Legislature(2001 - 2002)

02/28/2002 01:54 PM FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
HOUSE BILL NO. 288                                                                                                            
     "An Act relating to commercial fisheries limited entry                                                                     
     permit buy-back programs."                                                                                                 
REPRESENTATIVE DREW SCALZI, SPONSOR,  spoke in support of the                                                                   
legislation.  He observed that  the legislation would  change                                                                   
state statutes  governing the  buy back provision,  currently                                                                   
allowed under the limited entry  permit system. He noted that                                                                   
the  bill  removes  the  requirement  that  a  state  buyback                                                                   
program be  implemented after  determination from  an optimum                                                                   
number  study that  the optimum  number of  permits is  lower                                                                   
than  the  number  of  permits   currently  in  fishery.  The                                                                   
legislation  eliminates   the  requirement  that   a  buyback                                                                   
program, buy  out vessels and  gear as well as  permits. This                                                                   
is  the  biggest   detriment  to  a  buy  back   program.  He                                                                   
maintained   that    the   provision   has    prevented   the                                                                   
implementation  of a program since  its inclusion  in statute                                                                   
28  years ago.  [Buying  back  vessels and  gear]  is a  very                                                                   
cumbersome and costly process.                                                                                                  
Representative Scalzi explained that the legislation also                                                                       
eliminates  the mandate for  a "dedicated  fund", which  is a                                                                   
constitutional problem  that exists in the  funding mechanism                                                                   
under current law. The provision  provides that an assessment                                                                   
on  fishermen go  directly into  a  buyback fund.  Currently,                                                                   
assessments go  to the general  fund and the  legislature has                                                                   
the discretion  to appropriate the funds. The  Commission has                                                                   
no taxing  authority.  The provision [for  a dedicated  fund]                                                                   
would be eliminated because it is constitutionally illegal.                                                                     
Representative Scalzi observed that the legislation makes                                                                       
only transferable permits eligible  for buyback. (Current law                                                                   
has  provision  for buying  out  nontransferable  permits  if                                                                   
sufficient  funds  are available  in  the buyback  fund.)  He                                                                   
acknowledged  those with  a nontransferable  permit would  be                                                                   
unhappy  with the  provision,  but emphasized  that it  would                                                                   
help to extenuate a cheaper buy back program.                                                                                   
Representative Scalzi summarized the remaining changes                                                                          
incorporated  in  the  proposed   committee  substitute.  The                                                                   
committee substitute  would eliminate the requirement  to buy                                                                   
the permits  back within  a 10-year period.  The holder  of a                                                                   
permit  may  voluntarily  relinquish  their  permit  (whether                                                                   
under a  fleet consolidation  or for  any other reason).  The                                                                   
committee  substitute  also  adds a  definition  of  "optimum                                                                   
number"  to set  an  optimum number  range,  rather than  one                                                                   
number. The Commission  doesn't know the optimum  number that                                                                   
would  constitute   a  buy  back.  The  only   way  that  the                                                                   
Commission can  do it now is to  throw out a number,  buy the                                                                   
permits to  that number and then  go to a judicial  test; the                                                                   
courts would  decide the actual  optimum number.  He observed                                                                   
that  there is  a  disincentive since  the  court could  rule                                                                   
permits must be  put back into the system if the  buy back is                                                                   
too low.                                                                                                                        
Representative Scalzi reiterated that under the current                                                                         
law, the  permit, vessel,  and gear would  have to  be bought                                                                   
out,   which  would   be   cumbersome   and  expensive.   The                                                                   
legislation would help streamline the process.                                                                                  
Vice-Chair  Bunde  questioned  which  limited  entry  permits                                                                   
would be non-transferable.                                                                                                      
Representative   Scalzi  explained   that  there  were   non-                                                                   
transferable interim permits.                                                                                                   
Vice-Chair Bunde  questioned if permits that  are bought back                                                                   
would  still be  transferable and  could be  reissued if  the                                                                   
fisheries  regained  strength  or would  they  always  remain                                                                   
property of  the state. Representative Scalzi  explained that                                                                   
the permits would  be retired unless the court  required them                                                                   
to be issued.                                                                                                                   
In   response   to   a   question    by   Vice-Chair   Bunde,                                                                   
Representative Scalzi noted that  there is a zero fiscal note                                                                   
because the provision  already exists. Until a  buy back plan                                                                   
is  implemented there  is  no cost.  The  state controls  the                                                                   
resource  and permits,  but those  remaining  in the  fishery                                                                   
would pay  for the  Fund. The  provision was removed  because                                                                   
the dedicated fund portion was  illegal. However, a collected                                                                   
program  receipts  such  as  operates  under  Alaska  Seafood                                                                   
Marketing Institute  would be possible and the  sponsor would                                                                   
not  object.  A buy  back  plan  would  be tailored  to  each                                                                   
individual  area. He  observed that  other legislation  would                                                                   
allow  a consolidation  and stressed  that the  intent is  to                                                                   
stimulate buy backs.                                                                                                            
Vice-Chair Bunde  questioned if the legislation  would make a                                                                   
buy back more likely and asked  when a buy back program would                                                                   
begin. Representative  Scalzi noted  that there have  been no                                                                   
buy backs since 1974, due to the difficulty.                                                                                    
Co-Chair Mulder  noted that: "The commission  may establish a                                                                   
buy-back program,  a buy-back plan,  and a buy-back  fund for                                                                   
that  fishery.  If  the  commission  establishes  a  buy-back                                                                   
program  for a  fishery,  the  commission shall  request  the                                                                   
legislature to  appropriate money…" He asked  why "shall" was                                                                   
used instead of  "may". He clarified that it  would be funded                                                                   
through an assessment of the membership.                                                                                        
Representative  Hudson observed that  it would be  similar to                                                                   
