Legislature(2001 - 2002)
04/30/2002 04:43 PM Senate FIN
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
CS FOR HOUSE BILL NO. 288(FIN) am
"An Act relating to commercial fishing limited entry permit
buy-back programs, to a permit buy-back assessment, and to
voluntary relinquishment of commercial fishing permits; and
defining 'optimum number.'"
This was the first hearing for this bill in the Senate Finance
Committee.
REPRESENTATIVE DREW SCALZI informed the Committee this legislation
addresses repurchasing commercial fishing permits. He stated that
current State statutes allow this buy-back provision; however, it
has been problematic and never implemented because "an optimum
number study has to be conducted in order to establish what the
economic level is that would support the fishery, but yet not go
below a certain level to not make it too exclusive." He continued
that once the optimum number study is completed, current statute
"mandates that there be a buy-back." He stated that similar optimum
number studies have been considered by different fisheries
throughout the State, but not implemented because of concerns
regarding the requirement to purchase the permits, coupled with the
inability to predict when the permits would become available. He
furthered that the current statute specifies that, in addition to
purchasing the commercial fishing permit, the fishing industry is
also required to purchase the vessels and gear.
Representative Scalzi informed the Committee that this bill would
allow for the purchase of the permit without the obligation to
purchase the vessel and the gear. He stressed that the bill would
additionally allow the buy-back to be studied "voluntarily" without
mandating a buy-back.
Co-Chair Kelly asked what funding source would be available for the
buy-back program.
Representative Scalzi responded that the State's Commercial
Fisheries Entry Commission envisioned creating a loan program to be
funded by a tax of up to seven percent assessed on the fishing
industry. He stated the tax would be collected by the Department of
Revenue.
MARY MCDOWELL, Commissioner, Commercial Fisheries Entry Commission,
Department of Fish and Game, stated the funding mechanism currently
in place for the buy-back program law is unconstitutional because
it mandates a dedicated fund to be funded by an assessment on
fishermen. She qualified that another problem with the current law
is that the Entry Commission would be responsible for collecting
the money assessed on the fishing industry for the dedicated buy-
back fund; however, the Commission does not have taxing authority.
Ms. McDowell elaborated that this proposed legislation would allow
the fund to operate similar to the operation of the Aquaculture
Assessment by Alaska Seafood Marketing Institute (ASMI). She
continued that the new process would entail the Entry Commission
undertaking an optimum number of permits study to determine whether
a buy-back program should be undertaken. Ms. McDowell continued
that if an optimum number study determined there were too many
permits in a fishery, a buy-back program would be established, and
the Commission would work with the industry to develop an action
plan to establish a tax levy for the fishermen. She stated this tax
would be assessed on the "fish tickets," a common practice for
levying taxes in the fishing industry by the Department of Revenue.
She stated the Commission would request the Legislature to
appropriate funds to the buy-back program; thereby, enabling the
fund to be a constitutionally approved funding mechanism.
Ms. McDowell continued that language currently under discussion in
HB 286 would create a mechanism whereby the industry could
establish its own program to buy-back permits, would allow the
Entry Commission the leeway to discuss options for the buy-back
funding source mechanism, and would allow for the establishment of
the assessment level. She remarked this process would essentially
tax the remaining fishermen who would be "making a better living"
because with fewer fishermen in the fishery, the remaining fleet
would, "hopefully, earn more revenue."
Senator Hoffman voiced concern that if a buy-back price for permits
is not determined, a reduction of the number of permits in a
fishery could result in the remaining permits becoming too
expensive.
Representative Scalzi replied this could occur; however, if a buy-
back plan were established, the individual fishermen could decide
if they wished to sell or purchase at the established price.
Senator Green asked for clarification whether individual fishermen
or a fishing industry group could participate in the buy-back plan.
Ms. McDowell explained that the State would establish a buy-back
plan and notify the industry that a pool of money would be
available to purchase permits. She noted that permit holders would
decide whether to sell their permits at the price established in
the plan, and that the number of permits bought back would be
determined by the amount of money in the pool.
Representative Scalzi stated the optimum number study is "the key"
to the program. He hypothesized that if 100 permits existed and the
study determined "30 to be the optimum number that could be bought-
back without making it an exclusive fishery," the industry could
decide to only buy-back and be assessed for 20 permits. He stated
"it is up to the fishermen remaining in the industry to control
their own destiny on how much they would want to pay." He reminded
the Committee that the current law gives the fishermen no choice,
little flexibility, and is not conducive for development of a plan.
Co-Chair Donley, referring to an Alaska Supreme Court case
regarding a limited entry program constitutional amendment, voiced
his understanding that there is a requirement for a buy-back
program whenever a fishery is endangered, and that the funding for
the buy-back program would be the responsibility of the people in
the industry. He asked if this legislation is consistent with that
ruling.
Ms. McDowell responded that the Court and the law have been
consistent in supporting the State Constitution regarding
protection from allowing a fishery from becoming too exclusive. She
stated that more harm would result from the fishery being too
exclusive than from having too many fishermen in the fishery. She
stressed that the study would assist in determining the optimal
number of permits, which is the constitutional concern. She stated
the limited entry program is constitutional as "long as it is no
more exclusive than necessary for the resource and the economics of
the fishery." She stressed that the study is crucial in this
determination.
Co-Chair Donley asked how the funding mechanism in this legislation
conforms to the Supreme Court ruling specifying that funds be from
the fishermen.
