Legislature(2009 - 2010)HOUSE FINANCE 519

04/10/2010 09:00 AM House FINANCE

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
-- Continued at 7:00 pm Today --
Moved Out of Committee
Moved CSHJR 42(JUD) Out of Committee
Heard & Held; Assigned to Subcommittee
Heard & Held
+ Bills Previously Heard/Scheduled TELECONFERENCED
HOUSE BILL NO. 356                                                                                                            
     "An  Act   making  a   special  appropriation   to  the                                                                    
     transportation infrastructure  fund; and  providing for                                                                    
     an effective date."                                                                                                        
10:40:15 AM                                                                                                                   
REPRESENTATIVE PEGGY  WILSON, SPONSOR, pointed out  that the                                                                    
Alaska  Transportation Infrastructure  Fund (ATIF)  required                                                                    
three separate  pieces of  legislation in  order to  put the                                                                    
fund  into  practice.  The  first,   HJR  42,  would  put  a                                                                    
constitutional  amendment  on  the  ballot to  allow  for  a                                                                    
dedicated  transportation fund.  Next, HB  329 would  create                                                                    
the  fund,  define  how  it  would  be  used,  and  how  the                                                                    
appropriations would be dispersed.  The third, HB 356, would                                                                    
appropriate $1 billion seed money for the fund.                                                                                 
Representative  Wilson  maintained  that  Alaska  needed  to                                                                    
shoulder   more   of   the  responsibility   for   its   own                                                                    
transportation  costs. She  relayed that  the previous  year                                                                    
the  state had  received  87 percent  of its  transportation                                                                    
funding from  the federal government,  more per  capita than                                                                    
any other state. A new  federal highway reauthorization bill                                                                    
was  anticipated,  with  less  money  for  states  with  low                                                                    
populations.  She  argued  that Alaska  needed  a  dedicated                                                                    
transportation fund.  State-funded projects do not  have the                                                                    
same  stringent  requirements  that the  federal  government                                                                    
has, but they still need the same construction standards.                                                                       
Representative    Wilson    reported    that    the    House                                                                    
Transportation  Committee   had  met  during   the  previous                                                                    
session     regarding    improving     the    transportation                                                                    
infrastructure   in   geographically-diverse   Alaska.   The                                                                    
committee  traveled  to  villages  and urban  areas  to  see                                                                    
firsthand the challenges  faced, including safety corridors,                                                                    
congested areas, and roads in  need of repair. The committee                                                                    
heard from the Alaska Municipal  League (AML) and the Mat-Su                                                                    
Borough,  who teamed  together  to  contract an  independent                                                                    
study  of the  fiscal  challenges of  transportation in  the                                                                    
state.  Larry Persily,  a committee  aide, had  completed an                                                                    
extensive   study  of   the  fiscal   options  for   funding                                                                    
transportation  infrastructure upgrades.  There  was a  full                                                                    
day of  hearings on issues  from the national level  down to                                                                    
the local level, and discussion  of optimal solutions to the                                                                    
problems. She  maintained that the bill  was the culmination                                                                    
of all the hearings, travel, and hours of research.                                                                             
Represented  Wilson   emphasized  that  she  did   not  take                                                                    
changing  the  state  constitution  lightly.  Two  dedicated                                                                    
funds had been grandfathered  into the constitution already,                                                                    
including  one for  transportation.  She  asserted that  the                                                                    
time was right  to put the fund into place  in order to plan                                                                    
solutions  to  transportation  problems.  A  dedicated  fund                                                                    
would  provide known  funds  and the  ability  to provide  a                                                                    
long-term   plan   for   capital  improvements   and   major                                                                    
maintenance. She  believed the voters  would be in  favor of                                                                    
the dedicated fund.                                                                                                             
10:44:53 AM                                                                                                                   
BECKY  ROONEY, STAFF,  REPRESENTATIVE PEGGY  WILSON, briefly                                                                    
described the two other  transportation bills. She explained                                                                    
that  HB  329  would  cover  all  modes  of  transportation,                                                                    
including  aviation,  roads,  surface  transportation,  bike                                                                    
paths,  ferries, harbors,  and  municipal  assets. The  bill                                                                    
would  take  the  revenue  from the  fuel  tax  and  vehicle                                                                    
registration fees and  put them into a  fund. The Department                                                                    
of Revenue (DOR)  would manage the fund,  looking to provide                                                                    
6 percent  of market value  (POMV) average over  five years.                                                                    
Each  year, appropriations  into the  fund would  consist of                                                                    
the 6 percent POMV plus 50  percent of the revenues from the                                                                    
fuel  tax and  vehicle  registration  fees. The  legislation                                                                    
would set  limits on how  much could be  appropriated across                                                                    
the  modes of  transportation and  would create  an advisory                                                                    
council  with  representation   from  the  legislature,  the                                                                    
public,  and the  Department  of  Transportation and  Public                                                                    
Facilities  (DOT/PF). The  advisory council  would assign  a                                                                    
