Legislature(2001 - 2002)
02/28/2002 01:54 PM FIN
* first hearing in first committee of referral
= bill was previously heard/scheduled
= 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 authorization. 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 program. 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 consideration.