Legislature(1995 - 1996)

03/13/1996 01:45 PM FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
  HOUSE JOINT RESOLUTION 49                                                    
       Proposing amendments to the  Constitution of the  State                 
       of Alaska creating a highway fund.                                      
  REPRESENTATIVE  JEANNETTE  JAMES  noted  that  HJR  49 would                 
  propose amendments to the Alaska State Constitution creating                 
  a dedicated transportation  fund.   The amendments would  be                 
  placed  before the  voters  of Alaska  at  the next  general                 
  The  bill  would not  address an  amount  of motor  fuel tax                 
  increase,  but   merely  would  provide   a  mechanism   for                 
  allocating the proceeds from collection of fuel taxes.                       
  She  added  that the  resolution  has received  wide support                 
  relative to the  current level of  fuel taxes.  She  thought                 
  that Alaska's  citizens would  be more  willing to  accept a                 
  necessary increase in  their motor fuel  taxes if they  knew                 
  the money would be utilized to address the need for improved                 
  maintenance of the roads and highways.                                       
  PUBLIC FACILITIES (DOTPF),  testified in support of  HJR 49.                 
  He pointed out that the resolution  contains the marine fuel                 
  tax component.  The Department would utilize that revenue to                 
  transfer facilities to local governments.                                    
  Mr.  Kito pointed  out  the Department's  recommendations to                 
  permit  highway expenditures  to include  construction.   He                 
  suggested  changing  the  vote from  3/5  to  3/4 consenting                 
  DIVISION,  DEPARTMENT OF  REVENUE, advised  that the  fiscal                 
  note  provided by the Department of Revenue would change the                 
  effective date to July 1, 1998.  At that point, proceeds for                 
  motor fuel tax would be deposited into a dedicated fund.  He                 
  added, the fiscal note only indicates the  impact of gasohol                 
  in the Anchorage area.  In FY95, gasohol was required use by                 
  the  Environmental Protection Agency  (EPA) in Anchorage for                 
  duration of a two month period.  During that two months, the                 
  State lost $2.4  million dollars in revenue,  resulting from                 
  the motor fuel tax exemption.  The stipulation  in Anchorage                 
  was increased from two to four  months required use, as well                 
  as two to four million gallons  being sold each month during                 
  the transition.  The estimates  include FY96 lost revenue in                 
  the amount of $6 million dollars.                                            
  Representative Mulder asked  if there was any  Alaskan grain                 
  used  in production  of  gasohol.   If  not, he  recommended                 
  revising  that  statute.     Representative  James   agreed,                 
  indicating  that there is a bill  in another committee which                 
  addresses that tax.   There  could be some  gasohol made  in                 
  Alaska, although most of it comes from outside.                              
  Mr.  Bartholomew  pointed  out  that  DOR's  dedicated  fund                 
  revenue dollars, includes a tax applied to off highway fuel.                 
  On  off  highway fuel,  an  eight  cents per  gallon  tax is                 
  charged, and then a six cent per gallon refund is made.  The                 
  resulting net  tax amounts  to two  cents per  gallon.   The                 
  Department collects $3.2 million dollars  per year from that                 
  tax.  That revenue is not reflected in the fiscal note.                      
  testified in support  of HJR 49.   He requested that  intent                 
  language be added in order to tightly control the  dedicated                 
  fund,  stressing  that   the  fund  be  used   strictly  for                 
  maintenance  purposes.    He  recommended  that  a  tool  be                 
  implemented to focus behavior in  spending fuel tax revenue.                 
  He stressed  that he  would be  against using  the fund  for                 
  construction.  It  must be a  maintenance fund, and be  used                 
  for highways only.  Mr. Dillion noted that his company would                 
  not support the marine portion of the legislation.                           
  In  response to  Representative  Therriault's question,  Mr.                 
  Bartholomew  noted  that   a  separate   account  would   be                 
  maintained for the marine  fuel.  Mr. Kito added,  DOTPF has                 
  established that there  is not enough revenue even  with the                 
  proposed tax increases  to expand beyond maintenance  of the                 
  highway system.                                                              
  Co-Chair Hanley  advised that  there is  not enough  revenue                 
  available without a  tax increase to  cover the needs.   The                 
  public wants to  see current  roads being maintained  rather                 
  than  new  roads being  built  with those  funds.   Co-Chair                 
  Hanley voiced his  concern adding "construction" to  the use                 
  of the fund.                                                                 
  Representative  James noted  that  Commissioner Perkins  had                 
  indicated in a  previous committee discussion, that  federal                 
  funds  to  Alaska would  be  reduced, which  would  create a                 
  reduction to the federal tax requirement.  That action would                 
  provide  a  need for  the State  to  tax, thus  placing more                 
  revenue into that account.                                                   
  Mr. Kito noted  that a general accounting office  report had                 
  been released in January, 1996, which indicates how the U.S.                 
