Legislature(2001 - 2002)
01/30/2002 01:35 PM House FIN
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE FINANCE COMMITTEE
January 30, 2002
1:35 PM
TAPE HFC 02 - 17, Side A
TAPE HFC 02 - 17, Side B
TAPE HFC 02 - 18, Side A
TAPE HFC 02 - 18, Side B
CALL TO ORDER
Co-Chair Williams called the House Finance Committee meeting
to order at 1:35 PM.
MEMBERS PRESENT
Representative Eldon Mulder, Co-Chair
Representative Bill Williams, Co-Chair
Representative Con Bunde, Vice-Chair
Representative Eric Croft
Representative John Davies
Representative Richard Foster
Representative John Harris
Representative Bill Hudson
Representative Ken Lancaster
Representative Carl Moses
Representative Jim Whitaker
MEMBERS ABSENT
None
ALSO PRESENT
Representative Fred Dyson; Representative Gary Stevens;
Representative Vic Kohring; Cheryl Frasca, Municipality of
Anchorage, Anchorage; Brad Pierce, Office of Management and
Budget, Office of the Governor; Dale Fox, Chairman, Alaska
Travel Industry Association; Dennis Brandon, Alaska Travel
Industry Association; Paul Cauter, Alaska Travel Industry
Association; Mike Windred, Alaska Travel Adventure, Juneau;
Kirk Hoessle, Alaska Travel Industry Association, Girdwood;
Bruce Bustamante, Anchorage Business Convention Business
Bureau, Alaska Travel Industry Association, Anchorage,
Sharon Crisp, City of Valdez; Sharon Crisp, City of Valdez;
Sharon Crisp, City of Valdez.
PRESENT VIA TELECONFERENCE
There were no teleconference testifiers.
SUMMARY
HB 349 "An Act relating to agency programs and financial
plans."
HB 349 was REPORTED out of Committee with a "do
pass" recommendation and with a zero fiscal note
by the Office of the Governor.
HB 359 An Act making a supplemental appropriation for
tourism marketing efforts; and providing for an
effective date.
HB 359 was REPORTED out of Committee with a "do
pass" recommendation and with a House Finance
Committee Letter of Intent.
HOUSE BILL NO. 349
An Act relating to agency programs and financial plans.
REPRESENTATIVE FRED DYSON, SPONSOR, spoke in support of the
legislation. He maintained that [results based budgeting]
would provide the Administration with the best available
information. He provided members with an example of the
results based budgeting system used by the Municipality of
Anchorage: "Facility Management" (copy on file). He noted
that he used the budget system contained in the document
when he was on the Anchorage Assembly. He explained that
municipal departments present their activities and outputs
in decreasing levels of priority.
CHERYL FRASCA, MUNICIPALITY OF ANCHORAGE, ANCHORAGE,
provided information on the results based system used by the
Municipality of Anchorage. She discussed page 8 of the
handout. She explained that the funding line would be
similar to the state caps. Everything above the line would
be funded; everything below the line would not be funded. If
the funding level changes the funding line would move
upward, leaving more unfunded programs. If a service were
integral to the priority it could be moved up the funding
level. If there were a funding surplus the funding level
could be moved down.
Ms. Frasca explained that some departments list debt service
as their first priority; some departments prioritize their
commissioner's office; others set their core functions as
their first priority. She explained that the codes could
identify mandated services. She emphasized the need to
identify the level of funding mandated.
In response to a question by Representative Dyson, Ms.
Frasca acknowledged that the administration of the funding
process is complicated. Infrastructure must exist for the
system to work. She pointed out that information could be
presented in this format without acquiring the
infrastructure. The information can be used to provide clear
guidelines to the departments in respect to what a service
level should look like. She stressed the need to define
activities and to give definition and division of service
levels. The Anchorage Municipal Administration and Assembly
negotiated the use of funding level budgeting.
Representative Dyson asked if the state of Alaska could buy
software from the Municipality of Anchorage. Ms. Frasca did
not think that the software would be suitable. She observed
that they are looking at new systems.
Vice-Chair Bunde questioned if there is any reason the
system could not be adapted and moved to a state level. Ms.
Frasca responded that it is a good model to present to the
legislature and citizens because it shows the level of
service. She acknowledged that it would take time to
implement fully, but noted that it could be used as a
communication tool without actually producing the budget.
Vice-Chair Bunde asked what would keep departments from
placing a core function as number 10 and a burecratic
function as number one. Ms. Frasca responded that it is
important that the ranking process have integrity. She noted
that the legislature could rearrange the ranking to reflect
legislative priorities. The legislature would have the units
of information specific to the activities.
