HOUSE FINANCE COMMITTEE March 31, 1993 8:40 a.m. TAPE HFC 93-84, Side 1, #000 - end. TAPE HFC 93-84, Side 2, #000 - #561. CALL TO ORDER Co-Chair Larson called the House Finance Committee to order at 8:40 a.m. PRESENT Co-Chair Larson Representative Hoffman Co-Chair MacLean Representative Martin Vice-Chair Hanley Representative Navarre Representative Brown Representative Parnell Representative Foster Representative Therriault Representative Grussendorf ALSO PRESENT Mike Greany, Director, Legislative Finance Division; Representative G. Phillips; Larry Meyers, Director, Excise and Income Audit, Department of Revenue; Don Valesk, Local 71; Kent Swisher, Alaska Municipal League; Jeff Ottensen, Department of Transportation and Public Facilities; Irene Morris, Alaska Environmental Lobby; Darrel J. Rexwinkel, Commissioner, Department of Revenue. SUMMARY INFORMATION HB 1 "An Act relating to motor vehicle registration; and providing for an effective date." CSHB 1 (CRA) was reported out of Committee with "no recommendation" and with a fiscal impact note by the Department of Public Safety, and with a zero fiscal note by the Department of Environmental Conservation and with a fiscal impact note by the Department of Transportation and Public Facilities, dated 3/22/93 HB 58 "An Act relating to the budget reserve fund established under art. IX, sec. 17, Constitution of the State of Alaska." HB 58 was HELD in Committee. HB 96 "An Act extending the termination date of the Alcoholic Beverage Control Board." 1 HB 96 was reported out of Committee with a "do pass" recommendation and with a zero fiscal note by the Department of Revenue, dated 3/26/93. HB 135 "An Act making supplemental and special appropriations for the expenses of state government; making, amending, and repealing capital and operating appropriations; and providing for an effective date." HB 143 was HELD in Committee. HOUSE BILL NO. 1 "An Act relating to motor vehicle registration; and providing for an effective date." REPRESENTATIVE GAIL PHILLIPS, SPONSOR noted that present Alaska law does not provide for a state program of municipal grants for recycling junked and abandoned cars. HB 1 would create a program to do so by charging an annual fee to vehicle owners at the time of registration and by creating a fund in the Department of Transportation and Public Facilities for the purpose of providing grants to municipalities for transporting such vehicles to recycling centers. Representative Phillips observed that much of the beauty of our Alaska scenery is marred by the sight of junked and abandoned vehicles along roadways. In addition to the visual disruption, these vehicles are attractive nuisances where children may be at risk because of broken glass and other hazards. There is also the environmental damage stemming from leaking oil, fuel, brake and transmission fluids and battery acids. Representative Phillips explained that the program set forth in HB 1 would add a recycling fee of $2 to the annual vehicle registration fee. Current statistics show that there are 488,937 or more registered vehicles in this state which would create a fund of approximately $980,000. The funds from the fee would be deposited into the general fund. The bill also creates a municipal recycling grant fund Representative Phillips stated that the legislature would have to annually appropriate money from the General Fund into the Municipal Recycling Grant Fund. The Department of Transportation would then allocate grants to municipalities for the recycling of motor vehicles. Several municipalities have participated in programs for the removal of vehicles on their own or in conjunction with state-sponsored 2 "beautification" efforts. Other municipalities have participated in a federal program administered by the Department of Transportation/Public Facilities. During the last 13 years, over 7,000 vehicles have been removed from public roads under the federal program, with grants totalling $522,000. However, continued funding of the federal program is uncertain and would not be available in those areas that do not have federal funding for roads. Representative Phillips explained that because of the Department of Transportation and Public Facilities' expericence in administering and history with ISTEA (Intermodal Surface Transportation Efficiency Act of 1991) the legislation calls for DOT to be the administering agency. Representative Grussendorf asked if the municipalities that are already providing this service will be the ones to get all the funds. Representative Phillips stated that the program will be based on pro rata of vehicle registration. Representative Parnell noted that there is already an abandoned vehicle fund in AS.28.11.110. He noted that the program proposed in HB 1 is slightly different. He asked if there had been discussion of merging the two funds. Representative Phillips replied that there had not. Representative Hanley referred to the fiscal note. He observed that the revenue source would be $2 dollars per vehicle. Representative Phillips noted that $2 dollars per vehicle would raise approximately $2 million dollars. The Alaska Municipal League has encouraged a $5 dollar fee. The sponsor elected to keep the fee at $2 dollars per vehicle. Co-Chair MacLean asked how HB 1 would work in rural areas. Representative Phillips stated that back haul barges could be used. Representative Brown asked if language should be inserted to direct the department in the allocation of funds. She emphasized that there will not be sufficient funds to address the need. KENT SWISHER, ALASKA MUNICIPAL LEAGUE expressed support for HB 1. JEFF OTTENSEN, DEPARTMENT OF TRANSPORTATION AND PUBLIC FACILITIES stressed that the program