Legislature(2007 - 2008)BELTZ 211
05/08/2007 09:00 AM Senate STATE AFFAIRS
| Audio | Topic |
|---|---|
| Start | |
| HB8 | |
| SB144 | |
| SB40 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 8 | TELECONFERENCED | |
| += | SB 40 | TELECONFERENCED | |
| *+ | SB 143 | TELECONFERENCED | |
| *+ | SB 144 | TELECONFERENCED | |
| + | TELECONFERENCED |
SB 144 - TOURISM CONTRACT MATCHING FUNDS
9:07:43 AM
CHAIR MCGUIRE announced consideration of SB 144.
SENATOR STEVENS moved to adopt proposed committee substitute
(CS) to SB 144, labeled 25-LS0808\C, as the working document of
the committee. Hearing no objections, the motion carried,
placing Version C before the committee.
9:08:23 AM
MARIT CARLSON VAN DORT, Staff, to Senator McGuire, testified
that in 2001 the state privatized the functions of the tourism
marketing program by contracting with the Alaska Travel Industry
Association (ATIA). Previously the travel industry was promoted
by a membership organization comprised of the private sector and
state officials. Currently the Department of Commerce and
Economic Development (DCED) has contracted with the ATIA to
design and implement Alaska's tourism marketing program. Alaska
statute 44.33.125(a) currently requires a 50/50 match of state
general and private industry funds to finance the marketing
program. The recent passage of travel industry taxes has
generated significant revenue into the general fund and
eliminated the viability of raising private sector dollars
required to meet the 50 percent match, primarily coming from the
cruise industry. Without the commitment of the cruise industry
funding, ATIA's ability to successfully market Alaska is
compromised, particularly to independent travelers not
participating in tour packages. The independent traveler sector
has been stagnant or declining the last several years. The CS to
this bill would allow Alaska's travel industry to continue to
receive funds by temporarily changing the statutory match from
50/50 to 70/30 (state/private). This change would be repealed on
July 1, 2008. Additionally, the bill would create a nine-member
tourism task force operating from September to December of 2007
to investigate long term funding solutions. The purpose of the
temporary statutory change would be to insure maintenance of the
ATIA marketing budget thereby stabilizing visitor numbers while
allowing the state and industry to evaluate cruise industry
participation in the marketing program. The tourism industry,
one of the largest industries and employers in the state, has an
estimated 2.4 billion dollar annual economic impact. It is
essential to the state's economic well being to foster the
industry's growth. SB 144 strikes a good balance allowing the
industry to market itself in a time of financial uncertainty
without increasing further state expenditure. Unless the 70/30
match is passed, the ATIA will not be able to match the $5
million in the core budget.
9:12:54 AM
SENATOR BUNDE said he thought additional funds from the cruise
industry were still a possibility.
MS. VAN DORT replied that is correct, but if they don't this
provides funding to continue marketing for this year.
SENATOR BUNDE asked if the state increases its contribution
would the cruise ship industry provide additional money.
9:13:52 AM
MS. VAN DORT replied that the cruise industry was unhappy with
the passage of the cruise tax initiative and informally stated
that they will only market their own cruise packages.
CHAIR MCGUIRE said she offered the bill as a way to think about
this problem. Tourism is a growing, renewable industry that
brings many jobs and revenues to the state. If it is true that
the cruise industry won't contribute marketing dollars it will
significantly impact the marketing that benefits local
individuals.
9:16:03 AM
SENATOR BUNDE asked if the same fiscal note applies to the CS.
MS. VAN DORT answered that she assumes there will be a new
fiscal note because of the task force addition. Chair McGuire
added there is a Finance Committee referral to the bill.
9:16:54 AM
PATTI MACKEY, Chair, Board of Directors, ATIA, Ketchikan, said
the CS is a fair and reasonable solution to the industry's
immediate need. The bill also addresses the long term issue of
identifying the role of tourism economically and the amount of
investment the state should make to continue to assure tourism
as a viable industry. ATIA members have actively expressed their
concerns about the future of tourism marketing. Since the
millennium program legislation was passed the industry has
changed. The proposed match change is very important in this
time of uncertainty. The legislature's appropriation will be
available, but if ATIA cannot make the match some money may be
left on the table. She also supports the idea of the task force
to bring the parties together to discuss issues affecting the
industry.
9:20:30 AM
SENATOR STEVENS noted that in 2007 there was $5 million in state
funds and $5 million in private funds. He assumed that $3
million of the private funds contribution was from the cruise
industry and the $2 million was from everyone else.
MS. MACKEY explained the process for fund contributions.
Voluntary contribution levels are provided to ATIA's marketing
program through the cruise lines as well as from the visitor
bureaus, chambers, and tourism offices in local municipalities.
The cruise line percentage is based on a formula from the number
of berths available in Alaska. Cruise lines give almost $2
million in voluntary contributions and another half million for
advertising. The visitor bureaus in the state generate roughly
$500,000. The remainder comes from advertisement revenues in the
state vacation planner.
9:22:46 AM
SENATOR STEVENS asked for clarification on where the $2 million
dollars comes from.