Representative Hudson noted that budgets are nothing more
than estimates of what are needed and what will be available
to meet the needs of the state on an annual basis. He asked
if the mayor has flexibility to meet emergencies and in
relationship to nonproductive items in the budget.
Ms. Frasca noted that there is flexibility to move money
within the departments.
Representative Hudson noted that information is presented in
a positive format and emphasized that lawmakers need to know
the negatives. He asked if there is an opportunity for the
departments to indicate the downside of not funding a
function for the public record. Mr. Frasca observed that
there are work sessions where department directors have an
opportunity to answer questions. This is an opportunity to
focus on what is below the funding line.
Representative Croft referred to municipal priorities on
pages 3 - 4. He agreed that it made sense to place services
into components but emphasized that it is the legislature's
duty to set the priorities.
Representative Dyson acknowledged the concern. He stressed
that it makes sense for those that are doing the work to
take the first cut at setting the priorities. He pointed out
that the Assembly has the opportunity to change the position
of items on the priority list. He pointed out that they have
the information available to understand the effect of
changes.
In response to a question by Representative Croft, Ms.
Frasca noted that the most important items are ranked on the
front page, but that those items near the cut line are the
most vulnerable. The department submits the rankings in the
mayor's budget. The funding line is drawn based on the
Assembly's approval.
Representative Croft questioned how often the Assembly
changes the rankings. Ms. Frasca noted that the Assembly
might choose to fund something that is below the line. The
department would rank the item the next year based on
available funds.
Representative Croft suggested that reductions are unlikely
to be done as cleanly as presented in the handout. He
pointed out that [if park maintenance were below the cut
line] it would be unlikely that all the maintenance for the
226 parks would be deleted. He suggested that items within
the maintenance component might be identified for funding.
Ms. Frasca agreed and pointed out that separate service
areas can be created and funded. She observed that there is
flexibility and emphasized that it is a way of presenting
information.
Representative Croft maintained that the system is similar
to the current state process.
Representative Lancaster questioned if the process saved
time or money or if it provided better service.
Representative Dyson responded that he did not know of any
systems that worked better.
Representative John Davies asked the mayor's level of
involvement in determining prioritization. Ms. Frasca
explained that the mayor reviews the service levels. The
mayor has not changed the ranking and priorities of the
departments. The critical decision is where the funding line
is drawn. If a service falls below the funding line the
mayor would look at what is above the line to see if there
is a service that can be reduced are eliminated.
Representative John Davies questioned how departments
distribute the funding. Ms. Frasca noted that it is similar
to the cap process set by the state legislature.
Representative Dyson interjected that the city of Anchorage
has a strong mayor system. He observed that the rankings
could be changed.
Representative Harris spoke in support of the legislation.
He observed that the legislature is only in session for 4
months, while the administration works 12 months. He
suggested that the Administration would have a better chance
of doing something with the budget, but acknowledged that
the legislature would have to manipulate the final product.
BRAD PIERCE, OFFICE OF MANAGEMENT AND BUDGET, OFFICE OF THE
GOVERNOR, spoke against the legislation. He observed that
the Governor opposes the bill as an unnecessary burden on
state agencies without producing meaningful results. He
observed that the governor proposes and the legislature
disposes. Prioritizing agency activities is a subjective
process. He pointed out that state departments have a much
broader function than municipal departments. He questioned
what criteria would be used to rank governmental functions.
The dilemma is that general government functions could be
placed on the bottom, but that without general governmental
functions like personnel and payroll nothing else would
exist. He observed that the Legislative Research Agency, at
various times, has been asked to make lists of state
programs that are mandated vs. discretionary. They have
produced a list of new programs added between 1981 and 1989
and lists of unique Alaska programs. Gordon Harrison wrote
an essay for the Long Range Financial Planning Commission on
the difficulty of defining basic services. The Long Range
Financial Planning Commission itself produced a preliminary
report that gave several different scenarios for cutting the
budget by $500 million dollars using different criteria for
what should be eliminated. All of these exercises so far
have proven to be pointless but they might provide some
guidance along the lines of what is being proposed in HB
349.
Representative Hudson observed that the intent is to have a
more direct dialog with the administration. He acknowledged
that the administration functions under the direction of the
legislature. He stressed the need for more information
regarding the harmful affects of not funding items. Mr.
Pierce responded that impact statements are created during
the subcommittee process. Representative Hudson emphasized
the need to work together with greater flexibility.
