Legislature(2015 - 2016)CAPITOL 17

02/06/2016 01:00 PM TRANSPORTATION

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01:02:18 PM Start
01:02:30 PM HB249
01:43:05 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
-- Continued from 2/4/16 --
+= HB 249 ELECTRONIC TAX RETURNS & MOTOR FUEL TAX TELECONFERENCED
Heard & Held
-- Public Testimony Limited to 3 Minutes --
The Anchorage, Fairbanks, Mat-Su, Kenai, and
Wrangell LIOs are available Saturday for Public
Testimony.
Limited Number of Off-Net Phone Lines Available
Off-Net Participation Arrangements Must Be Made
Through the Chair's Office Prior to Hearing
Contact Chair's Office by Phone at 907-465-3743
For Approval
Public Testimony Can Be Submitted in Writing by
Email: Rep.Shelley.Hughes@akleg.gov
Deputy Commissioner Burnett
<Above Item Removed from Agenda>
+ Bills Previously Heard/Scheduled TELECONFERENCED
         HB 249-ELECTRONIC TAX RETURNS & MOTOR FUEL TAX                                                                     
                                                                                                                                
1:02:30 PM                                                                                                                    
                                                                                                                                
CO-CHAIR HUGHES announced  that the only 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."                                                                                                                
                                                                                                                                
CO-CHAIR HUGHES  noted that public  testimony remained  open from                                                               
the previous meeting.                                                                                                           
                                                                                                                                
1:03:57 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  HUGHES  directed  committee members'  attention  to  24                                                               
written  testimonies received  by her  office since  the previous                                                               
meeting and  noted that 22  of those expressed  concern regarding                                                               
the  proposed  legislation.  She indicated  that  any  additional                                                               
written public testimony would be added to the record.                                                                          
                                                                                                                                
1:05:07 PM                                                                                                                    
                                                                                                                                
BETH FREAD stated  that she appreciated the  opportunity to speak                                                               
regarding HB 249,  because she works in the  real estate industry                                                               
and, accordingly,  is almost always  on the road.   She indicated                                                               
that she  does not necessarily  oppose the  proposed legislation,                                                               
but that she  believes the proposed motor fuel  taxes should have                                                               
caps  applied.  She  expounded that  [Alaskans]  experienced  gas                                                               
prices over  four dollars per gallon  in the previous year.   She                                                               
explained  that  high  prices  resulted  in a  huge  cut  to  her                                                               
revenue.    She  requested  that  language  be  included  in  the                                                               
legislation stipulating that  if gas prices climb  to a specified                                                               
level, the tax would roll back to  a lower rate.  She opined that                                                               
the bill should  not be considered until the state  budget is cut                                                               
and suggested that  no new revenue be generated  until the budget                                                               
had been  reduced to between $4.2  and $4.5 billion.   She stated                                                               
her understanding  that [state government] can  utilize permanent                                                               
fund earnings to  help fund government for a period  of time, and                                                               
she  reemphasized  her  belief that  [the  state]  should  reduce                                                               
spending  prior  to  "making  money  from  [citizens']  pockets."                                                               
Additionally, she  expressed doubt regarding the  governor's plan                                                               
to  defund the  permanent fund,  and she  urged the  committee to                                                               
oppose the plan.                                                                                                                
                                                                                                                                
