02/23/2021 10:00 AM FISHERIES

          HB 80-SPT FSH HATCHERY FACIL ACCT; SURCHARGE                                                                      
                                                                                                                                
11:46:03 AM                                                                                                                   
                                                                                                                                
CHAIR STUTES announced that the  final order of business would be                                                               
HOUSE  BILL  NO.  80  "An  Act  establishing  the  sport  fishing                                                               
hatchery  facilities  account;  establishing  the  sport  fishing                                                               
facility surcharge; and providing for an effective date."                                                                       
                                                                                                                                
11:46:17 AM                                                                                                                   
                                                                                                                                
CHAIR STUTES made introductory remarks on  HB 80 on behalf of the                                                               
prime sponsor  [House Rules by  request of the  governor], noting                                                               
that the bill  is the Alaska Department of Fish  & Game (ADF&G's)                                                               
top  legislative  priority and  had  been  introduced during  the                                                               
previous legislative session and was  not passed due to COVID-19.                                                               
She  stated that,  because the  bill  did not  pass the  previous                                                               
session, the  sport fishing hatchery  surcharge had  been allowed                                                               
to sunset  and millions of  dollars of revenue was  not collected                                                               
by the department.  She urged quick action by the committee.                                                                    
                                                                                                                                
11:47:07 AM                                                                                                                   
                                                                                                                                
MR.  RUTZ testified  during the  hearing on  HB 80.   He  offered                                                               
remarks from  written testimony, which read  as follows [original                                                               
punctuation included]:                                                                                                          
                                                                                                                                
         This is a governor's bill that the Department                                                                          
     supports, and it is one of our legislative priorities                                                                      
     this session.                                                                                                              
                                                                                                                                
     A little background - in  2005 the legislature approved                                                                    
     a bond measure to  construct two sport fish hatcheries,                                                                    
     the William  Jack Hernandez in  Anchorage and  the Ruth                                                                    
     Burnett in Fairbanks.                                                                                                      
                                                                                                                                
     In order  to receive the  bond, the Department  of Fish                                                                    
     and   Game   crafted   a  repayment   plan   that   was                                                                    
     unprecedented. A  surcharge was added to  sport fishing                                                                    
     licenses,  nearly   all  of  which  went   directly  to                                                                    
     repayment of  the bond, less  $500K which went  to SEAK                                                                    
     annually for  hatchery production, since this  area was                                                                    
     not  serviced   by  the  two  bonded   hatcheries,  yet                                                                    
     fishermen paid  the surcharge. No general  fund dollars                                                                    
     were used to  pay back the bonds,  sport angler dollars                                                                    
     matched  by federal  DJ paid  the bill.   The  combined                                                                    
     enhancement   program   that   the   surcharge   funded                                                                    
     contribute  approximately 250M  to the  economy of  the                                                                    
     state.                                                                                                                     
                                                                                                                                
     This  unique plan  worked SO  well that  the department                                                                    
     paid this  bond back  5 years  early, in  Calendar Year                                                                    
     2020.  As a  result, the  surcharge and  all associated                                                                    
     statutes sunsetted on December 31, of 2020.                                                                                
                                                                                                                                
     Upon  the   repayment  of  bond  debt,   there  was  an                                                                    
     immediate  $500 thousand  funding  impact to  Southeast                                                                    
     Alaska from  loss of the surcharge  income, which funds                                                                    
     the raising  and releasing of over  1.4 Million Chinook                                                                    
     salmon  and  hundreds of  thousands  of  coho smolt  at                                                                    
     release  sites targeted  to  benefit  sport anglers  in                                                                    
     Southeast inside  waters. Losing this level  of funding                                                                    
     to  support  existing  enhancement activities  will  be                                                                    
     detrimental  to  Southeast  Alaska  sport  anglers  and                                                                    
     charter  operators  which   have  been  already  highly                                                                    
     impacted  by lack  of  out of  state  travelers due  to                                                                    
     Covid travel restrictions.                                                                                                 
                                                                                                                                
