HOUSE FINANCE COMMITTEE April 23, 1999 1:55 P.M. TAPE HFC 99 - 102, Side 1 TAPE HFC 99 - 102, Side 2 CALL TO ORDER Co-Chair Therriault called the House Finance Committee meeting to order at 1:55 p.m. PRESENT Co-Chair Therriault Representative Foster Co-Chair Mulder Representative Grussendorf Vice Chair Bunde Representative Kohring Representative Austerman Representative Moses Representative J. Davies Representative G. Davis Representative Williams was not present for the meeting. ALSO PRESENT Peter Torkelson, Staff, Representative John Cowdery; Marco Pignalberi, Staff, Representative John Cowdery; Kip Knudson, ERA Aviation, Anchorage; Mike Tibbles, Staff, Representative Gene Therriault; Kurt Parkan, Deputy Commissioner, Department of Transportation and Public Facilities. LISTENED VIA TELECONFERENCE Morton Plumb, Anchorage International Airport, Anchorage; Bill O'Leary, Fairbanks International Airport. SUMMARY HCR 3 Relating to use of passenger facility charges at the Anchorage International Airport. CS HCR 3 (FIN) was reported out of Committee with "no recommendation" and with a House Transportation Committee fiscal note dated 3/31/99. HB 40 "An Act combining parts of the Department of Commerce and Economic Development and parts of the Department of Community and Regional Affairs by transferring some of their duties to a new Department of Commerce and Rural Development; transferring some of the duties of the Department of Commerce and Economic Development and the Department of Community and Regional Affairs to other existing agencies; eliminating the Department of Commerce and Economic Development and the Department of Community and Regional Affairs; relating to the Department of Commerce and Rural Development and the commissioner of commerce and rural development; adjusting the membership of certain multi- member bodies to reflect the transfer of duties among departments and the elimination of departments; creating the office of international trade and relating to its duties; and providing for an effective date." HB 40 was HELD in Committee for further consideration. HOUSE CONCURRENT RESOLUTION NO. 3 Relating to use of passenger facility charges at the Anchorage International Airport. PETER TOKELSON, STAFF, REPRESENTATIVE JOHN COWDRY, stated that in 1990, U.S. Congress passed a law to allow publicly owned airports to collect user fees called Passenger Facility Charges (PFC). The State of Alaska owns and operates 170 airports statewide and to date has not elected to participate in the PFC program. In contrast, the city owned airports of Juneau and Ketchikan have each implemented PFC's. He noted that Passenger Facility Charges are a flat user fee collected at the time of ticket purchase and in most cases the fee is $3 dollars. Funds collected through the PFC mechanism may only be used for specific, pre-approved projects that directly benefit airport users. All major airlines serving Anchorage International Airport support the implementation of PFC's with the exception of ERA Aviation. Mr. Torkelson continued, Passenger Facility Charges are being paid now by Alaskans who travel out-of-state, to Juneau or Ketchikan. In the case of travel outside of Alaska, the money collected from Alaskans goes to outside airports which collect passenger facility charges. He suggested that Anchorage International Airport is losing up to $10 thousand dollars per day in missed PFC revenues to the benefit of many outside airports. Mr. Torkelson pointed out that the expansion of the Anchorage International Airport is a prime example of a capital project that could benefit from the implementation of the PFC program. While Department of Transportation and Public Facilities does not need direct legislative approval to implement a PFC program, HCR 3 would provide an important step in bringing the public into PFC discussion. In response a query by Co-Chair Therriault, Mr. Torkelson explained that for a round trip ticket from Fairbanks to Anchorage, the PFC charge would be $3 dollars, which would be collected at the first two-enplanement airports, but never the destination airport. Vice-Chair Bunde cited that the Anchorage International Airport could impose the PFC, however, he believed that they were looking for a political cover. Mr. Torkelson replied that the Department of Transportation and Public Facilities has the authority to impose a PFC subject to strict federal regulations. The airport must make an application and then the Federal Aviation Agency (FAA) would need to authorize it. Representative G. Davis inquired if an application had yet been submitted. Mr. Torkelson replied that it is currently being worked on. Representative G. Davis asked the need for the proposed resolution. Mr. Torkelson explained that there has been discussion with Department of Transportation and Public Facilities and that they expressed a need for public venue and debate on this issue and how it would be benefical to Alaska. Anchorage is the air traffic hub for the State. Representative G. Davis indicated that he does not support the legislation. MARCO PIGNALBERI, STAFF, REPRESENTATIVE JOHN COWDERY, added that the applications for the PFC's are airport specific. In the resolution before the Committee, application applies only to the Anchorage International Airport. Vice-Chair Bunde noted that a maximum PFC charged would be $6 dollars and that the Anchorage International airport is aware of concerns. Mr. Torkelson addressed issues for the small airports. He advised that the PFC's would be issued only in 18 statewide airports. Many airports would be exempted under the 1% rule. Co-Chair Therriault inquired if village traffic would be exempt. Mr. Torkelson replied that would depend on the way the ticket was written. Representative Austerman asked if the 1% was in current law. Mr. Torkelson discussed that was included in Section #158, Federal regulations, which