Legislature(1997 - 1998)
04/06/1998 03:40 PM Senate RES
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HB 392 - REPORTS: FISH TAX & SALMON PRODUCTS
MS. AMY DAUGHERTY, Staff to Representative Alan Austerman, sponsor
of HB 392, said it addresses two types of reporting, exvessel value
and wholesale price. The most important part are the changes they
make to the wholesale price reporting. The size of the cans are
antiquated, so they changed the denominations of the cans. Section
Four also adds another reporting period, so this information can be
obtained on a more timely basis by people who make marketing
decisions with it.
The first three sections enable the Department of Revenue to
provide processor information needed by ADF&G and DEC. Currently,
ADF&G is able to share information they receive with DOR, but this
is not provided for in law. DEC currently is unable to access this
information from DOR as well, although they have legitimate needs
for it. Additional duplicative reporting may be established unless
we can maximize and coordinate information the State already
obtains.
SENATOR TAYLOR asked if DEC would use this legislation to increase
fees on processors.
MS. DAUGHERTY answered that the fees wouldn't necessarily increase,
but perhaps they would decrease.
SENATOR TAYLOR said since DEC lives of its fees, he hadn't seen a
decrease yet. Once they take away the floor they are having to
charge all processors as a set fee, he is concerned they will use
this as an opportunity.
SENATOR TORGERSON asked if this information is currently available
to DEC. He said he didn't know why they don't take the word of a
little operator that they are a little operator.
CHAIRMAN HALFORD noted that they are adding thermally processed to
the reporting requirements and fees and asked if they are totally
untaxed at this point.
MS. DAUGHERTY said this just deals with the wholesale price which
isn't where the taxation occurs at the dock. The thermal processing
is new language so everything is consistent with DEC and federal
regulations on this type of product.
CHAIRMAN HALFORD said we are amending this law to be consistent
with regulations and thought it was supposed to happen the other
way. He asked if there was any change to any processor by changing
the word "canned" to "thermally processed."
MS. DAUGHERTY answered that the bill speaks past canned, applying
to pouched as well as any other device.
CHAIRMAN HALFORD asked if that was previously taxed.
MS. DAUGHERTY answered that it has always been taxed, but this is
just for the reporting of the wholesale value. There are enough
loopholes that information on products was not reported. This
generalizes the information by the size of container in which the
salmon is sold.
Number 502
SENATOR LEMAN asked what is the purpose of this report if they
don't have reporting of frozen product. He asked if that showed up
somewhere else.
MS. DAUGHERTY answered that fishermen who approached them were
concerned mostly with pink salmon and how that goes through the
market and how the information gets compiled. She said that frozen
is not within this bill now.
CHAIRMAN HALFORD said he hoped someone from DEC could explain how
this system works. It looks like it's all full of holes and all
they are doing is changing the terminology.
SENATOR LEMAN asked where in the bill was the reporting on exvessel
value.
MS. DAUGHERTY said the only part that refers to exvessel value is
the part that seeks to let the agencies share information in
Sections One and Two.
SENATOR LEMAN asked what kind of information DEC would possibly
have access to. Would it be grouped information or down to raw
fish data and who catches it and where it's caught.
MS. DAUGHERTY said she thought the bill didn't have restrictions on
the information. She said Representative Austerman is far more
attached to the wholesale reporting than any raw fish data.
MR. BOB BARTHOLOMEW, Assistant Director, Income and Exise Audit,
Department of Revenue, said he understands that there are two
distinct objectives with the draft bill, one is bringing in a
provision from last year to streamline and become more efficient.
This is to save money to satisfy industry concerns that too many
agencies are asking for too many reports. They found that they
could not streamline the reporting parts, because there were
certain confidentialities. The information comes into their data
base and the information that's not confidential they pass on to
ADF&G and DEC. They also send them the applications because they
don't capture all of the data. There is a lot of information the
ADF&G and DOR use that is reported to both departments. As the
Department of Revenue, it is their intent that the only information
they would allow DEC access to is what they have already been
getting in current reports. They would, then, replace a Fish and
Game report with the unified report. It's the same with DEC. They
will not open up the tax information and let DEC come in and pick
what they want.
TAPE 98-25, SIDE B
But if they currently, in determining their fees, get volume and
value information, they would work with industry and DEC to
eliminate that report. Sections One and Two deal with three
agencies trying to find ways to combine reporting. They took the
lead on this and it seems to have worked. Three agencies use one
application; dealing with the reporting is phase two of it. There
are no changes in reporting requirements in terms of looking for
efficiencies.
