Legislature(2015 - 2016)CAPITOL 17

02/18/2016 01:00 PM TRANSPORTATION

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Audio Topic
01:23:10 PM Start
01:23:42 PM HB249
01:44:32 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
-- Delayed to 1:15 p.m. Today --
Heard & Held
-- Public Testimony --
+ Bills Previously Heard/Scheduled TELECONFERENCED
         HB 249-ELECTRONIC TAX RETURNS & MOTOR FUEL TAX                                                                     
                [Contains discussion of SB 132.]                                                                                
1:23:42 PM                                                                                                                    
CO-CHAIR FOSTER 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."                                                                                                                
1:23:59 PM                                                                                                                    
CO-CHAIR HUGHES moved to adopt  the proposed committee substitute                                                               
(CS) for  HB 249,  Version 29-GH2912\E,  Nauman, 2/17/16,  as the                                                               
working document.                                                                                                               
1:24:11 PM                                                                                                                    
CO-CHAIR FOSTER objected for purposes of discussion.                                                                            
1:24:41 PM                                                                                                                    
CO-CHAIR HUGHES  stated that she  has had  reservations regarding                                                               
HB  249 since  it  was proposed.    Specifically, she  questioned                                                               
whether the tax  increases would remain in place in  the event of                                                               
recovering oil prices,  and she echoed the  sentiments of several                                                               
individuals  who provided  public testimony,  by emphasizing  the                                                               
importance  of  directing  the  revenue  from  the  proposed  tax                                                               
increase  toward  maintenance  and operation  of  infrastructure.                                                               
She  stated that  the  Senate  Transportation Standing  Committee                                                               
adopted  a committee  substitute  (CS) to  SB  132, the  Senate's                                                               
companion  bill  to HB  249,  which  addresses several  of  these                                                               
concerns.  She expressed her  agreement with the changes outlined                                                               
in the  CS to SB  132, and noted Version  E, of HB  249, proposes                                                               
one more change regarding how the revenue would be utilized.                                                                    
CO-CHAIR HUGHES outlined changes proposed  under Version E as the                                                               
addition  of an  oil price  per  barrel trigger,  inclusion of  a                                                               
sunset  date  in three  years,  and  clarification regarding  the                                                               
account where  the revenue  would be deposited.   She  noted that                                                               
the word "account"  would be replaced with  "fund" throughout the                                                               
applicable  statutes, and  language  would  be added  stipulating                                                               
that the funds  could only be used for  maintenance and operating                                                               
costs,  not  for  administration.    She  offered  to  provide  a                                                               
sectional analysis at the request of the chair.                                                                                 
1:27:10 PM                                                                                                                    
STUART  KRUEGER,  Staff,  Representative Shelley  Hughes,  Alaska                                                               
State Legislature,  on behalf of  Representative Hughes,  began a                                                               
presentation of the  sectional analysis of CS HB  249, Version E.                                                               
He stated that  the first change would be the  removal of Section                                                               
1 and Section 2, which  required the electronic submission of the                                                               
tax return and  report with the Department of Revenue  (DOR).  He                                                               
noted  that this  would be  included to  mirror the  change being                                                               
proposed in  the CS  to SB  132.   He explained  that in  the new                                                               
Section 1,  page 1, line 8,  the word "account" would  be changed                                                               
to  "fund",  and  would  be replaced,  in  kind,  throughout  the                                                               
remainder of HB 249 whenever  addressing specific fuel tax funds.                                                               
He explained that  the purpose of the change would  be to provide                                                               
more structure as to where those funds can be directed.                                                                         
1:28:15 PM                                                                                                                    
MR. KRUEGER  explained that Section  2, on  page 2, would  add an                                                               
oil price trigger, such that, if  the average price per barrel in                                                               
the previous calendar  year were to exceed $85,  then the highway                                                               
fuel tax  would return to its  previous rate of $0.08  per gallon                                                               