numeric  value  to the  proposed  projects  to define  which                                                                    
would be  done in  a given  year. The  bill would  allow for                                                                    
Division  of  Motor  Vehicle (DMV)  operations,  retain  all                                                                    
specialty license-plate appropriations  set forth in statute                                                                    
to date,  and retain  funds from the  aviation fuel  tax for                                                                    
municipal airports.  The governor and the  legislature would                                                                    
approve  the  capital   appropriations  recommended  by  the                                                                    
advisory  council; the  capital items  would go  through the                                                                    
regular budget process.                                                                                                         
Ms. Rooney  reported that HB  356 would be  an appropriation                                                                    
bill for the $1 billion for seed money.                                                                                         
10:47:25 AM                                                                                                                   
Representative Gara  commended the  work done on  the bills,                                                                    
although he  was skeptical about  dedicated funds.  He noted                                                                    
that  he had  been told  about a  provision that  interested                                                                    
him. He  believed other areas  of the capital  budget should                                                                    
be dealt  with in  the same  manner as  school construction,                                                                    
with some  sort of ranking  process. He asked  whether there                                                                    
was  a version  of  a  Statewide Transportation  Improvement                                                                    
Program  (STIP)  process  included  in  one  of  the  bills.                                                                    
Representative  Wilson  replied  the   process  was  in  the                                                                    
enabling bill (HB 329).                                                                                                         
Representative  Austerman  stated  that   he  had  had  some                                                                    
reservations about  the proposal  at first because  it would                                                                    
take  funds  that  are  already being  used  in  the  budget                                                                    
process and  dedicate them  to a  different use.  He thought                                                                    
there was  enough time to  address the issue before  a vote.                                                                    
He queried a change related to a date on page 1, line 9.                                                                        
BRIAN  KANE,   DRAFTER,  LEGISLATIVE  LEGAL   SERVICES  (via                                                                    
teleconference), explained  that the question referred  to a                                                                    
conforming change needed  because the constitutional section                                                                    
has not  been amended since  it was ratified. He  added that                                                                    
the real change to the  section was the addition of Sections                                                                    
15 and 18 as allowable  dedicated funds; putting the date in                                                                    
was a clean-up measure.                                                                                                         
10:50:44 AM                                                                                                                   
Representative   Wilson   asked  whether   the   appropriate                                                                    
committee  substitute was  before the  committee. She  noted                                                                    
that the bill should be version \C.                                                                                             
10:51:12 AM         AT EASE                                                                                                   
10:53:25 AM         RECONVENED                                                                                                
Co-Chair Stoltze explained that there  was a proposed CS and                                                                    
the  chair preferred  to  offer  a constitutional  amendment                                                                    
instead, which would allow a dedicated fund.                                                                                    
Representative  Wilson felt  that the  issue could  be taken                                                                    
care of in the enabling bill.                                                                                                   
Representative Joule  directed attention to HB  356 (related                                                                    
to  the appropriation).  He asked  whether the  numbers were                                                                    
strictly from  the 6 percent  POMV or from that  amount plus                                                                    
the  other  money  available.  He  wondered  what  would  be                                                                    
available  for  transportation  funds  in  the  future.  Ms.                                                                    
Rooney  referred to  the chart  "Available Funds  From ATIF"                                                                    
(in the  packets for  HB 356)  with two  scenarios. Scenario                                                                    
one assumed the $1 billion  appropriation seed money for the                                                                    
fund; all of the revenue  from the vehicle registration fees                                                                    
and  the  motor  fuel  tax   would  go  into  the  fund  and                                                                    
accumulate.  The  only  thing  available  for  appropriation                                                                    
would be the 6 percent POMV averaged over 5 years.                                                                              
Ms.  Rooney continued  with the  second  scenario, the  seed                                                                    
money plus  50 percent of  the previous year's  revenue from                                                                    
vehicle  registration   fees  and  motor  fuel   taxes;  she                                                                    
indicated  that the  total appropriation  was  shown on  the                                                                    
right-hand side in the last column.                                                                                             
Representative Joule queried the  difference between the two                                                                    
scenarios. He noted  that in FY 12, about  $36 million would                                                                    
be available  for projects  statewide. Ms.  Rooney responded                                                                    
in the affirmative.                                                                                                             
Representative  Joule  questioned   the  out-years  and  the                                                                    
changing  numbers.  Ms.  Rooney  replied  that  the  numbers                                                                    
reflected the compounding  of all of the  motor vehicle fees                                                                    
and  motor  fuel  tax  in  scenario  one;  the  funds  would                                                                    
continue to  be put into  the savings account  and compound;                                                                    
it would  catch up at about  year 2018. The choice  would be                                                                    
