Legislature(2015 - 2016)CAPITOL 17

01/28/2016 02:00 PM TRANSPORTATION

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Audio Topic
02:03:10 PM Start
02:04:08 PM HB249
03:07:35 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
-- Please Note Time Change --
Heard & Held
Deputy Commissioner Burnett
         HB 249-ELECTRONIC TAX RETURNS & MOTOR FUEL TAX                                                                     
[Due  to  technical  difficulties,  portions  of  the  audio  are                                                               
indiscernible throughout.]                                                                                                      
2:04:08 PM                                                                                                                    
CO-CHAIR FOSTER announced that the  first order of business would                                                               
be  HOUSE  BILL  NO.  249,   "An  Act  requiring  the  electronic                                                               
submission  of a  tax return  or  report with  the Department  of                                                               
Revenue; relating  to the  motor fuel tax;  and providing  for an                                                               
effective date."                                                                                                                
2:05:22 PM                                                                                                                    
JERRY  BURNETT stated  that  he would  be  giving a  presentation                                                               
discussing HB 249,  one of several tax increases  outlined in the                                                               
governor's   "Sustainable  Alaska"   Plan.     Slide  2   of  his                                                               
presentation displayed the title of  the bill:  "An act requiring                                                               
the  electronic submission  of a  tax return  or report  with the                                                               
Department  of  Revenue; relating  to  the  motor fuel  tax;  and                                                               
providing  for an  effective date."  He  stated that  all of  the                                                               
smaller tax  bills under consideration  by the  legislature would                                                               
require electronic  submission of  tax returns,  as it  makes the                                                               
process  more  efficient, but  there  are  ways of  dealing  with                                                               
(indisc.).   He transitioned to  slide 3, titled "Motor  Fuel Tax                                                               
History,"  and explained  that  there have  been  taxes on  motor                                                               
fuels in  Alaska since 1945.   He stated that the  tax rates have                                                               
increased  over  time,  but  the  per-gallon  tax  structure  has                                                               
remained unchanged.   He said  the last increase for  the highway                                                               
tax was in  1970, when it was changed to  eight cents per gallon.                                                               
He recounted  that in 1970  gas was 30  cents per gallon,  and he                                                               
said an  eight cent tax  was a large portion  of the price  for a                                                               
gallon of  gas.   He stated that  the tax has  less of  an impact                                                               
today.   He said in 1977  marine fuel taxes increased  to 5 cents                                                               
per gallon,  and the tax on  aviation fuel was last  increased in                                                               
2:07:02 PM                                                                                                                    
CO-CHAIR  HUGHES said  she  was still  chewing  on Mr.  Burnett's                                                               
opening   statement  that   this  is   part  of   the  governor's                                                               
"Sustainable Alaska" plan.  (indisc.)   She said she does not see                                                               
it as sustainable considering the  amount of money [Governor Bill                                                               
Walker's]  plan  pulls  from  the   private  sector  and  Alaskan                                                               
families and  businesses.  She  said she is very  concerned about                                                               
that  and  does  not  consider   it  sustainable  for  Alaska  or                                                               
Alaskans.    She asked  if  Mr.  Burnett  could say  whether  the                                                               
governor  is prepared  to have  his budget  decreased if  pieces,                                                               
such as this tax, valued at $49 million, do not make it through.                                                                
2:08:05 PM                                                                                                                    
MR.  BURNETT replied  that he  cannot speak  for the  governor on                                                               
that particular  issue, but he said  there are many parts  to the                                                               
"Sustainable Alaska" plan  and budget.  Each of  these would make                                                               
a  contribution  and, depending  upon  which  parts pass,  others                                                               
would  need  to  be  adjusted,   either  with  spending  cuts  or                                                               
additional  revenue from  another source.   He  said the  outcome                                                               
would  be a  matter  for the  legislature  to determine,  pending                                                               
review  by the  governor.   He said  there are  a lot  of pieces,                                                               
which  all  have  to  work  together one  way  or  another.    He                                                               
reiterated that  if one increase  does not go  through, something                                                               
else would  have to  increase more  or there would  have to  be a                                                               
decrease in another area.                                                                                                       
2:08:58 PM                                                                                                                    
CO-CHAIR HUGHES  thanked Mr.  Burnett for  his response  and said                                                               
she wanted to  express for the record that the  public should not                                                               
be  confused by  the word  sustainable.   She  posited that  what                                                               
might be sustainable in terms  of keeping the doors of government                                                               
open, might not be sustainable for families.                                                                                    
2:09:15 PM                                                                                                                    
MR. BURNETT continued to slide  4, titled "Motor Fuel Tax History                                                               
(Continued)," and stated that the  highway fuel tax was suspended                                                               
from  September 1,  2008, to  August 31,  2009, due  to extremely                                                               
high gas prices, which were in  the $4-plus range.  He said there                                                               
was one month in 2008 when oil  tax brought in $1 billion, so the                                                               
state was not concerned with revenues  from small taxes.  In 2015                                                               
HB 158  added a $0.0095 surcharge  on motor fuels and  some other                                                               
refined fuels,  which was intended  for the spill  prevention and                                                               
response fund.                                                                                                                  
2:10:12 PM                                                                                                                    
MR.  BURNETT  moved  on  to  slide  5,  titled  "Motor  Fuel  Tax                                                               
Proposal," and explained  that the proposed motor  fuel tax would                                                               
increase tax  rates on  all types  of motor fuels.   He  said the                                                               
rates would  increase from 8 to  16 cents per gallon  for highway                                                               
fuel; from 5 to 10 cents per  gallon for marine fuel; from 3.2 to                                                               
10 cents per  gallon for jet fuel;  and from 4.7 to  10 cents per                                                               
gallon  for  aviation  gas.   The  "off-road  use"  credit  would                                                               
increase from  6 to 12 cents  per gallon.  He  explained that the                                                               
"off-road use" credit  applies if fuel is bought for  use off the                                                               
highway system.   At the time  of purchase, the full  tax is paid                                                               
on  the  fuel,  and  the  credit  is  applied  for  and  returned                                                               
2:11:13 PM                                                                                                                    
REPRESENTATIVE NAGEAK  (indisc.) consideration  of the  high cost                                                               
of fuel  in the  villages of  rural Alaska.   He stated  that his                                                               
village is 150  miles from the source of Alaska's  wealth and the                                                               
starting point  of the pipeline,  from whence oil  is transported                                                               
to the Lower  48 before being shipped back as  a refined product.                                                               
He stated  that he  pays $6.50  per gallon at  home, and  in some                                                               
locations in rural  Alaska it is $20 per gallon.   He said adding                                                               
