Legislature(2003 - 2004)
02/03/2004 01:30 PM Senate L&C
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* first hearing in first committee of referral
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+ teleconferenced
= bill was previously heard/scheduled
SB 273-ASMI BOARD/ SEAFOOD TAXES & ASSESSMENTS
CHAIR CON BUNDE called the Senate Labor and Commerce Standing
Committee meeting to order at 1:30 p.m. Present were Senators
Seekins, French and Chair Bunde. Senator Davis was excused.
Senator Stevens arrived at 1:31 p.m. The first order of business
to come before the committee was SB 273.
SENATOR GARY STEVENS, sponsor of SB 273, said the Joint
Legislative Salmon Task Force had worked on this bill and it had
also been discussed in his marketing subcommittee. He commented:
Very quickly it was apparent to all of us that the
Alaska Seafood Marketing Institute (ASMI) is the focus
of marketing for Alaska seafood. It's a very important
element in the industry and whatever we do to it, we
didn't want to damage it any more than it has been.
But because of the loss of funding, primarily through
salmon, the loss of the value of salmon as well as the
volume, that has had an impact on ASMI. So we looked
at the bottom line. We realized that ASMI - I believe
and the committee believed, as well as the task force
- that we need to keep around $7 million coming into
ASMI annually - plus assuming another $2 million will
come in from the federal funding, as well - in order
to allow ASMI to do the job it is supposed to do -
which is to market seafood products from Alaska. They
are the generic marketer and do a very important job.
SENATOR STEVENS said one of the most contentious elements in SB
273 is the reduction in the size of the board from 25 members to
nine. His own experience on large membership boards and
observations at ASMI's twice-yearly meetings illustrate how
difficult it is for 25 members to make decisions and move ahead.
Nine is not a magic number, but he could defend nine members as
being efficient and the number could always be increased.
Second, ASMI needs to bring in $7.3 million annually to function
properly. Currently, salmon fishermen have a 1 percent tax.
Knowing the industry is in crisis, he argued to the salmon
fishermen that it should be reduced to .5 percent; but almost to
a person, they supported marketing and didn't want to reduce
their tax.
SENATOR STEVENS recapped that SB 273 changes the board from 25
to nine members, keeps the 1 percent salmon tax, establishes the
.3 of 1 percent processors' tax as mandatory instead of
voluntary and levies a new tax on all other seafood products.
The 1 percent salmon tax brings in $1.672 million, the
processors' tax would bring in $3.112 million and all other
species would bring in $2.610 million. He advised the committee
to keep an eye on the bottom line and not reduce taxes below $7
million. ASMI's current $4.5 million budget is less than it
needs to do an adequate job.
CHAIR BUNDE asked Senator Stevens to expand on the controversy
surrounding the size of the board.
SENATOR STEVENS elaborated that there are many elements in the
fishing industry, all wanting to know how they are represented.
If all were represented, the board would have 125 people instead
of 25.
You have to assume that a board of nine or whatever
the number might be...that the governor appoints and
we approve, would really be looking at the whole
industry.... I think you have to have a board that
represents the whole state and when they're appointed
realize they are statesmen, in a way, and not just
representing their own particular interests....
He suggested the best solution for getting the board down to
nine members, and one that he has already talked over with the
administration, is for the governor to ask for all the current
members to resign and then establish an entirely new board.
CHAIR BUNDE reminded the committee that ASMI's constitutionality
had been an issue in the past and asked if there had been
discussion about SB 273's constitutionality.
SENATOR STEVENS said he hadn't heard anything about that issue.
SENATOR SEEKINS asked if the board members were appointed or
nominated by the governor for legislative approval.
SENATOR STEVENS replied that board members are appointed by the
governor.
CHAIR BUNDE added that the board members are not confirmed by
the Legislature.
SENATOR SEEKINS said he didn't know why the word "nominee" on
page 1, line 14, is used if the nominee wasn't subject to some
sort of approval. He then surmised it was because the
nominations were made by people other than the governor. He
asked why salmon is taxed at 1 percent and all other seafood
products are taxed at only .3 of 1 percent.
SENATOR STEVENS replied that the current tax structure taxes
salmon at 1 percent because salmon fishermen are aware of the
importance of marketing and see no reason to reduce it.
SENATOR SEEKINS asked if he had received any feedback from the
"others" who were going to have a mandatory tax.
SENATOR STEVENS replied that one of the responses was:
You know, I've never put money into ASMI, so I can't
complain about what ASMI is doing and actually I
wouldn't mind it if some of my taxes went to ASMI,
because then I would have expectations of what ASMI
does with that money and I could have some demands on
how that money is spent.
Other responses from various processing firms and fishermen
indicated they don't want any new taxes.
SENATOR SEEKINS reflected that the salmon industry is more
distressed than the rest, yet they [salmon fishermen] are paying
the most. He asked if other segments of the industry need the
marketing support as well or is this assessment meant to be
industry's contribution to the salmon marketing effort.
SENATOR STEVENS clarified that even though fishermen of other
species have not been taxed, the processors of those species
have. He estimated that twice as much money would be coming to
ASMI from the processors than from salmon fishermen and almost
half again as much from fishermen of other species.
1:47 p.m.
SENATOR HOLLIS FRENCH asked Senator Stevens to elaborate on the
elimination of the geographic distribution requirement for board
members.