The second part of the bill deals mainly with the objectives of
Representative Austerman. It has nothing to do with taxes or
values and is basically a reporting requirement the legislature has
placed on certain parts of the fishing industry and they needed
somebody to collect that data, compile a report, and release it.
That somebody was the Department of Revenue. They don't do a lot
with the information. It used to be strictly for canned salmon
twice a year. Certain fishermen requested information more often
in a different format and covering more than just canned salmon.
SENATOR HALFORD said the way he reads the reference section, there
is no confidentiality required because it says it's not a matter of
public record except as provided in AS 43.05.230 which says it has
to have the degree of confidentiality required by law which it
doesn't.
MR. BARTHOLOMEW said the intent is to make certain confidential
information available to DEC and to ADF&G and try to give some
assurance that that information will be kept confidential by making
them subject to the same confidentiality requirements as the
Department of Revenue.
CHAIRMAN HALFORD said there is some concern about the actual
language in everything that is passed under 230 (I) remains
confidential and he's not convinced that it works.
Number 521
MR. SCOTT MCALLISTER, Chairman, Southeast Regional Chapter of
United Salmon Association, said they are comprised of salmon permit
holders and high volume harvesters of pink salmon, chum salmon, and
red salmon. Their primary purpose is to recapture profitability
for the salmon harvest industry. One of their objectives in
achieving that goal is to become market oriented. It became
apparent to them a number of years ago that they had no standards
of measurement in the marketplace. In researching what their
options were, they came up with the WCPR reporting requirement in
this bill. It's their desire to see the language tightened up in
statute to close the loopholes that seem to be of concern to
harvesters. The old statutes had can sizes that are not used now
and the other purpose was to have reporting periods that were more
conducive to negotiation and settlement of a year-round contract.
This bill also adequately tightens up language with thermal
processed wording replacing the "canned" wording.
Number 46
SENATOR TAYLOR asked if there was somewhere in law where frozen
product is reported.
MR. MCALLISTER said it was in regulation, but not statute. They
don't get good information about frozen product, which is another
step.
SENATOR TAYLOR asked where egg sales are covered.
MR. MCALLISTER said the commercial operator's annual report that
ADF&G requires covers eggs.
SENATOR TAYLOR thought egg sales would be a higher revenue
generator than canned product is.
MR. MCALLISTER said that's true in some years on some species,
particularly with chum salmon. Processors say that the data base
isn't worth the paper it's reported on and it's not statutorily
required; there is nothing requiring them to be accurate and also
there is no auditing provision.
CHAIRMAN HALFORD said it looks like the title doesn't prohibit an
amendment that would deal with frozen product.
MR. MCALLISTER said a very good report that was generated for this
body in 1983 goes into the difficulties in condensing different
product forms down to reliable and accurate reporting requirements.
He would support that debate anywhere it would occur, but it would
not be in time for the upcoming fishing season which is almost upon
us.
Number 401
MS. JANICE ADAIR, Director, Division of Environmental Health, said
Mr. Bartholomew characterized the first three sections of this bill
very well. They have been involved in combining their permitting
applications and the reporting is the next step that the processors
have actually asked for.
The fisheries business tax, which is the information that would be
provided to DEC, is from people who engage in processing fisheries
resources for sale by freezing, cooking, salting, or other methods.
This bill does not give DEC access to any kind of catch records,
nor would they want that information. It is their intent to not
actually share paper with the Department of Revenue, but have
electronic sharing of processing amounts for purposes of main
categories. Right now, their processing permits are based on the
amounts of fish processed and are very large groupings. This is
because right now they do not have the authority to keep that
information confidential. They are subject to the public record
and have relied upon constitutional protection for trade secrets
when it comes to recipes and things like that that they have in
their files. So far they have been successful, but haven't wanted
to chance it with financial information. This bill would allow
them to have access to that information for purposes of determining
the appropriate permitting structure and placement in that
structure for different processors and that's all they want it for.
SENATOR LEMAN said that is all the information they should be
seeking, but to get to that number, is it possible that the
Department could claim that they need the underlying data which is
the actual raw data that the processor uses as a receipt to pay the
fishermen.
MS. ADAIR answered that she couldn't fathom that.
SENATOR LEMAN asked if they would be looking at other data relating
to that processor's sales, or deployments of vans, or something
else that demonstrates how much product is moving out of the
facility.
MS. ADAIR answered that they would be looking at how much they
processed.
SENATOR TORGERSON asked if they would base that on tons or numbers
of cans or what - to determine the size of the facility.
MS. ADAIR said they report this in pounds. That is the information
they would use and put it into categories like they have now for
permits.
SENATOR TORGERSON asked if they don't trust the operators now to
tell them how many pounds they process a year.
MS. ADAIR answered that they don't ask them now.