1:07:18 PM                                                                                                                    
                                                                                                                                
STEVE ST. CLAIR  stated that HB 249 would have  a negative impact                                                               
on all Alaskans, especially  those living subsistence lifestyles,                                                               
and  he  explained  that  rural   Alaskans  utilize  motor  fuel,                                                               
aviation fuel, and watercraft fuel  for survival.  He recounted a                                                               
conversation  with his  mother-in-law, an  Inupiat woman  who was                                                               
raised  in rural  Alaska,  during which  she  explained that  all                                                               
those fuel types are used by  people in the villages.  He related                                                               
that in Shishmaref, motor fuel is  used in ATVs and snow machines                                                               
for transportation and hunting, and  in some instances motor fuel                                                               
is utilized  for cooking stoves and  lamps.  He pointed  out that                                                               
many  communities in  Alaska  are accessible  only  by plane  and                                                               
watercraft,  and the  cost of  basic amenities  are very  high in                                                               
these locations.  He stated that  many people in rural areas must                                                               
travel  to   Anchorage,  for  medical  appointments,   and  their                                                               
associated airline tickets  are primarily paid for  by the state.                                                               
He  noted that  many [rural  Alaskans] use  the medical  trips to                                                               
Anchorage as  an opportunity to  purchase basic amenities  due to                                                               
the price differences.  He  referenced an example of toilet paper                                                               
being cheaper  to ship from Anchorage  than it is to  purchase in                                                               
the  villages  and  posited  that the  proposed  motor  fuel  tax                                                               
increases  would serve  to further  increase  prices of  consumer                                                               
goods in  the villages.   He informed the committee  that despite                                                               
recent price  reductions for fuel  in cities, prices  remain high                                                               
off  the  road  system.    He  insisted  that  the  proposed  tax                                                               
increases  would be  disproportionately burdensome  to [Alaskans]                                                               
living subsistence  lifestyles, which  is necessitated by  a lack                                                               
of jobs in rural Alaska.                                                                                                        
                                                                                                                                
MR. ST.  CLAIR stated that  HB 249  is estimated to  generate $40                                                               
million  for the  general  fund, which  he  claimed was  "another                                                               
monster  that  needs to  be  addressed."    He held  that  adding                                                               
revenue to the  general fun encourages the  growth of government,                                                               
which he  considered counterproductive  in a  fiscal crisis.   He                                                               
explained that in 2014 the State  of Alaska paid $39.6 million to                                                               
rural Alaskans  via the Power  Cost Equalization  Program (PCEP).                                                               
He posited  that it would  be counter intuitive to  increase fuel                                                               
taxes on  the same group  of people receiving subsidies  for high                                                               
fuel costs.   He reemphasized his  belief that HB 249  was a "bad                                                               
bill" and should never leave  committee, and stated that taxation                                                               
and changes  to the  permanent fund  and permanent  fund dividend                                                               
should  never be  considered until  government is  "right-sized."                                                               
He  maintained  that the  "magic  number"  is $4.5  [billion]  in                                                               
unrestricted general  fund spending in  Fiscal Year 2017  (FY 17)                                                               
and opined that  any attempt that fails to meet  the threshold is                                                               
a disingenuous  attempt to solve  [Alaska's] fiscal problem.   He                                                               
encouraged the committee to oppose HB 249.                                                                                      
                                                                                                                                
1:10:42 PM                                                                                                                    
                                                                                                                                
ABBY ST.  CLAIR testified in opposition  to HB 249.   She related                                                               
that in Shishmaref,  where she was raised, the cost  of living is                                                               
incredibly high, and warned that  an increase in fuel taxes would                                                               
result in  a corresponding increase  in the cost  of necessities.                                                               
She  informed  the committee  that  the  current fuel  price  [in                                                               
Shishmaref] is $6.99  per gallon.  She explained  that [high fuel                                                               
prices]  make hunting,  fishing,  and  the subsistence  lifestyle                                                               
passed down by her ancestors  more difficult.  She requested that                                                               
[the  legislature] reassess  the  current budget  and find  other                                                               
means [of balancing the budget] before increasing taxes.                                                                        
                                                                                                                                