will not cover all the demand. Only one out of 10 cars will be cleaned up. He emphasized the need to encourage other disposition of vehicles. In response to a question by Representative Brown, he clarified that the federal program was a one time 3 clean up effort. Cars had to be on or within 100 feet of a federal or state right-a-way. Once funds were spent municipalities were mandated to keep the highway clean. He assured members that a formula can be developed to allow use of funds to be divided among applicants. Representative Brown asked if regulations would be adopted. Mr. Ottensen replied that regulations would be enacted. Representative Brown asked if the fiscal note addressed the cost of enacting regulations. Mr. Ottensen answered that the fiscal note does cover the cost of regulations. Representative Brown asked if there are controls to assess municipal spending. Mr. Ottensen replied that there is a small amount of money included for audits. He added that maintenance station operators will keep the Department informed on municipal progress. IRENE MORRIS, ALASKA ENVIRONMENTAL LOBBY spoke in support of HB 1. She emphasized that HB 1 will help ensure that junked and abandoned cars and trucks are removed from state and municipal roadways. She added that HB 1 will help address solid waste problems and potential safety and hazardous waste dangers. Representative Foster MOVED to report CSHB 1 (CRA) out of Committee with individual recommendations and with the accompanying fiscal notes. There being NO OBJECTION, it was so ordered. CSHB 1 (CRA) was reported out of Committee with "no recommendation" and with a fiscal impact note by the Department of Public Safety, and with a zero fiscal note by the Department of Environmental Conservation and with a fiscal impact note by the Department of Transportation and Public Facilities, dated 3/22/93 HOUSE BILL NO. 96 "An Act extending the termination date of the Alcoholic Beverage Control Board." Co-Chair Larson noted that HB 96 will extend the Alcoholic Beverage Control Board. There is a zero fiscal note. Representative Navarre MOVED to report HB 96 out of Committee with individual recommendations and with the accompanying fiscal note. There being NO OBJECTION, it was so ordered. HB 96 was reported out of Committee with a "do pass" recommendation and with a zero fiscal note by the Department 4 of Revenue, dated 3/26/93. HOUSE BILL NO. 143 "An Act relating to the distribution of the revenue obtained from imposition of the state tax on motor fuel used in watercraft of all descriptions; and providing for an effective date." Representative Mackie noted that the Department of Revenue has issued a new fiscal note based on amendments adopted by the House Finance Committee, Work Draft for SSHB 143 (FIN). The new fiscal note deletes a $112.1 thousand dollar request in new positions. Changes made by the House Finance Committee will require that municipalities eliminate the need for the additional positions. He noted that an estimated $9 - $10 million dollars is collected from the program. An estimated 5 - 7 percent of the harbors are municipally owned. Therefore 5 - 7 percent of the Fund will be affected. Members were presented with Amendment 1 by Representative Mackie (Attachment 1). Representative Mackie noted that rural areas that do not have boat harbors would be impacted by the amendment. He emphasized that communities on river systems pay fuel taxes and have needs due to erosion or haul out facilities. The amendment attempts to address the needs of these communities. He added that urban municipalities such as Anchorage or Fairbanks could receive funding of up to 50 percent if they apply and qualify. They would be mandated to use the money for construction and maintenance of public boat landing areas used by residents of the municipality or or for local efforts initiated to prevent or repair the effects of erosion along shorelines used as public boat landing areas. Co-Chair MacLean MOVED to ADOPT AMENDMENT NO. 1. Representative Hanley OBJECTED for purpose of discussion. Representative Mackie clarified that the Department of Revenue would be responsible for the funds. The Department of Transportation and Public Facilities will certify the amount. The Department of Revenue will disperse the funds after the Department of Transportation and Public Facilities certify the amount each municipality receives. Co-Chair MacLean asked if the Department of Transportation and Public Facilities will publish a list of the municipalities that have applied. FRANK TURPIN, COMMISSIONER, DEPARTMENT OF TRANSPORTATION AND PUBLIC FACILITIES stated that the Department could publish a 5 list of the municipalities that apply. Representative Hanley express the concern that there is a potential fiscal loss to the State of Alaska. He noted that the definition of eligibility has been expanded. Representative Mackie observed that the legislation is designed to offset the impacts of fuel use and to take care of harbors and boat launch facilities. Representative Martin agreed that the amendment would broaden eligibility. Representative Grussendorf stressed that municipalities would address their priorities through the Fund. Representative Navarre stressed the need to raise new revenues to offset the additional burden on the State's treasury. Representative Brown asked if the Committee could consider a small increase to offset the additional municipal appropriation. Representative Brown questioned if the use of "operating" on page 1, line 13 is consistent with the use of "owned" on page 2, line 5. She noted that the Department of Transportation and Public Facilities owns the Anchorage harbor facility but it is operated by the municipality. Representative Mackie explained that the intent is that funding will be allocated only for the portion owned by the municipality. Members discussed the drafting language. Representative Brown asked the definition of "municipality". Co-Chair MacLean noted that "municipality" refers to first and second class cities and municipalities of the state. Representative Brown asked if fuel is sold outside of municipalities. Co-Chair MacLean assured her that fuel is sold in villages. LARRY MEYERS, DIRECTOR, INCOME AND EXCISE AUDIT DIVISION, DEPARTMENT OF REVENUE discussed the Department's fiscal notes. He clarified that there are approximately 61 major wholesale fuel distributors. 