covers PFC applications. He pointed out that Representative Cowdrey has been in contact with Senator Steven's office in Washington D.C. regarding the possible amendment to the PFC law. Mr. Torkelson believed that law would not make it through the U.S. Senate this year. He pointed out that there are two additional standards for aircraft exemptions: * One is for an aircraft with 20 or fewer seats; and * The other is for an area with a population of less than 10 thousand and are not on a road system. Representative Austerman asked if there was a definition of "community" in Senator Steven's bill. Mr. Torkelson did not know. Vice-Chair Bunde distributed an amendment. [Copy on File]. He asked Mr. Knudson from ERA to comment on the amendment. KIP KNUDSON, ERA AVIATION, ANCHORAGE, spoke to the PFC's and/or passenger head taxes. He noted that ERA opposes the implementation of a PFC at Anchorage International Airport as it is currently being proposed. The chief concern revolves around the exemptions that are being debated in Washington D.C. Senator Steven's proposed exemption language singles out ERA as the only remaining Alaska based airline paying PFC's. With the exception of Illiamna, every ERA destination would be subject to a PFC by virtue of the fact that they are connected to Anchorage either by road or the marine ferry system. The so-called "rural exemption" that is moving forward in Federal legislation exempts communities not connected to the National Highway System. Mr. Knudson emphasized that this would be an inequity that singles out both ERA and its passengers. Mr. Knudson continued, the same Senate bill also exempts carriers in Alaska from collecting PFC's aboard an aircraft having a seating capacity of less than 20 passengers. ERA currently operates 18 passenger planes and 37 passenger or 50 passenger aircraft. Passenger loads can jump in the final hours before departure justifying an upgrade from the 18 passenger aircraft to the 37 seat aircraft. The reverse is also true. In any case, it is not fair to have a two tiered pricing system in common market whereby passengers riding on the larger aircraft pay more than those on a smaller one. Mr. Knudson added that the proposed tax would be disproportionate, collected both from a short trip to Kenai or a long trip to Seattle. The same $3 dollar fee would be collected. With respect to regional carriers in Alaska, either all should be required to collect PFC's or all excluded. ERA Aviation clearly prefers the latter approach. Mr. Knudson added that the company is willing to work to seek an equitable solution and that ERA would support HB 84 authorizing revenue bonds for the Anchorage International Airport. Co-Chair Therriault asked if PFC's could be structured so that the charge was only on the down line travel. Mr. Knudson explained that would depend on the way the application was submitted to the FAA. He directed that a copy of that application should be available from the Department of Transportation and Public Facilities soon. It could be that only Northwest Airlines down line tickets would be charged. Representative Austerman again asked the definition of "community" pointing out that his community would not be happy with this new tax. He questioned if everyone would pay. Mr. Knudson replied that the Department would need to define "community". KURT PARKEN, DEPUTY COMMISSIONER, DEPARTMENT OF TRANSPORTATION AND PUBLIC FACILITIES, voiced the Department's support of the legislation. Mr. Parkan advised that the Department is in the process of preparing applications for Anchorage and Fairbanks at this time with exceptions similar to those that Senator Stevens has included in his legislation. In response to Representative Austerman, Mr. Parkan noted that the definition of a "community" is the smallest component; the notice which the Department sent to the airlines, would exempt "communities" as areas under a ten thousand-population threshold, which would include Kodiak. Vice-Chair Bunde questioned who would be responsible to maintain the airports. Mr. Parkan replied that the State maintains and operates these airports. The PFC's collected would go to the Anchorage Airport and not to the destination airports. Additionally, Mr. Parkan pointed out the exemption in the U.S. Senate language, which would optionally exempt to satisfy the 1% rule. Vice-Chair Bunde believed that it would be clearer to the public if the 60-passenger exemption remain in place. Mr. Parkan suggested that amendment could cause problems in those communities that are served by more than one carrier. Mr. Parkan noted that PFC's result from the impact which passengers have on the airport and terminal. Representative Austerman questioned the need for the resolution since an application has already been submitted. Mr. Parkan advised that the Legislature was the perfect arena discuss the PFC project. He pointed out that legally, the Department has the ability to impose the PFC with the current statutory authority, however, these projects would require legislative appropriation. Representative G. Davis inquired if the Kodiak ferry system would be exempt. Mr. Parkan replied that the exemptions would be those communities not connected on the land highway. Co-Chair Therriault believed that the U.S. House bill had the same latitude as the Senate bill to add additional features. Mr. Parkan agreed that HR 1000 does have similar language. He could not speculate if it would move successfully through the U.S. Congress. He urged that the reauthorization bill be addressed this session. Representative G. Davis asked if the PFC charge would be enforced only for specific projects. Mr. Parkan stated that was correct. Representative Foster remarked that a user fee is a tax and questioned why this is not called a "tax". Mr. Parkan replied this is FAA language. Mr. Torkelson spoke to the amendment. He reiterated that there