between spending  the money up-front  or saving it  to spend                                                                    
in the out-years.                                                                                                               
10:58:41 AM                                                                                                                   
Representative  Gara speculated  that  the amount  available                                                                    
would start in  the high $50 million range and  then grow to                                                                    
$100  million.  Ms.  Rooney  agreed.  Representative  Wilson                                                                    
clarified that he was referring to scenario one.                                                                                
Representative  Gara  understood  the  need  for  a  healthy                                                                    
transportation budget.  He was  concerned that in  the early                                                                    
years, the fund  would spin off less than  was already spent                                                                    
on  transportation. He  was  worried  about declining  state                                                                    
revenue  and availability  of funds,  which could  result in                                                                    
budget cuts. The legislation  would not allow transportation                                                                    
funding to  be cut  any lower  than the  designated amounts,                                                                    
which was his  problem with the dedicated  fund. He wondered                                                                    
what would happen  if the state found itself  in a situation                                                                    
where  something needed  to be  slashed.  Supporters of  the                                                                    
dedicated  fund  would  be  protecting  transportation  from                                                                    
being cut, but people advocating  for schools would not want                                                                    
school  funding cut,  healthcare  advocates  would not  want                                                                    
health care cut, and so  on. The legislature would be forced                                                                    
to slash something big, and he  did not know why one area of                                                                    
need should  be protected more than  another. Representative                                                                    
Wilson  responded that  if the  legislature found  itself in                                                                    
the described situation,  the economy of the  state would be                                                                    
in dire straits.  She asserted that no matter  what was cut,                                                                    
jobs and economic  development would be important  in such a                                                                    
situation.  She maintained  that  the  measure would  ensure                                                                    
some economic development for the state.                                                                                        
Ms. Rooney  added that Representative Gara's  description of                                                                    
the smaller  amount was why  the enabling statutes  would be                                                                    
changed to allow  expenditure of 50 percent  of the revenues                                                                    
so that something substantial would be seen immediately.                                                                        
Representative Gara thought a lot of  work had to be done to                                                                    
address as many considerations as possible.                                                                                     
11:02:40 AM                                                                                                                   
Representative Joule shared  Representative Gara's concerns;                                                                    
however, the other part of  the discussion related to moving                                                                    
forward  with transportation  infrastructure  in the  state.                                                                    
Often,  the  challenge  in Alaska  is  developing  modes  of                                                                    
transportation  (surface  or  otherwise)  that  would  allow                                                                    
access to  resources that the  state might want  to develop.                                                                    
He  thought  development  could help  avoid  the  challenges                                                                    
Representative  Fairclough asked  where the  described funds                                                                    
[collected  from motor  vehicle fees  and motor  fuel taxes]                                                                    
were currently going and what  they were being used for. She                                                                    
thought the funds went to  other state entities, which would                                                                    
need  general   fund  dollars   [if  the   measure  passed].                                                                    
Representative Wilson replied that the  intent of the CS was                                                                    
to ensure  that the state  would not  take any of  the funds                                                                    
used currently  and that nothing  would be taken out  of the                                                                    
general  fund;  the  assurance  could  be  put  in  enabling                                                                    
legislation. The  sponsors did  not want to  change anything                                                                    
happening   currently  with   the   receipts  from   vehicle                                                                    
registration fees  and fuel taxes.  Some of the  receipts go                                                                    
to  different communities  for airports;  she asserted  that                                                                    
they did not want to touch that funding.                                                                                        
11:05:45 AM                                                                                                                   
Ms. Rooney  added that there were  [receipts from] specialty                                                                    
license  plates   that  go  through  the   general  fund  to                                                                    
specialty  organizations   such  as  veterans   and  Special                                                                    
Olympics; the  sponsors did not  intend to take  that money.                                                                    
She  noted that  there  were receipts  from taxing  aviation                                                                    
fuel that went to municipal airports.                                                                                           
Representative  Fairclough pointed  to page  1, Section  18,                                                                    
line  14 and  read:  "from any  sales tax  on  fuel for  the                                                                    
propulsion  of  motor  vehicles, aircraft,  and  watercraft,                                                                    
less  refunds, credits,  and  collection  costs provided  by                                                                    
laws, and  from a  registration fee  of motor  vehicles, not                                                                    
special registration  fees." She  asked whether  money would                                                                    
be  put  into a  fund  from  some state-revenue  sources  or                                                                    
taxation  already  in  place. Ms.  Rooney  answered  in  the                                                                    
Representative  Fairclough asked  whether the  money put  in                                                                    