the   funding    of   the   Northern/Southeast    Aquaculture                                                                   
Associations.  Co-Chair  Mulder pointed  out  that there  are                                                                   
alternative  means  to  asking  the legislature  for  a  "big                                                                   
check."  He  suggested  that the  language  be  clarified  to                                                                   
indicate that a general fund expenditure  is not expected; it                                                                   
would be an other funds expenditure.                                                                                            
Representative John  Davies questioned if the  intent was for                                                                   
the Fund  to be  capitalized with  an appropriation  from the                                                                   
legislature. Co-Chair Mulder noted  that he would not support                                                                   
capitalization by the legislation.                                                                                              
MARY  MCDOWELL,  COMMISSIONER,   COMMERCIAL  FISHERIES  ENTRY                                                                   
COMMISSION, DEPARTMENT  OF FISH  AND GAME explained  that the                                                                   
intent was to get around the designated  fund source problem,                                                                   
with the understanding that an  assessment of fishermen would                                                                   
be the most  likely source of funds. Any money  collected has                                                                   
to come  into the  general fund  and be  appropriated by  the                                                                   
legislature. The current language  does not provide authority                                                                   
for an  assessment on fishermen.  She observed  that language                                                                   
would need  to be added.  There is a  question as  to whether                                                                   
the  Commercial   Fisheries  Entry   Commission  has   taxing                                                                   
authority. Language  would need to be drafted  to allow funds                                                                   
collected  off fish  sales to  go through  the Department  of                                                                   
Revenue. She  clarified that state  funds for a buy  back are                                                                   
not anticipated.  The legislature would be the  source of the                                                                   
pass  through funds.  There may  be some  federal funds.  The                                                                   
legislation removes the provision  to automatically kick into                                                                   
a  state run  buy back  program  if an  optimum number  study                                                                   
determined that  there are too  many permits in  the fishery.                                                                   
Under  current law,  if a study  were done,  the state  would                                                                   
automatically kick into a buy  back program [if the number of                                                                   
permits   exceeded   the  optimum   number.   Fishermen   are                                                                   
interested  in   pursuing  other  options  such   as  federal                                                                   
funding. The  legislation would  provide the flexibility  for                                                                   
the Commission to do an optimum  number study. She noted that                                                                   
there is  a risk [without an  optimum number study]  that the                                                                   
court would declare  that the fisheries is too  exclusive and                                                                   
permits would  have to be put  back in [after a buy  out] and                                                                   
all of  the effort and expense  of buying permits  would have                                                                   
gone to  waste. Fishermen  would like  help in determining  a                                                                   
defensible  range, so  that they  would  have some  assurance                                                                   
that that  they won't  be forced  to put  bought out  permits                                                                   
back into the fisheries.                                                                                                        
Representative Lancaster  summarized the need  to clarify the                                                                   
funding source.                                                                                                                 
Representative Scalzi explained  that is the current language                                                                   
identifies the  legislature for the appropriation.  The state                                                                   
controls the fisheries and the permitting process.                                                                              
Representative Hudson agreed that  clarification is needed to                                                                   
establish the funding source;  how it is to be accounted for;                                                                   
and  the responsibility  of all  the  participants. He  noted                                                                   
that aquaculture  associations tax  members a little  so that                                                                   
the funds  continue to grow. He  agreed that section  5 needs                                                                   
more work.  He thought  that the  language inferred  that the                                                                   
legislature  would put  the "seed"  money into  the fund.  He                                                                   
noted that the money would go  out but nothing would come in.                                                                   
Both need to  happen. He observed that the  remaining members                                                                   
might want  to underwrite  an assessment  in order  to refuel                                                                   
the fund.  He agreed  concluded  that more  work needs  to be                                                                   
done regarding an assessment.                                                                                                   
Ms. McDowell recounted discussions  with fishermen. She noted                                                                   
that   if  a   particular  fleet   had   an  optimum   number                                                                   
determination which  showed that it was necessary  to buy out                                                                   
some of  the permits a plan  would be establish,  which would                                                                   
probably included  an assessment.  A statutory request  would                                                                   
then be  brought back  to the  legislature for that  fishery.                                                                   
Buy back  programs would  be specialized  for the  individual                                                                   
fisheries. There  has been an  assumption that  the fishermen                                                                   
would have  to pay for the  program "one way or  anohter." An                                                                   
assessment would  have to be  authorized in another  piece of                                                                   
legislation if it is not included in section 5.                                                                                 
Representative Hudson recommended  the addition of assessment                                                                   
Representative  Scalzi  did not  object  to  the addition  of                                                                   
assessment authorization.  He acknowledged  that it  has been                                                                   
difficult to  get fishermen to  consider a buy  back program.                                                                   
There is no one that feels that  the state of Alaska is going                                                                   
to pub money  into a buy back program without  an assessment.                                                                   
The language was removed because  it was illegal. He observed                                                                   
that  there  are  concerns regarding  a  mandatory  buy  back                                                                   
Representative John Davies did  not think that the Commission                                                                   
could establish  a fund. There  needs to be a  receiving fund                                                                   
and  an  expending  fund  created   by  the  legislature.  He                                                                   
stressed that  the intent needs to  be clarified if  it is to                                                                   
be a sub fund in the general fund.                                                                                              
Ms.  McDowell   noted  that  discussions  with   the  sponsor                                                                   
occurred  regarding an  assessment  of fishermen,  which  the                                                                   
legislature would  appropriated for  the intended  use. There                                                                   
was legal concern about the Commission's  taxing authority to                                                                   
implement  an assessment.  An  amendment would  be needed  to                                                                   
allow the Department of Revenue to collect the funds.                                                                           
HB  288  was   heard  and  HELD  in  Committee   for  further                                                                   

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