are 18 communities that would be exempt. He listed the community names and reiterated Representative Cowdery's position. He indicated that the FAA authority has commented that it was not legal to draw a line for State residents. Vice-Chair Bunde MOVED to adopt Amendment #1. [Copy on File]. There being NO OBJECTION, it was adopted. Representative Austerman MOVED to report CS HCR 3 (FIN) out of Committee with individual recommendations and with the accompanying fiscal note. There being NO OBJECTION, it was so ordered. CS HJR 3 (FIN) was reported out of Committee with "no recommendation" and with a fiscal note by the House Transportation Committee dated 3/31/99. HOUSE BILL NO. 40 "An Act combining parts of the Department of Commerce and Economic Development and parts of the Department of Community and Regional Affairs by transferring some of their duties to a new Department of Commerce and Rural Development; transferring some of the duties of the Department of Commerce and Economic Development and the Department of Community and Regional Affairs to other existing agencies; eliminating the Department of Commerce and Economic Development and the Department of Community and Regional Affairs; relating to the Department of Commerce and Rural Development and the commissioner of commerce and rural development; adjusting the membership of certain multi- member bodies to reflect the transfer of duties among departments and the elimination of departments; creating the office of international trade and relating to its duties; and providing for an effective date." MIKE TIBBLES, STAFF, REPRESENTATIVE GENE THERRIAULT, updated Committee members regarding changes to the work draft committee substitute. He noted that an updated copy of the changes made would be forth coming. Mr. Tibbles addressed the concerns of Legal Services, which would be included in the work draft. * Placement of the Office for International Trade. The bill arrived with that office being seated in the Governor's Office. Through discussion, it was determined that the bulk of that work was performed in the Department of Community and Regional Affairs. consequently, it will be placed in the new department. * Vocational Rehabilitation. This Division has been moved into the new department, and will be situated in the new work force development. * ChildCare Licensing. This component was moved from Department of Health and Social Services to the new Department of Education and Child Development. * Deletion of Section #35 This section mandated divisions within Department of Commerce and Economic Development, division directors to provide maximum flexibility. Co-Chair Therriault commented that change would allow more flexibility within the division structure for the department. * Community Grants. Mr. Tibbles advised that the municipal matching grants had been moved out of Title 37 and into the new department. * Adult Basic Education. Mr. Tibbles noted that the new committee substitute moved the component to the new work force development component. It was accepted that vocational technical would work more closely with high school. * Pass Work Services & I. Mr. Tibbles commented that included in the new work draft, these items were left in the Department of Health and Social Services because of their tie to the Alaska Temporary Assistance Program (ATAP). (Tape Change HFC 99 - 102, Side 2). * Licenses. Co-Chair Therriault addressed the regulation section. The Legislature granted the authority to start developing the regulation package before the new statute went into effect. The intent here was to give the Department the authority to develop the statutes and guarantee that it would go into effect the same time that the statute does. Mr. Tibbles advised that three items had not made it into the work draft. 1. The placement and number of board members on the Human Resource Development Council. Currently, they are on a five-year plan. The intent is to transition after the work is completed. Co-Chair Therriault commented that he would like to see the number of members reduced, however, understood that they are in the process of finishing up a five-year plan. 2. Mr. Tibbles added that he was working with Legislative Legal on language which would address any missed provisions or references for the impact of bills on federal funds. 3. Mr. Tibbles continued, Power Cost Equalization (PCE) and Alaska Industrial Development Export Authority (AIDEA) was not included in the work draft. Representative Grussendorf questioned why Vocational Technology was being moved to the Department of Education. Mr. Tibbles replied that function had been left in the Department of Labor and Work Force Development. Representative Grussendorf voiced concern for the Alaska Peer Information system because of the increased need to move people into the work force. Mr. Tibbles interjected that from public testimony, the idea was to move that item to the Department of Administration. Co-Chair Therriault updated members regarding the process. Representative Kohring voiced his appreciation on the work provided by Mr. Tibbles and all the efforts put forth by the individuals departments and agencies. He acknowledged that he was hopeful that the bill would provide greater efficiency in government with less management. Representative G. Davis questioned the need to change the names of agencies. He believed that changing the names would complicate concerns of the public. Co-Chair Therriault explained that when working with "mission and measures", it is important to indicate the work performed by specific agencies. He added that constituents are interested in being able to access budget documents through the Internet and he believed that the proposed new titles could assist and expedite that service. HB 40 was HELD in Committee for further consideration. ADJOURNMENT The meeting adjourned at 2:55 P.M. H.F.C. 9 4/23/99