the dedicated fund  would result in less money  going to the                                                                    
places where  the money currently  went. Ms.  Rooney replied                                                                    
that  the funds  went into  various holding  accounts within                                                                    
the general fund and then were appropriated.                                                                                    
Representative Fairclough queried the  total that would have                                                                    
to  be backfilled  with general  funds. Ms.  Rooney answered                                                                    
$76 million per year.                                                                                                           
Representative Austerman asked  whether the current gasoline                                                                    
motor  tax went  into a  dedicated  fund. He  referred to  a                                                                    
dedicated   fund    that   had   been    grandfathered   in.                                                                    
Representative   Wilson   responded   that  the   fund   was                                                                    
grandfathered in,  but when the legislature  raised the fuel                                                                    
tax, they  were told that  the dedicated fund would  have to                                                                    
Representative  Austerman  pointed  to 11  years  out  using                                                                    
scenario one, when  there would be a little  over $2 billion                                                                    
in the fund.  He wondered whether the  legislature could use                                                                    
the  money  for  anything  other than  transportation  if  a                                                                    
situation of  need occurred  as described  by Representative                                                                    
Gara.  Representative  Wilson  responded that  the  enabling                                                                    
legislation would be  in statute and that  the statute could                                                                    
be changed if needed.                                                                                                           
11:09:45 AM                                                                                                                   
Ms. Rooney clarified that the  legislature could not use the                                                                    
money  for other  things without  changing the  constitution                                                                    
because the amendment would stipulate  that the fund must be                                                                    
used for transportation capital funds.                                                                                          
Co-Chair   Stoltze   recalled   the  last   dedicated   fund                                                                    
established  by the  voters  in 1976.  There  was a  revenue                                                                    
stream and the legislature  augmented the fund "far beyond."                                                                    
He summarized that  the idea was to have  the legislature be                                                                    
able to send the  gas tax, any other tax, or  an amount in a                                                                    
special  appropriation   to  the  constitutionally-protected                                                                    
transportation fund instead of the general fund.                                                                                
11:11:05 AM                                                                                                                   
Representative  Gara referred  to  the  chart depicting  the                                                                    
historical  amount  of   state  spending  on  transportation                                                                    
projects,  with a  general fund  part, a  federal part,  and                                                                    
other.  He asked  whether the  fund would  be used  only for                                                                    
non-federal  transportation  projects  or  if  it  would  be                                                                    
available for state  transportation spending. Representative                                                                    
Wilson  replied that  the enabling  legislation would  limit                                                                    
how much  could be spent  on federal projects, but  it would                                                                    
allow spending on federal projects.  She preferred to do the                                                                    
projects as  state projects because  they tended to  be much                                                                    
cheaper and faster. However, they  did not want to limit use                                                                    
of the fund  to only state projects; up to  10 percent could                                                                    
be used on federal projects, such as for a federal match.                                                                       
Representative Gara  wanted to  know how  much of  the state                                                                    
money  has gone  to state  projects  and how  much has  been                                                                    
matching money  for federal projects.  Representative Wilson                                                                    
replied that DOT/PF would provide the information.                                                                              
Vice-Chair Thomas asked why all  three pieces of legislation                                                                    
were  being considered  at one  time. Representative  Wilson                                                                    
responded  that she  would be  happy if  the resolution  got                                                                    
through and  they waited  to do the  other ones.  She noted,                                                                    
however,  that  many  people  wanted  to  know  the  overall                                                                    
thought process.                                                                                                                
Vice-Chair Thomas commented that the  large sum of money ($1                                                                    
billion)   could  worry   people  and   distract  from   the                                                                    
resolution itself. He stated that he liked the idea.                                                                            
11:13:38 AM                                                                                                                   
Representative Austerman  asked for  clarification regarding                                                                    
the  conceptual amendment.  Ms.  Rooney  responded that  the                                                                    
amendment would  allow for the use  of some of the  fund for                                                                    
the  operations   of  the  DMV;  the   enabling  legislation                                                                    
stipulates  that  the  state   must  appropriate  for  those                                                                    
operations,  so   they  wanted  it  in   the  constitutional                                                                    
Representative Wilson  added that the program  was currently                                                                    
handled in the way described;  receipts were used to run the                                                                    
DMV  and the  sponsors did  not  want to  change that.  They                                                                    
wanted to  avoid people  coming to  the legislature  for the                                                                    
11:15:12 AM                                                                                                                   
Representative  Austerman   commented  that  he   would  not                                                                    