Representative Whitaker questioned the Administration's
objection. Mr. Pierce clarified that the subcommittee
process is already doing the directives of the bill. Co-
Chair Williams disagreed. Representative Harris maintained
that the subcommittees must dig [for information]. He
pointed out that there is a billion dollar deficient and
that priorities are needed. Vice-Chair Bunde recalled
instances where the relationship has been adversarial.
Representative Foster MOVED to report HB349 out of Committee
with the accompanying fiscal note. There being NO OBJECTION,
it was so ordered.
HB 349 was REPORTED out of Committee with a "do pass"
recommendation and with a zero fiscal note by the Office of
the Governor.
HOUSE BILL NO. 359
"An Act making a supplemental appropriation for tourism
marketing efforts; and providing for an effective
date."
Co-Chair Mulder stated that he was originally a skeptic
regarding the request [to provide funding for tourism
marketing]. After listening to comments about what is
happening to the [tourism] industry and analyzing the
numbers he concluded that the state of Alaska has a huge
investment in the tourism industry. He pointed out that this
is the first time that the state of Alaska has faced such a
step decline in tourism. A 10 percent decline in tourism
means over 140,000 fewer visitors or over $100 million less
dollars to the Alaskan economy. These are funds that the
state would not have to provide. He pointed out that tourism
is receiving the impact of 9/11/01, which it did not cause.
He acknowledged that the legislation is not 100 percent
supported by the majority, but stressed that action needs to
be prompt.
TAPE HFC 02 - 17, Side B
DALE FOX, CHAIRMAN, ALASKA TRAVEL INDUSTRY ASSOCIATION
(ATIA), testified in support of the legislation. He noted
that small business is the backbone of the Alaska tourism
industry. Tourism bookings in Alaska virtually stopped after
9/11/01. Bookings are currently down 30 - 46 percent. He
stressed that hundreds of businesses and thousands of jobs
will go away if the downward trend continues. He encouraged
the state to help the industry and observed that it is a
onetime problem. He stressed that although the state has
faced recessions, oil spills, fires and earthquakes nothing
has compared to the problems resulting from the 9/11/01
disaster.
DENNIS BRANDON, ALASKA TRAVEL INDUSTRY ASSOCIATION, gave a
power point presentation in support of the legislation. He
noted that, as a result of 9/11/01, consumers are: more
reluctant to fly, plan trips closer to home, are uncertain
about the future and less willing to commit to long-term
travel plans. The National Forecast from the Travel Business
Roundtable (10/31/01) found that 17% of all travelers say
they are traveling less. One out of every 20 trips is being
cancelled and 13% of leisure travelers have: cancelled, put
on hold, or remain undecided about taking an upcoming trip.
According to a survey of more than 300 visitor industry
businesses: bookings and inquiries are down by 23 percent
and businesses directly involved in advanced booking of
transportation, tours & lodging are down 30 - 46 percent.
Research indicates that current marketing efforts may yield
significantly fewer visitors. He pointed out that a decrease
in visitors would mean less revenue for municipalities that
are funded in part through bed taxes and emphasized that
revenue decreases would trickle through the entire Alaska
economy.
Mr. Brandon noted that the tourism industry is often
depicted as transportation, flight seeing, and vessels. He
pointed out that there are many indirect businesses that
depend on the volume of the visitors to Alaska. He added
that taxes, user fees, permits, and other state revenues
might suffer from a reduction in visitors.
Representative Croft observed that bookings after 9/11/01
dropped to zero and asked if the current average of 30 - 46
percent is the accumulative amount. Mr. Brandon affirmed and
clarified that volume is increasing, but that 60 - 90
booking days were lost after 9/11/01. February volumes are
back up but they need 120 - 130 percent to make up for lost
business. He noted that by December 31st, under normal
circumstances, businesses have 35 - 40 percent of their
following season booked.
Mr. Brandon reviewed the results of a survey of respondents
to the State Marketing Program (11/28/01). He observed that
1 in 3 people who indicated they were definitely planning to
visit Alaska prior to 9/11 now indicate they are less
committed to visiting. Only 1 in 10 of those planning to
visit have made reservations. He noted that 10% of
respondents say they are less likely to travel on vacation
in general. He reviewed possible Outcomes of these
Reductions in Alaska and observed that a 10% decrease in
visitors equals a loss of 140,000 visitors, a loss of $101.6
million dollars in visitor spending and a loss of 1,564
travel-related jobs. If there were a 20% decrease in
visitors then there would be a loss of 280,000 visitors,
$203.3 million dollars in economic impact and a loss of
3,127 travel-related jobs.