Ms. McDowell voiced uncertainty that the Court has established a
funding source; however, she noted the Court has determined that
the funding mechanism currently in place "doesn't work because of
the dedicated fund problem." She stated the proposed legislation
corrects this problem.
Senator Hoffman asked what factors are included in the
determination of the optimum number of permits.
Ms. McDowell informed the Committee that the optimum number study
could be a lengthy process and involves a full analysis of
biological and economic factors including such things as: the
average fish price; the average overhead including crew costs,
average earnings, average food costs and debt load. She continued
that the study takes into consideration net earnings, net costs and
biological factors.
Ms. McDowell stated that the definition of the term "optimum
number" is one of the most valuable components of this bill. She
explained this term "as being a range" instead of the current "one"
number; thereby allowing the number to vary based on a variety of
pertinent factors.
Co-Chair Donley asked if, in addition to the determination of the
optimum number, whether the number of permits considered for a
"threatened" fishery would affect the buy-back program.
Ms. McDowell stated that conservation is a primary consideration of
the buy back program, the other being to avoid economic distress of
the fishing industry. She stated "it is a balancing act" and the
optimum number takes these factors into consideration.
Co-Chair Donley asked how a threatened fishery affects the buy-back
equation under this legislation.
Ms. McDowell stated that "the balancing act" of conserving the
resource and ensuring a viable economic industry are taken into
consideration. She informed the Committee that there is also a
provision in this bill that allows individual permit holders to
relinquish their permits at any time.
Senator Hoffman asked, when talking about the fishery resource, if
the optimum number factors in subsistence fishing and the sport
fishing industry.
Ms. McDowell stated that the optimum number is based on what is
allocated to that specific fishery and whether "someone can make a
living and the resource can be conserved" within that fishery.
Senator Hoffman asked if the number is determined on a seasonal
basis.
Ms. McDowell qualified that this number does not vary year to year,
but rather is determined over time. She stated that if a fishery
experiences a considerable change, then another optimum number
study might be conducted.
Senator Hoffman asked who makes the determination that another
study is needed.
Ms. McDowell responded, "there is not a specific mechanism in
place" for determining what would trigger an optimum number study;
and, at this point, usually it would be a determination that "a
fishery is getting too exclusive or overloaded." She stated that
conducting an optimum number study "is a big undertaking" and would
require staff to "put other work aside."
Representative Scalzi stated this bill, along with HB 286, which
addresses Fishing Permits, Associations and Assessments, "are
viewed as tools by the industry to help them help themselves." He
stated there is no fiscal note accompanying this bill.
Representative Scalzi, referring to Co-Chair Donley's questions
regarding conservation of a fishery, noted this issue is addressed
in "the North Pacific Management Council under the Magnuson Act
which does have a buy-back provision for conservation purposes." He
stated the Magnuson Act also includes language specifying, "there
could be no re-allocation of the resource to another user group as
the resource has to be dedicated to pay that buy-back back." He
stated this is the only conservation buy-back proposal he is aware
of.
Senator Leman asked if this fund could include money from sources
other than the fishing permit holders as this process could affect
other groups.
Representative Scalzi stated the legislation does provide for this
option. He stated, "if he was going to be involved in a buy-back
program, he would want those checks and balances in to make sure we
are going to have enough of the wherewithal to pay it back." He
stressed this is the reason it is so important for the program to
be voluntary.
Senator Leman asked if the Department of Revenue recommendations
included in their March 5, 2002 fiscal note analysis were
incorporated in the bill.
Ms McDowell responded that those recommendations were adopted and
included in the CS for HB #288(FIN)am.
SUE ASPELUND, Executive Director, Cordova District Fishermen United
which represents fishermen and their families in the Cooper River
and Prince William Sound regions, testified via teleconference from
Cordova and voiced support for this bill. She stressed it includes
important changes to the existing buy-back program and is
appropriate to the changing needs of Alaska's fishing industry. She
urged the Committee to support the bill.
DON JOHNSON, testified offnet from Soldotna in support of the bill;
however, he voiced concern about the lack of a defined mechanism to
trigger a new optimum number study to be conducted, and asked for a
"more precise mechanism" to be determined. He then pointed out that
the legal definition for the optimum number of permits established
for a particular area, as defined under AS 16.43.290, is determined
by the economic health of the commercial industry, maintenance of
biological health of the fishery, and the economical hardship of
the industry. He voiced concern that the optimum number does not
factor in the public's viewpoint, and he suggested this also be a
consideration as subsistence needs and economic hardship of the
public is important. He continued this would also need to be
addressed in AS 16.43.300. He reiterated that the needs and desires
of the public should be a factor in the determination of the
optimal number of permits. He contended this is a good bill, but it
needs some "fine-tuning."
Ms. McDowell responded that once the Limited Entry Commission has
made its determination on what the optimum number should be, a
public comment period is required which would allow the public to
participate in the process.
Co-Chair Donley offered a motion to "move the CS for House Bill
288(FIN) amended from Committee with individual recommendations and
three accompanying fiscal notes."
There being no objections, CS HB 288(FIN)am was REPORTED from
Committee with a zero fiscal note, dated 2/01/02, from the
Department of Fish and Game; a zero fiscal note, dated 3/05/02,
from the Treasury Division, Department of Revenue; and an
indeterminate fiscal note, dated 3/05/02, from the Division of Tax,
Department of Revenue.
AT EASE 5:28 PM / 5:30 PM
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