support the  idea. He opined  that all revenue from  the DMV                                                                    
should  go to  the  general fund  and  then be  appropriated                                                                    
through the  legislature so the legislature  would know what                                                                    
was  going  on.  Representative Wilson  responded  that  the                                                                    
funds would still go through  the usual process, through the                                                                    
subcommittees and so on.                                                                                                        
Representative  Austerman stated  that he  did not  like the                                                                    
idea of the DMV being funded through the constitution.                                                                          
Representative  Kelly asked  whether  the legislature  would                                                                    
have  the flexibility  of spending  100 percent  state funds                                                                    
and  whether  the current  system  of  matching funds  would                                                                    
still  be in  place.  Representative  Wilson responded  yes,                                                                    
except  that 10  percent  could be  used  for federal  match                                                                    
(although it does not have to be used for federal match).                                                                       
Representative Kelly  summarized that the current  system of                                                                    
matching  across  the  board  would  be  permitted  but  not                                                                    
11:16:49 AM                                                                                                                   
Representative  Fairclough   asked  which  bill   was  being                                                                    
addressed in  public testimony. Vice-Chair  Thomas responded                                                                    
all three bills.                                                                                                                
JOHN  MACKINNON,  EXECUTIVE   DIRECTOR,  ASSOCIATED  GENERAL                                                                    
CONTRACTORS  OF  ALASKA (AGC  of  Alaska),  stated that  the                                                                    
organization represented over  650 businesses around Alaska.                                                                    
He provided testimony  regarding HB 329; he did  not have an                                                                    
opinion on  either the  appropriation or  the constitutional                                                                    
amendment.  He  noted  that Alaska  had  relied  on  federal                                                                    
transportation and construction funding  for many years. The                                                                    
federal  highway  program had  used  the  federal fuel  tax,                                                                    
which has been  around since 1916. He thought it  was one of                                                                    
the  best   programs  developed.  Alaska  did   not  get  to                                                                    
participate in the program until statehood.                                                                                     
Mr.  MacKinnon  detailed  that   for  the  federal  gas  tax                                                                    
collected  in  Alaska  (at $0.184  per  gallon),  the  state                                                                    
received  a  return of  about  six-to-one;  for every  $1.00                                                                    
collected the state received $6.00  back. He emphasized that                                                                    
most states get only $0.90  back for every dollar collected.                                                                    
He warned, however, that the  return may not be allowed much                                                                    
longer. The federal highway program  was a six-year program,                                                                    
and  re-authorization  was  overdue.  He  relayed  that  the                                                                    
federal  administration wanted  to hold  back, although  the                                                                    
federal  committee  chair wanted  to  move  ahead; the  [re-                                                                    
authorization  bill] has  been referred  to as  the "transit                                                                    
bill" instead  of the transportation bill,  and was expected                                                                    
to favor  urban areas  with higher populations.  He expected                                                                    
less  to  come  to  Alaska  as a  vast  state  with  limited                                                                    
Mr.  MacKinnon maintained  that general-fund  appropriations                                                                    
for transportation  projects have been generous  in past and                                                                    
current  capital budgets.  Over  the years,  the ability  to                                                                    
spend state  funds has  greatly speeded  up the  process. He                                                                    
noted  that  one  federal  dollar  was  worth  about  $0.75,                                                                    
compared to  the worth  of a  state dollar.  Federal dollars                                                                    
were  harder  to   spend  as  there  were   more  rules  and                                                                    
procedures;  state dollars  have the  same construction  and                                                                    
environmental   standards,   but    could   be   used   more                                                                    
concurrently instead  of consecutively. He pointed  out that                                                                    
there were numerous examples of faster projects.                                                                                
Mr. MacKinnon stated  that AGC of Alaska has  been on record                                                                    
for  many  years  supporting a  state-funded  transportation                                                                    
plan. He thought  the proposed plan had gone  through a long                                                                    
and  thoughtful  process  and had  made  great  headway.  He                                                                    
believed  a key  element  of any  successful  program was  a                                                                    
predictable  and steady  flow  of funding;  living from  one                                                                    
year's appropriation  to the next,  through highs  and lows,                                                                    
makes it difficult to have  an efficient system. He believed                                                                    
directing the state  motor fuel tax of $0.08  per gallon and                                                                    
the vehicle  registration fees constituted a  user fee going                                                                    
toward the  various modes of  transportation being  used. He                                                                    
thought  the  proposed   advisory  committee  resembled  the                                                                    
transportation boards or commissions  that most other states                                                                    
had; the system has worked well in other states.                                                                                
Mr. MacKinnon  concluded that  HB 329  would provide  a very                                                                    
good framework for  a successful state-funded transportation                                                                    
11:22:58 AM                                                                                                                   