additional tax on  $20 per gallon would have  a tremendous impact                                                               
on rural Alaskans.                                                                                                              
2:12:20 PM                                                                                                                    
MR.  BURNETT  explained  that motor  fuel  taxes  are  per-gallon                                                               
taxes, meaning that changes will  have differential impacts based                                                               
on how  many gallons  are used, not  the price of  the fuel.   He                                                               
allowed  that  people   who  already  pay  a   high  price  would                                                               
experience  an   increase.    He   said  he  did  not   know  how                                                               
distributors  and retailers  set prices  or how  prices would  be                                                               
affected by  a tax increase.   He stated  that some people  use a                                                               
lot more fuel,  some people will pay a higher  price, and nothing                                                               
about that part of the current system would change.                                                                             
REPRESENTATIVE NAGEAK  replied that there are  two locations near                                                               
Prudhoe Bay -  Nuiqsut and Kaktovik - where it  is very expensive                                                               
to  get to  the  rest  of the  world.   He  said  it  used to  be                                                               
affordable, but now  there is a monopoly [on fuel  in the region]                                                               
and  it  has  an  impact  on  those  two  places  in  particular,                                                               
especially if there is an additional tax on gasoline.                                                                           
2:14:25 PM                                                                                                                    
CO-CHAIR HUGHES noted  that the numbers in the  right hand column                                                               
of the chart on  slide 5 are round numbers.   She asked what type                                                               
of analysis  was conducted to  produce those figures and  if they                                                               
were based  on comparisons  with other  states or  comparisons of                                                               
the impacts on  people in regions of the state.   She pointed out                                                               
that  the jet  fuel tax  rate would  be tripled,  but the  others                                                               
appear  to be  doubled.   She  asked  if there  was  a basis  for                                                               
doubling or tripling  the tax or if  instead the [administration]                                                               
started with the goal of finding  $49 million in revenue and then                                                               
asked how it could be acquired.                                                                                                 
2:15:12 PM                                                                                                                    
MR. BURNETT  replied that  there are  many considerations  in the                                                               
process  of choosing  tax rates.   He  stated that  jet fuel  and                                                               
aviation gas tax rates would be  increased by a greater factor in                                                               
part because  members of the  Aviation Advisory Committee  - most                                                               
of whom, he  noted, were present at the meeting  - decided, after                                                               
great consideration,  to increase aviation fuel  tax rates rather                                                               
than raise  landing fees  at certificated  airports in  Alaska to                                                               
help offset  the cost of  repairs.   He stated that  all aviation                                                               
fuel taxes have  to be spent at airports; it  is a requirement of                                                               
the Federal Aviation Administration  (FAA) for grant eligibility.                                                               
He said all  the money that is collected for  aviation fuel taxes                                                               
is  spent   by  the  Department  of   Transportation  and  Public                                                               
Facilities (DOTPF) or  local governments at the  airport where it                                                               
is collected.                                                                                                                   
2:16:37 PM                                                                                                                    
CO-CHAIR HUGHES stated her understanding  that there is a foreign                                                               
exemption for  jet fuel  taxes.   She asked if  that is  based in                                                               
Alaska  statute  and  if  the Department  of  Revenue  (DOR)  had                                                               
considered  changing  it.   She  stated  her  understanding  that                                                               
foreign  carriers account  for the  largest portion  of jet  fuel                                                               
purchases, and she  offered that [by removing  the exemption] the                                                               
state may  be able to  bring in more  revenue with a  smaller tax                                                               
2:17:05 PM                                                                                                                    
MR. BURNETT  stated his  understanding that  the exemption  is in                                                               
Alaska statute but  is also required because  these companies are                                                               
involved in  international commerce,  and the U.S.   Constitution                                                               
mandates that  their fuel cannot  be taxed.   He stated  that Co-                                                               
Chair Hughes was  correct in her understanding that  far more jet                                                               
fuel is  sold to  international carriers than  any others  at the                                                               
Ted  Stevens   Anchorage  International  Airport   and  Fairbanks                                                               
International Airport.                                                                                                          
2:17:44 PM                                                                                                                    
CO-CHAIR HUGHES (indisc.) She requested  that Mr. Burnett provide                                                               
the  information to  the committee  so the  members could  better                                                               
understand.   She said she  thought that the statute  was changed                                                               
and that  some states were  opting out of it.   She said  she was                                                               
under  the   impression  that  the  exemption   was  designed  to                                                               
encourage  business and  the  use of  the  Ted Stevens  Anchorage                                                               
International  Airport   and  Fairbanks   International  Airport,                                                               
reasoning she  said she  could understand.   She stated  that she                                                               
also knows that as prices  have fluctuated, the carriers have not                                                               
cancelled flights to  Alaska; however, she allowed  that they may                                                               
do so if [removing the exemption] were allowed.                                                                                 
2:18:40 PM                                                                                                                    
CO-CHAIR FOSTER asked, in reference  to slide 5, if the [current]                                                               
"off-road use"  credit applies to  vehicles used  in construction                                                               
projects and  if he  is correct in  his understanding  that after                                                               
the  proposed credit  those vehicles  would only  be paying  four                                                               
cents per  gallon in taxes.   He asked  if the credit  would also                                                               
apply in villages where four-wheelers are used.                                                                                 
2:19:20 PM                                                                                                                    
MR.  BURNETT  stated  that  Co-Chair  Foster's  understanding  is                                                               
correct  in both  circumstances.   He  stated that  a person  can                                                               
apply for  a credit  for a  four wheeler, or  even a  lawn mower,                                                               
noting that it would be a small  amount.  He stated that DOR does                                                               
get  some  very small  applications  for  credits.   He  said  an                                                               
individual  can get  a  six  cent return  if  the department  can                                                               
verify that  the fuel  was not  used on a  highway, and  the same                                                               
applies  if  diesel  is  purchased  and  used  for  home  heating                                                               
2:19:54 PM                                                                                                                    
CO-CHAIR  FOSTER  stated  that  in some  villages  there  are  no                                                               
vehicles or cars.   He asked if  it is even possible  for a local                                                               
retailer to apply for the credit [on behalf of the consumer].                                                                   