MS. MACKEY replied that the money comes out of her budget and
goes to ATIA. She does not get credit for purchasing advertising
out of her budget. The money goes to ATIA to build the $10
million dollar statewide budget. Two million dollars comes from
voluntary contributions from the cruise industry.
9:23:39 AM
SENATOR STEVENS asked for further clarification on the $2
million dollars that is left after the cruise industry
contribution.
MS. MACKEY said the money comes from members who advertise or
buy services offered by ATIA.
CHAIR MCGUIRE added other ATIA members include hotels or tour
companies that are not connected to the cruise industry. ATIA
has been able to market Alaska tourism in a way that all members
have benefited. Now there is a concern that the cruise industry
will decide to handle its own marketing and stop contributing to
ATIA. Tourism is more than the cruise industry, but they have
provided a significant portion of the marketing money. She hopes
a task force can address this issue.
9:25:43 AM
CHAIR MCGUIRE said states like Hawaii spend huge amounts of
their state budget on tourism. She is not suggesting that other
parts of the state budget are not important, but it is fair to
ask what kind of investment the state should make in an industry
that contributes so much to the state's economy.
SENATOR BUNDE said last year the state share was $5 million and
the industry share $5 million. The proposed change is 70 percent
from the state and 30 percent from industry. Since the industry
now has $2 million would only one million dollars need to be
raised?
9:27:04 AM
MS. MACKEY answered that $2 million is what they expect to have.
LINDA ANDERSON, Lobbyist, Alaska Travel Industry Association,
said there is a one-time funding request for $3 million in the
senate budget that has not been decided. Right now, if this bill
passed, the ATIA budget would go from $10 million to $7 million.
Industry would have $2 million to draw the matching five,
leaving a $3 million hole. A funding problem still exists, but
at least the $5 million core budget of state funds is not left
on the table.
CHAIR MCGUIRE said efforts are being made to piece the budget
together.
9:29:03 AM
SENATOR BUNDE clarified that this bill would take care of $7
million and the industry is looking to the Finance Committee for
the additional $3 million.
SENATOR GREEN asked how the 70/30 split gets ATIA to $7 million.
Her calculations show they need to raise $2.5 million or $2.6
million.
MS. ANDERSON said she is assuming they will raise between $2
million and $2.5 million, but there are no assurances.
9:30:06 AM
CHIP THOMA, resident of Juneau, said it would be a dramatic
change to go from anything other than the 50/50 share which was
agreed upon. This kind of change requires a demonstrated need
and a logical advertising strategy for the future. He has not
seen ATIA come up with a strategy with substance. ATIA numbers
indicate maybe 100,000 people are affected by ATIA advertising
dollars. That means approximately $200 per couple are being
spent to get those people to come to the state. He thinks the
ATIA has failed to make a case that past state appropriations
were well spent or that increased funding is the simple answer.
Instead the ATIA blames the cruise ship initiative as the
probable cause of its funding woes, while ignoring the fact that
private advertising for cruises in Alaska now top $70 million
dollars a year. Market forces appear to be working naturally to
make the ATIA irrelevant in advertising for a $2 billion dollar
a year Alaska tourism industry. $100 million dollars worth of
advertising is done each year in Alaska by the private sector.
Governor Jay Hammond articulated the gold standard for state
funding of industry three decades ago, no subsidies. ATIA should
use its considerable marketing skills to raise monies for the
fifty percent share agreement they now enjoy before it dissolves
in the wake of the wealthy cruise industry.
9:33:27 AM
GERALD SHOLAND, President, B&B Association of Alaska, and Owner,
Kiana Bed and Breakfast, Homer, said many bed and breakfasts are
very small businesses that cannot afford to advertise worldwide,
therefore they support ATIA. His contribution to ATIA is part of
the $2 million that is raised from private industry. He noted
that Alaska is one of four or five states in the country whose
tourism marketing support is not funded completely by taxpayer
money. Competition for tourism is increasing worldwide. Of the
50 states, Alaska is in the bottom third of advertising dollars
spent with some states spending seven and eight times as much.
He believes the matching ratio for ATIA must be increased, if
not 100 percent taxpayer supported. If funding is not increased,
especially the matching ratio, some of the smaller tourism
businesses such as the bed and breakfasts may decrease in
numbers and revenues. He urges approval of the bill and the
enactment of the task force to address the issues addressed
today.
CHAIR MCGUIRE closed public testimony on SB 144.
9:36:30 AM
SENATOR BUNDE said the appropriate place for debating the
supplemental appropriation is in finance committee. Tourism is a
viable, important Alaskan industry. The question is how much the
state can afford. When the state is facing deficits, future
appropriations like this subsidy will have to be paid by taking
money from other state services. He questioned the long-term
outlook of the program under current financial projections.
Precedent will be set if a program is established where the
state picks up more of the costs. It would be unrealistic to say
the long-term future of this program is secure.
9:38:53 AM
SENATOR STEVENS moved to report CSSB 144(STA), from committee
with individual recommendations and accompanying fiscal note.
Hearing no objections, the motion carried.
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