a majority of the nation's coast lines, but has significant challenges developing and maintaining the state's docks and harbors for access to fishing resources. The state has world class mineral deposits but few transportation corridors to get to those resources. ATF will improve access to those resources which will decrease the cost of production. She summarized the two major issues: declining funds, both federal and state, and an aging transportation system. This constitutional amendment needs to be on the ballot this November; let the people decide, she concluded. 2:30:14 PM TOM BRICE, lobbyist, Alaska Laborers, Juneau, Alaska, stated that HJR 10 will break down some constitutional barriers that exist in terms of long term transportation projects for the state. 2:31:31 PM SARAH GEARY, Legislative Coordinator, Alaska Municipal League (AML), stated that HJR 10 will help the state be ready to maintain and build new infrastructure to meet future needs. CHAIR EGAN found no further comments and held HJR 10 in committee.