MR.  BURNETT stated  that  he  did not  know  the  answer to  the                                                               
question, but he offered to find out for the committee.                                                                         
2:20:21 PM                                                                                                                    
REPRESENTATIVE   CLAMAN   requested    clarification   that   the                                                               
international   cargo   carriers   at   Ted   Stevens   Anchorage                                                               
International Airport and  Fairbanks International Airport, which                                                               
he said constitute the majority  of international traffic, do not                                                               
pay the 3.2-cent  and would not [under  the proposed legislation]                                                               
pay  the  proposed 10-cent  aviation  fuel  tax when  they  fuel;                                                               
whereas, Alaska  Airlines, Delta  Airlines, United  Airlines, Jet                                                               
Blue, or any other domestic carrier  do and would have to pay the                                                               
2:20:58 PM                                                                                                                    
MR. BURNETT replied that is correct.                                                                                            
2:21:03 PM                                                                                                                    
REPRESENTATIVE  CLAMAN   asked  if  the   aforementioned  foreign                                                               
exemption also applies to landing fees.                                                                                         
2:21:13 PM                                                                                                                    
MR.  BURNETT replied  no, international  carriers do  pay landing                                                               
fees.   He  stated that  since  Anchorage is  the second  largest                                                               
freight airport  in the United States  and one of the  largest in                                                               
the  world, many  landing fees  are collected  from international                                                               
2:21:34 PM                                                                                                                    
REPRESENTATIVE STUTES  inquired if any user  groups were involved                                                               
in the process of developing the proposed tax rates.                                                                            
2:21:49 PM                                                                                                                    
MR.  BURNETT  replied  no,  other   than  the  Aviation  Advisory                                                               
Committee there  were no  specific user  groups that  gave input.                                                               
He clarified  that there was  significant input from  the general                                                               
public.   He indicated that  [DOR] held several  public meetings,                                                               
attended by  the Commissioner of  Revenue and  others, throughout                                                               
the  state  since  June,  during  which  various  proposals  were                                                               
discussed.  He stated that there  had been a lot of public input,                                                               
but that  he was  uncertain who might  be considered  the highway                                                               
user group.   He speculated that a trucking  association may fall                                                               
into the category.                                                                                                              
2:22:28 PM                                                                                                                    
CO-CHAIR FOSTER stated his  understanding that the administration                                                               
accepted the recommendations of  the Aviation Advisory Committee,                                                               
with the  exception of  indexing, which  would have  stipulated -                                                               
given a scenario  where oil prices were to  climb significantly -                                                               
for  example to  $100  per barrel,  that the  tax  rate could  be                                                               
reduced.    He  stated  that  he personally  likes  the  idea  of                                                               
indexing,  because   sometimes  government  operates   under  the                                                               
concept that if the  money is there, it must be  spent.  He asked                                                               
whether Mr. Burnett had a particular viewpoint on the topic.                                                                    
2:23:15 PM                                                                                                                    
MR.  BURNETT  stated  that  Department  of  Revenue  Commissioner                                                               
Hoffbeck  and  he  spoke with  the  Aviation  Advisory  Committee                                                               
regarding the topic.  He  stated that [indexing] was not included                                                               
in  the bill,  and he  related there  are no  projections of  oil                                                               
prices increasing  to that level in  the near term.   He said the                                                               
administration is open to discussing that type of change.                                                                       
2:23:53 PM                                                                                                                    
CO-CHAIR FOSTER stated that this will  not be the only hearing on                                                               
the  topic.   He said  one  reason he  likes the  idea and  likes                                                               
talking about it  moving forward is that although  he agrees that                                                               
oil prices  aren't going that  high anytime  soon, it would  be a                                                               
difficult change to make later.                                                                                                 
2:24:28 PM                                                                                                                    
MR. BURNETT moved on to slide  6, titled "Relative Motor Fuel Tax                                                               
Rate,"  and said  it  compares Alaska's  current  motor fuel  tax                                                               
rates to those of other states.   He stated that Alaska's current                                                               
highway fuel  tax rate is the  lowest, but there are  some states                                                               
that are close.  He stated that  the jet fuel tax rate is thirty-                                                               
fifth out of  fifty, the aviation fuel tax  rate is twenty-fourth                                                               
out  of fifty,  and  most other  states do  not  have a  specific                                                               
marine fuel  tax.   He said  this is  likely because  most states                                                               
don't  sell much  marine  fuel  and people  in  those states  are                                                               
paying highway tax  rates for marine fuel.  He  stated that under                                                               
HB  249, Alaska  tax  rates  would still  be  below the  national                                                               
average of  20.17 cents [per  gallon] for highway fuel  and above                                                               
the  national average  for jet  and aviation  fuel.   He restated                                                               
that  there was  no national  average that  [DOR] could  find for                                                               
marine fuel tax rates.                                                                                                          
2:25:35 PM                                                                                                                    
CO-CHAIR HUGHES stated  her understanding that the  tax rates may                                                               
be below national  average, but asked how total  fuel costs would                                                               
compare with the addition of the proposed tax.                                                                                  
2:25:51 PM                                                                                                                    
MR.  BURNETT stated  that he  had not  checked how  Alaska's fuel                                                               
costs are ranked  compared to other states recently,  but he said                                                               
it has  been among  the highest.   He stated that  it is  high in                                                               
Juneau, slightly  lower in  Anchorage, and  much higher  in rural                                                               
areas.  The  proposed tax increase would raise fuel  prices by at                                                               
least the amount of the tax.                                                                                                    
2:26:31 PM                                                                                                                    
CO-CHAIR  HUGHES   requested  that  before  the   next  committee                                                               
meeting,  Mr. Burnett  gather information  comparing fuel  prices                                                               
across  the  nation,  with  tax  included,  for  the  purpose  of                                                               
comparing our fuel costs with the proposed tax increase.                                                                        
2:26:47 PM                                                                                                                    
MR.  BURNETT  responded that  would  not  be  a problem,  and  he                                                               
relayed that the information is  available on gasbuddy.com at any                                                               
time.    He  offered  an  example to  put  the  tax  increase  in                                                               