     As you  can see  from the fact  sheet in  your packets,                                                                    
     the  overall sport  fish  enhancement programs  release                                                                    
     nearly  7.2  million  fish into  nearly  270  locations                                                                    
     annually,  that  in  addition to  the  1.4  Million  in                                                                    
     southeast  which  provides  thousands of  anglers  with                                                                    
     additional  fishing  opportunities  providing  a  large                                                                    
     economic boost to SE business.                                                                                             
                                                                                                                                
     When the  Ruth Burnett and William  Jack Hernandez came                                                                    
     online, nearly $5 million  of Dingell-Johnson funds had                                                                    
     to be redirected  in order to pay  for their operations                                                                    
     and maintenance. Any needed  repairs and maintenance to                                                                    
     date  have come  from existing  operating budget  funds                                                                    
     and  is  usually  done  so  at  the  expense  of  other                                                                    
     division needs.                                                                                                            
                                                                                                                                
     There  are also  several larger,  more expensive  needs                                                                    
     that were deferred during construction  and have yet to                                                                    
     be  addressed. Of  course, as  the facilities  age, the                                                                    
     maintenance  needs  will  grow  this  will  likely  put                                                                    
     further  undue burden  onto  existing programs.  Having                                                                    
     the  ability to  tap into  a source  of funds  to cover                                                                    
     these  needs   will  allow  the  Division   to  sustain                                                                    
     existing   enhanced    production   without   impacting                                                                    
     elsewhere.                                                                                                                 
                                                                                                                                
     With these ongoing maintenance  obligations and loss of                                                                    
     a substantial  amount of revenue to  support sport fish                                                                    
     enhancement in  SE Alaska,  the department  worked with                                                                    
     groups  across  Alaska  to  propose  a  new  plan  that                                                                    
     reinstates a reduced surcharge  to support these needs.                                                                    
     The reduction  to what  was being  collected previously                                                                    
     is $5  across the board.  This leaves residents  with a                                                                    
     $4  surcharge and  nonresidents contributing  the lions                                                                    
     share, over 6x what  residents contribute. The proposed                                                                    
     surcharge would be a  60percent reduction for residents                                                                    
     and  overall a  34percent  decrease  from the  original                                                                    
     surcharge fee. In  your packets you will  see a license                                                                    
     fee breakdown.                                                                                                             
                                                                                                                                
     The   department  proposes   to   again  collect   that                                                                    
     surcharge  and deposit  it into  a separate  subaccount                                                                    
     within the fish  and game fund to be  accounted for and                                                                    
     used  only for  the maintenance  and operations  of the                                                                    
     state's sport fish hatchery  facilities, and sport fish                                                                    
     enhancement in SE Alaska.                                                                                                  
                                                                                                                                
     There  was,  on  average,  $6.4  Million  generated  in                                                                    
     revenue  from surcharge  collections  on sport  fishing                                                                    
     licenses. The reduction in surcharge  would net the DSF                                                                    
     about 4M/CY. The Division  currently allocates a little                                                                    
     over $7.0  Million to enhancement related  programs and                                                                    
     projects  across the  Division  with most  tied to  the                                                                    
     Operations and  Maintenance at  the 2  large facilities                                                                    
     in Fairbanks and Anchorage.                                                                                                
                                                                                                                                
     Establishing  this  new reduced  enhancement  surcharge                                                                    
     would  cover  most  of  the  existing  costs  allocated                                                                    
     toward the enhancement programs.  It would also address                                                                    
     deferred  equipment and  maintenance needs,  and ensure                                                                    
     contingency funds  are available for  unforeseen events                                                                    
     at  these  facilities  without  having  to  go  to  the                                                                    
     legislature for supplemental, or  worst case, shut down                                                                    
     the facilities.  This same Bill was  also introduced in                                                                    
     2019 to  be heard during the  2019-20 state legislative                                                                    
     session   but  with   the   pandemic   in  full   swing                                                                    
     unfortunately it was not meant to be.                                                                                      
                                                                                                                                