Mr. Brandon noted that according to the Air Transport
Association domestic revenue passenger miles are down 21.1
percent. International revenue miles are down 37.3% and
current total air passengers are down by 23%. Summer air
bookings to Alaska are down 30%. A majority of Alaska's non-
resident visitors arrive or depart by plane.
Mr. Brandon observed that total cruise cancellations could
reach $2 billion dollars, according to industry analyst
Lazard Freres. He maintained that incentive discounts could
translate to significant reductions in land-based
expenditures in Alaska. He observed that increased capacity
brings decreased pricing to stimulate activity. One company
coming to Alaska has discounted their cruises by 50 percent.
Representative Croft asked if someone with a discount would
be more likely to purchase items off of the ship. Mr.
Brandon stated that they have not found that to be true;
those that are bargain hunters are bargain hunters.
Mr. Brandon reviewed impacts on travel and concluded that
more Americans will travel closer to home, if at all.
Inbound international travel is expected to decline. He
noted that European charters that were building have
cancelled flights and discontinued services.
Mr. Brandon concluded that travel and tourism businesses
would suffer business declines and/or profit erosion in
2002. He noted that long-term predictions depend on: a
return of consumer spending, the public's willingness to
travel, and Alaska's ability to compete with other
destinations for market share by spending more marketing
dollars. There has been a return to some consumer spending.
The public's anxiety has started to ease, but other markets
have acted to grab the shrinking market. The problem has
been compounded by the loss of confidence to travel and
increased competition.
Vice-Chair Bunde observed that the national economy is in
trouble and that the people are afraid to fly and questioned
what advertising can do to change these.
Mr. Brandon noted that confidence is returning. He recalled
that he felt more confident traveling on the west coast
after 9/11/01 than to the east. He felt that the public's
reluctance to fly would lessen.
In response to a question by Vice-Chair Bunde, Mr. Brandon
noted that the statistics were complied prior to Dec. 31,
2001.
Mr. Brandon discussed competition prior to 9/11/01 and
observed that Alaska's current marketing budget of $7.8
million dollars is far below the national average per state
of $13.7 million dollars for 2000-2001. Alaska ranked 36th
out of 50 in state funding for tourism.
Representative Hudson questioned how the state rates in
relation to all industry. Mr. Brandon did not have the
answer. He observed that cruise lines market multiple
destinations. The total amount spent by the cruise lines
industry on marketing efforts is approximately $70 million
dollars. Since 9/11/01 competition for willing travelers has
increased. Many states, countries and even cities have
appropriated emergency funds to bolster tourism. The Travel
Association of America has bolstered their funds by $20
million dollars. Canada increased their funding by $15
million dollars two months ago. Puerto Rico by increased
their tourism-marketing budget by $15 million dollars and
Mexico by $6 - 8 million dollars.
Mr. Brandon observed that New York City had bolstered their
marketing program by $40 million dollars. Las Vegas
increased their tourism marketing by $13 million dollars and
was successful in turning their 40 percent decrease into a
10 percent decrease in tourism.
Vice-Chair Bunde observed that Las Vegas is giving away a
lot of free hotel rooms and questioned what was the
percentage of their increase to their total budget. Mr.
Brandon noted that their total budget is $22 million
dollars.
Representative Harris asked how tourism serves to increase
the state's income. Mr. Brandon observed that funding
reaches the state through user fees, permits and corporate
taxes. He pointed out that fishing licenses are not counted
as part of the tourism user stream. He maintained that
revenue from permits, taxes, and user fees result in an
excess of $100 million dollars.
Mr. Brandon noted that American consumers with previous
overseas travel plans might choose Alaska instead. He
emphasized that Alaska has a great story to tell and is one
of the finest destinations in the United States, but because
Alaska is being outspent in the market place those that
would come to Alaska may be influenced to go somewhere else.
He noted that West-Coast Americans and Canadians might be
more hesitant to travel to the East Coast. Targeted
marketing efforts in the Lower 48 could encourage people
thinking of postponing their Alaska trip to visit this year.
Mr. Brandon stressed that marketing efforts need to be
increased immediately. Everyday the state loses an
opportunity to pick up on the market. There is an
opportunity in the next 45 to 60 days to pick up a lot of
the predictable loss. The longer the state waits the more
difficult it will be to fill in the void. Alaska must
compete for a limited pool of visitors willing to travel.
Alaska destination marketing must focus on domestic markets.
They have isolated the markets they feel can be turned
quickly.
