Alaska's motor fuel tax rate is the lowest in the nation; less than one-third the average of the other 49 states. The 8-cent-a-gallon tax has not budged since 1970.
Lawmakers again this year will consider increasing the tax rate and, in a separate provision of the bill, helping to maintain the dwindling state account for spill prevention and response.
The state Senate approved a motor fuel tax increase last year, boosting the rate to 16 cents a gallon, still far below the national average, but the House failed to take up the measure as legislators rushed to adjourn last March amid the growing pandemic.
The measure cleared the Senate by a wide 12-5 margin before it ran out of time in the House.
"We should have voted on it March 28 before we hurried out of town," said Anchorage Rep. Andy Josephson, sponsor of this year's legislation to go to 16 cents a gallon.
The national average of the 50 states is 25.68 cents a gallon, according to a Jan. 1 report from the American Petroleum Institute. When other fees and sales taxes are added in, the national average is close to 37 cents a gallon.
The federal motor fuel tax is 18.4 cents a gallon on gasoline and 24.4 cents a gallon on diesel.
The bill, if approved, would raise more than $30 million a year for the state general fund that could be used for highway maintenance, and more than $3 million a year for the Spill Prevention and Response Division at the Department of Environmental Conservation.
Part of Alaska's problem is that motor fuel tax revenue is declining due to a long-term trend of better fuel mileage, allowing drivers to travel just as far on less gasoline or diesel, and due to the pandemic's hit to economic activity.
The spill response and prevention account is "woefully underfunded," Josephson said. The Department of Environmental Conservation commissioner acknowledged last fall that the account needs more money to do its job, which includes cleanup at spill sites across the state.
The prevention account "is heading toward a revenue shortfall" in a few years, the department said in its budget submission to the Legislature this winter.
The account is funded by a four-cent surcharge on each barrel of oil produced in Alaska - which is a declining number - and from a 0.95-cent surcharge on each gallon of refined fuel. This year's legislation, same as the version that died in the House last year, would raise that surcharge on refined fuel by about half a penny per gallon.
In addition to crude oil spills, the account has been used for other cleanups around Alaska. The Legislature in 2018 appropriated $5 million from the response account to complete the cleanup of the former Byford junk yard about 4 miles south of Wrangell. That was in addition to a previous $6 million appropriation from the account for the same Wrangell cleanup.
Without additional revenues, the department would have to reduce operations and cut positions at the spill prevention and response division, according to its budget book.
Josephson, a member of the House Finance Committee in his fifth term in the Alaska Legislature, said someone in the House needed to introduce the tax bill this session after the Senate took the lead last year. "I don't do as much 'why me' analysis as maybe I should," but the spill fund needs the money, Alaska's highways need maintenance, and taxes are the way to pay for it, he said.
"I am at a point in my career," the legislator said, that he can live with criticism from opponents to the tax increase.
The bill has to make it through the Transportation and Finance committees before it can go to the House floor for a vote, and then to the Senate.
In addition to increasing the motor fuel tax on gasoline at the pump from 8 cents to 16 cents a gallon, the legislation would raise the marine fuel tax rate from 5 cents to 10 cents a gallon, though that 5-cent tax increase would be refunded for fuel that goes into the tanks of commercial fishing vessels.
The tax hikes would take effect Jan. 1, 2022. Fuel purchased for heating is exempt from the state tax.
As the intent is that motor fuel tax revenue goes toward highway maintenance - though not a constitutionally mandated requirement - the bill addresses the fact that a growing number of drivers use the highway as much as others but buy little to no fuel for their plug-in hybrid and all-electric vehicles.
The bill would create a new $50 fee, good for two years, for plug-in hybrids that use some motor fuel, and a $100 biennial fee for all-electric vehicles that use no motor fuel.
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