SENATOR TORGERSON asked why they don't instead of having the
legislature pass legislation that would open up confidential
records.
MS. ADAIR answered she didn't know why they would tell her.
SENATOR TORGERSON responded if their fee structure is based that
way, why wouldn't they.
MS. ADAIR answered that DEC couldn't keep it confidential.
SENATOR TORGERSON said their fee structure for restaurants is based
on how many people they sit and that's not confidential either.
MS. ADAIR responded that it's easy to see how many people a
restaurant can seat; it is a trade secret how much fish a processor
processes. All the seats in the restaurant are not full seven days
a week. You can't really glean how much money they are making
based on the number of seats, but you could figure out how much
money a processor is making by finding out how many pounds they
process and she didn't think it was appropriate for them to be
involved with that.
SENATOR TORGERSON asked if the processors are asking for this, but
they don't want each other to know what they are doing.
MS. ADAIR read an excerpt from a letter from the Southeast Alaska
Gillnetters Association saying they supported a fee assessment
based on poundage processed.
SENATOR TORGERSON asked if they have the authority to audit if they
suspect the poundage information was not correct.
MS. ADAIR said she didn't believe so.
SENATOR TAYLOR asked why DEC would, other than for structuring a
fee, have to know poundage. Wouldn't they rather know the number of
lines they had for canning processing, the number of tables and
cookers, the number of sinks and bathrooms, etc.
MS. ADAIR said he was right. There is a correlation between how
much fish is processed and all those other things. They base their
fees on how much time it takes them within a given plant in certain
broad categories of plants. They want the categories to be smaller
and once you break them down, you're looking at amounts that are
being processed.
SENATOR TAYLOR asked if they are just looking for ways to come up
with a new fee schedule.
MS. ADAIR responded that they are responding to a request made by
the public which has asked them to base their fees on something
they don't have access to. She thought it would lead to a fee
reduction for the smaller processors.
SENATOR TAYLOR said they could just as easily base their fee on the
number of employees at a plant.
MS. ADAIR said she didn't know what correlation she could make
between their processing services and the number of employees at a
given facility.
SENATOR TAYLOR said he was concerned that basing fees on the volume
of fish processed would be moving toward a straight tax.
MS. ADAIR said it is not their intent or the processor's intent,
but they are trying to get a better correlation between their
average amount of time spent in a plant and what that plant
actually looks like. Currently, their categories are broad,
because they are not able to keep the information confidential.
They are trying to get smaller categories that are more reflective
of those processors who are in that category. One of the ways to
do that is to look at how much fish is processed in a facility.
CHAIRMAN HALFORD asked what would happen to the fee if they freeze
the fish.
MS. ADAIR responded that their fees are different for different
kinds of processing. Thermal processing and smoking are the
highest fees, because that is more complicated and requires more
time. Fresh frozen has lower fees.
CHAIRMAN HALFORD asked how they knew processors were not lying
about how much they froze.
MS. ADAIR answered if they have facilities for smoking and canning,
they are inspected at a higher frequency.
CHAIRMAN HALFORD clarified his point was that they have a lot of
reporting for thermally processed fish and not for frozen fish.
SENATOR TAYLOR said he thought the majority of lobbying for this
bill is coming from the smaller processors who are getting hit with
the same fee that they are charging the big processors.
MS. ADAIR said that was not the case and that the smaller
processors don't pay as much as the large ones do.
SENATOR TAYLOR asked if everyone wanted the fee based on the volume
of fish produced.
MS. ADAIR answered that wasn't true, but the lobbying was coming
from only one group.
SENATOR TAYLOR asked why they didn't just charge $100, $200, and
$300 for the small, medium, and large processors and come back to
the legislature for general funds which is the way it used to be
done.
MS. ADAIR said that is not how they budget and set fees and she
would be happy to go over the process with him. No one pays the
full cost to the Department of the time involved in inspections and
permitting. The fees cover only about 30 percent of the seafood
processing program.
SENATOR TAYLOR asked if there was assurance in this legislation
that that same 30 percent of cost would be reflected in the future.
He asked how he would know they weren't getting 100 percent of
their cost in the future.
MS. ADAIR responded that the Legislature had to approve, through
the budget process, any department's ability to receive and expend
fees.
SENATOR TAYLOR parried that was called program receipts and didn't
count as general funds, anymore, and no one gets denied their
program receipts.
MS. ADAIR responded that program receipts are only considered
designated program receipts if they cover the entire cost of a
program. DEC has a statutory prohibition on covering the travel
costs of the programs through fees. Their program receipts are
considered general funds and they have had increases denied.
CHAIRMAN HALFORD said they would have staff work on this bill
further.
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