for  dealers.   He  related  that Section  3,  on  page 3,  would                                                               
provide a sunset  clause for Section 2; and  Section 4, beginning                                                               
on page  4, line 15 would  enact the same fuel  trigger described                                                               
in Section 2,  but applied to the consumers.   Section 5, on page                                                               
5, would provide a sunset of  Section 4.  He stated that Sections                                                               
6 through  10 would replace  the word "account" with  "fund", and                                                               
add  the  language  "direct capital,  operating,  or  maintenance                                                               
costs,"  and specify  "infrastructure" for  airport, marine,  and                                                               
highway.   He related that  inclusion of the word  "direct" would                                                               
eliminate  the  possibility  of  the  funds  being  utilized  for                                                               
administrative purposes.                                                                                                        
MR. KRUEGER noted that Sections  11 through 13 add exemptions for                                                               
emergency vehicles, as  defined in AS 11.56.825,  and for student                                                               
transportation services,  where the  school or  district receives                                                               
funding under  AS 14.09.010.   He explained  that Section  14, on                                                               
page 10,  would provide  the refund rate  for "off-road  use", as                                                               
proposed by the  bill sponsor; Section 15, on  page 10, beginning                                                               
on line  10, would  provide a  sunset of Section  14.   He stated                                                               
that in Section 16, on page  10, there would also be replacements                                                               
of the  word "account"  with "fund".   He explained  that Section                                                               
17, on  page 10, would  move the  exemptions from the  motor fuel                                                               
tax out  of the definition  of "motor fuel", in  AS 43.10.100(2),                                                               
and into  the body  of the motor  fuel tax law.   He  pointed out                                                               
that the 2015 Manual of  Legislative Drafting states "substantive                                                             
provisions  of law  must not  be hidden  in definitions,"  and he                                                               
offered that the current motor  fuel tax exemptions are in direct                                                               
violation of  that rule.  He  said Section 18, on  page 12, would                                                               
describe  the  applicability;  Section  19,  on  page  12,  would                                                               
provide  transitional   language  allowing  for   regulations  to                                                               
implement the  changes.   He explained that  Section 20,  on page                                                               
12,  would  set  an  immediate effective  date  for  Section  19;                                                               
Section  21 would  set an  effective date  of July  1, 2018,  for                                                               
Sections 3, 5, and 16; Section  22 would set an effective date of                                                               
July 1, 2016, for the remainder of the changes.                                                                                 
1:32:01 PM                                                                                                                    
CO-CHAIR FOSTER  requested clarification that the  trigger figure                                                               
described in Section 2 and Section  4, which would reduce the tax                                                               
to its  current rates in  the instance that oil  prices increased                                                               
to $85 per  barrel, would apply not only to  the highway fuel tax                                                               
rates, but also the marine and aviation fuel tax rates.                                                                         
1:32:58 PM                                                                                                                    
MR. KRUEGER  clarified that the  tax rates for all  categories of                                                               
motor fuel would  revert back to their current  rate, as outlined                                                               
in Section 4.                                                                                                                   
1:33:20 PM                                                                                                                    
MARC LUIKEN, Commissioner, Department  of Transportation & Public                                                               
Facilities  (DOTPF), Anchorage,  Alaska, drew  members' attention                                                               
to Section 4,  on page 4, and pointed out  that the current rates                                                               
for all  categories of motor  fuel are listed below  the language                                                               
describing the fuel trigger and  would be reverted to those rates                                                               
if the trigger came into effect.                                                                                                
1:33:54 PM                                                                                                                    
MR. KRUEGER  noted that the  change is  clear in the  statute and                                                               
that a clerical error in the  sectional analysis was the cause of                                                               
