Legislature(2003 - 2004)
04/29/2004 08:44 AM House FIN
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE CS FOR CS FOR SENATE BILL NO. 273(FSH)
An Act amending the size, membership, and powers of the
board of directors of the Alaska Seafood Marketing
Institute and making a corresponding change in the
quorum requirement; authorizing the establishment of
the seafood marketing assessment at a rate of 0.5
percent or 0.6 percent of the value of seafood products
produced; providing for an election to retain,
terminate, or increase the seafood marketing
assessment; providing for the repeal of the salmon
marketing tax and provisions related to the salmon
marketing tax; and providing for an effective date.
Co-Chair Harris MOVED to ADOPT Work Draft Version G, 23-
LS1366\G, Utermohle, dated 4-26-04, as the version before
the Committee. There being NO OBJECTION, it was so ordered.
SENATOR GARY STEVENS, SPONSOR, explained that SB 332 would
expedite a process to begin in January 2005. On August 1,
2004 the director of the Division of Elections would approve
the ballot [for the Board of Directors, Alaska Seafood
Marketing Institute (ASMI)]. On September 1, ASMI would hold
a meeting with the processors and fishermen. The ballot
would be mailed, postmarked and returned to the Division of
Elections to be certified by November 1. If the processors
made the proposed choice, the tax on salmon fishermen would
end on December 31 and the increased tax on processors would
begin on January 1. The bill ensures that processors would
be taxed during the full year and if there were fewer
fishermen on the board, they would not pay the 1% tax.
Co-Chair Harris thought that Section 2 and Section 3
appeared nearly identical. Senator Stevens referred to the
chart showing the current tax structure (copy on file.) He
pointed out that ASMI does the generic marketing for all
seafood products. He mentioned the 1% tax on salmon
fishermen, the 2% processors' assessment, and the current
25-member ASMI Board. The bill addresses both the size of
the Board and stable funding for ASMI, and it presents three
options to the processors.
Senator Stevens asserted that the current 25-member ASMI
board is unworkable. He pointed out in the far right column
on the chart the option for the processors to eliminate
their assessment and to end ASMI, with only the salmon tax
continuing. The ballot would ask if any tax should be
continued for ASMI. The second column of the chart would
reduce the ASMI Board to 7 members, eliminate the tax on
fishermen and raise the processors tax to .5% or $5 million.
He asserted that this option would be the most effective way
for ASMI to continue. The third column would raise the ASMI
Board to 9 members by adding two more fishermen, and
continue the taxes on salmon fishermen and on processors.
Senator Stevens acknowledged that the bill is confusing
because it provides options. The law requires 51% of the
processors based on the volume of product, or the largest 7
or 8 processors, to make a change.
In response to a comment by Co-Chair Harris, Senator Stevens
remarked that a smaller board with more processors would
mean that the processors would pay more into the industry.
He said the processors are willing to pay the .5% and let
the fishermen "off the hook."
In response to a question by Co-Chair Harris, Senator
Stevens answered that the federal funding appears stable.
Co-Chair Harris asked if fishermen would prefer the second
option of not paying a tax. Senator Stevens affirmed and
noted that the structure of the board should change in that
case.
Representative Joule commented on small Alaska-owned shops.
He thought that the ASMI Board would be controlled by out of
state processors and questioned giving the marketing of
seafood to non-Alaskans. Senator Stevens pointed out that
seafood is an international industry, with a lot of
marketing outside of Alaska. He commented that he was
involved in ASMI in the 1970s when he was a processor. He
thought that the board was more effective at that time
because the decisions were made at the board level, and he
expressed that CEOs, presidents and owners of processors are
needed on the ASMI Board.
TAPE HFC 04 - 101, Side B
Senator Stevens continued, noting that all the larger
companies and corporations deal in farmed fish. He
reiterated that leadership from industry should be
represented on the board.
Representative Croft asked the current structure of the
board. Senator Stevens replied that the 25-member board
includes one person from outside of the industry, 12
fishermen and 12 processors. Representative Croft asked if
the bill would change the composition to five processors and
two fishermen. Senator Stevens affirmed.
Representative Croft pointed out that under either scenario,
a smaller board would be substantially or partially
dominated by processors. Senator Stevens affirmed.
Representative Croft wondered why permission is necessary to
assess a processor tax. Senator Stevens replied that under
current law, processors could make the choice of increasing
the percentage, with the option not to fund ASMI.
Representative Croft asked the rationale of changing to a
board dominated by processors interested in the expansion of
farmed fish and not motivated by Alaskan interests. Senator
Stevens replied that ASMI would become less effective if it
continued with the 1% fishermen's' tax and the .2%
processors' tax. Alaska is no longer the primary supplier of
salmon with most of the industry involved in farmed salmon.
