Legislature(2001 - 2002)
04/08/2002 04:48 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
CSHB 288(FIN) am-LIMITED ENTRY BUY-BACK PROGRAM/ASSESSMENT CHAIRMAN TORGERSON announced HB 288 to be up for consideration. REPRESENTATIVE DREW SCALZI, sponsor of HB 288, told members that he looked at tools to revitalize the fishing industry. Since limited entry was instituted, a lot of efficiencies had been developed but some inefficiencies were developed as well. Those inefficiencies need to be evaluated. He stated: Buying back permits is certainly authorized under statute currently. To authorize a buy back, we have to do an optimum number study to determine what that number is. When CFEC asks the courts what the number is, the courts say go ahead and have a buy back and we'll tell you when you hit it. They will not tell you ahead of time what that optimum number is. But, currently under statute, if you do have an optimum number study, it automatically triggers a buy back. You can't turn back. CFEC, according to statute has to go through with a buy back. In a buy back proposal now you have to buy back the permit, the boat, the gear, skiffs, nets - everything involved in the fishery. That can be cumbersome and very expensive and it could be certainly a number that would be hard to hit, because every fisherman has different values to their gear to their vessels. So, it wouldn't be a simple task. What HB 288 does is it first of all lets an optimum number study come forward and not automatically trigger a buy back. But, what it would allow is the CFEC to develop a plan and take that to the public and see if it's worth implementing a buy back. It also does not require that the gear and the boat and the ex-wife and everybody that goes along with it has to be bought back. Only the permits may be bought back. It also makes it voluntary rather than mandatory. Currently, if you have an optimum number study, as I said, and you implement a buy back, it is a mandatory buy back. Being voluntary, this wouldn't keep someone from selling their permit and boat as a package, if they wanted to do. CHAIRMAN TORGERSON asked who set the assessments. REPRESENTATIVE SCALZI replied that the assessment is up to 7% and that is developed in the plan. CHAIRMAN TORGERSON noted that it says CFEC may establish the assessment by regulation and asked if that's what CFEC intends to do. REPRESENTATIVE SCALZI said he understood that CFEC already has the authority to set it but, under this provision, CFEC would have to develop a plan that went through public review first. It would have to be related to the numbers in each fishery and CFEC would be the best agency to know that. SENATOR STEVENS asked if optimum studies had been done on any salmon fisheries. MS. MCDOWELL, CFEC, replied that CFEC did one full-fledged optimum salmon study on the Sitka sac roe fishery and on Chatham Straits black cod. CFEC has just undertaken another optimum study on the Bristol Bay drift gill net fishery. Staff is just completing a survey to send to permit holders. She added that there is a buy back statute in current law that also functions, theoretically, with the assessment. The problem with the current statute is that the funding mechanism is unconstitutional because it creates a dedicated fund. She explained: So, the main feature of this bill is that it restructures the path the money would take to make it constitutional. Under the current statute it just says the commission will decide there needs to be a buy back. The commission does an assessment and creates a buy back program, which is a dedicated fund. The Department of Law has given us an opinion on that… She explained that the funding path would be similar to the aquaculture assessment or the ASMI 1% tax where CFEC would create a buy back program and a plan for it and adopt regulations establishing an assessment. The Department of Revenue would collect the assessment through fish tickets, just like the salmon enhancement tax. That money would go into the state treasury and the legislature could appropriate it back to CFEC to implement this fisheries program for which it was collected. It creates a constitutional funding mechanism for what they originally anticipate by the legislature. She noted regarding a question about the Entry Commission not having taxing authority, the Department of Revenue does so this bill fixes those problems. SENATOR WILKEN asked what an optimal study is. MS. MCDOWELL replied that by statute, when CFEC originally limits a fishery, it creates a maximum number of permits to target. After that, once the permits have been issued, CFEC can be petitioned if there's a belief that the fishery has either become too exclusive, is too small and lucrative or, it's over capitalized. CFEC can be petitioned to undertake an optimum number study where they do an economic analysis to determine the target number that would be the best number to meet the constitutional provisions of limited entry: not more exclusive than necessary to provide for conservation of the resource and the economic health of the fishery. SENATOR WILKEN asked if that method is used worldwide or whether it is an Alaskan invention. MS. MCDOWELL said she didn't know, but it is one of the provisions that keeps limited entry constitutional under our state