1:11:33 PM                                                                                                                    
                                                                                                                                
MIKE  COONS  stated his  opposition  to  HB  249 and  noted  that                                                               
Governor  Bill  Walker  has  suggested  that  [state  government]                                                               
cannot cut  its way to a  sustainable budget.  He  suggested that                                                               
the  governor's $100  to  $200 million  in  proposed budget  cuts                                                               
would do very little toward  the goal of developing a sustainable                                                               
budget.  He   explained  that  he  opposed   the  proposition  of                                                               
utilizing the permanent fund, and  he posited that the governor's                                                               
proposed state income  tax is unfair to people  who work because,                                                               
like all "progressive  tax schemes," low income  residents do not                                                               
pay the tax  but do soak up the majority  of Department of Health                                                               
and Social  Services spending.   He  indicated that  although the                                                               
governor's    proposed   sales    tax    is    fairer,   it    is                                                               
disproportionately  visited  upon those  with  low  incomes.   In                                                               
reference to the proposed "sin  taxes" on alcohol and tobacco, he                                                               
expressed  doubt  that  the  increased cost  would  lead  to  any                                                               
meaningful reduction in usage.                                                                                                  
                                                                                                                                
MR.  COONS   transitioned  to  a   discussion  of   the  proposed                                                               
legislation and noted that President  Obama had recently proposed                                                               
legislation  that would  create  a  $10 per  barrel  oil tax  for                                                               
alternative energy.   He  stated that Section  3 of  the proposed                                                               
legislation  raised many  questions that  would create  difficult                                                               
accounting circumstances for  gas stations.  He  pointed out that                                                               
all  tax  increases would  be  between  100  and 175  percent  of                                                               
current rates. He  listed the proposed rate  changes described in                                                               
Section 3  of the bill and  stated that he found  them confusing.                                                               
He stated  his assumption that  fuel oil for home  heating, which                                                               
is  diesel, would  be included  in the  tax scheme  and suggested                                                               
that  a  heating fuel  tax  increase  would significantly  impact                                                               
rentals and  homeowners.   He contended  that the  "off-road use"                                                               
refund  outlined in  Section  5 of  the  proposed legislation  is                                                               
complicated  in  terms  of  the logistics  of  applying  for  the                                                               
refund;  he questioned  how  a gas  station  could determine  the                                                               
purpose of the  fuel being purchased and how  an individual would                                                               
be compensated  for his/her due  refund.  He concluded,  "This is                                                               
not a  perfect bill; this is  a horrible bill. Get  a big backhoe                                                               
and burry this bill ten feet under poured concrete."                                                                            
                                                                                                                                
1:15:04 PM                                                                                                                    
                                                                                                                                
ED ZASTROW  stated that he has  lived in the territory  and state                                                               
of Alaska for  over 50 years.  He acknowledged  that the state is                                                               
currently "enjoying a  fiscal problem" and requested  that if the                                                               
proposed tax  increase were to be  implemented, [the legislature]                                                               
consider imposing  the tax  increase in  a "stepped"  manner over                                                               
the next  several years.   He  pointed out  that other  taxes are                                                               
going  to  be  implemented  and "stepping"  the  motor  fuel  tax                                                               
increases would help [manage the transition].                                                                                   
                                                                                                                                
1:16:33 PM                                                                                                                    
                                                                                                                                
CLAY MURPHY  shared that he is  a veteran, a 35-year  resident of                                                               
the state of  Alaska, a retired Alaska Railroad  worker, a former                                                               
fuel truck  driver, and  he currently drives  busses.   He stated                                                               
that he had always voted  in local, state, and federal elections,                                                               
and he  opposed the motor fuel  tax increases proposed in  HB 249                                                               
as they  would increase the  cost of  energy in the  interior. He                                                               
discussed how companies  cascade their cost of  doing business to                                                               
consumers  and pointed  out that  the proposed  legislation would                                                               
double or even  quadruple current motor fuel tax  rates but would                                                               
not significantly  improve the current  budget circumstance.   He                                                               
said he agreed  with previous comments suggesting  that the state                                                               
should make  meaningful spending  cuts, and  he related  that the                                                               
companies he has worked for in  the past all ran their businesses                                                               
on revenues;  when revenues decreased, the  companies were forced                                                               
to make meaningful cuts. He noted  that he hasn't seen that occur                                                               
with Alaska's  state government.  He said  the first  action that                                                               
state  government  wants  to  take  in  response  to  the  budget                                                               
shortfall is  to implement  resident taxes,  which he  opined was                                                               
the wrong action.   He stated that businesses make  cuts if their                                                               
projected revenues are  estimated to be lower.   He cited several                                                               
business-based  examples of  how  the state  could reduce  costs,                                                               
including:   implementation of a  hiring freeze,  cancellation of                                                               
travel    reimbursements,   restructuring    agencies,   facility                                                               
consolidation, sale of unnecessary  buildings and lands, delay of                                                               
promotions, parking  and potentially  disposing of  equipment and                                                               
vehicles,   cancellation  of   unnecessary  services,   increased                                                               
scrutiny and  meaningful reductions at all  levels of management,                                                               
and implementation of a wage  cut with a promise of reinstatement                                                               
upon return of revenues.                                                                                                        
                                                                                                                                