WHITNEY  BREWSTER,  DIRECTOR,  DIVISION OF  MOTOR  VEHICLES,                                                                    
DEPARTMENT OF ADMINISTRATION  (via teleconference), spoke to                                                                    
HB  329.  She  explained  that  currently,  almost  all  DMV                                                                    
appropriations  (including   capital  and   operating)  were                                                                    
funded  via receipt-supported  services; the  division lived                                                                    
off receipts, and  the extra was deposited  into the general                                                                    
fund.  The   DMV  budget  went  through   the  appropriation                                                                    
process,  but  the   funding  source  was  receipt-supported                                                                    
Ms.  Brewster  furthered  that  HB 329  would  allow  for  3                                                                    
percent   of  the   appropriation   of  the   transportation                                                                    
infrastructure  fund to  be  available  for DMV's  operating                                                                    
costs. She  referred to  a letter from  the division  to the                                                                    
committee  [April  6,  2010, copy  on  file]  outlining  the                                                                    
details. She thought the DMV  would have enough funds for FY                                                                    
12 in terms  of operating expenses; but  looking forward, it                                                                    
could possibly have budgetary problems  that would result in                                                                    
the   DMV   requesting   supplemental   funding   from   the                                                                    
legislature. The vehicle registration  fees listed in HB 329                                                                    
would be transferred  into the transportation infrastructure                                                                    
fund; there  would be  insufficient funds  left to  fund the                                                                    
DMV operations.  None of the  funds would be  capital funds.                                                                    
She  stated that  the division  did not  conceptually oppose                                                                    
the bill,  but wanted  to see  the language  changed dealing                                                                    
with the 3  percent being available to the  DMV. She thought                                                                    
the language should basically state  that anything in excess                                                                    
of  needs for  operations would  go into  the transportation                                                                    
Co-Chair   Stoltze   appreciated   information   about   the                                                                    
technical  difficulties,  but  said  that  he  preferred  to                                                                    
consider  the  constitutional  amendment without  having  to                                                                    
figure out all the funding mechanisms.                                                                                          
Vice-Chair  Thomas  commented  that the  Commercial  Fishery                                                                    
Entry Commission was fully funded  by the fishermen and that                                                                    
the  surplus went  automatically to  the Department  of Fish                                                                    
and  Game to  supplement its  budget. He  thought a  similar                                                                    
mechanism  could be  used to  make  sure the  DMV was  fully                                                                    
funded each  year, with the  surplus going to  the dedicated                                                                    
11:27:43 AM                                                                                                                   
Representative  Gara commented  about  moving  ahead on  the                                                                    
constitutional amendment.  He also  wanted to go  forward on                                                                    
another  statute  to evaluate  and  rank  projects to  limit                                                                    
spending and  dedicate money to  the most  important things.                                                                    
He described the current  process related to transportation,                                                                    
with  each  district  fighting  for  its  own  projects.  He                                                                    
thought the  capital budget  needed to  be reformed  to rank                                                                    
projects.  He wanted  the  process to  be  written into  the                                                                    
proposed transportation fund.                                                                                                   
Representative Fairclough suggested  limiting the discussion                                                                    
to  HB  42 in  order  to  facilitate  the process.  She  was                                                                    
concerned that discussion  about funding possibilities could                                                                    
result in  losing the overall  focus on whether to  create a                                                                    
dedicated  transportation fund.  She  argued that  education                                                                    
and  emergency  medical  services would  also  benefit  from                                                                    
dedicated funds for transportation.                                                                                             
MARK  HICKEY,  JUNEAU,  noted his  30  years  of  experience                                                                    
working  on transportation  issues in  Alaska, including  as                                                                    
commissioner of  DOT/PF. He testified  in strong  support of                                                                    
the bills, particularly a  dedicated transportation fund. He                                                                    
believed all  former DOT/PF commissioners would  support the                                                                    
idea as  well. He  thought the state  needed a  reliable and                                                                    
predictable  way  to  fund  transportation,  especially  the                                                                    
user-fee  concept, since  the state  did not  have a  state-                                                                    
funded  program. Alaska  was the  only state  that did  not,                                                                    
which caused considerable problems  on the federal level. He                                                                    
thought the real problem was  that the state was not meeting                                                                    
its transportation needs. The  municipalities were forced to                                                                    
make federal  programs meet  a variety  of needs,  which did                                                                    
not work and was an inefficient use of federal money.                                                                           
Mr. Hickey informed the committee  that at statehood, Alaska                                                                    
had dedicated  taxes from  both motor-craft  and water-craft                                                                    
fuels, as well  as the school fund (using  tobacco tax). The                                                                    
purpose for  the motor-craft and water-craft  fuel taxes was                                                                    
related to operations and maintenance, such as repairs.                                                                         