SENATOR STEVENS replied that other fishing organizations in the
state, like the North Pacific Fisheries Management Council
(NPFMC), operate with fairly small boards and don't
geographically divide up the state for their board membership.
By dividing the state geographically, the board could
conceivably end up with all salmon fishermen on it instead of
other parts of the industry being represented. "If you really
try to be totally representational by gear type, by fisheries,
by geographical area, that way leads to insanity."
SENATOR FRENCH surmised that another danger might be having a
nine-member board whose members are all from the Lower Cook
Inlet and asked what in the bill would keep that from happening.
SENATOR STEVENS replied that that responsibility is on the
shoulders of the governor who does the appointing.
MR. RAY RIUTTA, Executive Director, Alaska Seafood Marketing
Institute (ASMI, said ASMI supports SB 273 and thanked everyone
for their efforts to help identify the problems it is facing. He
related how ASMI has become extremely dependent on federal
grants and how the value of [wild] salmon has decreased while
the world markets have been flooded with farmed salmon. Funding
that comes from the industry to ASMI has decreased in proportion
to that decrease in value. Federal grants have been taking up
that slack for a number of years, but one grant for $1 million
ends this year and won't be repeated. Another grant for $2
million is carrying ASMI through this year and partially into
next year, but its continuance beyond that is in question.
MR. RIUTTA projected that ASMI would receive $2 million to $3
million in federal grants to fund its market access program
(export program overseas) and very little other money to support
domestic marketing operations. He said the board figures ASMI
needs a $10 million to $11 million annual budget. ASMI is not
asking for an increased budget, but a stable budget that doesn't
fluctuate wildly with the swings of the fisheries market. With
the estimated $2 million in federal funds, it needs $7 million
to $8 million of additional baseline funding. The white fish
industry is having the same problems as the salmon industry did
10 years ago. Part of the across-the-board assessment is to help
address that problem.
SENATOR SEEKINS asked if the red meat scare had any effect on
demand for seafood.
MR. RIUTTA replied that it is too early to measure, but people
are increasingly moving from red meat to seafood. The
marketplace for seafood has great opportunities in the months
ahead.
MR. BRENT PAINE, Executive Director, United Catcher Boats (UCB),
Anchorage, said they had been in existence for 11 years and are
primarily based in Seattle. They represent most of the catcher
vessels that fish for Pollock and cod and half their vessels
fish for crab in the Bering Sea. There are 63 member vessels
from the roughly 112 catcher boats that fish the Bering Sea for
pollock and cod and the 300 vessels that fish for crab. UCB is
primarily involved with fisheries at the federal level and less
at the state level, since National Marine Fisheries Service is
the primary manager of their fishery.
UCB strongly opposes increased taxation on their fleet for
marketing services by ASMI for ground fish at this time. He
informed them that the pollock fleet in the Bering Sea harvests
roughly 600,000 metric tons of pollock a year and they would be
responsible for paying almost half of the increased taxation or
almost $1 million.
Members' concerns include not knowing what the money would be
used for and that it would address problems in the salmon
industry, not in the white ground fish industry. They don't like
filling in the gap to solve the falling revenues of salmon
fishermen. Marketing of their products is done at a private
level through the producers of the final product made from the
fish that they catch.
MR. PAINE bewailed the fact that this measure is taxation
without representation because most of the Bering Sea fishermen
are not Alaskan residents. Further, shrinking the size of the
board doesn't allow for representation of all fisheries that are
being taxed.
MR. PAINE pointed out that the UCB is made up of fishermen and
not marketing experts and he felt that the board needed to be
made up of professional marketing people, not necessarily
fishermen or processors.
SENATOR SEEKINS asked him to repeat what percentage of his fleet
is Alaska owned.
MR. PAINE replied that the fleet that fishes in the Bering Sea
is probably about 95 percent non-Alaskan.
2:00 p.m.
MS. DONNA PARKER, F/V Sea Storm, said she and her husband fish
for pollock and cod and also own a gillnetter in Southeast
Alaska. She is the former fisheries liaison with ASMI and helped
draft the original legislation.
She suggested making all the assessments in SB 273 voluntary and
felt that the duties of the board should be expanded to all
seafoods on a species by species basis. Finally, language in SB
273 proposes to tax the boat, the permit, the quota and all the
deck hands and she favored an assessment on the vessel only
because:
Having been a fisherman for many years in Kodiak, I
know how it filters down to the back deck. These costs
are taken off of the top, so we would pay for it at
that point - on the expenses of the boat, then taken
off the top in terms of expenses for the quota and by
the time it got down to us who are on the back deck,
we already would have paid for two or three times. So,
I think that language should be amended to be a
specific assessment to the vessel.
CHAIR BUNDE responded that Senator Stevens was making notes of
her concerns for further discussion.
MR. BRUCE SCHACTLER, Marketing Chairman, United Fishermen of
Alaska, said he is also president of the United Salmon
Association. He felt the tax proposal was fair and had heard the
white fish industry vigorously asking for money to begin
addressing the marketing problems they foresee in their
industry. While he supported a smaller board, Mr. Schactler felt
that the issue should be dealt with in separate legislation,
because it wasn't connected to taxation at all.
CHAIR BUNDE thanked everyone for their testimony and asked
Senator Stevens to notify him when he was ready to hear the bill
again.
SENATOR STEVENS thanked ASMI members for their input and
reiterated that the real goal is to establish stable long-term
funding so that ASMI can continue to operate into the future.
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