MR. MURPHY stated that  if a tax is created, it  must sunset at a                                                               
certain  point.    He  posited that  an  existing  agency  should                                                               
perform  the  work of  taxation;  no  new agencies  or  personnel                                                               
should  be  allowed,  as  no  increase  to  government  could  be                                                               
responsibly allowed.   He held  that businesses will not  ask for                                                               
increased taxation,  but those  who work  for state  agencies and                                                               
the  University  of Alaska  will  say  "we  should pay  our  fair                                                               
share."   He  opined  that Alaskan  residents  already pay  their                                                               
"fair  share."   He  specified that  his  federal taxes  increase                                                               
every  year,  and his  property  mill  rate  is increasing.    He                                                               
explained that the state receives  significant funding, given its                                                               
population, from  the federal  government and  the money  is from                                                               
taxpayers.   He recommended that  the legislature  begin spending                                                               
cuts by "trimming the fat"  in the Department of Transportation &                                                               
Public  Facilities  (DOTPF)  and  taking actions  such  as  those                                                               
listed previously.  He stated  that the commissioner of an agency                                                               
should  have the  ability to  perform the  necessary streamlining                                                               
and restructuring or they should  be replaced by someone who can.                                                               
He   acknowledged  that   the  reductions   are  difficult,   but                                                               
maintained that strong leadership is  necessary at this time.  He                                                               
stated his  opposition for tapping  the permanent fund,  but said                                                               
if it  must happen, he  would support Senator  McGuire's proposed                                                               
legislation.   He advised  the committee  that the  Anchorage LIO                                                               
debacle is an  embarrassment to the state, and he  compared it to                                                               
former Governor Murkowski's jet.                                                                                                
                                                                                                                                
1:21:52 PM                                                                                                                    
                                                                                                                                
BRIAN MCNEIL stated  that Alaska's per gallon  [highway] fuel tax                                                               
rates are  either the  lowest or  close to the  lowest of  the 50                                                               
states  and   the  average  state   highway  fuel  tax   rate  is                                                               
approximately $0.30 per  gallon, while the highest  rate is $0.50                                                               
per  gallon.   He commented  that based  on [Alaska's]  difficult                                                               
topography, large geographic  area, inclement weather conditions,                                                               
small  population, and  the associated  maintenance requirements,                                                               
he does not understand how [Alaska's  motor fuel tax rate] is not                                                               
higher.   He maintained that  Alaska is an expensive  state, with                                                               
regard to  transportation for the aforementioned  reasons, and he                                                               
said he doesn't  see a way around  it.  He affirmed  that he does                                                               
not like to  pay taxes any more than anyone  else, but stated his                                                               
belief that Alaskans must be reasonable.                                                                                        
                                                                                                                                