11:34:09 AM                                                                                                                   
Mr. Hickey  continued that in  1961, the motor-fuel  tax was                                                                    
changed from  $0.04 to  $0.08 because  the state  needed the                                                                    
revenue. At the  time, the Department of  Law (DOL) provided                                                                    
what turned out  to be incorrect advice that if  there was a                                                                    
change to a tax that  had been dedicated, such as increasing                                                                    
the amount, the  dedicated fund would be lost.  Based on the                                                                    
advice, the Title  19 statute still on  the books stipulated                                                                    
how the  money would  be used.  The legislature  amended the                                                                    
statute to  say "may be  used" and therefore  eliminated the                                                                    
dedicated-fund  status.  He did  not  know  whether DOL  had                                                                    
issued a new  opinion since that time. When  the tobacco tax                                                                    
was put in place in  the mid-1990s, it was demonstrated that                                                                    
the DOL  advice was incorrect.  There was a  long discussion                                                                    
about what would  happen to the dedicated funds  if the rate                                                                    
of taxation  was changed in  the future. The members  of the                                                                    
constitutional  convention   all  agreed  that   since  need                                                                    
changes, the  rate can be  changed. To lose  the dedication,                                                                    
the tax would  have to be eliminated and  then brought back,                                                                    
or the  purpose of the  tax would have  to be changed.  As a                                                                    
result, the tobacco  tax was increased for  the school fund,                                                                    
which was still in place and had never been challenged.                                                                         
Representative  Austerman queried  the relationship  between                                                                    
HB 42  (Section 18) and HB  356 and how the  fund could work                                                                    
without  the $1  billion appropriation.  Mr. Hickey  replied                                                                    
that it was complicated to  look at all the pieces required.                                                                    
He  believed HB  329 also  needed to  be considered;  it was                                                                    
designed  to supplement  the programs  in place  already and                                                                    
focus    on   state-funded    capital.   He    referred   to                                                                    
Representative Fairclough's question  about what money would                                                                    
get  displaced; the  $76 million  was accounted  for in  the                                                                    
budget in the  highway account as well  as being essentially                                                                    
appropriated  to   maintenance  support  along   with  other                                                                    
general funds. House  Bill 329 would take the  money and put                                                                    
it into  the capital side  (which could participate  in some                                                                    
federal  money  but  was  mostly  designed  to  augment  the                                                                    
federal).  There  would be  a  need  for additional  general                                                                    
funds  to  deal  with  funding  for  maintenance  costs.  He                                                                    
continued that  the concept  as a  whole would  require both                                                                    
the appropriation of  a meaningful amount of  funds and user                                                                    
fees sufficient  enough to  have a  program; $20  million or                                                                    
$30 million spin-off each year  would not be meaningful, but                                                                    
$50 to  $70 million in  addition to a  way to grow  the fund                                                                    
would  be meaningful.  He thought  user fees  were important                                                                    
and  had to  be looked  at.  He noted  polls showing  strong                                                                    
support for  increasing the  motor fuel tax  as long  as the                                                                    
money raised was used appropriately.                                                                                            
Mr.  Hickey   opined  that  the   dedicated  fund   and  its                                                                    
mechanisms would  not work very  well without  some initial,                                                                    
significant  appropriation into  the  fund.  He thought  the                                                                    
foundation  was  created at  statehood  with  user fees.  He                                                                    
recommended protecting the user  fees and then supplementing                                                                    
11:40:11 AM                                                                                                                   
Representative  Austerman  pointed   out  that  putting  $76                                                                    
million  each year  into  the  fund would  not  grow it.  He                                                                    
wanted a fund  that would grow, and thought  that would take                                                                    
a significant endowment by the legislature.                                                                                     
Mr. Hickey responded that it  would depend on what the funds                                                                    
were  used for.  He agreed  with the  concept in  HB 329  of                                                                    
keeping half of  it (or some other amount) to  grow the fund                                                                    
more  with the  resulting interest  deposits. He  noted that                                                                    
putting the money  into state-funded transportation projects                                                                    
represented a significant change  from current practice. The                                                                    
problem of  what the  $76 million was  used for  would still                                                                    
have to be  worked out. The need for  a state-funded program                                                                    
had been  discussed since  1986 or 1987,  when the  price of                                                                    
oil went down to $9  per barrel. Projects were still funded,                                                                    
but  haphazardly.  Transportation projects  need  investment                                                                    
over time on a programmatic  basis, because of environmental                                                                    
requirements and  so on.   In the  current system,  a little                                                                    
bit of  money was  acquired at a  time, and  each subsequent                                                                    
bit  had  to  be  fought   for.  He  acknowledged  that  the                                                                    
endowment part was important, but  the added benefits of the                                                                    