Visitors spend an estimated $726 per person, per trip. The
total direct full-year spending for all visitors is $949
million dollars. Visitor industry accounts for approximately
30,700 Alaska jobs, or 1-in-8 private sector jobs. The ATIA
is requesting $12.5 million dollars for an emergency
destination marketing campaign. This was put together in a
plan in November. The marketing campaign will generate an
additional 182,850 visitors to the state this season, which
would spend an average of $726 dollars each. This equates to
an overall economic impact of $332 million dollars in direct
and indirect spending. This is a return rate of more than
26:1.
Vice-Chair Bunde pointed out that the estimates were based
on a $12 million dollar plan. The plan and estimates would
have to be cut to reflect the proposed $6 million dollar
appropriation. Mr. Brandon noted that television would be
the primary focus. Television offers the quickest stimulus
to travel.
Mr. Brandon observed that the plan would encourage previous
inquirers to proceed with their travel plans and increase
efforts to convince those "willing to travel" to come to
Alaska. The plan would target various sectors of trade that
are in key positions to affect destination choices by
reminding consumers that Alaska is part of the United
States. He stressed that Alaska is perceived to be [a] safer
[destination].
Mr. Brandon observed that ATIA Images 2000 research
indicates that about half (49%) of all visitors decided to
visit Alaska within 6 months of actual travel and that if
aggressive efforts are not taken immediately, the impact
could be devastating to many of Alaska's small tourism
businesses. The time to act is now.
Mr. Brandon discussed the Recovery Plan, which would launch
an aggressive television campaign to elevate interest in
visiting Alaska this year and enhance performance of other
marketing. The plan would place dominant Alaska newspaper
advertisements in 25 national markets and sub-markets. He
observed that 2.5 million direct mail packages would be
delivered to targeted independent travel prospects. They
would schedule briefings with 60 key travel editors from
influential West Coast travel and trade publications.
Mr. Brandon observed that additional multi-media features
would be added to the official Alaska travel site at
www.travelalaska.com. He observed that planning on the
Internet is becoming more of the norm. Internet advertising
and opt-in e-mail would be used to complement traditional
programs and increase reach. They would implement an
interactive Travel Alaska TV series and Internet promotion.
Representative John Davies clarified that the target would
be the independent traveler, not the cruise industry. He
emphasized that the cruise industry can assist itself. Mr.
Brandon agreed. He stressed that research would be used to
assure that the money would be spent right in order to
motivate the targeted audience. Research would allow ATIA to
modify its message based on changes in the marketplace.
Trends and attitudes in the travel marketplace will be
monitored by contact with travel agents.
Mr. Brandon explained that ATIA would do a number of things
to enhance the decisions of people coming to Alaska. He
emphasized the importance of visits by friends and relatives
of residents. Television spots will encourage residents to
invite their friends and relatives to visit the state.
Television ads will augment current marketing efforts with a
"stay home - discover your own backyard" message. A Resident
Travel Newspaper Campaign would elevate interest among
residents in Alaska.
Mr. Brandon discussed the Recovery Budget as originally
proposed at $12.5 million dollars:
Television campaign $8,080,000
Newspaper campaign $425,000
Direct mail campaign $975,000
Online campaign $650,000
State Vacation Planner/800# $464,000
Public relations campaign$722,000
Website development/promo$300,000
TV advertising $250,000
Research $54,000
Travel Trade Training $280,000
Instate Travel Campaign $300,000
Mr. Brandon summarized that Alaska is one of the greatest
destinations. Those that are willing to travel need to look
at Alaska and Alaska must make certain that Alaska is before
them as a destination.
Representative Croft asked for a breakdown of the estimated
$100 million dollars [in tourism related state revenues].
Co-Chair Mulder observed that there was a focus toward media
markets to present Alaska's case. He thought that the best
investment Alaska could make would be to have their chief
executive and his lieutenant governor fly around the west
coast and represent Alaska as advocates. Mr. Brandon
acknowledged the suggestion and observed that there is a
willingness by the Governor to try to stimulate people to
come to Alaska and look to Alaska.
Representative Hudson asked what could occur on national
television for $4 million dollars. He observed that there
needs to be multiple spots for the public to absorb the
message. He questioned if more money should be placed into
direct mailings. Mr. Brandon thought that television would
be the best expenditure but acknowledged the use of direct
mailings. He emphasized the need to go to the highest
producing markets.
Representative Lancaster asked how soon they could be in the
market place. Mr. Brandon noted that everything is in place.
They could be in the market place within hours. He felt that
there could be a significant impact in a two to three week
period.
Representative Lancaster asked what would happen in the case
of another event. Mr. Brandon acknowledged that there would
be another problem and they would have to start from
scratch. The industry is faced with a different agenda
because of what happened. He stressed that it is not a
bailout; it is not because they ran their business badly. He
emphasized that other business have rebounded though
increases in advertising.
