Fuel tax bill moves with industry support

Gov. Bill Walker’s bill to increase state fuel taxes has support from some industry groups it would directly impact.

It is also the only tax bill amongst a suite of revenue proposals by the administration to help close the $3.5 billion-plus budget deficit to have moved out of a single committee so far.

The Senate Transportation Committee passed the bill onto the Finance Committee last week with lukewarm support on a 3-2 vote.

Committee chair Sen. Peter Micciche, R-Soldotna, said he was for moving the bill to Finance for further vetting, but not necessarily in favor of the bill itself.

Senate Bill 132, and its mirror House Bill 249, would raise the per gallon state fuel taxes as follows: highway fuel tax from 8 cents to 16 cents; marine fuel tax from 5 cents to 10 cents; aviation gasoline from 4.7 cents to 10 cents; and jet fuel from 3.2 cents to 10 cents.

The legislation would correspondingly increase the per gallon highway fuel tax rebate for off-road use from 6 cents to 12 cents.

In all, the tax hikes are projected to raise $49 million per year, according to the Revenue Department.

Leaders of the Associated General Contractors of Alaska, Alaska Airmen Association, Alaska Trucking Association and the Alaska Region of the Aircraft Owners and Pilots Association all supported the tax increases in letters to House and Senate committees.

Alaska Trucking Association Executive Director Aves Thompson wrote to Senate Transportation that the tax hike is part of a “durable, long-term fiscal plan” for the state.

“The Alaska Trucking Association has long supported a fuel tax increase if the funds could be dedicated to transportation needs,” he wrote. “We realize that this won’t happen in this bill but feel strongly that we need to help to resolve the fiscal issues by doing our part.”

Owner of the Anchorage taxi service Checker Cab Michael Thompson wrote in opposition to the tax increase. He estimated doubling the highway fuel tax would “burden each driver an additional $325 per year.”

Alaska’s 8-cent per gallon highway fuel tax is the lowest in the nation. The national average for state highway fuel taxes is 20 cents per gallon, according to the American Petroleum Institute, while the federal tax is 18 cents per gallon.

Alaska’s highway tax hasn’t been raised since 1970, Transportation Commissioner Marc Luiken wrote in a letter informing the committees on the legislation.

The 3.2-cent per gallon jet fuel tax is the 32nd lowest in the country, according to the national policy research group the Tax Foundation.

The State of Alaska collected $41.8 million from fuel taxes in fiscal year 2015. Those fuel taxes accounted for 3.5 percent of all state taxes last fiscal year, according to Revenue.

SB 132 moved out of Senate Transportation with limiting amendments added by the committee, including a sunset date of July 1, 2018, and a provision reverting the taxes back to previous amounts if the average price for Alaska North Slope crude is more than $85 per barrel in the previous calendar year. At that oil price the state’s need for other revenue sources would be diminished, committee members reasoned.

“If we reduce our budget as we have planned we would have more revenue than we need at those (oil) price ranges and I think that’s the right place to promise Alaskans that we would be returning some of this revenue,” Micciche said.

Sen. Mike Dunleavy, R-Wasilla, who opposed moving the bill, said the Legislature needs to spend another year doing its “due diligence” to cut spending before adding to taxes.

An amendment to add subaccounts to track the tax revenue by fuel source was also added by Fairbanks Republican Sen. Click Bishop.

Opponents to the fuel tax increases have said the legislation could have more support if highway fuel tax money, for example, was dedicated to highway maintenance, instead of being lumped into the General Fund. The same could be applied to airports and aviation fuel taxes.

The Department of Revenue tracks the taxes by fuel type, but those monies are not dedicated for specific uses.

The Department of Transportation has $113 million in unrestricted general fund money to spend on road and airport maintenance this fiscal year, according to department spokesman Jeremy Woodrow.

He said roughly 75 percent of that goes to road work, but winnowing out exactly how much is allocated to the specific type of work is difficult because DOT crews in rural communities often handle both road and airport duties with the same equipment.

Fuel for flight

Aviation fuel tax collections totaled nearly $4.9 million in 2015; and the vast majority of that, about $4.4 million, came from jet fuel.

At the same time, the state spends about $39 million per year to wholly operate its 247 airports, Alaska Airport Division Operations Manager Troy LaRue said.

The higher aviation fuel taxes would generate about $9 million, according to a DOT model.

The state Aviation Advisory Board, comprised of state and industry members, unanimously recommended in November the state use fuel tax hikes to add revenue over landing fees or airport user fees, largely because the latter two proposals would require implementing new payment systems while the fuel taxes are already in place at lower levels.

The state airport system also generates about $1.5 million in lease revenue, LaRue said.

“We know we’re probably never going to earn enough money to insulate the airports from the General Fund, but maybe we could get a lot closer,” he said in an interview.

Alaska Airlines Senior Vice President Joseph Sprague told the House Transportation Committee that the airline believes it will pay 30 percent of the additional revenue generated by the jet fuel tax increase from 3.2 cents per gallon to 10 cents per gallon.

He said to the Juneau Empire that it’s difficult for the airline to directly oppose the tax increase as it is advocating for a solution to the state’s budget deficit, as many businesses and trade organizations have.

Delta Air Lines, which has increased its presence in the state in recent years, wrote in opposition to the jet tax change, as did UPS.

UPS uses Ted Stevens Anchorage International Airport primarily as a fueling stop for flights between Asia and the Lower 48. However, jet fuel for flights with an international origin or destination is exempt from taxes at the Anchorage airport because the airport is in a federal Foreign Trade Zone established primarily to encourage cargo companies to use the airport as a transfer facility.

Elwood Brehmer can be reached at elwood.brehmer@alaskajournal.com.

Updated: 
02/24/2016 - 1:51pm

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