6 Representative Grussendorf emphasized that the intent of the amendment is to get operation and maintenance money to municipalities for harbors or boat landing facilities. He stressed that the cost of maintenance is cheaper than the cost of repair. (Tape Change, HFC 93-84, Side 2) Co-Chair Larson asked if Title 28 would allow municipalities to levy the tax. Mr. Meyers could not answer. Representative Mackie noted that funding is subject to appropriation. Representative Grussendorf did not think municipalities could discriminate in taxing a single commodity. Representative Hanley reiterated his concerns that the legislation would divert money from the State. Co-Chair MacLean pointed out that the fuel tax is collected from all users of motor fuels. Representative Hanley asserted that a revenue sharing program is being developed. He asked that the legislation be held until the Department of Revenue presents a new fiscal note. Representative Martin agreed. Co-Chair MacLean WITHDREW her amendment. Co-Chair Larson expressed concern that revenues will be withdrawn from the State. Representative Brown reiterated her concerns regarding the use of "operating" on page 1, line 13 and of "owned" on page 2, line 5. Representative Mackie noted that reimbursement is only provided to municipalities that own a portion of the facility. Representative Brown asked if Anchorage would be reimbursed under the legislation. Members further discussed the criteria for reimbursement. Representative Martin asked that HB 143 be held. Co-Chair Larson announced that HB 143 would be held in a subcommittee consisting of Representatives Hanley, Parnell and Brown. Representative Grussendorf emphasized that the intention of HB 143 is to encourage municipalities to own and operate harbor facilities. Representative Mackie expressed concern that HB 143 would not meet the deadline for passage of legislation from committee. Co-Chair Larson MOVED to report HB 143 out of Committee with individual recommendations and with the accompanying fiscal notes. Representative Martin OBJECTED. A roll call vote was taken on the motion. 7 IN FAVOR: Brown, Grussendorf OPPOSED: Hanley, Martin, Parnell, Larson, MacLean Representatives Hoffman, Navarre, Foster and Therriault were absent from the vote. The MOTION FAILED (2-5). Representative Hanley detailed issues that need to be resolved. He stressed the need for a fiscal note by the Department of Revenue addressing the amendment. He wanted to know how much water fuel taxes are collected. How much fuel tas is collected in municipalities that operate harbors. How much is collected in municipalities that do not have state owned docks. He noted that the issue identified by Representative Brown regarding "operated" and "owned" also needs to be resolved. HB 143 was HELD in Committee. HOUSE BILL NO. 58 "An Act relating to the budget reserve fund established under art. IX, sec. 17, Constitution of the State of Alaska." DARREL J. REXWINKLE, COMMISSIONER, DEPARTMENT OF REVENUE noted that HB 58 would change the Attorney General's opinion in regards to which monies would be deposited in the Constitutional Budget Reserve Fund. He observed that HB 58 states that revenues from cases that remain in "informal hearing status" for more than 6 months would be deposited in the Constitutional Budget Reserve Fund. Commissioner Rexwinkle reviewed the audit process. He expressed the concern that companies could determine by their action where money would be deposited. He theorized that substantial amounts could go into the Constitutional Budget Reserve Fund under the legislation. He added that there is at least $266.6 million dollars in back settlements that would need to be deposited. He observed that there is not a large General Fund balance to cover the back settlements. Representative Brown noted that under AS 43.05.240 (b), "A person aggrieved by the action of the department in fixing the amount of a tax or in imposing a penalty may apply to the department and request a formal hearing. (1) in place of the informal conference provided for in (a) of this, section, within 60 days from the date of mailing the notice required to be given to the person by the department; (2) 8 within 30 days after decision resulting from an informal conference." She asserted that a company can direct the procedure in order to divert money into the Constitutional Budget Reserve Fund. Commissioner Rexwinkle argued that a formal conference is accompanied by additional process. Co-Chair MacLean noted the retroactive effective date of July 1, 1990. Co-Chair Larson explained that the effective date would include the $144.9 million dollar administrative settlement in FY 93. Revenues in FY 93 included another $121.3 million dollars. An additional $13.6 million dollars were generated in interest. A total of $279.8 million dollars are included in the Statutory Budget Reserve would be affected. He added that settlements in FY 94 would also be leveraged. HB 58 was HELD in Committee. ADJOURNMENT The meeting adjourned at 10:04 a.m. 9