Representative Whitaker clarified that the plan would target
independent travelers. The major portal for independent
travelers to Alaska is Anchorage or Southcentral Alaska.
Representative Whitaker observed that the legislation would
benefit the entire state. He questioned the affects on
winter tourism. Mr. Brandon noted that the Japanese market
and business travel has been dramatically reduced. It is too
soon to tell if event travel such as the Iditarod will be
affected.
In response to a question by Representative Whitaker, Mr.
Brandon noted that there was a 30 - 46 percent decrease in
actual bookings. He guessed that 50 - 60 percent of the
winter tourism was lost.
Vice-Chair Bunde referred to the return to the state through
taxes. He observed that municipalities receive bed taxes. He
questioned how much municipalities are contributing. Mr.
Brandon could not respond.
Representative John Davies stressed that the proposed
legislation is not a bailout. Bailout implies an industry
that has failed under its terms of doing business. The term
is not used when speaking of communities impacted by
earthquakes of hurricanes.
TAPE HFC 02 - 18, Side A
Co-Chair Williams asked if funding provided in the
legislation would be used to assist the ferry system. Mr.
Brandon responded that the plan would have to be reworked to
incorporate the reduction. He stressed that the highest use
of the money would be sought. He noted that a plan has not
been formulated. Co-Chair Williams observed that the ferry
system carries a lot of passengers to the interior.
Mr. Brandon presented a short video as an example of how the
money would be spent.
PAUL CAUTER, ALASKA TRAVEL INDUSTRY ASSOCIATION, testified
in support of the legislation. He noted that he has 6
businesses in Alaska with over 250 employees and over 300
vendors. His business makes up to 2 percent of the jobs in
question. He stressed the issue of timing. He emphasized the
need for active support.
MIKE WINDRED, ALASKA TRAVEL ADVENTURE, JUNEAU, testified in
support of the legislation. They have over 200 employees and
have seen a 46 percent decrease in motor home rentals. He
expressed concern with the long-term health of his business
if bookings are not increased.
Mr. Windred commented that they would be hiring fewer
employees this year. He added that they are looking at
decreasing some of their seasonal employees. Without extra
funding from the state, they expect their motor home
bookings to be at 50 percent. They will not be able to make
up for the ground already lost without help. Support through
the proposed legislation would allow them to make it through
the next winter as well.
Mr. Windred pointed out that they are a big business and
noted that many smaller businesses are dependent on their
business. He emphasized that the marketing plan was worked
on by some of the best people in the nation. All that is
lacking is the funding. He stressed that the marketing plan
is well thought out and urged funding.
Representative Hudson asked the percentage of his business
that goes into market promotion.
Mr. Windred replied that about 10% of their gross goes
toward marketing. Their company is putting as much money as
they can into additional advertising. He pointed out that
they need to conserve cash to make it through next winter in
the event that there are not more bookings.
Representative Hudson emphasized that there needs to be a
combined effort with the industry and the state.
Mr. Windred noted that the industry has contributed an
additional $1.2 million dollars. He pointed out that they
cannot make it on their own.
Representative Whitaker understood that cost reductions
cannot get the industry where they need to go. Mr. Windred
agreed.
KIRK HOESSLE, PRESIDENT, ALASKA WILDLIFE ADVENTURES,
GIRDWOOD, testified in support of the legislation. Their
business has grown to $4 million dollars a year and employs
20 year-around and 100 seasonal employees. He noted that
sales are down about 40% from the last three years. Sales
look like they will be 10-20 percent below the previous
high. The industry is doing everything they can. Marketing
expenses have been increased by $40 thousand dollars and
they plan to add another $20 - $30 thousand dollars. Full
time employees have been reduced and trip options have been
consolidated. Seasonal staff will be reduced by
approximately 20%. He anticipated that revenue would be down
20 - 25 percent, which is the equivalent loss of $100 - $200
thousand dollars. He observed that the reduction in revenues
would mean that they would spend $500 - $600 thousand
dollars less within the state.
Mr. Hoessle stated that there is hope and that the industry
is "not giving up". The industry could rebound if additional
funding is placed into the marketplace at this time.
BRUCE BUSTAMANTE, ANCHORAGE BUSINESS CONVENTION BUSINESS
BUREAU, ALASKA TRAVEL INDUSTRY ASSOCIATION, ANCHORAGE,
commented that he was testifying in support of the
legislation. There are 1,319 business members that rely on
the tourism industry. He stressed that there are far
reaching impacts and emphasized that the threat is real.
