Knowles proposes fuel tax increase

The DOT-requested hike will insure that the state has enough funds to match incoming federal highway monies for state-approved projects

Bill Kelder

PNA Contributing Writer

Gov. Tony Knowles has introduced identical bills in the state Senate and House that would, if passed, raise the state’s motor fuel tax to 17 cents a gallon from the present 8 cents a gallon, while leaving other fuel taxes, such as aviation fuel, at their current rates.

Under Senate Bill 39 and its House counterpart, HB 59, revenues generated by the tax would no longer go into the Highway Fuel Tax account in the state’s General Fund. That’s because the governor’s bills would change the account’s name to the Highway Construction and Maintenance account, still within the General Fund. The intent is to use the funds in the new account for highway construction and maintenance projects. That comes close to violating the Alaska Constitution’s prohibition against dedicating funds for specific uses, but doesn’t quite cross the threshold, according to Asst. State Attorney General Debra Vogt.

“It is in what I would call the ‘soft dedicated fund’ category,” Vogt said in a telephone interview from her Juneau office. “There are a number of accounts within the state’s General Fund that could be categorized as ‘soft dedicated funds’.”

Vogt said that it is not unusual for one state Legislature to indicate to its successor where it would like state income to be spent by placing the funds in various accounts. Generally, she said, the succeeding Legislature honors that intent.

“But not always,” Vogt added. “The accounts are merely suggestions,” she explained, “the funds are still part of the General Fund and, as such, are subject to be appropriated by the Legislature for whatever purposes it deems fit. But, historically, one Legislature has generally respected the intent of the previous Legislature.”

The state Department of Transportation and Public Facilities asked the governor to introduce the fuel tax increase, according to Dennis Poshard, special assistant to DOT&PF Commissioner Joe Perkins.

“That was our department’s bailiwick; it was our call to make,” Poshard said.

One of the DOT&PF’s responsibilities, he said, is to make sure the state has enough funds on hand to match incoming federal highway funds for specific projects that have been approved by the Legislature and the governor. In Alaska, as in most states, federal funds account for about 90 percent of the cost of new highway construction. That 90 percent is matched with 10 percent of the project’s cost from state funds. In the case of SB 39 and HB 59, the state’s matching funds would be the money in the Highway Construction and Maintenance account of the General Fund.

“It is the Department of Transportation’s responsibility to make sure that the motor fuel taxes coming into the General Fund meet or exceed the amount the state needs to match federal highway funds for projects that are already scheduled,” Poshard explained. “That’s what we did when we asked the governor to introduce legislation to increase the motor fuel tax.”

SB 39 and HB 59 only seek increases in motor fuel taxes for vehicles using Alaska’s highways. Other fuel taxes remain, unless the bills are amended, at their present rates. Other fuel tax rates include: aviation fuel remains at 4 7/10 cents per gallon, fuel used on or in water craft at 5 cents a gallon, aviation fuel other than gasoline at 3 2/10 cents a gallon. Motor fuel blended with alcohol is taxed at the same rate as regular motor fuel, almost. If alcohol blended gasoline is used in an area and during months when its use is required to meet federal air quality standards, the tax is reduced to 2 cents a gallon under present rates, and reduced to 11 cents a gallon if SB 39 or HB 59 is approved.

Alaskans using snow machines or all terrain vehicles can actually get a fuel tax refund, Poshard said. The refund is 6 cents a gallon under present law and would be 13 cents a gallon under either of the governor’s bills. To get the refund, Alaskans must keep track of the snow machine and ATV fuel purchases and use, then contact the DOT/PF to obtain a “refund warrant”. The warrant would then be used to withdraw money from the Highway Construction and Maintenance account to pay for the refund.

“That refund was put in because it didn’t seem fair to tax the use of snow machines and ATV’s to pay for highway construction and maintenance when these vehicles are not driven on the highways,” Poshard said. State law also prohibits their being driven on roads and highways.

On Feb. 10, SB 39 was in the Senate Transportation Committee, and also has referrals to the Senate Resources and Finances committees. HB 59 was in the House Oil and Gas Committee, and also has referrals to the House Resources and Finance committees. Persons interested in find out when hearings may be held or who may want to testify on these bills should contact their local Legislative Information Office for hearing schedules and to find out how to get on the list of those testifying.