11:55:50 AM                                                                                                                   
                                                                                                                                
CHAIR STUTES stated that the  surcharge had been in existence for                                                               
some time  prior to the  sunset, and the department  is currently                                                               
requesting only  a portion of  the surcharge be reinstated.   She                                                               
postulated that  if the entire  surcharge were to  be reinstated,                                                               
then  the department  would collect  an estimated  $2 million  in                                                               
additional revenue  than the  current proposed  legislation would                                                               
provide.   She added  that the  department has  well-known budget                                                               
shortages and  that 82 percent  of the revenue is  collected from                                                               
nonresident anglers.   She  asked the  department to  explain why                                                               
only a portion of the surcharge is requested to be reinstated.                                                                  
                                                                                                                                
MR. RUTZ explained that in  2005, the department had conveyed its                                                               
intention that the  surcharge would be eliminated  once the bonds                                                               
had been fully repaid.  He  stated his intention on behalf of the                                                               
department  that it  should not  appear [to  the industry]  to be                                                               
greedy.                                                                                                                         
                                                                                                                                
11:57:51 AM                                                                                                                   
                                                                                                                                
CHAIR  STUTES stated  that things  have changed  since 2005  and,                                                               
during   the   previous   legislative   session,   the   proposed                                                               
legislation had  been amended to include  additional surcharge to                                                               
be collected.   She  expressed her  concern that  HB 80  does not                                                               
request sufficient revenue to cover the program.                                                                                
                                                                                                                                
11:58:41 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE  MCCABE  stated  his   support  for  the  hatchery                                                               
program  and  requested  that  the   department  provide  a  cost                                                               
breakdown  by facility  for deferred  maintenance  that had  been                                                               
referred to in testimony.                                                                                                       
                                                                                                                                
11:59:50 AM                                                                                                                   
                                                                                                                                
MR. RUTZ directed  attention to a cost breakdown  included in the                                                               
committee  packet.   He estimated  that $5  million of  sportfish                                                               
funds had  been spent on the  program, with $3.4 million  for the                                                               
William  Jack  Hatchery  and  $2 million  for  the  Ruth  Barnett                                                               
Hatchery.  He  stated that cost overruns  during the construction                                                               
of  the hatcheries  had resulted  in incomplete  construction and                                                               
deferred  costs.   He  gave examples  of  maintenance items  that                                                               
included wells,  disinfection units  for production  modules, new                                                               
trucks, and completion of visitor center facilities.                                                                            
                                                                                                                                
12:01:56 PM                                                                                                                   
                                                                                                                                
CHAIR  STUTES pointed  out that  the  committee packet  contained                                                               
itemized costs for projects and  requested the department provide                                                               
a cost estimate breakdown by facility.                                                                                          
                                                                                                                                
MR.  RUTZ agreed  to  provide the  requested  information to  the                                                               
committee.                                                                                                                      
                                                                                                                                
12:02:38 PM                                                                                                                   
                                                                                                                                
REPRESENTATIVE  STORY  asked  for  the department  to  provide  a                                                               
formula or  revenue analysis depicting how  the surcharge revenue                                                               
proposed  would  be  allocated according  to  the  facility  cost                                                               
breakdown that the  department had agreed to provide.   She asked                                                               
for  the  department to  also  provide  a breakdown  of  economic                                                               
development and impact to the state from the hatchery program.                                                                  
                                                                                                                                
12:03:16 PM                                                                                                                   
                                                                                                                                
CHAIR STUTES  stated her  intention to  offer a  future committee                                                               
substitute to HB 80.                                                                                                            
                                                                                                                                
CHAIR STUTES announced HB 80 was held over.