Emergency marketing funds could assist in the next season.
Tourism marketing works. The infrastructure is in place. He
estimated that this year would be the most competitive
season the state has seen. Additional funding would make a
difference.
Vice-Chair Bunde asked how much the Municipality of
Anchorage contributes. Mr. Bustamante explained that the
Municipality contributes half of the bed tax to the
marketing fund. He stressed that it is more efficient to
market the entire state of Alaska, not individual cities.
Representative Hudson questioned if the municipality of
Anchorage had considered making a greater contribution. Mr.
Bustamante stated that they had not yet considered and
additional contribution but added that they already make a
large effort toward statewide marketing.
SHARON CRISP, DIRECTOR, VALDEZ CONVENTION AND VISITOR'S
CENTER, testified in support of the legislation. She
observed that there are 200 members, each employing between
2 - 5 employees. She observed that the city of Valdez went
into the season knowing that their cruise ship dockings
would be reduced; 9/11/01 has further reduced dockings.
Their most popular shore excursion has been the Valdez
pipeline terminal, which was cancelled after 9/11/01. They
do not know when or if the suspension will be lifted. There
is tightened port security in the Port of Valdez, which will
affect sport fishing and charters. Independent bookings are
down 20 percent. She expressed concern that this could be
further reduced.
Representative Hudson questioned what element of the
proposed marketing plan would have the greatest affect on
Valdez. Ms. Crisp noted that the city of Valdez focuses on
the independent traveler, as does the marketing plan. She
felt that once the traveler is brought to the state that the
city would capture their travel. The city spends 5 percent
of their budget on generic marketing.
Mr. Bustamante stated that the Alaska Travel Industry
Association contributed approximately $250 thousand dollars
on generic marketing. They also spend funding on
conventions. Anchorage lost 8 conventions directly after
9/11/01.
STEVE BOWHAY, GLACIER GARDENS, JUNEAU, testified in support
of the legislation. He noted that they are on the cruise
ships' itinerary. He maintained that the cruise lines would
discount their trips in order to fill their spots. He
emphasized that the cruise industry is already spending $70
million dollars to put Alaska out as a destination. The
legislation would supplement this spending and target the
independent traveler. He stressed the pristine environment
of Alaska. Alaska has less pollution and people, and more
beauty then other destinations. He pointed out that the
industry would promote themselves if they had the money. He
quoted his grandfather: "Hearts like doors will open with
ease to those that hold the little keys and don't forget
that two of these are thank you sir and if you please."
SALLY SADLER, LEGISLATIVE LIAISON, DEPARTMENT OF COMMUNITY
AND ECONOMIC DEVELOPMENT, testified in support of the
legislation. The Administration believes that the Alaska
Travel Industry Association has a good marketing plan that
would attract visitors to the state in a short amount of
time. She noted the suggestions of the Committee to improve
the role of the Administration in the marketing process. The
legislation is consistent with the Governor's Task Force on
Jobs and the Economy's recommendation to invest in tourism
and to attract more people to the state. She encouraged the
Committee to increase the level of funding and emphasized
the critical issue of timing.
Vice-Chair Bunde stressed that it would be helpful if the
Administration would identify $6 million dollars that could
be used to fund the legislation.
Representative Croft MOVED to ADOPT Amendment 1. He noted
that the amendment would add $6 million dollars for the
Alaska Seafood Marketing Institute. He spoke in support of
the amendment. He pointed out that the fishing crisis is not
the fault of the individual fisherman. He emphasized the
opportunity to market Alaska's fish in light of the Mad Cow
Disease.
Co-Chair Williams stated that he supports the fishing
industry, but questioned the effect of the amendment. He
pointed out that there is a plan to support the tourism
industry and asked what could be done to help the fishing
industry. The fishing industry is huge and the legislature
needs to make sure that funding to help it is in the right
place at the right amount. He noted that he had received
mixed signals from the fishing industry. He suggested that
more thought needs to be given to the amendment.
Co-Chair Mulder stressed that the emergency nature of the
fishing industry is different and more systemic than the
affect of 9/11/01 on the tourism industry. He observed that
there has been discussion of a task force to look at the
long-term problems of the fishing industry. A resolution is
being considered to direct the Board of Fish to present a
long-term solution and map out a course of action. He stated
that he was reluctant to make a great investment until he
can see light at the end of the tunnel.
Representative Harris acknowledged problems in the fishing
industry. He observed that 50 percent of the fleet in
Cordova and Valdez no longer fish. He thought that
Representative Stevens had introduced legislation to address
the issue.
Representative Croft noted that Representative Stevens'
legislation is not identical to the proposed amendment.