1:24:20 PM                                                                                                                    
                                                                                                                                
JIM  SYKES acknowledged  the severity  of Alaska's  fiscal crisis                                                               
and  stated that  a  motor fuel  tax  increase seemed  reasonable                                                               
under the circumstance.   He stated his hope that  motor fuel tax                                                               
revenues  would be  applied toward  maintenance,  as the  federal                                                               
government   will  provide   significant   funding  toward   road                                                               
construction,  but  very little  for  maintenance  purposes.   He                                                               
explained that  the result of  that imbalance is that  many roads                                                               
have been constructed, but there  is less money to maintain them.                                                               
He noted  that many  Bush communities  use fuel  but do  not have                                                               
roads  to maintain;  he emphasized  the  importance of  providing                                                               
some level of funding to  rural community services if their taxes                                                               
are also  going to be raised.   He stated that  it is appropriate                                                               
for the tax to be applied  by the gallon, specifically due to the                                                               
incredibly high cost of fuel  in rural communities.  He indicated                                                               
that upon  consideration of revenue  options after  making budget                                                               
cuts, the  proposed motor  fuel tax increase  would be  a prudent                                                               
choice. He noted  that Alaska does not have  dedicated funds, and                                                               
accordingly  he expressed  his hope  that  the revenue  generated                                                               
from  the  proposed   tax  increase  would  be   utilized  for  a                                                               
combination of  both road maintenance  and community  services in                                                               
rural communities.   He  said he  was not  sure he  supported the                                                               
bill, but  indicated his belief  that the proposal was  headed in                                                               
the right  direction because [Alaskan's] must  start paying their                                                               
own way.                                                                                                                        
                                                                                                                                
1:26:30 PM                                                                                                                    
                                                                                                                                
BRIAN  SIMPSON  emphasized his  opposition  to  the proposed  tax                                                               
increase.   He  said  Alaska  is already  a  "welfare state"  and                                                               
expounded that  there is little  consideration of  small business                                                               
owners who  "actually work for  a living."   He posited  that the                                                               
idea   of   increasing  the   cost   of   personal  or   business                                                               
transportation  is  abhorrent  and  remarked  that  the  cost  of                                                               
funding state  employees and  their associated  benefits packages                                                               
is  a  significant financial  stressor.    He indicated  that  in                                                               
addition to the  cost associated with state  employees, there are                                                               
substantial  costs associated  with "a  big block  of people  who                                                               
just  live  off  of  the  state."     He  pointed  out  that  the                                                               
administrative costs associated with  providing services to rural                                                               
areas would increase in relation  to the increased transportation                                                               
costs that  the proposed legislation  would cause.   He contended                                                               
that the best  course of action would be to  slowly dismantle the                                                               
dependency  of  residents, ween  people  off  of the  state,  and                                                               
encourage  people to  have "real  jobs" and  produce things.   He                                                               
emphasized his  belief that this  tax proposal is  a particularly                                                               
bad idea,  and he does not  see any gain for  people who actually                                                               
work for a living  and contribute to the state.   As an aside, he                                                               
indicated his opposition to electronic  filing and the imposition                                                               
of an  income tax  for the  cited reason  that income  taxes also                                                               
punish those who  work.  He urged the  committee, "Dismantle this                                                               
welfare state; the writing is on the wall."                                                                                     
                                                                                                                                
1:32:43 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE NAGEAK stated that  the proposed tax increases are                                                               
disproportionately aimed at people who  can't afford to pay them,                                                               
particularly  people in  rural Alaska.   He  explained that  most                                                               
good  jobs available  in rural  Alaska require  skilled laborers,                                                               
and many  rural residents don't have  those skillsets; therefore,                                                               
most available jobs  are filled by shift workers who  live on the                                                               
road  system.  He  stated  that  there  are  both  organized  and                                                               
unorganized  boroughs  in  the   state,  as  is  constitutionally                                                               
mandated, and  boroughs have a duty  to step up and  find ways to                                                               
raise  revenues in  their  communities.   He  indicated that  his                                                               
borough has  taken the initiative [since  establishment] to build                                                               
infrastructure  in the  village, including  power plants,  health                                                               
clinics,  and  runways.    He   related  that  his  borough  took                                                               
advantage when  opportunity presented itself  in the form  of tax                                                               
revenues from the oil industry.                                                                                                 
                                                                                                                                