  Congress  plans  on  putting   together  the  next   funding                 
  authorization for the Federal Highway  Trust Fund.  In  four                 
  of  the  seven scenarios,  Alaska  went from  receiving $230                 
  million dollars to being allocated approximately $40 million                 
  Mr.  Dillion  questioned  how  the  ferry  system  would  be                 
  integrated as  part of  the highway system.   He  understood                 
  that ferries do not pay a fuel tax.  Mr. Kito responded that                 
  some activities on the ferry  system would be permissible as                 
  an expenditure.  The primary focus would be pavement, repair                 
  and  maintenance from  the dedicated  fund.   Representative                 
  James agreed that within the legislation, the marine highway                 
  would be  an allowable  use of  fund monies  for maintenance                 
  (Tape Change, HFC 96-75, Side 1).                                            
  Representative  Brown asked  how  much  the State  currently                 
  spends  on highway maintenance.   Mr. Kito  replied the best                 
  estimate  of the  direct  and  indirect  FY95 costs  is  $75                 
  million dollars.   The indirect expenses would  include some                 
  administrative costs which helps to keep  equipment working.                 
  The Department does not have a  clearly defined break-out of                 
  those costs.   Representative Brown asked the  current costs                 
  of construction and  improvement of harbor facilities.   Mr.                 
  Kito replied that FY97 budget  requests a $1 million  dollar                 
  appropriation for the  harbor fund.   He added, those  costs                 
  have averaged approximately  37% of the amount  collected in                 
  fuel tax.   The  balance would  be placed  into the  general                 
  Representative  Brown  pointed  out  that  passage   of  the                 
  legislation  would provide  that  revenue  available to  the                 
  general fund  be decreased  and the  amount spent  on harbor                 
  construction be increased by $7.6 million dollars.  Co-Chair                 
  Hanley  suggested that  costs could be  added to  the amount                 
  currently spent.  He voiced concern with that portion of the                 
  bill, pointing out that  it could increase by six  times the                 
  expenditures  for  ports  and  harbors.     Co-Chair  Hanley                 
  recommended separating the issues.                                           
  Representative  Brown  asked how  much  the State  spends on                 
  maintaining local government  roads.  Mr. Kito  replied that                 
  revenue for local government road maintenance passes through                 
  the Department of Community and Regional Affairs (DCRA) in a                 
  revenue sharing request, for a road program component in the                 
  amount of $4.4 million dollars.   Representative Brown asked                 
  if  local  governments  would be  entitled  to  some of  the                 
  maintenance money.   Mr. Kito  commented that provision  had                 
  been included  in order  to prevent incentive  to take  over                 
  roads.  Without increasing the tax  rate, there would not be                 
  enough revenue  for the  State to  initiate the  transfer or                 
  sharing program.  Mr. Kito  noted that the "airport  system"                 
  would not  be considered a "highway" within  the language of                 
  the legislation.                                                             
  Mr. Kito  spoke to  upgrading facilities  which belong  to a                 
  municipality.   The Department currently is negotiating with                 
  the  municipalities  to  determine  the level  of  community                 
  acceptance.     He  added,   the  Department  is   currently                 
  investigating  a   "tax  sharing"   mechanism,  whereby,   a                 
  community that  does accept  ownership of  a facility  would                 
  also receive a portion of the tax revenue collected.                         
  Discussion  followed  among   Committee  members   regarding                 
  inclusion  of  the   marine  highway   to  the   resolution.                 
  Representative  Brown  inquired   if  the  State   currently                 
  collects  shared taxes on behalf of  local governments.  Mr.                 
  Bartholomew  replied  that the  State  does not  collect any                 
  shared highway or marine  fuel taxes.  A minimum  amount has                 
  been collected for aviation air revenue.                                     
  Representative Brown argued  that if the Constitution  is to                 
  be  amended,   the  new  language  should  be  clear.    She                 
  recommended  deletion  of  Section  (b).    Co-Chair  Hanley                 
  replied that there should exist  some statutory mechanism to                 
  address   when    the   State   collects   taxes   for   the                 
  municipalities.     He   questioned  who   would   pay   the                 
  administrative costs.                                                        
  Co-Chair Hanley  interjected that he  was not in  support of                 
  including  the marine  fuel  tax, suggesting  that  it be  a                 
  separate issue.  Discussion followed among Committee members                 
  regarding the marine fuel tax.   Representative Brown voiced                 
  opposition   to   creating    a   dedicated   fund   source.                 
  Representative Navarre  commented that the State  spends far                 
  more than collected  on highway  maintenance.  He  suggested                 
  that  the amount  assessed should  be increased,  otherwise,                 
  there would be no reason to pass a constitutional amendment.                 
  Representative  Navarre  suggested  the   harbor  facilities                 
  provision be removed.  He  added, if a dedicated fund  is to                 
  be  established,  a  3/5ths vote  would  not  provide enough                 
  protection  for  a dedicated  fund,  and recommended  that a                 
  3/4th or 4/5th  majority vote be required.   Co-Chair Hanley                 
  agreed.  Representative  Grussendorf elaborated his  support                 
  to include harbor maintenance.                                               
  HJR 49 was HELD in Committee for further consideration.                      

Document Name Date/Time Subjects