Representative Harris stressed the need for a fiscal plan
before additional funding is sought.
REPRESENTATIVE GARY STEVENS spoke to his legislation, which
addresses problems in the fishing industry. He noted that
fisherman and processors fund the Alaska Seafood Marketing
Institute (ASMI) through taxes. His legislation would add
state support. He noted that revenues to ASMI are reduced as
fewer fish are caught. He added that ASMI is also facing the
completion of a grant.
Representative Harris pointed out that there is another
vehicle to address the problems regarding reductions in the
fishing industry.
TAPE HFC 02 - 18, Side B
Representative Hudson stressed that the appropriation for
tourism marketing is time sensitive. He observed that
9/11/01 affected a major industry in the state of Alaska
that by themselves are not prepared to restore a lot of
their business. He pointed out that there is a potential job
loss that would have an adverse economic affect throughout
Alaska. He acknowledged there are real systemic problems
within the seafood industry. He felt that it would take more
than $6 million dollars to address health of the fishing
industry. He thought that a major effort was needed, which
would include financial participation by the industry. He
expressed his hesitation to support any increases to the
budget before the fiscal needs of the state have been dealt
with. He stated that he would support the legislation
because failure to do so would result in the failure of
economic development, which would otherwise occur.
Vice-Chair Bunde noted that he has worked in the tourism
industry and stated that can understand the legitimate
concerns of both the tourism and fishing industries, but
noted that he would not support the amendment.
A roll call vote was taken on the motion.
IN FAVOR: Croft, Davies, Moses
OPPOSED: Bunde, Foster, Harris, Hudson, Lancaster,
Whitaker, Williams, Mulder
The MOTION FAILED (3-8).
Representative Foster MOVED to report HB 359 out of
Committee with the accompanying fiscal note.
Vice-Chair Bunde OBJECTED. He stated that he is not willing
to support additional funding because it sends a message
that the public doesn't need to take the state's fiscal
problems seriously.
In response to a question by Representative Harris, Co-Chair
Mulder explained that effective dates in the legislation
would allow funds to be spent into the next fiscal year.
Representative Harris stated that he supports the
legislation but is concerned with how the state's budget
would be balanced.
Representative Whitaker acknowledged the need to balance the
budget but emphasized the need to support the economy of the
state. He noted that he has a letter from an Alaskan bank
observing that, if the tourism industry fails, the bank
would also fail. He spoke in support of the legislation.
Representative Lancaster stated that he would support the
legislation with mixed emotions and emphasized his support
for a fiscal plan.
Representative John Davies spoke in support of the
legislation and maintained that it is not a bailout. He
stressed that action needs to be prompt and that it cannot
wait for the development of a fiscal plan.
Representative Carl Moses pointed out that there are serious
problems with the state's budget gap, which are not being
addressed. He stated that he could not support the
legislation without a fiscal plan. He acknowledged the
problem but emphasized the importance of addressing the
state's overall fiscal problems. He stressed that the
fishing industry is as important as the [tourism industry].
Representative Lancaster stated that results should be
evident before the legislative session ends and stated that
he would like to see a shorter timeline for the report.
Vice-Chair Bunde stated that it is not his hope or intent to
inflict pain, but that the budget cannot be balanced if
state "continues to spend, spend, spend".
Co-Chair Mulder MOVED to ADOPT a Letter of Intent:
Letter of Intent
The Legislature acknowledges that tourism bookings in
Alaska are well below the forecasts prior to the
terrorist attack on America September 11, 2001. Surveys
show that actual bookings are 30 % to 40% below normal.
It is the intent of the Legislature that the
appropriation made by House Bill 359 is focused at
increasing tourism in Alaska in 2002.
The Legislature expects that the Alaska Tourism
Industry Association will report back to the
Legislature during the FY 2004 budget deliberations.
That report should include measures that indicate the
results of the advertising supported by this
legislation.
Co-Chair Mulder explained that the Letter of Intent is in
the spirit of performance budgeting and would provide a
better sense of the return for the investments made by the
state of Alaska. He agreed with Representative Lancaster and
requested a summary report about the results before the end
of session.
Representative John Davies MOVED to AMEND the Letter of
Intent by inserting "FY 2003 and" before FY2004".
There being NO OBJECTION, it was so ordered.
There being NO OBJECTION, the House Finance Committee Letter
of Intent was adopted.
HB 359 was REPORTED out of Committee with a "do pass"
recommendation and with a House Finance Committee Letter of
Intent.
ADJOURNMENT
The meeting was adjourned at 4:15 PM
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