perspective:   a person who  drives 20,000  miles per year,  in a                                                               
car that  gets 20 miles per  gallon, using 1,000 gallons  of fuel                                                               
per  year, would  experience an  increase of  $80.00 per  year in                                                               
his/her fuel bill.  For  the construction or trucking businesses,                                                               
this would equate to a significant amount of money.                                                                             
2:27:27 PM                                                                                                                    
MR.  BURNETT,  in  response to  Co-Chair  Hughes,  clarified  his                                                               
example.   He  added  that the  figure would  vary  based on  the                                                               
length of  commute, how much  a person drives, and  the vehicle's                                                               
gas  mileage.   He  said  the  tax  would impact  every  consumer                                                               
2:27:53 PM                                                                                                                    
MR. BURNETT transitioned to slide  7, titled "The New Sustainable                                                               
Alaska Plan,"  which displayed a chart  titled "Per-Capita Broad-                                                               
Based State  Tax Revenues, by  State, 2014." He said  he included                                                               
the chart in the presentation  at the request of Co-Chair Hughes'                                                               
staff.  He stated  that it is a chart showing  the tax burden for                                                               
per capita, broad-based  tax revenues.  He stated  that Alaska is                                                               
represented  by the  bar on  the far  left of  the chart,  and he                                                               
noted that  the black portion  of Alaska's bar comprises  all the                                                               
new taxes  proposed in the governor's  "Sustainable Alaska Plan."                                                               
He  stated that  the  area  below the  black  bar represents  the                                                               
general sales  taxes, selective sales  taxes, and  license taxes,                                                               
but  noted that  it does  not include  individual income  tax, as                                                               
Alaska  does  not  have  one.    He  said  University  of  Alaska                                                               
Anchorage's (UAA's)  Institute for  Social and  Economic Research                                                               
(ISER) produced the information on the  slide, and he said he was                                                               
uncertain as to  the source of the  data.  He stated  that he did                                                               
check the Alaska data with the  Revenue Sources Book, and he said                                                             
the   $500  per   year,  per   capita  figure   -  which   yields                                                               
approximately  $370 million  per year  - is  consistent with  the                                                               
Revenue Sources Book for non-petroleum license fees.                                                                          
2:29:18 PM                                                                                                                    
CO-CHAIR  HUGHES stated  that  at first  glance  it appears  that                                                               
Alaska is  doing pretty well  in terms of per  capita broad-based                                                               
tax rates, but she said it  must be taken into consideration that                                                               
[Alaskans]  corporately   own  sub-surface  rights.     She  said                                                               
[Alaskans]  have heard  for years  that oil  revenues pay  for 90                                                               
percent of state  government, and although that  is currently not                                                               
the  case, it  remains  true  that the  money,  which belongs  to                                                               
Alaskans,  has been  paid into  the  state's general  fund.   She                                                               
suggested that  it could have been  set up such that  rather than                                                               
the money  being paid into the  general fund each year,  it would                                                               
be divided  and paid  out to  all Alaskans, and  a chunk  of that                                                               
paid  back as  a state  income tax.   She  stated that  these oil                                                               
revenues are not reflected in the  bar, and she requested the per                                                               
capita amount  Alaska was  receiving into  the general  fund from                                                               
oil revenues prior to the decrease in prices.                                                                                   
2:30:26 PM                                                                                                                    
MR. BURNETT stated  that the oil revenues in Alaska  for the past                                                               
several years  have run  at a high  of approximately  $10 billion                                                               
per year,  which, when divided  by a population  of approximately                                                               
700,000, yields  a per capita  revenue of about $7,000  to $8,000                                                               
per  person.   He said  Article XI  of the  Alaska Statehood  Act                                                               
granted  subsurface  rights  to  the state  for  the  purpose  of                                                               
building infrastructure,  operating schools, et cetera.   He said                                                               
it  was a  bargain  that  the federal  government  made with  the                                                               
people  of Alaska  in  order to  become a  state  - to  sacrifice                                                               
subsurface  rights and  use that  money to  fund government.   He                                                               
said this  has basically occurred  since Prudhoe Bay  came online                                                               
in  the 1960s.    He stated  that now  [the  state] doesn't  have                                                               
enough revenue from those rights, and "we are where we are."                                                                    
2:32:04 PM                                                                                                                    
CO-CHAIR HUGHES  thanked Mr. Burnett  and stated that if  the low                                                               
figure of  $7,000 per capita  oil revenue were added  to Alaska's                                                               
bar on the chart, the figure  is much higher, and "we the people"                                                               
have a lot of skin in the game.                                                                                                 
2:32:26 PM                                                                                                                    
MR.  BURNETT transitioned  to  slide 8,  titled  "Impacts of  Tax                                                               
Proposal," and stated that gas  prices at the pump would increase                                                               
relative to prices  without the tax.  He stated  that there would                                                               
be  more aviation  taxes  to fund  certificated  urban and  rural                                                               
airports.   He noted that the  tax was requested by  the Aviation                                                               
Advisory Committee as preferable to landing fee increases.                                                                      
2:32:52 PM                                                                                                                    
REPRESENTATIVE  ORTIZ  asked  whether   the  aviation  taxes  are                                                               
currently  dedicated and  returned  directly to  urban and  rural                                                               
2:33:04 PM                                                                                                                    
MR.  BURNETT   stated  that  the   FAA  requires,  in   order  to                                                               
participate in federal programs,  that revenue from aviation fuel                                                               
taxes is allocated  to urban and rural airports.   He stated that                                                               
the revenue acts  as a dedicated fund and in  the Revenue Sources                                                             
Book it shows up as general fund  money.  He said it is collected                                                             
and kept  in a  sub-account of  the general  fund, but  an amount                                                               
equal to it is spent for these purposes.                                                                                        
REPRESENTATIVE ORTIZ  asked whether  that was true  of automobile                                                               
fuel taxes.                                                                                                                     
2:33:45 PM                                                                                                                    
MR. BURNETT stated  that no other taxes have a  dedication in the                                                               
state  constitution or  a  requirement under  federal  law to  be                                                               
spent for any specific purpose.                                                                                                 
2:34:06 PM                                                                                                                    
REPRESENTATIVE CLAMAN  inquired where the FAA  requirement can be                                                               
2:34:27 PM                                                                                                                    