Representative Croft supported restructuring the board to a
smaller number but wanted to see control over a resource
Alaska owns. He didn't think ASMI could achieve the
marketing of wild salmon by giving the marketing decisions
to people with an inherent conflict of interest. He said
that assessing the tax is one thing, but giving processors
the power to choose how to market is another.
Co-Chair Williams commented that the processors and the
federal government pay into the marketing endeavor, and if
the state were paying, restrictions could be placed on how
the money is spent. Representative Croft argued that it is
all state money. Co-Chair Williams replied that the
processors could object. Representative Croft noted that it
is a voluntary tax on processors. Co-Chair Williams said
that it is "money out of the back pockets of processors."
The fishermen have assessed themselves and have asked not to
pay a tax.
Senator Stevens pointed out that if 7 of the 8 processors
could not be on the board because they have farmed fish
product, the processors would not move to tax themselves
higher. In current law the processors can decide taxation
and this bill gives the option to go to .5% with more
control of the board by the processors. He felt that it is
reasonable as long as ASMI gets the marketing dollars to
make the industry succeed. The tax level is not in this
bill.
Vice-Chair Meyer asked if the processors would pass on the
tax to the fishermen if the fishermen don't pay any tax.
Senator Stevens said that any tax on the industry impacts
the ex-vessel price to fishermen. Vice-Chair Meyer noted
that fishermen pay the price either indirectly or directly.
Vice-Chair Meyer asked if any of the Dutch Harbor floating
processors are Alaskan companies. Senator Stevens replied
that Alaska couldn't tax the processors outside state waters
unless they deliver a product inside state waters.
Representative Joule asked if the 5 processors on the ASMI
Board, as proposed in the bill, would be Alaskan. Senator
Stevens replied at least one would be Alaskan, but currently
most of the larger processors have offices in Seattle and
elsewhere.
Representative Croft asked if the bill allows fishermen to
lower their own tax and to raise the processors' tax.
Senator Stevens replied that it is similar to twelve
regional marketing organizations with fishermen choosing to
tax themselves and collect monies for regional marketing.
Regional marketing is based on grants and lacks stable
funding. He said that many fishermen would rather see money
put into their own local organizations than into ASMI.
Representative Croft asked if fishermen want any of the
options in the bill. Senator Stevens replied that the United
Fishermen of Alaska (UFA) supports eliminating the 1% salmon
harvester tax as part of the ASMI funding formula.
In response to a question by Representative Croft, Senator
Stevens affirmed that the bill would involve a shift to big
processors, stating that the board needs industry leaders.
Representative Croft questioned shifting the tax and giving
up control of the market when it all will work out in the
value of the fish. Senator Stevens stated that it is a very
indirect process.
Representative Croft asked how the composition of the ASMI
Board could represent the diversity of Alaskan fishermen
with just 2 seats for fishermen. Senator Stevens replied
that it would be unworkable for ASMI to represent every
regional fishery and every species, and the Board should
have members that represent and make marketing decisions to
benefit the entire industry. He thought that a small group
of 7 to 9 members would be more effective than a much larger
group of 25 members.
Representative Fate asked if the board would market wild
Alaskan salmon at the expense of farmed salmon, which might
represent the biggest margin of profit. Senator Stevens
replied that Alaska now must deal with the international
marketing structure that includes farmed fish. He said that
Alaska must provide the highest quality product. The
industry looks at what is most profitable, and farmed fish
can compete fairly in the market. All product, including
farmed salmon, is marketed through ASMI.
MR. DONALD BREMNER, TLINGIT & HAIDA CENTRAL COUNCIL, and
STAFF to SOUTHEAST ALASKA INTERTRIBAL FISH & WILDLIFE
COMMISSION, commented that the proposed size reduction of
the ASMI Board to 7 or 9 might make economic sense but it
would be at the expense of rural representation by the
smaller communities and smaller processors. He voiced that
the Department of Fish & Game and ASMI have done a good job.
The Central Council also opposes having representatives on
the board who sell farmed salmon. He recommended a reduction
to a 15-member board.
In response to a question by Representative Joule, Mr.
Bremner explained that the number of 7 or 9 was derived in
looking at the issue of representation.
Representative Joule asked if there were a number between 9
and 15 that would accommodate both of his concerns [rural
representation and economics]. Mr. Bremner felt that there
was basis for saying that rural Alaska's voice has not been
heard when major decisions have been made. He felt that the
quality and quantity of ASMI staff is also a key issue. He
maintained that rural Alaska would not receive
representation with the size of the board proposed in the
Committee Substitute.
SB 273 was heard and HELD in Committee for further
consideration.
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