REPRESENTATIVE  NAGEAK  suggested  that  people  should  be  less                                                               
concerned  about state  spending and  more concerned  about their                                                               
own boroughs, and he recommended  that local governments take the                                                               
initiative  to  [solve their  fiscal  problems].   He  said  many                                                               
people call for  cuts [to state spending], but none  of them want                                                               
to cut  services that  affect them.   He  expressed the  need for                                                               
honest discussion  regarding [the  fiscal crisis] and  noted that                                                               
[Alaska] is in [a fiscal  circumstance] where a bucket of chicken                                                               
is  more expensive  than  a  barrel of  oil.    He remarked  that                                                               
[Alaska's  economy]  is  near  "the bottom  of  the  barrel"  and                                                               
accordingly all [Alaskans] must "give  and take."  He stated that                                                               
[solving the  budget crisis]  will be difficult,  but it  must be                                                               
done.   He stated that the  governor's proposals are in  front of                                                               
[the  legislature]  and  that the  conversations  had  begun.  He                                                               
encouraged Alaskan  residents to  call in  and share  their ideas                                                               
with the legislature regarding solutions  for the fiscal problem,                                                               
and he  acknowledged that  [the legislature]  can't be  afraid to                                                               
make tough decisions.                                                                                                           
                                                                                                                                
1:39:03 PM                                                                                                                    
                                                                                                                                
CO-CHAIR HUGHES  commented to clarify that  funds collected under                                                               
HB  249 would  not be  reflective of  a user  fee, in  that there                                                               
would not be a requirement  that the revenue be used specifically                                                               
toward  transportation infrastructure,  with the  exception of  a                                                               
requirement  that  taxes  on  aviation  fuel  are  used  to  fund                                                               
airports.  She  further clarified that all fuel  tax revenues are                                                               
deposited into  the general fund.   She noted that  despite being                                                               
one of the  states with the lowest fuel tax  rates in the nation,                                                               
Alaska still  has one  of the  highest cost  per gallon  of fuel.                                                               
She mentioned a federal proposal  being considered by the current                                                               
administration, which,  if it  were to  pass, would  increase the                                                               
price per gallon of gasoline by $0.25.                                                                                          
                                                                                                                                
1:40:25 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE ORTIZ  thanked everyone who testified  for sharing                                                               
their  views  on  Alaska's  fiscal situation.    He  stated  that                                                               
government, by  the people, for the  people is not just  an idea;                                                               
it can be  a reality.  He complimented testifiers  for taking the                                                               
time  to share  comments and  making it  more of  a reality.   He                                                               
commented,  regarding the  governor's proposal  in general,  that                                                               
the governor  did come up  with a plan  knowing that some  of his                                                               
tax  proposals  would  be  unpopular,  even  with  himself.    He                                                               
expressed  his  appreciation   for  the  governor's  demonstrated                                                               
leadership in  formulating a  plan for  the legislature  "to pick                                                               
apart and criticize." He added  that although the legislature has                                                               
unpopular   options   to   choose  from,   the   alternative   is                                                               
significantly more  budget cuts.    In response to  the criticism                                                               
that  the governor's  proposed  $100 million  budget  cut is  not                                                               
large enough, he reminded that  in the previous session, with the                                                               
governor's  leadership, the  legislature  cut approximately  $450                                                               
million  from the  operating  budget and  $400  million from  the                                                               
capital budget.   He  contended that the  proposed cuts  for this                                                               
session cannot  be considered  outside the  context of  cuts from                                                               
the  previous session,  and he  noted that  those cuts  will mean                                                               
significant reductions in services that are important to people.                                                                
                                                                                                                                
1:43:05 PM                                                                                                                    
                                                                                                                                
CO-CHAIR HUGHES thanked the participants.                                                                                       
                                                                                                                                
[HB 249 was held over.]