MR. BURNETT replied  that [the requirement for  aviation fuel tax                                                               
distribution] is in  federal regulation and is part  of the grant                                                               
assurance agreements between  the State of Alaska and  the FAA in                                                               
order to receive  federal dollars for airports. In  response to a                                                               
follow-up  question  Mr. Burnett  said  DOTPF  would provide  the                                                               
specific location, under which the regulation exists.                                                                           
2:35:00 PM                                                                                                                    
REPRESENTATIVE  ORTIZ   inquired  what  percentage   of  Alaska's                                                               
airport operational costs are covered by federal funding.                                                                       
2:35:25 PM                                                                                                                    
MR. BURNETT  replied that  DOR would  provide the  information to                                                               
the committee.                                                                                                                  
2:35:36 PM                                                                                                                    
REPRESENTATIVE NAGEAK asked how  many certificated urban airports                                                               
are in the Alaska.                                                                                                              
2:35:49 PM                                                                                                                    
MARK LUKIN,  Commissioner, Department of Transportation  & Public                                                               
Facilities, stated  that there are  a total of [247]  state owned                                                               
and operated airports.   In response to a follow  up question, he                                                               
relayed  that of  those, 21  are certificated,  which essentially                                                               
means those  are the airports with  jet service.  He  stated that                                                               
this tax  would actually fund all  247 airports.  He  stated that                                                               
DOTPF would  deliver the  exact number to  the committee,  and he                                                               
said the number may be slightly higher.                                                                                         
2:36:56 PM                                                                                                                    
REPRESENTATIVE NAGEAK said 247 (indisc.).                                                                                       
2:37:09 PM                                                                                                                    
CO-CHAIR HUGHES  requested that  Mr. Burnett  return to  slide 8,                                                               
regarding the impacts of the  tax proposal, and stated that there                                                               
is an  important bullet  missing.   She said  not only  would gas                                                               
prices at  the pump  rise, but  so would the  price of  goods and                                                               
travel.  She  asked if there had been any  analysis regarding the                                                               
increased costs to the consumers.                                                                                               
2:37:34 PM                                                                                                                    
MR.  BURNETT  stated  that  Co-Chair Hughes  is  correct  in  her                                                               
assessment that consumer  prices would increase.   He stated that                                                               
[DOR]  can't  predict the  precise  effect  but  may be  able  to                                                               
predict relative effects.  He stated  that it is a per gallon tax                                                               
and price has varied tremendously over  the past two years; if an                                                               
eight-cent tax  is added  to a  gallon of  fuel today,  the total                                                               
cost of  the gallon  is still much  lower than it  was then.   He                                                               
stated that it  might be less expensive next year  or it might be                                                               
more expensive.   He said it is not technically  possible to give                                                               
an exact  answer to Co-Chair  Hughes' question; however,  the tax                                                               
increase would affect airline ticket  prices, parking prices, and                                                               
anything else related to transportation.                                                                                        
2:38:45 PM                                                                                                                    
REPRESENTATIVE NAGEAK asked if this  increase would extend to the                                                               
United  States  Postal  Service   (USPS),  freight,  and  similar                                                               
2:38:58 PM                                                                                                                    
MR. BURNETT replied that it is  likely there would be some effect                                                               
on the  cost of those types  of services.  He  suggested that for                                                               
air carriers the  effect would be less than a  needed landing fee                                                               
increase.  He pointed out that  there are no toll roads in Alaska                                                               
yet,  and [the  state] would  probably like  to avoid  that.   He                                                               
stated there are some countries  where people pay every time they                                                               
travel anywhere.   He stated  that many effects are  unknown, but                                                               
the goal of [tax] increases is  to avoid the known effects of not                                                               
having enough funding.                                                                                                          
2:39:47 PM                                                                                                                    
REPRESENTATIVE  NAGEAK  said  the   tax  increase  would  have  a                                                               
tremendous  impact on  rural  customers.   He  said  the cost  of                                                               
freight to his town is much more  than it used to be; the cost of                                                               
living, including goods and services,  is already extremely high;                                                               
and this would  increase it further.  He said  there are few jobs                                                               
and few avenues  for taxation, and he stated that  there are many                                                               
people in  rural Alaska who wish  they had a tax  to pay, because                                                               
that would mean they had a job.                                                                                                 
2:41:37 PM                                                                                                                    
CO-CHAIR  FOSTER stated  that  even with  the  proposed tax,  the                                                               
price of fuel  is substantially lower than it was  two years ago.                                                               
He said the  proposed tax could be doubled or  tripled and prices                                                               
would still be lower than they  were two years ago, but in places                                                               
like Western Alaska,  Nome, or Bethel, fuel prices  do not change                                                               
monthly as they might  in a place like Anchorage.    He said this                                                               
is because  rural areas get a  shipment of fuel in  September and                                                               
lock in  a price,  which remains  steady for  the winter  and, in                                                               
some cases,  until the following June.   He said the  public does                                                               
not realize some of the challenges that rural Alaska has.                                                                       
2:42:46 PM                                                                                                                    
REPRESENTATIVE CLAMAN  stated that  [the committee] must  keep in                                                               
mind  the other  side  of the  equation, which  is  that if  [the                                                               
legislature] does  not close the  fiscal gap, there will  be dire                                                               
consequences to the  state on all levels as well.   He said there                                                               
are  also broad  impacts  of  doing nothing  with  regard to  the                                                               
substantial deficit.                                                                                                            
2:43:20 PM                                                                                                                    
MR.   BURNETT  concurred   and   said  [Representative   Claman's                                                               
observations]   relate  to   a   complex   problem  that   [state                                                               
government] must address.                                                                                                       
2:43:31 PM                                                                                                                    
CO-CHAIR  FOSTER mentioned  that this  was not  the only  meeting                                                               
that the committee  will hold regarding HB 249,  and he suggested                                                               