the confusion.                                                                                                                  
1:34:37 PM                                                                                                                    
CO-CHAIR HUGHES further  explained the cause of  the confusion in                                                               
the  sectional analysis  and thanked  the  committee members  for                                                               
their  understanding.   She mentioned  that  the Alaska  Aviation                                                               
Advisory Board had  requested that a fuel trigger  be included in                                                               
the  bill,  and  she  discussed  her  general  apprehension  with                                                               
increasing  taxes  without  first   reducing  the  state  budget,                                                               
restating  her  concern  regarding  the families  that  would  be                                                               
negatively impacted by  increases.  She acknowledged  that as the                                                               
tax proposals  go through the  legislative process, there  is the                                                               
possibility  that  they  make  it  to the  floor  and  pass,  and                                                               
accordingly she wanted  to ensure that the changes  listed in the                                                               
sectional analysis were included in the proposed CS.                                                                            
1:36:09 PM                                                                                                                    
REPRESENTATIVE ORTIZ  inquired how the  trigger point of  $85 per                                                               
barrel was determined.                                                                                                          
MR.  KRUEGER stated  his belief  that it  was designed  to mirror                                                               
changes made in the other body.   He deferred to Ken Alper, for a                                                               
detailed explanation.                                                                                                           
1:37:09 PM                                                                                                                    
KEN ALPER,  Deputy Director, Tax Division,  Department of Revenue                                                               
(DOR), stated  that Mr. Krueger's  analysis was correct  and that                                                               
the $85 trigger  was designed to mirror changes  introduced in SB
132.   He stated his understanding  that the reason the  chair of                                                               
the Senate  Transportation Standing Committee,  Senator Micciche,                                                               
set the  trigger at $85  dollars was because it  roughly reflects                                                               
the point at  which the "minimum tax" falls away  on oil and gas,                                                               
and Alaska  begins to increase  the amount  of money made  off of                                                               
oil at  a greater  rate.  It  is the threshold  at which  the tax                                                               
system of Senate Bill 21 [signed  into law on 6/24/13] would come                                                               
into effect.   He stated that Alaska's revenue  problems begin to                                                               
diminish more  rapidly as the price  per barrel exceeds $85.   He                                                               
stated  that  there  is  a  reasonable  conversation  to  be  had                                                               
regarding the  value of the  trigger point,  but that $85  is the                                                               
figure that  the Senate Finance  Committee ultimately  settled on                                                               
and Co-Chair  Hughes wishes to  parallel the changes made  in the                                                               
1:38:17 PM                                                                                                                    
REPRESENTATIVE ORTIZ  asked whether $85  per barrel is  the price                                                               
point where  the State  of Alaska  would be  able to  balance its                                                               
budget  or if  there  would  still be  a  significant deficit  at                                                               
current spending levels.                                                                                                        
MR. ALPER  responded no.  He  expounded that in Fiscal  Year 2016                                                               
(FY  16) [DOR]  estimated that  the budget  would balance  if the                                                               
price of oil were $109 per  barrel.  He stated that although that                                                               
number  currently  sounds  unreasonable,  two years  ago  it  was                                                               
considered  to be  a normal  and rational  number.   He explained                                                               
that if the price  of oil were $85, the state  would still have a                                                               
deficit of approximately $2 billion  under the current conditions                                                               
and budgetary realities.                                                                                                        
1:39:18 PM                                                                                                                    
REPRESENTATIVE  CLAMAN   requested  clarification  that   as  the                                                               
proposed statute  is written,  this $85  trigger would  come into                                                               
effect, whether that occurred in 2017 or 2037.                                                                                  
MR. ALPER replied  that there are two  different triggers written                                                               
into the proposed CS for the tax  increase to fall away:  the $85                                                               