constitution. She added that another important feature of this bill is that it defines optimum number as a range of numbers, which makes the process much more meaningful. Current statute just says optimum number. She added: If we have to choose one number - this is the perfect number of permits for this given fishery over all time - you can see how any variable could change and make that a pretty meaningless number - the price of fish, the strength of the run, the economics of the fishery. By giving us the authority to define optimum number as a range, we've got a target range so any of those variables can fluctuate a little bit and you're still in your target range and that's a valuable piece of this legislation. CHAIRMAN TORGERSON asked Representative Scalzi if he intended this to piggy-back on top of the previous legislation, HB 286. REPRESENTATIVE SCALZI said no, they're independent of each other. CHAIRMAN TORGERSON asked if they could both be in place at the same time. REPRESENTATIVE SCALZI they could and he noted that the industry is taxed pretty heavily. 4:55 p.m. CHAIRMAN TORGERSON said it looked like they were starting to be. REPRESENTATIVE SCALZI said the industry and members of UFA came up with the association idea and they were going to have to figure out whether they wanted to be taxed. SENATOR ELTON thought this bill is a little different in that there is an assessment to buy back permits, but the value of the permits that are held would probably go up at the same time, so he thought it would work out to be a wash. CHAIRMAN TORGERSON asked if under this program the permit would come back to the person who retired it. REPRESENTATIVE SCALZI indicated that was right. MR. DON JOHNSON, Soldotna, said he wanted to speak to the optimum number definition. He thought using a range is a good idea, but he believes the most important issue is that under AS 16.43.290, three points are used to qualify the optimum number, that being a single number or a range of numbers. The points are basically laid out by the commercial fishing industry. The first point is the economic health of the commercial industry; the second is the amount of harvestable fish to be taken efficiently; and the third is to avoid economic hardship in the commercial industry. He agreed that the optimum numbers keep limited entry constitutional but since the range was laid out by the commercial industry, the public, including subsistence users and the sport industry, need to be involved too. He thought the federal government would agree with him. MS. MCDOWELL responded that when they look at the optimum number, they look at the number of people in a given fishery harvesting a resource as it's been allocated by the Board of Fisheries, which decides what goes to sport and commercial, etc. In looking at an optimum number, they look at what has been allocated to that fishery and the number of participants in that fishery that can make a reasonable living. CHAIRMAN TORGERSON asked where in the legislation the public comments were covered and what process they would use if they were to implement the 7% assessment. MS. MCDOWELL replied: This bill directs us to, once we get an optimum number, at that point, assuming that you pass HB 286 as well as this bill, most likely what would happen is if we did an optimum number study that showed there were too many participants than the optimum number in the fishery, probably the first thing we would do is go to the industry and see if they plan to do something under HB 286. Are they going to among themselves work out a way to get the number of permits down? If not, that would leave us with this tool where we could then propose a plan…and then propose an assessment. The only mechanism that we, as an agency, have for doing things like that is by regulation. So, that presupposes we would propose regulations that would create that and then we would go through the entire public process. CHAIRMAN TORGERSON asked if CFEC does it through regulation only. MS. MCDOWELL answered that is correct. CHAIRMAN TORGERSON asked if CFEC promulgates regulations fishery by fishery. MS. MCDOWELL said it does. CHAIRMAN TORGERSON asked if they intend to wait until they have the money collected before buying the permits or whether they would enter into lease/loan agreements that they would pay based upon receiving the 7% income. MS. MCDOWELL said that question is one of the shortfalls of the buy back program. She explained: The best way for a buy back program to work would be if you had upfront money, whether it was funding from the state or the federal government, where you could do it all at once and then use an assessment to pay that back. I think that would be the ideal situation. We don't have lending authority. We would need statutory language for that. Otherwise the mechanism proposed here is an assessment and as you accrue the money, you do a buy back. But it would be much more effective to have upfront money that we could use. CHAIRMAN TORGERSON asked her to make sure that CFEC has the authority to receive federal funds to do this. SENATOR WILKEN moved to pass CSHB 288(FIN) am from committee with individual recommendations and attached fiscal notes. There were no objections and it was so ordered.
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