that  members  take  as  much  time as  they  want  in  terms  of                                                               
2:43:46 PM                                                                                                                    
CO-CHAIR HUGHES referred to the  slide relating to impacts of the                                                               
tax proposal  and asked  if there was  any consideration  for the                                                               
specific regional impacts  of the proposed tax  increase, such as                                                               
cost of freight  in rural areas.  She posited  that people in the                                                               
Matanuska-Susitna  (Mat-Su) region  probably  put  more miles  on                                                               
their vehicles than  anyone else in the state,  with the possible                                                               
exception  of   Kenai  Peninsula   residents.    She   said  this                                                               
especially applies to people who  commute, but even for those who                                                               
do not,  a round  trip to the  grocery store may  be 20  miles as                                                               
everything is so  spread out.  She surmised that  a large portion                                                               
of the  $49 million on the  revenue impact slide would  come from                                                               
her region, but because these  are not designated funds, it would                                                               
not necessarily  benefit the  people of her  region.   She stated                                                               
that a user  fee may be more  palatable in the sense  that a user                                                               
would know that  the road would be well maintained  by their fee.                                                               
She asked if she was correct  in her understanding that the funds                                                               
from the motor fuel tax are not dedicated.                                                                                      
2:45:21 PM                                                                                                                    
MR.  BURNETT replied  that  Co-Chair Hughes  was  correct in  her                                                               
understanding  that  other  than   the  aviation  fuel  tax,  the                                                               
legislature is free to spend the  money however it chooses, so it                                                               
is incumbent upon  the legislature and the governor  to propose a                                                               
budget that  utilizes whatever  tax revenues  are collected.   He                                                               
said  [the legislature]  could  choose to  spend  motor fuel  tax                                                               
revenues at  DOT or  somewhere else, and  that is  something they                                                               
could explain to constituents in the future.                                                                                    
2:46:03 PM                                                                                                                    
MR.  BURNETT,   in  response  to  Co-Chair   Hughes,  stated  his                                                               
understanding  that  there  was regional  consideration  for  the                                                               
impacts of the bill.  He said  although [a motor fuel tax] is not                                                               
a user fee,  there are similarities.  He stated  that the cost of                                                               
maintaining  highways  is  greater   than  the  amount  of  money                                                               
collected from  taxes.  He  said the  tax does offset  costs, and                                                               
the amount  of use of  the highways and airports  varies directly                                                               
proportional  to how  much fuel  is  purchased.   In that  sense,                                                               
regional impacts have been taken into consideration.                                                                            
2:46:59 PM                                                                                                                    
CO-CHAIR   HUGHES  stated   that   although   the  committee   is                                                               
considering this proposal in isolation  from all other proposals,                                                               
the  income tax  proposal combined  with the  proposal in  HB 249                                                               
would  disproportionately burden  the  Mat-Su region  due to  the                                                               
number of  people who are employed  and the number of  miles they                                                               
drive, and she said she views this as problematic.                                                                              
2:47:25 PM                                                                                                                    
REPRESENTATIVE  NAGEAK said  (indisc.) rural  Alaska, especially.                                                               
He stated that  residents of the region "do not  have [the money]                                                               
to pay  that in the  first place," and  they don't know  how much                                                               
will be charged.   He said with the level  of employment in rural                                                               
Alaska (indisc.).  He said  [the proposed legislation] would have                                                               
a tremendous  impact on the people  who depend on fuel  for their                                                               
livelihood,  including  subsistence  hunting,  fishing,  and  all                                                               
other aspects of  their lives.  [The  proposed legislation] would                                                               
have a disproportionate impact on  the pumps in rural Alaska when                                                               
compared to  the effects on people  who live on the  road system.                                                               
He said  the high cost  of transporting  fuel had not  been taken                                                               
into consideration.   He said most of  the fuel is paid  for at a                                                               
market price based  on the rest of the United  States, and prices                                                               
are incredibly  high.   He concluded by  stating his  belief that                                                               
the  effects  of HB  249  would  be disproportionate  and  unfair                                                               
[toward rural Alaskans].                                                                                                        
2:49:34 PM                                                                                                                    
MR.  BURNETT  continued  his  presentation  on  slide  9,  titled                                                               
"Revenue  Impact," and  stated  that the  tax  increase would  be                                                               
expected  to  generate  approximately  $49 million  per  year  in                                                               
additional  revenue,  of  which  $200,000 would  be  shared  with                                                               
municipally owned  airports.  These  include airports  in Juneau,                                                               
Kenai, Palmer, and Wasilla.                                                                                                     
2:50:00 PM                                                                                                                    
CO-CHAIR   HUGHES  inquired   as  to   the  amount   shared  with                                                               
municipally owned  airports, and she  asked if there  was another                                                               
amount  that  was  always  in  the budget  set  aside  for  those                                                               
airports.   She  stated that  she was  under the  impression that                                                               
there was  some sort of  reduction for municipal  airport funding                                                               
in this year's budget.                                                                                                          
2:50:18 PM                                                                                                                    
MR. BURNETT responded  that the shared taxes are in  the range of                                                               
$140,000  per year  at  the  current rates.    He suggested  that                                                               
perhaps Commissioner  Lukin could  speak to any  other reductions                                                               
in funding.                                                                                                                     
2:50:36 PM                                                                                                                    
COMMISSIONER  LUKIN   stated  that   under  HB  249,   the  state                                                               
contribution  to  municipal  airport match  funding  for  capital                                                               
projects would be reduced.  He  said it is a large difference, as                                                               
those are  state match funds that  used to be paid  optionally to                                                               
municipal  airports.   He said  at this  point, with  the federal                                                               
program, [DOTPF] has  elected not to continue  [state match funds                                                               
for capital projects to municipal airports].                                                                                    
2:51:14 PM                                                                                                                    
CO-CHAIR HUGHES inquired how much the funds are being reduced.                                                                  
2:51:16 PM                                                                                                                    
COMMISSIONER LUKIN stated  that it used to be a  50 percent match                                                               
and now there is no match.                                                                                                      