dollar per  barrel fuel trigger and  the 2018 sunset clause.   He                                                               
stated his  understanding that the  intent is to bring  the issue                                                               
before  the legislature  in two  years to  determine whether  the                                                               
legislature wants to continue the increased tax regime.                                                                         
REPRESENTATIVE  CLAMAN requested  clarification  that the  sunset                                                               
provision is designed to eliminate the tax in two years.                                                                        
MR. ALPER  responded that  the tax  increases would  disappear in                                                               
two years, but  stated his understanding that  the exemptions for                                                               
school busses  and emergency vehicles  would remain  in permanent                                                               
1:40:47 PM                                                                                                                    
CO-CHAIR HUGHES  commented that when considering  the various tax                                                               
proposals,  some  are  more  regressive   than  others,  and  she                                                               
suggested that  this might be  the most regressive.   She stated,                                                               
in reference to commuters who  live in her community, that people                                                               
with low wages  are more likely to drive older  vehicles that are                                                               
not fuel  efficient.   She held  that an  individual who  makes a                                                               
higher  salary  is more  likely  to  drive  a newer,  more  fuel-                                                               
efficient vehicle.   She offered that  if the price of  fuel goes                                                               
up, the motor fuel tax is one of  the first that would need to be                                                               
reconsidered, and  she explained  that this  is the  intention of                                                               
the sunset and  the oil price trigger.  She  stated that she does                                                               
not want to  punish workers in her area and  throughout the state                                                               
who are  trying to make ends  meet.  She reemphasized  her belief                                                               
that this is  a regressive tax, at least in  terms of the highway                                                               
fuel increase.                                                                                                                  
1:42:06 PM                                                                                                                    
REPRESENTATIVE  ORTIZ stated  that all  legislators share  in the                                                               
concern regarding the regressive nature  of any tax proposal.  He                                                               
questioned the statement  that HB 249 is the  most regressive tax                                                               
proposal  and asked  Co-Chair Hughes  whether she  would consider                                                               
changes to the permanent fund as more regressive.                                                                               
1:42:43 PM                                                                                                                    
CO-CHAIR HUGHES  replied yes,  in a  sense, primarily  because of                                                               
the  different  types  of  vehicles   that  people  drive.    She                                                               
acknowledged  that  an  equal  amount would  be  taken  from  the                                                               
permanent  fund dividend,  but offered  that in  terms of  fuel a                                                               
lower income person  is actually paying more for  a 100-mile trip                                                               
than a wealthier person with a better car.                                                                                      
1:43:19 PM                                                                                                                    
REPRESENTATIVE CLAMAN commented that  determining which taxes are                                                               
fair versus  regressive or more  versus less equitable is  a very                                                               
complicated discussion.   He stated that  he appreciates Co-Chair                                                               
Hughes'  perspective, but  would like  to note  that he  does not                                                               
1:43:46 PM                                                                                                                    
CO-CHAIR FOSTER removed his objection  to the motion to adopt the                                                               
proposed CS for  HB 249, Version 29-GH2912\E,  Nauman, 2/17/16 as                                                               
the working  document.   There being no  objection Version  E was                                                               
adopted as the working document.                                                                                                
[HB 249 was held over.]                                                                                                         

Document Name Date/Time Subjects
HB249 Sponsor Statement - Governor's Transmittal Letter.pdf HTRA 2/18/2016 1:00:00 PM
HB 249
HB249 ver A.pdf HTRA 2/18/2016 1:00:00 PM
HB 249
HB249 Sectional Analysis.pdf HTRA 2/18/2016 1:00:00 PM
HB 249
HB249 Fiscal Note-0912-DOR-TAX-01-13-16.pdf HTRA 2/18/2016 1:00:00 PM
HB 249
Motor Fuel Tax FAQ.docx HTRA 2/18/2016 1:00:00 PM
Tax presentation MOTOR FUEL 1-22-16 with comparison slide.pdf HTRA 2/18/2016 1:00:00 PM
House Transportation Committee Response - DOR DOT - 1.28.16.pdf HTRA 2/18/2016 1:00:00 PM
HB 249 Draft Proposed CS Version E Section Analysis.pdf HTRA 2/18/2016 1:00:00 PM
HB 249
HB249 Draft Proposed Blank CS ver E.pdf HTRA 2/18/2016 1:00:00 PM
HB 249