user fees focused on state-funded  capital in a programmatic                                                                    
way with  a ranking mechanism would  represent a significant                                                                    
change from the current process.                                                                                                
Representative Austerman agreed that  something needed to be                                                                    
done,  but  stated concerns  regarding  HB  329 and  how  to                                                                    
appropriate the  money; with percentages  at 188  percent of                                                                    
the  fund and  funding sources  (page 3),  he thought  there                                                                    
would be  a lot  of competition.  Mr. Hickey  explained that                                                                    
there  was a  not-to-exceed  amount that  would create  some                                                                    
equity between  modes. He explained  that Alaska  was unique                                                                    
in terms of the  multi-modal challenges, including ports and                                                                    
harbors as well as aviation.                                                                                                    
Representative  Gara  stated that  he  was  beginning to  be                                                                    
convinced, but he  saw a reverse problem  that might require                                                                    
an amendment. He  did not want to overspend,  to require the                                                                    
legislature to spend  money that it does not  need to spend.                                                                    
He felt  a dedicated  fund meant  that the  money had  to go                                                                    
only  to  transportation  funding,  but  he  did  not  think                                                                    
transportation funding  would be the  same in all  years. He                                                                    
noted that  the fund would  soon have $60 million  per year,                                                                    
but in FY  10, only $35 million was  spent on transportation                                                                    
projects. He  questioned what would happen  with extra money                                                                    
during  times  of less  need.  He  suggested that  the  bill                                                                    
stipulate that  at the  end of the  fiscal year,  the excess                                                                    
not  spent   on  transportation  (of  spin-off   money,  not                                                                    
principal) should be put into the general fund.                                                                                 
11:45:12 AM                                                                                                                   
Mr.  Hickey  replied that  any  expenditure  was subject  to                                                                    
appropriation;  the  legislature  annually  controlled  what                                                                    
funds were spent,  although the money in  the dedicated fund                                                                    
could only  be spent as  prescribed. He underlined  that the                                                                    
backlog  for transportation  needs  were excessive;  between                                                                    
deferred  maintenance and  capital  projects,  the need  was                                                                    
more than ten  times the amount that would  be available. He                                                                    
emphasized that  the user fees  collected would not  have to                                                                    
be spent in any given year,  if there were not projects that                                                                    
it  made sense  to  fund.  He believed  the  money would  be                                                                    
protected. He was not sure  how a sweep structure could work                                                                    
within a constitutional amendment.                                                                                              
Representative Gara commented that  leaving the money in the                                                                    
fund would mean  it could only be  spent for transportation.                                                                    
He  wanted to  consider some  kind of  sweep provision  that                                                                    
would happen  after the  legislative session  was over  in a                                                                    
given  year.  Mr. Hickey  detailed  that  DOT/PF had  a  $20                                                                    
billion  backlog in  transportation projects.  He emphasized                                                                    
that the costs  of the projects were very  high. He referred                                                                    
to one  project that cost  $70 million.  In a good  year, he                                                                    
conjectured the  fund could  pay for  five or  six projects,                                                                    
and  thought  two  or  three projects  each  year  was  more                                                                    
11:47:58 AM                                                                                                                   
Representative  Fairclough  asked whether  public  testimony                                                                    
was closed.                                                                                                                     
Vice-Chair Thomas closed public testimony.                                                                                      
11:48:37 AM         RECESSED                                                                                                  
6:59:40 PM     RECONVENED                                                                                                     
Co-Chair Stoltze continued discussion on HJR 35.                                                                                

Document Name Date/Time Subjects
HJR42 SWAMC Letter.docx HFIN 4/10/2010 9:00:00 AM
HJR 42
HB 329 Const_testimony.pdf HFIN 4/10/2010 9:00:00 AM
HB 329
2 HJR 35 Sponsor Statement.pdf HFIN 4/10/2010 9:00:00 AM
3 HJR 35 Sectional.pdf HFIN 4/10/2010 9:00:00 AM
5 Feb 9th Hearing HESS Questions.pdf HFIN 4/10/2010 9:00:00 AM
HJR 35
6 NFIB Ltr.pdf HFIN 4/10/2010 9:00:00 AM
HJR 35
7 Goldwater Institute Q-A.pdf HFIN 4/10/2010 9:00:00 AM
HJR 35
8 ALEC's Freedom of Choice in Health Care Act.pdf HFIN 4/10/2010 9:00:00 AM
HJR 35
8 ALEC's Freedom of Choice in Health Care Act.pdf HFIN 4/10/2010 9:00:00 AM
HJR 35
20100409133225145.pdf HFIN 4/10/2010 9:00:00 AM
HCR 35
9 Health Care Reform Letter Jan13-2010.pdf HFIN 4/10/2010 9:00:00 AM
HJR 35
HJR42 -Sponsor Stmt VerP.pdf HFIN 4/10/2010 9:00:00 AM
HJR 42 Resolution ATIF[1].pdf HFIN 4/10/2010 9:00:00 AM
HJR 42
ATIF values w-out taxes.pdf HFIN 4/10/2010 9:00:00 AM
CSHB329-DOT-CO-3-14-10 NEW.pdf HFIN 4/10/2010 9:00:00 AM
HB 329
fund values with taxes.pdf HFIN 4/10/2010 9:00:00 AM
HB 329 AK Trans Finance Study.pdf HFIN 4/10/2010 9:00:00 AM
HB 329
HB 329 Sponsor Stmt.pdf HFIN 4/10/2010 9:00:00 AM
HB 329
HB 329 SWAMC Resolution.pdf HFIN 4/10/2010 9:00:00 AM
HB 329
HB 329 TRA Major Changes.pdf HFIN 4/10/2010 9:00:00 AM
HB 329
FY04-FY10 summary Capital Approp (2).pdf HFIN 4/10/2010 9:00:00 AM
HB356 Approp from ATIF.pdf HFIN 4/10/2010 9:00:00 AM
HB 356
HB 356 Sponsor.docx HFIN 4/10/2010 9:00:00 AM
HB 356
TRANSPORTATION_Fiscal_Plan_FY2011.pdf HFIN 4/10/2010 9:00:00 AM
HB329 Letters of Support.pdf HFIN 4/10/2010 9:00:00 AM
HB 329
HB 329 -ATIF major changes VerO.pdf HFIN 4/10/2010 9:00:00 AM
HB 329
HJR 42 Exec Summary AK Trans Finance Study.pdf HFIN 4/10/2010 9:00:00 AM
HJR 42
Illinois Research.pdf HFIN 4/10/2010 9:00:00 AM
HB 329
Persily Rpt Financing Transportation.pdf HFIN 4/10/2010 9:00:00 AM
HJR 42
HJR 42 Use of gas tax revenue by state.pdf HFIN 4/10/2010 9:00:00 AM
HJR 42
House Finance Letter HB 329 04 06 10.pdf HFIN 4/10/2010 9:00:00 AM
HB 329
HJR 35 Letter.pdf HFIN 4/10/2010 9:00:00 AM
HJR 35
CSHB329-FIN-DOA-DMV-04-09-10NEW.pdf HFIN 4/10/2010 9:00:00 AM
HB 329
HJR 42 Amendment #1 Kelly.pdf HFIN 4/10/2010 9:00:00 AM