2:51:23 PM                                                                                                                    
CO-CHAIR HUGHES asked  for the total dollar figure  that would be                                                               
removed from the program.                                                                                                       
2:51:32 PM                                                                                                                    
COMMISSIONER LUKIN  replied that  he would  get the  exact figure                                                               
for the committee.                                                                                                              
2:51:36 PM                                                                                                                    
CO-CHAIR FOSTER  asked how many  municipal airports exist  in the                                                               
COMMISSIONER  LUKIN  offered  his understanding  that  there  are                                                               
five; they are located in  Juneau, Wasilla, Palmer, Soldatna, and                                                               
2:51:58 PM                                                                                                                    
REPRESENTATIVE  CLAMAN asked  if the  airport in  Ketchikan is  a                                                               
municipal airport.                                                                                                              
COMMISSIONER  LUKIN  stated   that  the  Ketchikan  International                                                               
Airport  is a  state owned  airport, but  DOTPF has  an agreement                                                               
with the  Ketchikan Gateway  Borough such  that the  borough will                                                               
run the airport, which allows it to charge landing fees.                                                                        
2:52:22 PM                                                                                                                    
MR.   BURNETT  presented   slide  10,   titled  "Revenue   Impact                                                               
(continued)," and said  the estimates are based on  the fall 2015                                                               
forecast  and   do  not   account  for   changes  in   demand  or                                                               
stockpiling.   He  stated that  [DOR] expects  a small  amount of                                                               
stockpiling to  occur, where people  buy fuel in  anticipation of                                                               
the tax increase, specifically at the distributor level.                                                                        
MR.  BURNETT transitioned  to  slide  11, titled  "Implementation                                                               
Cost," and stated that there  would be an implementation cost for                                                               
the proposal.  He explained that  under HB 249, DOR would have to                                                               
update the  Tax Revenue Management  System (TRMS) and  change the                                                               
tax  return  forms, among  other  things.    He stated  that  DOR                                                               
expects a  one-time implementation cost  of $50,000 and  does not                                                               
expect any  ongoing additional cost related  to administering the                                                               
tax program.                                                                                                                    
2:53:12 PM                                                                                                                    
MR. BURNETT stated  that slides 12 and 13 discuss  how the budget                                                               
gap would  be closed  with the governor's  sustainable plan.   He                                                               
said he would not be speaking on  that but did point out on slide                                                               
13 where  the proposed motor  fuel tax  would fit within  the new                                                               
revenue components of the governor's plan.                                                                                      
2:53:31 PM                                                                                                                    
CO-CHAIR HUGHES asked,  in reference to slide 12,  about the $850                                                               
million from existing taxes and fees (indisc.).                                                                                 
2:54:01 PM                                                                                                                    
MR. BURNETT  replied that  those are  existing revenues,  not new                                                               
revenues,  and includes  components  like  corporate income  tax,                                                               
personal  taxes like  those  in an  earlier  chart, some  license                                                               
fees, direct charges, and some other  types of revenues.  He also                                                               
pointed out the "earnings on savings" line item.                                                                                
2:54:29 PM                                                                                                                    
MR. BURNETT, in  response to Co-Chair Hughes, stated  that all of                                                               
the new revenue components can be  found on slide 13, which shows                                                               
all  of the  new  proposals,  including a  change  to the  mining                                                               
license tax,  an increase to  the fishing landing  tax, increased                                                               
taxes on  cruise ship  passengers, the  proposed motor  fuel tax,                                                               
increased alcohol  tax, tobacco tax,  hardening the floor  on oil                                                               
and gas taxes,  and an income tax,  all of which would  add up to                                                               
$457 million dollars.                                                                                                           
2:55:16 PM                                                                                                                    
CO-CHAIR FOSTER  asked for clarification that  the $5.242 billion                                                               
figure  for reductions  and new  revenue is  not the  Fiscal Year                                                               
2017 (FY 17) total operating budget.                                                                                            
MR. BURNETT replied  that it is the amount  that approximates the                                                               
FY 17  budget, including the  capital budget and  other statewide                                                               
expenditures  like retirement;  not only  the agency  operations,                                                               
but also all unrestricted general fund spending.                                                                                
2:56:01 PM                                                                                                                    
REPRESENTATIVE   ORTIZ  requested   confirmation   that  if   the                                                               
legislature  accepted  all of  the  governor's  plan, the  budget                                                               
would be roughly balanced.                                                                                                      
MR. BURNETT replied  that is correct and stated that  if any part                                                               
of the  package is  altered, it  must be  offset by  a reciprocal                                                               
MR.  BURNETT stated  that the  last  two slides  are a  sectional                                                               
analysis  of  HB 249,  and  he  indicated  he could  discuss  the                                                               
specifics of HB 249 at the committee's request.                                                                                 
CO-CHAIR  FOSTER  stated that  it  appears  as though  the  major                                                               
components of  the sectional  analysis were  discussed previously                                                               
in the meeting.                                                                                                                 
2:56:55 PM                                                                                                                    
REPRESENTATIVE  NAGEAK stated  his  opinion  that [the  sectional                                                               
analysis] would  be good information  to have when it  comes time                                                               
to discuss the bill on the floor.                                                                                               
MR.  BURNETT stated  that  he  would be  willing  to present  the                                                               
sectional analysis  and that it would  not take long.   He stated                                                               
that  Section 1  would add  a $25  or 1  percent tax  penalty for                                                               
failure to  file electronically  unless the taxpayer  received an                                                               
exemption.  Section 2 would  require the electronic submission of                                                               
tax returns.  He stated that this  is a common element of all the                                                               
smaller tax proposals.   He said HB 249 would  change the general                                                               
tax statutes and apply to all tax types administered by DOR.                                                                    
2:57:44 PM                                                                                                                    
REPRESENTATIVE  CLAMAN  asked  whether  the  owners  of  the  gas                                                               
stations would  be responsible for  electronic filing  and paying                                                               
the tax.                                                                                                                        
MR. BURNETT  stated that the tax  is payed farther up  the supply                                                               
chain, at the distributor level.   He stated that last year there                                                               
were 243 motor fuel tax payers.                                                                                                 
2:58:23 PM                                                                                                                    
REPRESENTATIVE  CLAMAN  asked  for clarification  that  the  only                                                               
instance where the  average consumer would need  to pay attention                                                               
to  the  electronic filing  requirement  is  in relation  to  the                                                               
proposed income tax.                                                                                                            
MR.  BURNETT  stated  that  there are  no  taxes  currently  paid                                                               
directly by  consumers; however, there  is a  car tax and  a tire                                                               
tax that are  added at the point  of sale.  Other  taxes are paid                                                               
at the distributor level or are direct business taxes.                                                                          
2:59:25 PM                                                                                                                    
CO-CHAIR HUGHES  asked who,  under HB 249,  would qualify  for an                                                               
exemption from electronic filing.                                                                                               
MR. BURNETT replied that the  exemptions would be for cases where                                                               
the distributor may operate in rural  Alaska and may not have the                                                               
ability to  file electronically.   He  said most  businesses that                                                               
pay this tax would not be exempt.                                                                                               
3:00:02 PM                                                                                                                    
CO-CHAIR  HUGHES  clarified  that  the exemption  would  be  from                                                               
electronic filing, not from payment of the tax.                                                                                 
REPRESENTATIVE NAGEAK  asked if the tax  would specifically apply                                                               
to business enterprises.                                                                                                        
MR.  BURNETT responded  that the  tax would  be collected  at the                                                               
distributor level and passed on to the user.                                                                                    
REPRESENTATIVE NAGEAK  asked whether, under  HB 249, it  would be                                                               
the  individual's responsibility  to  file electronically  unless                                                               
they receive  an exemption.   He  said a lot  of people  in rural                                                               
Alaska don't  have computers and cannot  file electronically, and                                                               
the  $25  penalty is  another  disproportionate  impact on  rural                                                               
MR. BURNETT clarified  that the individual Alaskan  does not [and                                                               
would not]  file a tax return  for this tax.   It is paid  at the                                                               
distributor level.  He clarified,  in response  to Representative                                                               
Nageak that the tax payer is the distributor.                                                                                   
3:01:33 PM                                                                                                                    
CO-CHAIR  FOSTER   (indisc.),  opened   the  meeting   to  public                                                               
testimony on HB 249.                                                                                                            
3:02:07 PM                                                                                                                    
STEVE  ST.  CLAIR  stated  that  he  does  not  have  any  direct                                                               
affiliation with  any groups or  organizations and  is testifying                                                               
on behalf of  himself as a concerned Alaskan.   He stated that he                                                               
would like to discuss the  proposed motor fuel tax, aviation fuel                                                               
tax, and marine fuel tax.  He  read a definition of the word tax:                                                               
"a compulsory  contribution to a  state revenue, rendered  by the                                                               
government on  worker's income, business profits,  et cetera." He                                                               
stated that the second definition  is "a strain or heavy burden."                                                               
He said  as he was  listening to  the committee meeting  he heard                                                               
Representative  Nageak  discuss  increased prices  of  goods  and                                                               
services.   He  stated  that  in Alaska  the  cost  of living  is                                                               
already higher  than most  other places  and there  are secondary                                                               
and tertiary  effects when transportation is  taken into account.                                                               
He said increased  costs may create a situation  where people who                                                               
are  on a  fixed income  cannot  afford to  live in  Alaska.   He                                                               
stated  his belief  that before  any taxation  occurs, government                                                               
needs  to be  "right-sized."   He indicated  that government  has                                                               
grown disproportionately and out of control.                                                                                    
MR. ST. CLAIR  stated that based on a  previous conversation with                                                               
Co-Chair Hughes, he  understands that $4.5 billion  is the target                                                               
budget for FY  17.  He said this [target  budget] is supported by                                                               
ISER  recommendations, Mr.  Goldsmith, Brad  Keithly, and  an oil                                                               
and gas  consultant.  He  stated that before there  is discussion                                                               
of taxes or revenue sources, [the  state] needs to make sure that                                                               
it can afford  the budget.  He said the  legislators were elected                                                               
to  represent constituents  in Juneau.   He  stated that  in line                                                               
with the second  definition of taxes, [the  legislature] would be                                                               
putting a strain or heavy  burden on constituents by approving or                                                               
recommending  this  tax.     He  stated  that   his  district  is                                                               
represented  by  Representative  Cathy Tilton  and  Senator  Bill                                                               
Stoltze.    He  said  he  speaks  with  his  representatives,  is                                                               
actively  engaged with  them, and  they know  how he  feels about                                                               
this topic  and several others.   He said Alaska is  a vast state                                                               
without much  infrastructure; many  of the  villages can  only be                                                               
accessed  by flight  or watercraft.   He  opined that  increasing                                                               
fuel costs would  increase ticket prices, which  would will place                                                               
an  undue burden  or  strain  on constituents.    He stated  that                                                               
synonyms  of the  word  tax include:    strain, stretch,  burden,                                                               
load, encumber,  and "push  too far."   He thanked  the committee                                                               
for its time and service.                                                                                                       
3:06:21 PM                                                                                                                    
CO-CHAIR FOSTER (indisc.) or Kimberly  in Co-Chair Hughes' office                                                               
and they can direct people on  how to testify.  He drew attention                                                               
to two emails included in the  committee packet.  The first email                                                               
was from  Tim Ivanitskiy, a  15-year Wasilla resident,  who wrote                                                               
in  opposition to  the proposed  fuel tax  increase and  to relay                                                               
that his  parents and brother also  oppose it.  The  second email                                                               
was  from  Katie  Sinclair,  a   Houston/Big  Lake  resident  and                                                               
Anchorage taxi driver,  who said she opposes the bill  due to her                                                               
commute, and the  increase in the overhead  costs associated with                                                               
driving a taxi.                                                                                                                 
[HB 249 was held over.]                                                                                                         

Document Name Date/Time Subjects
HB249 ver A.pdf HTRA 1/28/2016 2:00:00 PM
HB 249
HB249 Fiscal Note-0912-DOR-TAX-01-13-16.pdf HTRA 1/28/2016 2:00:00 PM
HB 249
HB249 Sectional Analysis.pdf HTRA 1/28/2016 2:00:00 PM
HB 249
HB249 Sponsor Statement - Governor's Transmittal Letter.pdf HTRA 1/28/2016 2:00:00 PM
HB 249
Motor Fruel Tax FAQ.docx HTRA 1/28/2016 2:00:00 PM
Tax presentation MOTOR FUEL 1-22-16 with comparison slide.pdf HTRA 1/28/2016 2:00:00 PM